Keogh v. Commissioner, 713 F.2d 496 

U.S. Court of Appeals for the Ninth Circuit

1983

Chapter

6

Title

Hearsay

Page

233

Topic

803(6) Business Record Exception

Quick Notes

Keogh is a 21 deal at the Dunns hotel in Las Vegas.  He was under investigation by the IRS for underreporting tip amount.  A tip diary of another person is being used to estimate his earnings.  The tax court admitted the diary as a business record exception.

Court held that tax court did not abuse it discretion in admitting the diary as a business record exception.   The diary showed indication of his own business activity.  The reliability usually found in records kept by business concerns may be established in personal business records if they are systematically checked and regularly and continually maintained, which was corroborate by his x-wife seeing him make timely and regular of entries of his tips. 

803(6) Records of regularly conducted activity. 

o    A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinions, or diagnoses,

o    made at or near the time by, or

o    from information transmitted by, a person with knowledge,

o    if kept in the course of a regularly conducted business activity, AND

o    if it was the regular practice of that business activity to make the memorandum, report, record or data compilation, all as shown by the testimony of the custodian or other qualified witness, or by certification that complies with Rule 902(11), Rule 902(12), or a statute permitting certification, unless the source of information or the method or circumstances of preparation indicate lack of trustworthiness.

o    The term "business" as used in this paragraph includes business, institution, association, profession, occupation, and calling of every kind, whether or not conducted for profit.

Book Name

Evidence: A Contemporary Approach.  Sydney Beckman, Susan Crump, Fred Galves.  ISBN:  978-0-314-19105-2.

Issue

o         Whether a personal diary used to keep tips can be used as a business record exception?  Yes.

o         Whether a third party can testify to the systematic entries of the diary?  Yes.

Procedure

Trial

o         United States Tax Court, which assessed income tax deficiencies against Keogh for underreported tip income

Appellant

o         Affirmed

Facts

Discussion

Key Phrases

Rules

Pl Keogh

Df Commissioner

Keogh (21 Dealer)

o          Keogh was employed at the Dunes Hotel in Las Vegas.

o         He was a 21 dealer.

o         He made his money from wages and toke tips.

o         The commissioner of the IRSA assert that Keoghs had underreported his wages from 1969 71.

Commissions Statistical Analysis

o         Based on Whitlockss diary.

Problems with the diary.

o         Did not cover the entire period.

o         Was not always a 21 dealer.  Craps dealers make more money and do not share tokes.

o         Commissioner did not consult with gaming authority.

o         Whitmore has a poor reputation for honesty and truthfulness.

Principal evidence

o         Photocopy of Whitlocks diary

o         Testimony from X-wife Barbara.

o         Admitted under 803(6).

Court Tax court did not abuse its discretion in admitting the diary.

Keoghs Arg - Rule 803(6) does not apply.

o         The diary because it was not a business record.

o         The diary was Whitlock's personal record, not a record of the business enterprise involved, the Dunes.

Court Show indication of his own business activity.

o         But Whitlock's diary, even though personal to him, shows every indication of being kept "in the course of" his own "business activity," "occupation, and calling."

o         Personal records kept for business reasons may be able to qualify.

Housekeeper example

o         A housekeeper's records kept neatly and accurately for purposes of balancing bank statements, keeping strict budgets and preparing income tax returns could qualify under the statute."

Court Person business records requirements

o         The reliability usually found in records kept by business concerns may be established in personal business records if they are

o    Systematically checked and

o    Regularly and continually maintained.

Court X-Wife saw Whitlock update his diary

o         Systematically, regularly and continuously.

Keoghs Cites 803(6) only applies to commercial business records.

o         Rule 803(6) applies only to commercial business records.

o         Kept by those under a business duty to do so that arose in the commercial context.

Court  -  of timeliness and regularity of entries that are present here

o         More to the point is Sabatino v. Curtiss National Bank of Miami Springs,

o         A man has a direct financial interest in keeping accurate accounts in his personal business.

o         The cases indicate that private records, if kept regularly and if incidental to some personal business pursuit, are competent evidence.

o         It made no difference whether the check account was used for any specific business.

Keoghs Arg -  dispute the general trustworthiness of the diary entries.

o         Palmer v. Hoffman,

o    Alleging that Whitlock's motives in preparing the diary were never explained.

Court  -  Palmer v. Hoffman is not in point

o         Because there is no evidence that Whitlock's motives in making the entries were suspect.

o         The diary contained his own personal financial records.

o         The reliability of the tip entries is corroborated by Dunes' payroll records

o         Rule 803(6) is NOT made inapplicable by the fact that Mikle, not Whitlock, testified to lay the foundation for the diary.

Keoghs Custodian testimony is required.

o         The Keoghs contend that the testimony of Whitlock as custodian of the diary was required.

o         Only he could speak to his reliance on the records.

Court - There is no reason to believe that Whitlock did not rely on his personal financial diary

o         We do not find that the tax court abused its discretion in admitting it without Whitlock's personal testimony.

Rules

803(6) Records of regularly conducted activity. 

o    A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinions, or diagnoses,

o    made at or near the time by, or

o    from information transmitted by, a person with knowledge,

o    if kept in the course of a regularly conducted business activity, AND

o    if it was the regular practice of that business activity to make the memorandum, report, record or data compilation, all as shown by the testimony of the custodian or other qualified witness, or by certification that complies with Rule 902(11), Rule 902(12), or a statute permitting certification, unless the source of information or the method or circumstances of preparation indicate lack of trustworthiness.

o    The term "business" as used in this paragraph includes business, institution, association, profession, occupation, and calling of every kind, whether or not conducted for profit.

Class Notes