On April 7, 2021, the Tax Court issued a Memorandum Opinion in the case of Berry v. Commissioner (T.C. Memo. 2021-42). The primary issues presented in Berry v. Commissioner were whether the petitioners S corporation underreported its income, whether the petitioners’ S corporation is entitled to certain claimed deductions, whether the petitioners are entitled to certain claimed deductions, and whether the petitioners are liable for accuracy-related penalties under IRC § 6662. Background to Berry v. Commissioner In 2013, Ronald Berry and his son, Andrew, owned and operated Phoenix Construction & Remodeling, Inc., which built houses and developed real estate. It used the cash method of accounting and maintained its records using QuickBooks software. Phoenix “retained” H&R Block to prepare its 2013 Form 1120S (U.S. Income Tax Return for an S Corporation). Phoenix reported gross receipts of $1.1 million and net income of $37,000 for 2013. On their 2013 Form 1040,…