View source for Olk v. United States

{{Use mdy dates|date=September 2023}}
{{Infobox COA case
|Litigants=Olk v. United States
|Court=[[United States Court of Appeals for the Ninth Circuit]]
|CourtSeal=File:Seal of the United States Courts, Ninth Judicial Circuit.svg
|ArgueDate=
|ArgueYear=
|DecideDate=June 1,
|DecideYear=1976
|FullName=Olk v. United States
|Citations=536 [[Federal Reporter|F.2d]] [https://law.justia.com/cases/federal/appellate-courts/F2/536/876/139372/ 876]; 76-2 USTC ([[CCH (company)|CCH]]) ¶ 9484
|Prior=
|Subsequent=Rehearing denied, July 14, 1976; ''[[Certiorari|cert. denied]]'', {{ussc|429|920|1976|el=no}}
|Holding=District court decision reversed
|Judges=[[Alfred Goodwin]], [[Joseph Tyree Sneed III]], [[Robert Van Pelt]] ([[United States District Court for the District of Nebraska|D. Neb.]])
|Majority=Sneed
|JoinMajority=Goodwin, Van Pelt
|LawsApplied=[[Internal Revenue Code]]
}}
'''''Olk v. United States''''', 536 [[Federal Reporter|F.2d]] 876, 76-2 U.S. Tax Cas. ([[CCH (company)|CCH]]) ¶ 9484 (9th Cir.), ''[[Certiorari|cert. denied]]'', 429 U.S. 920, 97 S. Ct. 317 (1976),<ref>{{cite court |litigants=Olk v. United States |vol=536 |reporter=F.2d |opinion=876 |pinpoint= |court=9th Cir. |date=1976 |url=https://law.justia.com/cases/federal/appellate-courts/F2/536/876/139372/ |accessdate=2017-11-27 |quote=}}</ref> was a case decided before the [[United States Court of Appeals for the Ninth Circuit]] which dealt with the question of whether [[Gratuity|tips]] (or "tokes") to casino dealers were taxable as [[income]] to the dealers under [[Internal Revenue Code section 61]]<ref>{{usc|26|61}}.</ref> or, alternatively, [[nontaxable gifts]] under Internal Revenue Code section 102(a).
==Facts==
In 1971, the [[plaintiff]] was employed as a [[craps]] dealer in two [[Las Vegas Strip|Las Vegas]] [[casino]]s.<ref name="Pin877">''Olk'', 536 F.2d at 877.</ref> Dealers would at times receive money from the players as "tokes," which are similar to [[Gratuity|tips]]. The major difference between tips and "tokes" is that the casino workers do not perform specific [[Service (economics)|services]] for customers. In fact, their [[contract]]s prohibited any such services other than the task of running the various games. This money would be collected and split evenly among the four dealers at the craps table at the end of each shift. This particular plaintiff received an average of $30 per day combined from his two casino jobs.<ref name="Pin877"/>
The [[United States district court|district court]] in this case made two "findings of fact" that were relevant to the Court of Appeals decision. The first was that the tips were the result of "impulsive generosity" on the part of the players, and the second is that the tips were the result of "detached and disinterested generosity."<ref name="Pin877"/> These findings led the district court to find that the tips were gifts and not income for tax purposes under the test established in ''[[Commissioner v. Duberstein]]''.<ref>{{ussc|name=Commissioner v. Duberstein|link=|volume=363|page=278|pin=|year=1960}}</ref> This is relevant because gifts are not included in [[gross income]] for federal tax purposes.<ref>See generally {{usc|26|102}}.</ref>
==Issue==
The issue in this case was whether the trial court erred in such "findings of fact" that led to the determination of holding that the tips to dealers were gifts and not income for federal tax purposes.
==Holding==
The Court of Appeals for the Ninth Circuit reversed the trial court, holding that the tips did in fact constitute income, and the district court erred in making findings to the contrary.
==Reasoning==
The Court began by stating that the conclusion that the tips were made out of "detached and disinterested generosity" was a conclusion of law, not a finding of fact, and as such the Court did not need to give any deference <ref>A court must evaluate a finding of fact by the trial court under the "clearly erroneous" standard, but does not need to give such deference to a conclusion of law.</ref>  to the trial court's finding on that point.  The court made a distinction between the lower court's determination of law and determination of fact.  The determination of the dominant reason that explains the player's action in making the transfer was a matter of law for the [[lower court]] that would not be reversed because it was not clearly erroneous.  The determination that such dominant reason requires tax treatment as a gift is one of law, to which the appeals court does not owe deference.
The Court decided that such payments by the players in casinos are not motivated by "detached or disinterested [[generosity]]," but instead was an "involved and intensely interested act" motivated by a hope that such a "tribute to the gods of fortune" would be "returned bounteously."<ref name="Pin879">''Olk'', 536 F.2d at 879.</ref> The Court enumerated a number of factors to consider in making the determination that the tips should be reasonably regarded as [[Remuneration|compensation]] for services, including:
*the regularity of the flow
*the equal division of [[receipts]], and
*the daily amount received<ref name="Pin879"/>
The Court announced a generalization that:
"receipts by taxpayers engaged in rendering services contributed by those with whom the taxpayers have some personal or functional contact in the course of the performance of the services are [[taxable income]] when in conformity with the practices of the area and easily valued."<ref name="Pin879"/>
Clearly, tips to dealers fit this description. As such, the tips should be included in [[gross income]].
==Importance==
The importance of this case is the creation of a set of factors that the Court created to evaluate these types of cases. While the giver's intention can be difficult to ascertain, objective factors like the regularity, division, and amount of tips are less subjective.  Also, the Court made the easy leap from tips to "tokes," and indicated that the very strong similarity to tips made them income. This strong similarity exists, despite the fact that the casino workers are not "compensated" for performing any specific service to customers.
==References==
{{Reflist}}
==External links==
*{{caselaw source
| case = ''Olk v. United States'', 536 F.2d 876 (9th Cir. 1976)
| courtlistener =https://www.courtlistener.com/opinion/336173/wendell-olk-v-united-states/
| googlescholar = https://scholar.google.com/scholar_case?case=5207623102947237888
| justia =https://law.justia.com/cases/federal/appellate-courts/F2/536/876/139372/
| openjurist =https://openjurist.org/536/f2d/876
}}
[[Category:United States Court of Appeals for the Ninth Circuit cases]]
[[Category:United States taxation and revenue case law]]
[[Category:1976 in United States case law]]