Inez Meilak - Page 6

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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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