Appeal, No. 278, Oct. T., 1958, from order of Court of Common Pleas No. 7 of Philadelphia County, Dec. T., 1954, No. 8552, in case of James A. Quaid v. Tax Review Board of the City of Philadelphia. Order reversed.
George F. Shinehouse, Jr., with him James W. Brown, Jr., and Zink, Shinehouse & Holmes, for appellant.
Leonard B. Rosenthal, Assistant City Solicitor, with him Shirley S. Bitterman, Assistant City Solicitor, and David Berger, City Solicitor, for appellee.
Before Rhodes, P.j., Gunther, Wright, Woodside, Ervin, and Watkins, JJ. (hirt, J., absent).
[ 188 Pa. Super. Page 625]
This is an appeal from an order of the court below sustaining the action of the Philadelphia Tax Review Board in denying the petition of the taxpayer to strike off a net profit tax assessment.
James A. Quaid was an equal partner with Rodman H. Martin in Martin-Quaid Co., which was engaged in the business of fabricating metals and metal products in the City of Philadelphia. The partnership filed tax returns with the City of Philadelphia and paid tax on the net profit earned by the partnership in the operation of its business during all of the time of its existence.
On March 24, 1952, the partnership was terminated by Quaid selling his interest in it to Martin for $200,000. Calculated according to federal income tax standards, the cost to Quaid of his interest in the partnership was $77,294.16 and his expenses of sale were $4300, with the result that the sale yielded a gain to petitioner of $118,405.84.
Quaid, a resident of Montgomery County, did not file a net income tax return in Philadelphia for the year 1952, but Martin-Quaid Co. did file a return and
[ 188 Pa. Super. Page 626]
paid the tax on the gain earned by the operation of its business during that part of the year Quaid was associated with it.
After the sale by Quaid of his interest in the partnership, the city assessed a tax against him on the $118,405.85 gain which it contends was a net profit earned by him from the operation of a business in Philadelphia.
Upon petition of Quaid, the Tax Review Board conducted a hearing which took the form of a recorded conversation between members of the board, the city solicitor and counsel for Quaid. The board was given a copy of the agreement of the sale of the partnership interest, and the facts set forth above were admitted by both parties.
The agreement of sale provided that Quaid did "bargain, sell, transfer, set over and assign unto [Martin and his wife] all of the right, title and interest of Quaid in the partnership known as MARTIN-QUAID Co., including the interest of QUAID in all real estate, fixtures, equipment, machinery, work in progress, inventory, accounts receivable, contracts, policies of insurance, choses in action, and the good will used in and belonging to said partnership. MARTIN shall have the right to the use of the name 'MARTIN-QUAID Co.' until December 31, 1952, whereupon such right to the use of said name shall cease, and thereafter neither party shall have the right to use the name of 'MARTIN-QUAID Co.' or any other deceptively similar name."
Upon being interrogated by members of the board and the city solicitor, counsel for Quaid said, "A substantial amount of the profit represented the good will of the business. So there could be some minor appreciation in certain of the assets, for example, real estate held over a period of time, but the big factor in
[ 188 Pa. Super. Page 627]
the sale of this business was the good will which ...