Yes, its possible to deny heroes, but only under certain circumstances:
Friendly heroes can only be denied when they are under certain sources
of damage over time, such as Doombringer's Doom. You cannot deny a
hero who's low on health but not taking DoT.
How is gold assigned to the enemy team:
Denying a hero will prevent the enemy from gaining any experience or
gold from the kill, but your ally will still lose gold from dying.
To deny a hero:
Most heroes can only deny a friendly hero by attacking them manually (one exception to this is Tiny, who can deny any friendly unit using Toss as long as they have low enough health).