*44 Held: Petitioners' tip income determined to be 10 percent of sales of food and beverages.
Held, further: Respondent correctly imposed additions to tax for negligence under section 6653(a). 2
MEMORANDUM FINDINGS OF FACT AND OPINION
IRWIN, Judge: Respondent determined the following deficiencies and additions to tax under section 6653(a) against petitioners:
| Name | Docket No. | Year | Deficiency | Section 6653(a) |
| Arthur J. McQuatters and Lorna J. McQuatters | 2411-71 | 1967 | $ 636.72 | $31.84 |
| 1968 | 868.60 | 43.43 | ||
| Horst J. Nehren and Erika Nehren | 2412-71 | 1968 | 903.61 | 45.18 |
| Lucio Boscolo and Anita Boscolo | 2413-71 | 1967 | 388.62 | 19.43 |
| 1968 | 216.86 | 10.84 | ||
| Nancy J. Journey | 2414-71 | 1967 | 691.94 | 34.60 |
| 1968 | 790.31 | 39.52 | ||
| George A. Raatz and Wilma G. Raatz | 2415-71 | 1967 | 911.84 | 45.59 |
| 1968 | 1,059.84 | 52.99 | ||
| Pauline F. Bowers | 2416-71 | 1967 | 758.33 | 37.92 |
| April J. Ryan | 2417-71 | 1967 | 473.69 | 23.68 |
| 1968 | 715.80 | 35.79 | ||
| John R. Bowers and Pauline Bowers | 2418-71 | 1968 | 817.33 | 40.87 |
| Mary R. Jackson | 2419-71 | 1967 | 204.99 | 10.25 |
| 1968 | 752.13 | 37.61 | ||
| Arnold C. Cruickshank and Lois M. Cruickshank | 2420-71 | 1967 | 887.02 | 44.35 |
| 1968 | 759.26 | 37.96 | ||
| Curtis Robinson and Mattie Robinson | 2422-71 | 1967 | 621.05 | 31.05 |
| 1968 | 748.28 | 37.41 | ||
| James R. Washington and Connie M. Washington | 2423-71 | 1967 | 859.16 | 42.96 |
| Donald E. Keesler and Phyllis A. Keesler | 2424-71 | 1967 | $616.82 | $30.84 |
| 1968 | 522.19 | 26.11 | ||
| Orin G. Yates and Patricia L. Yates | 2426-71 | 1968 | 717.00 | 36.00 |
| Edgar E. Crownover and Pauline Crownover | 2427-71 | 1968 | 958.85 | 47.94 |
| Osamu Hirata and Mary Hirata | 2428-71 | 1967 | 636.60 | 31.83 |
| 1968 | 680.76 | 34.04 |
Concessions as to some issues have been made by the petitioners in docket No. 2423-71. The issues for decision are whether respondent correctly redetermined the tip income received by petitioners during 1967 and 1968 and whether any part of the underpayment of tax by each of the petitioners for each of the years is due to negligence or intentional disregard of rules and regulations.
FINGINGS OF FACT
Petitioners are Arthur J. and Lorna J. McQuatters, Horst J. and Erika Nehren, Lucio and Anita Boscolo, Nancy J. Journey, George A. and Wilma G. Raatz, Pauline F. Bowers, April J. Ryan, John R. and Pauline Bowers, Mary R. Jackson, Arnold C. and Lois M. Cruickshank, Curtis and Mattie Robinson, James R. and Connie M. Washington, Donald E. and Phyllis A. Keesler, Orin G. and Patricia L. Yates, Edgar E. and Pauline Crownover, and Osamu and Mary Hirata. All the petitioners resided in the State of Washington at the time the petitions herein were 4 filed. Some of the tax returns involved were filed with the district director of internal revenue, Tacoma, Wash. Others were filed with the Western Service Center, Ogden, Utah. The male petitioners are included solely because they*46 filed joint income tax returns with their wives. Hereafter, petitioners shall refer only to the female petitioners.
