I believe you are incorrect.  Many of the trades who are "sole proprieters" use a 1065 and pass income through to partners (often husband and wife) through the K-1s.  So to say that just because you use a K-1 to pass income over to your 1040 then you cannot deduct tips is incorrect.  Our trade happens to be on the table of allowable occupations where the tip deduction is allowed.  There is a misconception that folks who are in partnerships and use 1065s are "big business", and that is completely false.