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did not establish a prima facie case that its treatment of
Sadanaga was reasonable, the burden of proof remains on
petitioner.
II. Classification of Sadanaga for Employment Tax Purposes
A. Status Under FICA and FUTA Provisions
In contending that Sadanaga should not be classified as an
employee under the FICA and FUTA provisions of the Internal
Revenue Code, petitioner focuses on Sadanaga’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. at 145. Furthermore,
an employer cannot by the expedient of characterizing moneys paid
in remuneration for services as distributions of net income,
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