Corporation F, a calendar-year, accrual-basis taxpayer, distributed stock of Corporation K to F employees in lieu of salaries. The salary expense would have been deductible as compensation if paid in cash. On the date of the payment, Corporation F had an adjusted basis in Corporation Ks stock of $50,000 and a fair market value of $170,000. What is the tax effect to Corporation F?

1. $50,000 deduction; $120,000 recognizedgain.
2. $170,000 deduction; $120,000 recognizedgain.
3. $170,000deduction.
4. $50,000deduction.