John is the owner of a real estate business and has been successful. He feels th

Question

John is the owner of a real estate business and has been successful. He feels that his reputation is a large part of his success. He acquires 30% of a restaurant in the community.   The restaurant does not do well and files for bankruptcy in six months. The bankruptcy is reported in the local news. Many of the restaurant’s creditors also have real estate dealings with John. His real estate business begins to decline. John feels it is due to the bankruptcy of the restaurant. He uses earnings from his real estate business to pay off the creditors. May John claim those payments as a business expense for the real estate company since he used them to help save the business reputation of his real estate firm?

Explanation / Answer

Payment can be shown as loss in Restaurant business however it cannot be shown as business expense for the real estate company.

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