- 7 - (per petitioner’s Form W-2) from tips derived from petitioner’s sales from the room service function. Respondent calculated the latter amount by multiplying petitioner’s net sales ($61,427.78) by a tip rate of 15.4 percent and then subtracting an amount ($147) that appears to reflect “tip-outs”; i.e., the amount paid by petitioner to his bussers.6 Discussion We begin with a number of well-established principles. First, there is no question that tips constitute compensation for services and are includable in gross income under section 61(a). 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); Meneguzzo v. Commissioner, 43 T.C. 824, 831 (1965); Sec. 1.61-2(a)(1), Income Tax Regs. Second, all taxpayers are required to maintain records sufficient to determine their correct tax liability. Sec. 6001; Meneguzzo v. Commissioner, supra at 831-832. When a taxpayer receives tips on a daily basis, he or she is required to keep an accurate and contemporaneous record of such income. Ross v. Commissioner, T.C. Memo. 1989-682, affd. without published 6 The 15.4-percent tip rate was based both on financial data furnished by the room service department of the Las Vegas Hilton (e.g., sales journals and credit card records) and on interviews of department personnel. The determined tip rate reflects a “stiff” rate of 15 percent and a 2-percent discount for tips paid in cash (rather than by credit card).Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
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