Superior Proside, Inc. - Page 10




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          II.  Classification of Murdock for Employment Tax Purposes                  
               A.  Status Under FICA and FUTA Provisions                              
               In contending that Murdock should not be classified as an              
          employee under the FICA and FUTA provisions of the Internal                 
          Revenue Code, petitioner focuses on Murdock’s status as an                  
          S corporation shareholder and alleged lack of status as a common            
          law employee.  We briefly address these contentions seriatim.               
                    1.  Contentions Regarding S Corporation Shareholders              
               Petitioner cites sections 1366, 1372, and 6037(c) and                  
          Durando v. United States, 70 F.3d 548 (9th Cir. 1995), presumably           
          in support of an argument that S corporation shareholders should            
          not be deemed employees.  Sections 1366 and 6037(c) generally               
          require that income items of S corporations be passed through to            
          shareholders on a pro rata basis and reported by such                       
          shareholders in a manner consistent with treatment on the                   
          corporate return.  These rules, however, pertain to calculation             
          of income tax liability under subtitle A and have no bearing on             
          computation of Federal employment taxes.  Veterinary Surgical               
          Consultants, P.C. v. Commissioner, 117 T.C. 141, 145 (2001),                
          affd. sub nom. Yeagle Drywall Co. v. Commissioner, 54 Fed. Appx.            
          100 (3d Cir. 2002).  Furthermore, an employer cannot by the                 
          expedient of characterizing moneys paid in remuneration for                 
          services as distributions of net income, rather than as wages,              
          avoid FICA and FUTA liabilities.  Id. at 145-146.  Thus, as in              






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