Petitioner had a set routine of how he recorded his tips at the end of each shift. MGM Grand’s point-of-sales system would generate a receipt that stated how much he had earned in tips from credit cards and room charges (charged tips). He would cash out his charged tips receipt daily. Cash tips were not internally controlled by MGM Grand’s system, and so petitioner would personally keep track of his cash tips for each shift. Petitioner would put any change from cash tips that he received in a glass jar. He would add together his cash tips and his charged tips and enter the total into the system when he punched out. He would tip the cashier any leftover change that he received. This amount would then be automatically reported to MGM Grand’s payroll department. He also kept daily a personal tip diary by recording the total on a slip of paper. His daily totals were recorded in whole numbers. Petitioner kept both the receipts from his charged tips and his contemporaneously recorded slips of paper for 2010 and 2011. For 2009 he kept only the contemporaneously recorded slips of paper. After he submitted his tip information to MGM Grand’s system, petitioner would “tip out”, or give a portion of his tips to, the barback who had helped him that shift.
He did not keep a contemporaneous log detailing how much he paid out to the barbacks. Petitioner gave the barbacks 10% to 20% of his total tips. Petitioner’s tip diaries show that petitioner received tips of $21,849, $24,212, and $22,950 for tax years 2009-11, respectively. These amounts include the tips he gave to the barbacks but do not include the change tips he gave to the cashiers when he cashed out his charge tip receipts. Tax Returns Petitioner filed timely tax returns for all three years at issue. He hired a tax return preparer to aid him in this process. Each year he would provide his return preparer with the Form W-2 generated by MGM Grand. The Form W-2 showed how much he had earned in tips for that year on the basis of the amounts that he reported to MGM Grand at the end of each shift. The return preparer used that information to complete petitioner’s Form 1040, U.S. Individual Income Tax Return. Each year petitioner reduced the total tips that he received by approximately 10% to account for the tip outs to the barback at the end of each shift. In accordance with his Forms W-2 petitioner reported income from tips of $18,110, $23,941, and $21,926 for tax years 2009-11, respectively. He claimed deductions for the tip outs of $1,811, $2,394 and $2,193 for tax years 2009-11, respectively.
Petitioner also testified about the typical tipping behavior of his patrons. Most of his drinks served were comps, and he testified that customers rarely tipped on comp drinks and that if they did they might “throw a buck or two” after several hours of sitting at his bar receiving the comped drinks. Petitioner additionally testified that college kids and foreigners rarely tipped.
On the basis of all the evidence presented, and on this record, we find that petitioner has met his burden of proof. He has satisfied the requirement of section 31.6053-4(a)(1), Employment Tax Regs., by keeping a daily record and has reported amounts substantially the same as recorded therein. We find petitioner’s [*16] figures accurately reflect the tip income he earned during the years at issue.
But if a cruel fate should land you behind a six-stool Las Vegas bar jammed with sullen slotmachinists who guzzle and don’t tip, or, even worse, give you, the in-the-trenches tax preparer, a platoon of clients so situated, read Judge Kerrigan’s tip to Al, who gets the deficiency bounced based upon his well-kept records and truthful testimony.