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FREEDMAN ET AL. v. PHILADELPHIA TAX REVIEW BOARD (06/13/68)

decided: June 13, 1968.

FREEDMAN ET AL., APPELLANTS,
v.
PHILADELPHIA TAX REVIEW BOARD



Appeal from order of Court of Common Pleas No. 6 of Philadelphia County, June T., 1966, No. 5749, in case of Herman M. Freedman et al. v. Tax Review Board of City of Philadelphia.

COUNSEL

Marvin J. Levin, with him Freedman, Borowsky and Lorry, for appellants.

Levy Anderson, First Deputy City Solicitor, with him Allan Gordon, Assistant City Solicitor, and Edward G. Bauer, Jr., City Solicitor, for appellee.

Wright, P. J., Watkins, Montgomery, Jacobs, Hoffman, Spaulding, and Hannum, JJ. Opinion by Hoffman, J.

Author: Hoffman

[ 212 Pa. Super. Page 443]

The sole issue in this case is whether a taxpayer's income, earned as a limited partner, is subject to the Philadelphia Net Profits Tax. Philadelphia General Code of Ordinances § 19-501 et seq.

By agreement dated July 15, 1952, a partnership known as Flandel Enterprises was formed for the purpose of owning and operating interests in realty and personalty. The partnership agreement provided for the formation of a limited partnership under § 2 of the Limited Partnership Act, Act of April 12, 1917, P. L. 55, 59 P.S. § 171 et seq., with its principal office in Philadelphia. Pertinent provisions of the agreement provided that profits and losses would be divided among the partners in the proportions set forth; that the general partners would have complete control of the funds and of the management and conduct of the partnership business; that the liability of the limited partners would not exceed their contribution to the partnership capital; that no additional limited partners would be admitted nor would any limited partner have the right to assign his interest; and that the death of a limited partner would not terminate the partnership, but that his estate would have the right to receive his share of the profits and distributions.

[ 212 Pa. Super. Page 444]

The partnership consisted of twenty-five partners -- four general, two limited and general, and nineteen limited partners. Decedent taxpayer was entitled to a 5.405% interest in the partnership.

The decedent taxpayer was at all times a resident of Philadelphia. Until his death in 1964 he did not file a return nor did he pay net profits tax on the profits of the partnership.

In 1966, the City of Philadelphia made an assessment for net profits taxes for the years 1953 through 1964. The Tax Review Board denied the estate's petition contesting the assessment, and the lower court affirmed. From this affirmance, the executors have now appealed.

Section 19-1502(1)(c) of the net profits tax ordinance imposes a tax "on the net profits earned in business, profession, or other activities conducted by residents. . . ."

It further provides under subsection (3): "The tax levied under § 19-1502(1)(c) and (d) shall relate to and be imposed on the net profits of any business, profession, or enterprise carried on by any person as owner or proprietor, either individually or in association with some other person or persons."

Section 19-1501(7) defines a resident as: "An individual co-partnership, association, corporation, or any other ...


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