T.C. Memo. 1998-97
UNITED STATES TAX COURT
H ENTERPRISES INTERNATIONAL, INC., AND SUBSIDIARIES, Petitioner
v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 11478-93. Filed March 9, 1998.
W II, a subsidiary of HEI, borrowed funds, a part
of which was distributed to HEI with respect to its
stock in W II. HEI used a portion of the distribution
to buy portfolio stock and tax-exempt obligations and
held such stock and obligations for the 3 tax years in
issue. Held: the indebtedness was incurred to
purchase tax-exempt obligations for the purpose of
sec. 265(a)(2), I.R.C., and is directly attributable to
the acquisition of portfolio stock for the purpose of
sec. 246A, I.R.C.; respondent's disallowances of an
interest deduction pursuant to sec. 265(a)(2), I.R.C.
and of a dividend received deduction pursuant to sec.
246A, I.R.C., are sustained.
William L. Hippee, Jr., and Edward J. Pluimer, for
petitioner.
John Schmittdiel and Jonathon Decatorsmith, for respondent.
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