Gary Nguyen owns his own real estate business. He has developed a reputation within the community for honesty and integrity. He believes that this is one of the reasons his firm has been so successful. Gary was a 30 percent shareholder in an unsuccessful fast-food restaurant, Pho-to-Go. Although he personally thought the business had great food and was well run, it never appealed to the local community. Early this year, the corporation filed bankruptcy. Many of the creditors of Pho-to-Go were also clients of Garys real estate business. After Pho declared bankruptcy, Garys real estate business began to suffer. Gary felt that the decline in his real estate business was related to the bankruptcy of Pho. Thus, Gary used the earnings of his real estate business to repay all the creditors of Pho-to-Go. Within a few months, Garys real estate business began to pick up. Gary has asked you to determine if his real estate business can deduct the expenses of repaying Pho-to-Gos creditors. Prepare a letter to Gary and a memo for the tax file documenting your conclusions. Garys address is 41 Albion St, Providence, RI 02907. Research aids: Thompson v. Comm., 46 TCM 1109 (1983).