Bell v. Commissioner

¶3MEMORANDUM FINDINGS OF FACT AND OPINION

¶4CHABOT, Judge: Respondent determined deficiencies in Federal individual income tax and additions to tax under sections 6651(a) ¹ (failure to file return) and 6653(a) (negligence) against petitioner as follows: ^2*117

¶5

¶6After concession by petitioner that he received the income shown on the Forms W-2 for the years in issue and determined by respondent to have been received by him, the issues remaining for decision are as follows:

¶7(1) Whether respondent erred in determining petitioner's tip income;

¶8(2) Whether respondent erred in determining petitioner's "kickback", or commission, income;

¶9(3) Whether petitioner is liable for additions to tax under section 6651(a); and

¶10(4) Whether petitioner is liable for additions to tax under section 6653(a).

¶11FINDINGS OF FACT *118

¶12Some of the facts have been stipulated; the stipulation and the stipulated exhibits are incorporated herein by this reference.

¶13When the petition in this case was filed, petitioner resided in Las Vegas, Nevada.

¶14Petitioner worked full-time as a taxi driver for the Yellow Cab Company in Las Vegas, Nevada, from 1959 at least until the trial in the instant case. Petitioner's wages received from his employer during the years in issue amounted to one-half of his gross booked fares. During the years in issue, petitioner worked the 8:30 p.m.-to-5:30 a.m. shift anywhere in Las Vegas except the Westside.

¶15Taxi drivers were not obligated to share their tips with the taxi companies for which they worked.

¶16Petitioner maintained no record of his tip income; he did not report his tips to his employer.

¶17Occasionally, petitioner received kickbacks or commissions from restaurants, motels, wedding chapels, and other establishments.

¶18Petitioner did not file income tax returns for any of the years in issue.

¶19Petitioner completed high school. Petitioner maintained a "trip sheet" or daily log of fares, showing miles driven, units clocked, number of passengers, etc.; correct completion of a trip sheet required *119an understanding of, and an ability to perform, arithmetic calculations and an ability to balance cash received against the reported totals.

¶20For the notice of deficiency, as to each of the years before the Court respondent doubled the amount shown on petitioner's Form W-2 as wages for that year, in order to determine the gross fares charged on petitioner's taxi meter, and assumed that petitioner's tip income for that year averaged fifteen percent of these gross fares. Also, respondent determined that petitioner received $50 in 1973 and $424 in 1974 as kickbacks, or commissions.

¶21Some part of petitioner's underpayments were due to negligence for each of the years before the Court.

¶22OPINION

¶231. Tip Income

¶24Petitioner maintains that he booked all of his tips on his taxi meter during the years in issue, and we infer ^3*120 that his position is that, as a result, his net tip income was reflected as "wages" on his Forms W-2. Respondent contends that petitioner's tip income during the years in issue was not less than the amounts determined on the notice of deficiency. In addition to the wages shown on petitioner's Forms W-2.

¶25We agree that respondent's determinations as to petitioner's tip income have not been shown to be in error.

¶26Tips are, of course, includible in gross income under section 61(a), ⁴ e.g., ; . If a taxpayer fails to keep records or the records kept do not clearly reflect income, then respondent may reconstruct the taxpayer's income by use of a formula. See , affg. a Memorandum Opinion of this Court; ⁵; . It is, however, open to petitioner to point out areas or specific instances in which the method used by respondent failed to reflect his true income. .

¶27The parties *121have stipulated that petitioner kept no record of his tip income, that he reported no tips to his employer, and that his wages were fifty percent of his gross booked fares.

¶28Petitioner introduced no evidence, other than his own testimony, to support his contention that he booked all of his tips on his taxi meter. Petitioner admitted he had no record to support his contention and that he had never told his employer that he engaged in such a practce. In addition, the record discloses that taxi drivers were not required to share their tips with the taxi companies for which they worked, that stories about "booking" tips were regarded as standing jokes, and that petitioner generally stopped his taxi meter immediately upon arriving at the designated destination. Moreover, petitioner understood that booking tips would result in his employer keeping half of his tip income.

¶29We conclude that petitioner failed to prove that his tip income during any of the years in issue was less than that determined by respondent.

¶302. Kickback, or Commission, Income

¶31Petitioner stipulated that he occasionally received kickbacks or commissions from restaurants, motels, wedding chapels, and other establishments. *122At trial, petitioner did not introduce any evidence directed to the question of how much kickback income he received during the years in issue. What evidence was introduced tended to show that respondent's determination may have understated petitioner's income from such sources.

¶32We conclude that petitioner failed to prove that his kickback, or commission, income during the years in issue was less than that determined by respondent.

¶333. Addition to Tax - Failure to File Return

¶34Petitioner has the burden of proving error in respondent's determination that an addition to tax should be imposed under section 6651(a) for each of the years before the Court. . Petitioner stipulated he filed no returns for the years in issue. Petitioner explained that he thought the withheld Federal income tax was sufficient to meet his obligations. Evidently, it was not sufficient.

¶35We conclude that petitioner has failed to prove that his failure to file income tax returns for any of the years before the Court was due to reasonable cause and not due to willful neglect.

¶364. Addition to Tax - Negligence

¶37Petitioner has the burden of proving error in respondent's *123determination that an addition to tax should be imposed under section 6653(a) for each of the years before the Court. . Petitioner admitted he never maintained any record of his income. Petitioner had a high school education and was capable of performing the arithmetic skills necessary to maintain the "trip sheet". Petitioner introduced no evidence to explain why he kept no records.

¶38We conclude that some part of petitioner's underpayments were due to negligence for each of the years before the Court.

¶39On all the issues before the Court we hold for respondent.

¶40In light of the foregoing,

¶41Decision will be entered for the respondent.