McGinty v. Commissioner, Docket No. 14622-85.
| Decision Date | 05 September 1991 |
| Docket Number | Docket No. 14622-85.,Docket No. 5693-89. |
| Citation | 62 T.C.M. 654 |
| Parties | Sarah Elizabeth McGinty v. Commissioner. |
| Court | U.S. Tax Court |
GALLOWAY, Special Trial Judge.
These consolidated cases were heard pursuant to the provisions of section 7443A(b) and Rules 180, 181, and 182.1
Respondent determined, in a notice of deficiency for the years 1980 and 1981 dated March 15, 1985, and in a notice of deficiency for the year 1982 dated February 10, 1989, deficiencies and additions to tax in petitioner's Federal income taxes as follows:
Additions to Tax, Secs
Year Deficiency 6653(a) and (a)(1) 6653(a)(2) 6653(b)(1) 6653(b)(2)
1980 $3,101.00 $155.00 -- -- --
1981 3,942.00 197.00 * -- --
1982 3,093.00 -- -- $1,547.00 **
* 50 percent of the interest due on the deficiency of $3,942
** 50 percent of the interest due on the deficiency of $3,093
The issues for decision are: (1) Whether petitioner underreported toke income on her 1980, 1981, and 1982 Federal income tax returns; and (2) whether petitioner is liable for the above additions to tax.
These cases were part of a group of assigned cases called at a special trial session of the Court held at Las Vegas, Nevada. The cases contain common questions of fact or law and are among the remaining unresolved cases which arose from a toke compliance program initiated by respondent in Nevada in 1982. (An explanation of respondent's toke compliance program is found in Petrie v. Commissioner [Dec. 46,499(M)], T.C. Memo. 1990-168, 59 T.C.M. 275, 278, 59 P-H Memo T.C. par. 90,168).
Some of the facts have been stipulated and are so found. The stipulation and attached exhibits are incorporated herein by reference. Petitioner was a resident of Las Vegas, Nevada, when the petitions were filed in this case.
The parties agree that during the years 1980, 1981, and 1982, petitioner was employed on the graveyard shift at the Stardust Hotel and Casino (Stardust) in Las Vegas. Petitioner was classified as a "21" dealer during these years. Stardust dealers normally worked eight-hour shifts during the years in issue. Petitioner began working at Stardust in 1978.
Petitioner was paid a salary slightly above the minimum wage by Stardust in the taxable years (approximately $3.50 per hour). In addition, petitioner received tips (tokes) from the players at the "21" tables. "Tokes" are casino chips (house checks) that players either give to the dealers directly or place along with their own bets as bets for the dealers. Tomburello v. Commissioner [Dec. 42,960], 86 T.C. 540, 541 (1986), affd. without published opinion 838 F.2d 474 (9th Cir. 1988). Twenty-one dealers routinely pooled all tokes received by them, placing said tokes in a common toke box before leaving the area of the tables on a break or at the end of a shift. The total amount so pooled was divided at the end of a 24 hour period among all "21" dealers assigned to a table during that period. The pooled tokes were divided equally on the basis of a full share to a dealer for each eight-hour shift. The parties agree that the average hourly toke rate earned by all "21" Stardust dealers during the years in issue was $8.67. Petitioner did not maintain any written diary, log, worksheet, or other contemporaneously kept accounting of toke income during the years in issue.
Stardust occasionally used "21" dealers, including petitioner, to fill in as floor persons during the years in issue. The parties stipulated that dealers standing in for a floor person received floor pay ($90 per 8-hour day or $11.25 per hour) and no tips.
Petitioner's wages and toke income for the years in issue were reported on W-2 forms as follows:
Year Hours Worked Wages Toke Income Total
1980 ............................... 1,608 $5,275 $1,040.00 $6,315
1981 ............................... 1,865 6,982 1,732.50 8,714
1982 ............................... 1,613 6,127 -0- 6,127
Respondent reconstructed petitioner's toke income by multiplying the average hourly toke rate ($8.67) by the number of hours petitioner worked during each year in issue. Petitioner had reported toke income received in 1980 and 1981 at the hourly rates of $0.65 and $0.93, respectively. Petitioner reported zero toke income in 1982. Respondent determined that petitioner had underreported her toke income by $12,901.36, $14,437.05, and $13,984.71, for the respective taxable years of 1980, 1981, and 1982.