During 1967 the following petitioners were employed as waitresses at the Space Needle Restaurant. Their hours, wages and tips reported were:
| Name | Hours | Wages | Tips Reported to Employer | Tips Reported on Tax Return |
| Connie M. Washington Docket No. 2423-71 | 1,421 | $2,344.12 | $ 35.00 | $ 239.00 |
| Lorna J. McQuatters Docket No. 2411-71 | 1,522 | 2,439.66 | 1,052.49 | 1,052.49 |
| Mary Hirata Docket No. 2428-71 | 1,569 | 2,648.24 | 1,257.00 | 1,257.00 |
| April J. Ryan Docket No. 2417-71 | 1,109 | 1,908.71 | 283.41 | 662.91 |
| Phyllis A. Keesler Docket No. 2424-71 | 1,410 | 2,514.95 | 749.95 | 749.95 |
| Mary R. Jackson Docket No. 2419-71 | 692 | 1,228.00 | 337.00 | 817.00 |
| Wilma G. Raatz Docket No. 2415-71 | 1,693 | 2,853.18 | 1,046.13 | 1,046.13 |
| Mattie Robinson Docket No. 2422-71 | 1,452 | 2,314.53 | 1,048.16 | 1,048.16 |
| Lois M. Cruickshank Docket No. 2420-71 | 1,202 | 2,110.86 | 571.36 | 571.36 |
| Anita Boscolo Docket No. 2413-71 | 798 | 1,339,55 | 288.57 | 288.57 |
| Nancy J. Journey Docket No. 2414-71 | 1,753 | 2,960.52 | 1,086.64 | 1,086.64 |
| Pauline F. Bowers Docket No. 2416-71 | 1,688 | 2,783.92 | 1,034.98 | 1,034.98 |
During 1968 the following petitioners were employed as waitresses at the Space Needle Restaurant. Their hours, wages and tips reported were:
| Name | Hours | Wages | Tips Reported to Employer | Tips Reported on Tax Return |
| Lorna J. McQuatters Docket No. 2411-71 | 1,499 | $2,504.94 | $1,128.31 | $1,128.31 |
| Mary Hirata Docket No. 2428-71 | 1,461 | 2,512.96 | 1,335.00 | 1,335.00 |
| Particia L. Yates Docket No. 2426-71 | 1,403 | 2,390.51 | 1,094.06 | 1,378.94 |
| April J. Ryan Docket No. 2417-71 | 1,483 | 2,489.68 | -0- | 1,446.00 |
| Phyllis A. Keesler Docket No. 2424-71 | 841 | 1,598.08 | 378.80 | 378.80 |
| Mary R. Jackson Docket No. 2419-71 | 1,688 | 2,849.44 | 1,017.00 | 1,527.00 |
| Erika Nehren Docket No. 2412-71 | 1,503 | 2,478.50 | 767.00 | 767.00 |
| Wilma G. Raatz Docket No. 2415-71 | 1,646 | 2,845.44 | 876.65 | 876.65 |
| Mattie Robinson Docket No. 2422-71 | 1,352 | $2,275.04 | $ 829.45 | $ 829.45 |
| Lois M. Cruickshank Docket No. 2420-71 | 856 | 1,509.17 | 251.50 | 251.50 |
| Pauline Crownover Docket No. 2427-71 | 1,723 | 2,892.75 | 1,008.50 | 1,008.50 |
| Anita Boscolo Docket No. 2413-71 | 440 | 795.16 | 307.86 | 307.86 |
| Nancy J. Journey Docket No. 2414-71 | 1,774 | 2,991.06 | 1,238.10 | 1,358.10 |
| Pauline F. Bowers Docket No. 2418-71 | 1,610 | 2,762.51 | 955.89 | 1,032.64 |
The total food and beverage sales of the Space Needle Restaurant for the years 1967 and 1968 were $2,197,295.84 and $2,334,856, respectively.
