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Respondent prepared analyses of Sandomenico's Forms 8027,
Employer's Annual Information Return of Tip Income and Allocated
Tips, for purposes of reconstructing the directly tipped
employees' tip income for 1989 and 1990. The Forms 8027 reflect
Sandomenico's total charged tips, total charged receipts, total
tips reported by its directly tipped employees, gross receipts
from food and beverage operations, the number of directly tipped
employees, and an allocated tip amount of 8 percent of its gross
receipts. These Forms 8027 show that $558,227 and $390,004.49 of
charged tips had not been declared to Sandomenico by the directly
tipped employees for 1989 and 1990, respectively.
Respondent's determinations of petitioner's unreported tip
income are based on Sandomenico's allocation of gross receipts
among its directly tipped employees, prepared pursuant to section
6053 and the regulations thereunder. The allocations were done
by Mr. Hemang Patel (Mr. Patel), Sandomenico's then bookkeeper.
Mr. Patel explained that he allocated gross receipts on a daily
basis among directly tipped employees using a point system of 10
points for captains, 8 points for waiters and waitresses, and 5
points for busboys. Sandomenico's directly tipped employees used
this same point system to divide and distribute the pooled tips
among themselves on the day after a particular shift.
Mr. Patel would total the points of all the employees that
worked a shift, and then divide the total gross receipts for that
shift by the number of points. Mr. Patel would then take the
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