It is well established that tokes constitute compensation for services rendered and are includible in gross income under section 61. Catalano v. Commissioner [Dec. 40,261], 81 T.C. 8, 13 (1983), affd. without published opinion sub nom. Knoll v. Commissioner, 735 F. 2d 1370 (9th Cir. 1984). Taxpayers are required to maintain sufficient records to establish their correct tax liability. Sec. 6001. If a taxpayer fails to keep the required records or the records maintained do not clearly reflect income, respondent is authorized by section 446 to compute income in accordance with such method as in his opinion clearly reflects the full amount of income received. Meneguzzo v. Commissioner [Dec. 27,282], 43 T.C. 824, 831 (1965). Respondent's determinations are presumed correct, and the burden is on petitioner to show otherwise. Welch v. Helvering [3 USTC ¶ 1164], 290 U.S. 111 (1933); Rule 142(a).
Petitioner disputes respondent's determinations that she underreported her toke income, contending that although she was classified as a dealer by Stardust, she worked for Stardust at other jobs for most of 1980 and 1981 and all of 1982. (Petitioner listed her occupation as "dealer" on her 1980, 1981, and 1982 tax returns). Petitioner first claims that although classified as a dealer, she worked as a floor person and occasionally as a pit clerk during most of 1980 and 1981 and all of 1982. . In addition to her own testimony, petitioner called two former co-workers who worked with her on the graveyard shift during all or part of the taxable years 1980-1982. One co-worker dealer testified that she never saw petitioner work as a dealer. The other co-worker testified that from October 16, 1980 through the end of 1982, he saw petitioner work as a dealer and as a floor person and that petitioner worked as a dealer "no more than 50 percent of the time." On the other hand, Phil Dioguardi, petitioner's supervisor on the graveyard shift for a seven month period in 1980 extending into 1981, testified that petitioner was "a very good dealer", and that he used her as a floor person only about seven times during that time period. Mr. Dioguardi stated that when petitioner worked the floor she was paid floor persons' wages and received no tips. After he was transferred to the day shift, Mr. Dioguardi still saw petitioner and was aware that she worked as a dealer. Neither party called petitioner's supervisor, during the 1982 year, to testify regarding how frequently petitioner worked as a dealer or floor person. However, petitioner herself stated during cross-examination of one of her witnesses that
Petitioner also contends that when working as a floor person, she received dealers' wages of approximately $3.50 per hour with no tips or tokes instead of the normal pay for floor persons during the 1980-1982 years of $11.25 per hour. According to petitioner, her employer was guilty of discriminatory practices against women in managerial positions since Stardust "occasionally used female dealers in that (floor person) capacity while paying them dealers' wages." Petitioner's testimony was controverted by Mr. Dioguardi, a 32-year employee of Stardust. He knew of no discrimination against women during the years in issue. Ms. Krol Stover, assistant controller and former personnel director of Stardust since April 1986, had a similar managerial position at the larger Las Vegas Tropicana Hotel/Casino prior to her Stardust employment. She named 10 women at Stardust presently in managerial positions, including four female floor persons paid floor person's wages. Ms. Stover was unaware of any female employment discriminatory action by her employer in the 1980s before her Stardust employment commenced. After weighing the evidence in this record, we conclude that petitioner has failed to prove that she did not earn tip income in the amounts determined by respondent. Accordingly, we sustain respondent's determination.
Negligence or intentional failure to keep adequate records of tip income which results in the underpayment of tax supports the imposition of the additions to tax under section 6653(a), (a)(1), and (a)(2). Catalano v. Commissioner, supra at 17. Respondent's determination of these additions to tax for 1980 and 1981 is presumed correct, and petitioner bears the burden of proving otherwise. Bixby v. Commissioner [Dec. 31,493], 58 T.C. 757, 791-792 (1972); Rule 142(a). Because of the lack of record keeping and the wide discrepancies between the amounts of toke income reported by petitioner and the actual amounts of such income, we sustain respondent's determination regarding the additions to tax for the years 1980 and 1981. See Zibilich v. Commissioner [Dec. 31,347(M)], T.C. Memo. 1972-92.
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