During 1968 the total food and beverage sales which were charged were $634,762.
The total hours worked by all waitresses, including those which worked in the "cocktail lounge" were 83,194 for 1967 and 81,165 for 1968.
The total food and beverage sales for the months of March and September 1968 were $183,976.06 and $214,707.18, respectively.
For the months of March and September 1968, the total charge sales which included a charge tip, but exclusive of 7 the tip and sales tax, were $36,954.12 and $39,606.29, respectively.
For the months of March and September 1968 the total charge tips on charge sales of food and beverage were $5,213.07 and $5,509.77, respectively.
During 1968, 27.17 percent of the sales of the Space Needle Restaurant were paid by charge. During March and September 1968 the percentage tips which were charged on charge sales were 14.10 percent and 14.42 percent, respectively. During the months of March and September 1968 the percentage of total sales which were charged and included a charge tip were*49 20.09 percent and 18.45 percent, respectively.
None of the petitioners kept or had records of their tip income for 1967 and 1968. Respondent determined the tip income of petitioners indirectly using the following method for each year: (1) total sales of food and beverages for the restaurant were reduced by ten percent to account for low or nontippers, sharing tips with captains and banquets; (2) the resultant figure (sales subject to tips) was divided by the total number of hours worked by all waitresses during the year to determine a sales-per-waitress-hour average; (3) this average was multiplied by the number of hours in each year that each waitress worked to determine the yearly sales of each waitress; and (4) the yearly sales of each waitress was multiplied by 12 percent to determine the yearly tip income of 8 each waitress. No distinction was made between tips on cash sales and charge sales. Using this method respondent determined that petitioners had the following amounts of tip income during the years in issue:
| Name Docket No. | Year | Tip Income Determined by Respondent |
| Erika Nehren 2412-71 | 1968 | $4,659.30 |
| Wilma Raatz 2415-71 | 1967 | 4,825.05 |
| 1968 | 5,102.60 | |
| Mattie Robinson 2422-71 | 1967 | 4,138.20 |
| 1968 | 4,191.20 | |
| April Ryan 2417-71 | 1967 | 3,163.31 |
| 1968 | 4,607.38 | |
| Connie Washington 2423-71 | 1967 | 4,053.26 |
| Patricia Yates 2426-71 | 1968 | 4,349.00 |
| Anita Boscolo 2413-71 | 1967 | 2,276.23 |
| 1968 | 1,366.99 | |
| Pauline Bowers | ||
| 2416-71 | 1967 | 4,810.80 |
| 2418-71 | 1968 | 4,991.00 |
| Lois Cruickshank 2420-71 | 1967 | 3,428.58 |
| 1968 | 2,659.42 | |
| Pauline Crownover 2427-71 | 1968 | 5,353.01 |
| Mary Hirata 2428-71 | 1967 | 4,475.42 |
| 1968 | 4,539.03 | |
| Mary Jackson 2419-71 | 1967 | 1,973.86 |
| 1968 | 5,244.28 | |
| Nancy Journey 2414-71 | 1967 | 4,996.05 |
| 1968 | 5,499.40 | |
| Phyllis Keesler 2424-71 | ||
| 1967 | 4,018,50 | |
| 1968 | 2,607.10 | |
| Lorna McQuatters 2411-71 | 1967 | 4,337.70 |
| 1968 | 4,646.90 |
OPINION
Petitioners were all waitresses working in the Space Needle Restaurant in Seattle during various times in 1967 and 1968. Although there is no consistent pattern in their reporting, all of petitioners reported relatively low amounts of tip income on their tax returns for these years in comparison to their wages (10 to 50 percent of wages) and to the number of hours each worked (from $0.17 to $1.18 per hour). Unfortunately none of petitioners kept or had available records recording their tip income. Respondent determined that in the average working hour petitioners each sold $23.77 and $25.89 of food and beverages in 1967 and 1968, respectively, and that petitioners earned tips equal to 12 percent of these sales. Respondent's sales-per-hour figure contains a ten percent downward adjustment to account for nontippers.
