George John Killoran v. Commissioner of Internal Revenue

We affirm a tax court decision assessing deficiency and hold that a taxi cab driver’s tips, regardless of how state law may treat them, are income for federal income tax purposes.

Appellant Killoran drove a cab in Reno, Nevada, during 1979. He stipulated in the tax court that during that year he received tips totaling $1,608.70, and that he did not report those tips on his federal income tax return. The tax court assessed a deficiency of $288 in unpaid taxes, plus $14.40 negligence penalty, and denied a motion for review. This appeal, of the tax assessment only, followed.

Killoran argues that his tips are not taxable income, but non-taxable gifts. Compare 26 U.S.C. § 61 with § 102. We have held to the contrary. Cracchiola v. C.I.R., 9 Cir., 1981, 643 F.2d 1383, 1384 (waiter’s tips); Olk v. United States, 9 Cir., 1976, 536 F.2d 876, 879 (casino craps dealer’s “tokes”); Roberts v. C.I.R., 9 Cir., 1949, 176 F.2d 221, 225-226 (taxi driver’s tips). See Treas.Reg. § 1.61-2(a)(l) (1960).

Killoran argues that his customers tipped him out of a “detached and disinterested generosity” because they “like[ed] and respected]” him, and that he accepted the tips “only on the condition that…