Facts. The Deerfield Corporation is owned by John Hunter. John also owns 100 percent of the stock of Elkton Corporation. Elkton lost a contract that it had with the U.S. government which was the primary source of income to Elkton. Deerfield made an advance to Elkton of $500,000 to cover its cash flow problem. The advance had no fixed maturity date and interest payments were contingent upon the future profitability of Deerfield. 18 months after making the advance, Deerfield determined that Elkton would never be able to repay the advance and claimed a business bad debt of $500,000 on its corporate tax return. The IRS is currently auditing Deerfield Corporation and has proposed to disallow the bad debt. Write a memo to John discussing whether Deerfield can successfully protest the disallowance of the bad debt. What section of the IRC apply?