Olk was a dealer at a casino
in Nevada. There is a tradition that if you win a lot of money at the
table, the gambler gives some money to the dealer.
That's known as a 'toke'.
The IRS claimed that the
'tokes' were gross income. Olk
objected.
Olk argued that there was no
legal obligation to provide the 'toke', therefore it is a gift, and not taxable per 26 U.S.C. §102(a).
The IRS argued that the
'tokes' were like a tip to a waiter, and were therefore not a gift.
The Trial Court found for Olk.
IRS appealed.
The Trial Court looked to
the logic of Commissioner v. Duberstein (363 U.S. 278 (1960)) and found that there was a clear intent
of the gambler to give the gift out of "detached and disinterested
generosity," and not out of obligation.
The Appellate Court reversed.
The Appellate Court found
that there is a social obligation for gamblers to provide a 'toke', and
therefore it is akin to a waiter receiving a tip. And tips are not
considered to be gifts, they are
included in gross income.
The Court listed a number of
factors to consider in making the determination that the tips should be
reasonably regarded as compensation for services, including:
The regularity of the flow
The equal division of
receipts, and
The daily amount received
Basically, this case
reiterated the Duberstein decision
that in order to be considered a gift, the item must be
given with no expectation of getting something in return, or in response
to receiving something of value.
That includes voluntary
tips, if those tips are traditionally given for the specific service
rendered.
