Berry v. Commissioner: S corporation income attribution and §6662 penalty
Berry v. Commissioner, T.C. Memo. 2025-109, No. 10634-20., 2025 BL 376377, Court Opinion
The Tax Court held that Andrew Berry was a 50% shareholder of an S corporation in 2016 and must include his pro rata share of the corporation’s unreported income. It sustained an accuracy-related penalty subject to Rule 155 computations.
Holding
The court found that Andrew Berry owned 50% of Phoenix Construction & Remodeling, Inc. (PCR) in 2016 and must include his share of PCR’s income on Schedule E regardless of distributions.
The court sustained the IRS determinations that PCR had unreported gross receipts from customer payments, diverted receipts, and bank deposits attributed to PCR.
The court excluded petitioners’ late-produced exhibits under the Standing Pretrial Order, admitted a limited counter-exhibit under Federal Rule of Evidence 106, and concluded that the §6662 penalty applies, subject to computation.
Why It Matters
Confirms that S corporation shareholders must report pro rata income based on beneficial ownership, not officer status or distributions.
Reinforces substantiation …
