H Enterprises International, Inc., and Subsidiaries v. Commissioner of Internal Revenue

This is an income-tax case. Two issues are presented: whether H Enterprises International, Inc., is entitled to a dividends-received deduction with respect to certain distributions made to it by a subsidiary, Waldorf Corporation; and whether Waldorf is entitled to an interest deduction for certain indebtedness incurred by it.

The Commissioner asserts, and the Tax Court held, that H Enterprises was not entitled to the dividends-received deduction because, under Section 246A of the Internal Revenue Code, 26 U.S.C. § 246A, the dividends had been received with respect to debt-financed portfolio…