Opinion ID: 1958884
Heading Depth: 1
Heading Rank: 9

Heading: Excluding MC's tax returns.

Text: To establish its claim for lost revenues, MC presented the testimony of its accountant. Relying on information given to him by Louis Maietta, Sr., the accountant testified that the net lost revenues due to the three accidents was $72,428. The calculation was made on the basis of lost work days, average number of trips per day, average yards of material per trip, average price of the material handled, and revenues from delivering and spreading the material at the job site. From the resulting figure, wages of the operators, stumpage fees, fuel costs, and estimated repair and maintenance costs were deducted. Defendant proposed to cross-examine the accountant concerning information contained in MC's tax returns for 1976, 1977, and 1978 and to introduce those returns into evidence. The Court excluded the returns and questions concerning the returns. Defendant argues that the Court's ruling is reversible error. Plaintiff MC relies on the case of Orr v. Williams, 379 S.W.2d 181 (Mo.App.1964) for the proposition that the proper measure of damages for the loss of use of the trucks is lost gross revenues minus the normal expenses directly attributable to the production of such revenues. Defendant does not challenge the use of lost revenues as the proper measure of damages. Defendant argues, however, that where a plaintiff claims lost earnings or profits, tax returns are admissible, either as admissions or for the purpose of impeachment. Defendant offered the tax returns for the stated purpose of permitting the jury to compare taxable income to the claimed damages. Defense counsel told the Court that: The Defendant intends to offer this evidence, your Honor, to show that the amount of profit received by the corporation as evidenced on their tax returns is a much smaller percentage of gross sales than the Plaintiff is claiming in this suit.... The Court explained to plaintiffs counsel: We're not concerned with net profit. We're not concerned with taxable income. We're concerned with the lost revenue less the direct cost of producing that revenue that was lost .... We couldn't care less as to the taxable income of this corporation, the bottom line. The issue is not whether tax returns per se are admissible, but whether MC's tax returns would have aided the jury in assessing the claimed damages. In making this determination, it is necessary to decide whether the defendant made clear the purpose for which the returns were offered, and if so, whether the returns were offered for a proper purpose. Defendant originally offered the returns to show that the amount of profit claimed on the tax returns was a much smaller percentage of gross sales than what the plaintiff was claiming as damages. The tax returns have entries for gross receipts (or gross sales) and gross profit. After cross-examining the accountant about deductions of certain costs from gross sales figures, defense counsel explained to the Court that he had been trying to meet MC's objection concerning whether or not the bottom line taxable income reflected any of these accidents here. The Court replied that [t]axable income is not the test .... Finally, defense counsel made an offer of proof in which he said: The tax returns would show that the amount of profit that Maietta Construction Company or the profit upon which they're taxed is a small fraction of the figure that they intend to put up on the board here as their lost revenue or lost profits figure. Still later defense counsel attempted to elicit testimony that taxable income in 1978 was about 3% of gross sales. The conclusion is inescapable that defendant sought to introduce the tax returns for the purpose of comparing taxable income with gross sales or receipts. The Court committed no error in excluding the evidence for this purpose. Had defendants sought to introduce only the gross receipt and gross profit figures on the tax returns so that the ratio between those two figures could be compared to the ratio of claimed total lost revenues and claimed net lost revenues, the result might have been different.