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Editor: Colin Miller
Univ. of South Carolina School of Law

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Tuesday, April 15, 2008

Declare The Pennies On Your Eyes: Tax Case Reveals Interplay Between Rule 803(6) And Rule 1006

While I am completely clueless about all matters tax-related (I thank my wife Zoe for handling all of these matters), I thought I would do a tax-related post in (dis)honor of everybody's last favorite holiday:  Tax Day (I'm sad to report that Chipotle is not doing its annual Free Burrito on Tax Day promotion this year).  A "preference action" is a suit by a bankruptcy debtor, seeking recovery from a creditor of value received from the debtor during the so-called “preference period” immediately preceding the debtor's bankruptcy filing.  The plaintiff in In re Teligent, Inc., 2006 WL 1030417 (Bkrtcy.S.D.N.Y. 2006), brought such an action against the County of Fairfax, Virginia, but those wily Northern Virginians defeated the action by introducing the 2000 Assessment Record for Teligent, its 2000 tax bill, and its 2001 Assessment Record. 

The plaintiff objected that these documents were inadmissible under Federal Rule of Evidence 1006, which allows for a party to prove the contents of voluminous writings, recordings, or photographs which cannot conveniently be examined in court through the use of charts, summaries, or calculations, but only if the originals, or duplicates, are made available for examination or copying, or both, by other parties at reasonable time and place.  And according to the plaintiff, the County of Fairfax never produced the relevant documents underlying the assessments reflected in these three documents.  According to the court, however, the plaintiff "confused Rule 1006 with the business records exception to the hearsay rule contained in FED.R.EVID. 803(6)."

Under Federal Rule of Evidence 803(6), inter alia, a data compilation of conditions made from information transmitted by a person with knowledge, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the data compilation, is admissible as an exception to the rule against hearsay if properly authenticated.  And as the court in Teligent properly found, "[w]here the 'summary' is itself a business record, it is admissible without regard to the requirements of Rule 1006."  In other words, because the County of Fairfax as part of its regular practice of business, created tax-related data compilations, it could get these compilations admitted without having to show the plaintiff the original tax documents from which these compilations were created.

-CM   

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