Olk v. United States
536 F.2d 876 (1976)

  • 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.