Petitioners complain that their tips did not average anything close to 12 percent of their sales and that seven percent is a more realistic figure; however, their evidence in support of such claims has little relevance or credibility since a sparse effort was made in 1970 and 1971 to determine actual tips and there were inconsistencies in these efforts. *51 In the absence of adequate record keeping by petitioners, respondent was justified in reconstructing their tip income by an indirect method, and the method employed was logically and factually sufficient.See section 446(b); Mendelson v. 10 Commissioner, 305 10 F.2d 519">10 F.2d 519 (C.A. 7, 1962), affirming a Memorandum Opinion of this Court, certiorari denied 371 U.S. 877">371 U.S. 877 (1962); Carroll F. Schroeder, 40 T.C. 30">40 T.C. 30 (1963).Rather than presenting evidence favorable to their claims petitioners have mainly appealed to the Court's sympathies, perhaps hoping for our liberal application of the rule in Cohan v. Commissioner, 39 F.2d 540">39 F.2d 540 (C.A. 2, 1930).
None of the petitioners has claimed that she did a significantly greater amount of low tipping work (serving banquets or lunches or working in the cocktail lounge) than the other petitioners. Accordingly, we believe that respondent's flat rate approach to all petitioners is appropriate. Respondent's 12 percent rate is based upon the fact that charge customers of the Space Needle who also charged their tips gave*52 tips equaling slightly more than 14 percent of the cost of their food and beverages. Such customers accounted for about one-fifth of the restaurant's total sales for two months in 1968. Respondent reduced the rate to 12 percent to account for the facts that cash customers usually left smaller and fewer tips than charge customers, that petitioners shared their tips with the captains, and that low tipping work like banquets was not charged.
Although we are reluctant to extricate petitioners from the predicaments caused by their own lack of records, we do 11 believe that petitioners have justified an additional two percent reduction in the rate to be applied. We are convinced that petitioners gave 10 to 15 percent of their tips to the captains and that to account for this and other factors respondent's formula should be applied with a 10 percent rather than a 12 percent rate of tipping. Accordingly, we hold that the amounts of tip income determined by respondent for each petitioner should be reduced by one-sixth.
With respect to the additions to tax imposed under section 6653(a) for*53 negligence, petitioners must show that respondent's determinations were erroneous. David Courtney, 28 T.C. 658">28 T.C. 658 (1957). Petitioners have not even made a plausible argument to explain their fantastically low reporting of tip income. In no case did the amount reported by any petitioner approach the seven percent "guesstimate" of tips made by some petitioners at trial. We sustain respondent's imposition of the additions to tax.
Decisions will be entered under Rule 50.
Footnotes
1. Cases of the following petitioners are consolidated herewith: Horst J. Nehren and Erika Nehren, docket No. 2412-71; Lucio Boscolo and Anita Boscolo, docket No. 2413-71; Nancy J. Journey, docket No. 2414-71; George A. Raatz and Wilma G. Raatz, docket No. 2415-71; Pauline F. Bowers, docket No. 2416-71; April J. Ryan, docket No. 2417-71; John R. Bowers and Pauline Bowers, docket No. 2418-71; Mary R. Jackson, docket No. 2419-71; Arnold C. Cruickshank and Lois M. Cruickshank, docket No. 2420-71; Curtis Robinson and Mattie Robinson, docket No. 2422-71; James R. Washington and Connie M. Washington, docket No. 2423-71; Donald E. Keesler and Phyllis A. Keesler, docket No. 2424-71; Orin G. Yates and Patricia L. Yates, docket No. 2426-71; Edgar E. Crownover and Pauline Crownover, docket No. 2427-71; and Osamu Hirata and Mary Hirata, docket No. 2428-71. ↩