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regarding the Petitioners is distorted.” Our findings of fact in
Executive Network Club, Inc. describe some of the operations of a
charitable organization’s casino operation in Prince George’s
County, with a focus on how tips from patrons were collected by
the casino and “were ultimately distributed to the workers in
cash.” We held that the casino operation constituted an
unrelated trade or business. However, we held that the tips that
came from the patrons and were distributed to the casino workers
did not constitute income to the exempt organization. In the
course of our opinion, we noted as follows:
4 The fact that the tips were shared does not preclude a
finding that the payments by the patrons were tips. Similar
pooling or tip-splitting arrangements have been held to
constitute tip income to those participating in the pooling
or tip-splitting arrangement. See Allen v. United States,
976 F.2d 975, 976 (5th Cir. 1992); Olk v. United States, 536
F.2d 876, 877 (9th Cir. 1976); Catalano v. Commissioner, 81
T.C. 8, 11-13 (1983), affd. without published opinion sub
nom. Knoll v. Commissioner, 735 F.2d 1370 (9th Cir. 1984);
Armeno v. United States, 6 Cl. Ct. 521 (1984). In
respondent’s regulations, respondent describes such pooling
arrangements. Secs. 31.3121(a)-1(c), 31.6053-3(j)(12)-(13),
and 31.6053-4(a)(2), Employment Tax Regs.; see also Guadron
v. Commissioner, T.C. Memo. 1994-553; Tech. Adv. Mem. 81-46-
001 (Sept. 21, 1978) [Executive Network Club, Inc. v.
Commissioner, T.C. Memo 1995-21.]
We agree with petitioners (as does respondent) that the
process of gathering tips, apportioning them, and periodically
paying them out to the workers in Executive Network Club, Inc. is
quite similar to the process followed by the CIPAA Casino during
the years in issue in the instant case.
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