The Tax Court Analyzes Privilege Issues

January 12, 2005

The United States Tax Court recently issued an opinion dealing with several attorney-client privilege issues.

In Moore v. Commissioner, No. 11002-03, 2004 Tax Ct. Memo LEXIS 273, at *6, 18 (T.C. Nov. 15, 2004), the Tax Court: (1) found that the taxpayer had carried its burden of showing that the challenged documents were confidential, even though the taxpayer’s supporting affidavit did not explicitly state it; (2) explained that the attorney-client privilege applies to communications made “for the purpose of obtaining legal advice,” even if “the communication contains non-confidential information”; (3) analyzed the Georgia Limited Liability Company Act in concluding that a member of a Georgia Limited Liability Company cannot by herself waive the company’s privilege; and (4) held that a company must take “reasonable precautions” to preserve the confidentiality of privileged communications. Even though a company’s employee cannot waive the company’s privilege, the Tax Court ultimately held that the company’s failure to retrieve privileged documents taken by a departing employee meant that the departed employee’s later disclosure of the documents caused a waiver.

The Tax Court’s various analyses follow the majority rule in each instance.

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