## Facts

- Wendell Olk worked in 1971 as a craps dealer at two Las Vegas casinos.
- Each craps table was staffed by a boxman and three dealers under casino supervision.
- Casino rules required equal treatment of patrons, prohibited fraternizing, and barred dealers from providing special service.
- Patrons sometimes gave dealers chips or cash, or placed bets for them; these payments were known as “tokes.”
- Tokes were required to be placed into a common pool for the table and were split equally among the four table employees at the end of each shift; keeping a toke was grounds for termination.
- Olk received roughly $30 per day from tokes.
- Olk paid federal income tax on the tokes and brought a refund action, claiming the tokes were excludable “gifts” under I.R.C. § 102(a).
- After a bench trial, the district court characterized the tokes as stemming from patrons’ “impulsive” and “detached and disinterested” generosity and entered judgment for Olk.
- The United States appealed, contending the tokes were taxable income under I.R.C. § 61.

## Issues

1. Whether tokes received by a craps dealer from casino patrons are excludable “gifts” under I.R.C. § 102(a) or taxable income under I.R.C. § 61.
2. Whether the trial court’s determination that patrons acted from “detached and disinterested generosity” is a factual finding entitled to clear-error deference or a legal (or mixed) characterization subject to closer appellate review.

## Decision

- The Ninth Circuit reversed the refund judgment.
- The court held the tokes were taxable income to Olk under I.R.C. § 61, not excludable gifts under I.R.C. § 102(a).
- The court treated the district court’s “detached and disinterested generosity” characterization as a legal (or mixed) determination, not a purely factual finding insulated by clear-error review.
- Applying the gift standard, the court concluded the tokes functioned like tips: regular, pooled, and economically significant payments arising in connection with services at the gaming table.
- The court rejected the view that superstition or hope of good luck equated to disinterested generosity, reasoning such motives can reflect a self-interested expectation of future favorable outcomes.

## Legal Principles

- Gross income under I.R.C. § 61 is broad and includes customary service-related payments from customers, including tips and analogous amounts.
- A transfer is excludable as a “gift” under I.R.C. § 102(a) only if it proceeds from “detached and disinterested generosity” rather than from a compensatory or self-interested motive.
- Determining whether a transfer satisfies the “detached and disinterested generosity” standard involves legal characterization of the facts and may receive less deference on appeal than ordinary historical factfinding.
- Regularity, pooling, predictable amounts, and the payment’s role in an industry’s compensation practices weigh against gift treatment.

## Conclusion

The Ninth Circuit held that casino tokes received and pooled by a craps dealer are taxable income because they operate as customary, service-related payments rather than gifts motivated by detached and disinterested generosity, requiring reversal of the taxpayer’s refund judgment.


Olk v. United States, 536 F.2d 876 (9th Cir. 1976)