Tax Coda Weekly Digest — October 26, 2025
1. Berry v. Commissioner — Who reports the S corp income
T.C. Memo. 2025-109 (Oct. 21, 2025)
The Tax Court said Andrew Berry owned half of his S corporation, Phoenix Construction & Remodeling, in 2016. Because of that ownership, he had to report half of the company’s unreported income on his return, even if he didn’t get the cash. The court also approved a 20 percent accuracy-related penalty for underreporting.
Why It Matters:
Reinforces that S corp income flows through to shareholders, whether or not money is distributed.
The IRS can rely on bank deposits and customer payments to reconstruct income.
Reminds taxpayers that late or incomplete evidence can be excluded under the court’s pretrial order.
Takeaway:
If you own part of an S corp, you’re taxed on your share of its earnings—not just what you take home.
2. Murrin v. Commissioner — When a preparer’s fraud keeps the clock open
No. 24-2037 (3d Cir. Oct. 17, 2025)
The Third Circuit said the IRS can assess tax at any time if a return is fraudul…
