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On her 1989 Federal income tax return, petitioner reported
tip income of $7,200. Petitioner failed to include in income
$7,931 of tips allocated to her by Sandomenico pursuant to
section 6053(c)(3) and noted in Box 6 of her Form W-2. On her
1990 return, petitioner reported tip income of $13,147, which
included the $347 of tips allocated to her by Sandomenico
pursuant to section 6053(c)(3).
In 1989 and 1990, Sandomenico's directly tipped employees
included captains, waiters and waitresses, and busboys. After
each shift (either lunch or dinner), the directly tipped
employees would pool all the charged and cash tips received. The
next day, two of the employees would allocate and distribute the
tips pursuant to a point system (described in greater detail
below). They allegedly recorded the amount of tips received in
notebooks, along with the resulting allocation and distribution
among the employees who worked that shift. Petitioner claimed
these notebooks were kept on the premises of Sandomenico.
During the initial audit of petitioner's returns by
respondent, petitioner did not produce any personal records of
her tip income. Later in the audit, petitioner produced one of
the above mentioned notebooks, purportedly covering the period of
April 28, 1990 to December 31, 1990. Other than this notebook,
during the audit petitioner did not mention, nor did she produce,
any personal records of her tip income.
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