Rev. Rul. 62-217

A corporation distributed shares of its treasury stock to its employees as compensation for services rendered. The cost basis of the treasury stock to the corporation was less than its fair market value on the date of the distribution to the employees. In filing its Federal income tax return for the taxable year, the corporation deducted the fair market value of the stock on the date of the distribution as a business expense.

In accordance with the nonrecognition of gain or loss provisions of section 1032(a) of the Internal Revenue Code of 1954 and section 1.1032-1(a) of the Income Tax Regulations, relating to the receipt by a corporation of money or other property in exchange for its own stock (including a transfer of shares as compensation for services), the corporation did not report gain upon the distribution of treasury stock.

Held , the fair market value of the treasury stock on the date of the distribution is deductible as a business expense in accordance with the provisions of section 162(a) of the Code. The nonrecognition of gain or loss provisions of section 1032(a) of the Code have no effect upon a business expense deduction that is otherwise allowable under section 162(a) of the Code.