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MEMORANDUM FINDINGS OF FACT AND OPINION
HALPERN, Judge: This is our second report in this case, the
first also denominated H Enters. Intl., Inc., & Subs. v.
Commissioner, and appearing at 105 T.C. 71 (1995) (H Enterprises
I). The only issues for decision concern the applicability of
sections 246A1 and 265(a)(2) to the consolidated tax liability of
petitioner. In H Enterprises I, we denied petitioner's motion
for summary judgment (the motion) on the grounds that this case
presented genuine issues of material fact. As grounds for the
motion, petitioner argued that, as a matter of law (1) section
246A cannot be applied to disallow the dividends received
deduction to a parent corporation on account of indebtedness
incurred by its subsidiary corporation and (2) section 265(a)(2)
cannot be applied to disallow an interest expense deduction to a
subsidiary corporation on account of tax-exempt obligations
purchased by its parent corporation. In H Enterprises I, we held
that, in appropriate circumstances, sections 246A and 265(a)(2)
may be applied when one member of an affiliated group of
corporations is the borrower and another member is the purchaser
of portfolio stock (sec. 246A) or tax-exempt obligations (sec.
265(a)(2)). H Enterprises I at 81. We concluded: "Whether any
1
Unless otherwise noted, all section references are to the
Internal Revenue Code in effect for the years in issue, and all
Rule references are to the Tax Court Rules of Practice and
Procedure.
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