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percent, to come up with a total cash tip amount. Respondent's
agent testified that the rate of 12 percent was used for cash
tips "to be as conservative and, hopefully, equitable as
possible, since usually the charge [tip] rates range from 15 to
20 percent". Respondent once again used petitioner's percentage
of total gross receipts as allocated by Sandomenico, and
multiplied the total cash tips figure by petitioner's percentage
of total gross receipts to arrive at petitioner's cash tips.
Respondent then added the unreported charged tips to the cash
tips to determine the amount of tip income petitioner failed to
report.
Petitioner conceded that she underreported her tip income on
her 1989 and 1990 Federal income tax returns. However,
petitioner contends that she earned tip income of $22,026 and
$18,988 for 1989 and 1990, respectively, rather than the amounts
determined by respondent.
It is well established that tips are includable in gross
income under section 61(a). Killoran v. Commissioner, 709 F.2d
31 (9th Cir. 1983), affg. T.C. Memo. 1981-659; sec. 1.61-2(a)(1),
Income Tax Regs. Under section 6001 a taxpayer is required to
keep sufficient records to enable respondent to compute the
taxpayer's correct tax liability. In the absence of such
records, respondent may use any method of computation that will
clearly reflect the income of the taxpayer. Sec. 446(b);
Menequzzo v. Commissioner, 43 T.C. 824, 831 (1965).
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