                     T.C. Summary Opinion 2008-37



                        UNITED STATES TAX COURT



                   MARK MONKICHI ITO, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



        Docket No. 16129-06S.             Filed April 16, 2008.



        Mark Monkichi Ito, pro se.

        Marion K. Mortensen and David Sorensen, for respondent.



     SWIFT, Judge:     This case was heard pursuant to the

provisions of section 7463 of the Internal Revenue Code in effect

when the petition was filed.     Pursuant to section 7463(b), the

decision to be entered is not reviewable by any other court, and

this opinion shall not be treated as precedent for any other

case.
                               - 2 -
     Respondent determined deficiencies in petitioner’s 2003 and

2004 individual Federal income taxes in the respective amounts of

$3,771 and $1,366, and penalties under section 6662(a) in the

respective amounts of $754 and $273.

     The primary issue for decision is the amount of tip income

petitioner received in 2003 and 2004.

     All section references are to the Internal Revenue Code for

the years in issue.


                             Background

     Some of the facts have been stipulated and are so found.

     At the time the petition was filed, petitioner resided in

Utah.

     During 2003 and 2004, petitioner was employed as a bartender

in the lobby lounge of the Grand America Hotel, in downtown Salt

Lake City.

     In 2003 and 2004, petitioner received total wages of $20,487

and $28,850, respectively, for his work at the Grand America

Hotel.

     In each year, petitioner also received tips from customers

he served as a bartender in the lobby lounge of the Grand America

Hotel.   Petitioner, however, did not keep records of the amount

of tip income he received.

     The Grand America Hotel reported to respondent and to

petitioner that petitioner received in 2003 $419 and in 2004
                              - 3 -
$7,214 in tip income, and petitioner reported on his 2003 and

2004 Federal income tax returns as income a total of $20,487 and

$28,850, respectively, which amounts included the above wages

petitioner received and the above reported tip income.

     During respondent’s employment tax audit of the Grand

America Hotel and respondent’s income tax audit of petitioner,

using documented tip income received in 2003 and in 2004 on

credit card sales at the food and beverage locations in the Grand

America Hotel, applying a discount thereto to calculate tips

received on cash sales, calculating an employee per hour tip

rate, and considering the number of hours petitioner worked,

respondent determined that petitioner had received tip income of

$21,360 and $8,737 in 2003 and 2004, respectively, over and above

the income from the Grand America Hotel petitioner reported on

his Federal income tax returns.1

     During respondent’s income tax audit of petitioner,

petitioner did not provide respondent with any records or other

credible substantiation of the amount of tip income he received.


                           Discussion

     It is well established that tip income received by a

taxpayer constitutes compensation for services rendered and is



     1
        As a result of his calculations, respondent estimated
that each Grand America Hotel employee who received tips received
approximately $10 in tips per hour worked in 2003 and $9 in tips
per hour worked in 2004.
                               - 4 -
includable in the taxpayer’s gross income for Federal income tax

purposes.   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); Way v. Commissioner, T.C. Memo.

1990-590.

     Also, it is well established that a taxpayer is required to

maintain records sufficient to allow the taxpayer to accurately

report all income, sec. 1.6001-1(a), Income Tax Regs., and in the

absence of taxpayer records, respondent is authorized to

reconstruct a taxpayer’s income using any reasonable method,

United States v. Fior D’Italia, Inc., 536 U.S. 238, 243 (2002);

Mendelson v. Commissioner, 305 F.2d 519, 521-522 (7th Cir. 1962),

affg. T.C. Memo. 1961-319; Catalano v. Commissioner, supra at 13;

Schroeder v. Commissioner, 40 T.C. 30, 33 (1963).

     In McQuatters v. Commissioner, T.C. Memo. 1973-240, we

approved respondent’s estimate of tip income based on total tips

received on credit card sales, total annual credit card and cash

sales, and an individual waiter’s estimated pro rata share of

annual sales (based on the number of hours each waiter worked).

A discounted tip rate also was applied to reflect likely lower

tips on cash sales.

     Petitioner acknowledges that in 2003 and 2004 he received

tip income that he did not report on his Federal income tax

returns.
                                  - 5 -
     Petitioner, however, alleges that because he worked in the

lobby lounge of the Grand America Hotel, he received fewer and

lower tips than employees who worked in the hotel’s restaurants.

Petitioner also alleges that the hotel was aware of that fact and

accordingly set his hourly wage at $9 an hour, whereas other

employees at the hotel’s restaurants, who generally received

higher tips, were paid a wage of only $2 an hour.

     At the trial petitioner called no witnesses, and no

documentation was offered to corroborate petitioner’s allegation

that his employment in the lobby lounge of the Grand America

Hotel resulted in higher wages but lower tips for petitioner.

Corroborating evidence should have been easily available.

     On the basis of the limited evidence before us, we sustain

respondent’s determination of petitioner’s 2003 and 2004 tip

income.

     Section 6662(a) imposes an accuracy-related penalty of

20 percent on any portion of an underpayment of tax that is

attributable to negligence or to disregard of rules or

regulations.   Sec. 6662(b)(1).    Petitioner’s failure to keep

records and to make a reasonable attempt accurately to report his

tip income supports imposition of the section 6662(a) penalties.
                                 - 6 -
     Based on the limited evidence before us, we sustain

respondent’s determination of petitioner’s tip income and

respondent’s imposition of the section 6662(a) negligence

penalties.

     To reflect the foregoing,


                                              Decision will be entered

                                         for respondent.
