- 10 - each year in issue is less than the charged tips alone as reported by Sandomenico on the Form 8027 for each year. Due to the inadequacy of the records produced by petitioner, it became incumbent upon respondent to reconstruct petitioner's income for the years in issue. When reconstruction of a taxpayer's income is necessary, respondent has great latitude in the method of reconstruction used. Catalano v. Commissioner, 81 T.C. 8, 13 (1983), affd. without published opinion sub nom. Knoll v. Commissioner, 735 F.2d 1370 (9th Cir. 1984). The method of reconstruction is sufficient if the reconstruction is reasonable in light of all of the surrounding facts and circumstances. Schroeder v. Commissioner, 40 T.C. 30, 33 (1963). This Court and other courts have accepted the use of formulas in the reconstruction of tip income. Cracchiola v. Commissioner, 643 F.2d 1383 (9th Cir. 1981), affg. per curiam T.C. Memo. 1979-3 and Lombardo v. Commissioner, T.C. Memo. 1979-11. A taxpayer may, however, point out areas or specific instances in which the method used by respondent fails to reflect his or her true income. Miller v. Commissioner, 237 F.2d 830, 838 (5th Cir. 1956), affg. in part and revg. in part T.C. Memo. 1955-112. Petitioner argues that the amounts allocated to her by respondent are inherently erroneous because the gross receipts allocated to her by Sandomenico are too high. Petitioner asserts Sandomenico employed numerous directly tipped employees who werePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
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