Appeal from order of Superior Court, Oct. T., 1967, No. 839, reversing 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 the City of Philadelphia.
Levy Anderson, First Deputy City Solicitor, with him Frank J. Pfizenmayer, Assistant City Solicitor, Matthew W. Bullock, Jr., Second Deputy City Solicitor, and Edward G. Bauer, Jr., City Solicitor, for appellant.
Marvin J. Levin, with him Freedman, Borowsky and Lorry, for appellee.
Bell, C. J., Jones, Cohen, Eagen, O'Brien and Roberts, JJ. Mr. Justice Roberts would affirm on the unanimous opinion of the Superior Court. Dissenting Opinion by Mr. Justice Cohen. Mr. Justice Eagen and Mr. Justice O'Brien join in this dissenting opinion. Dissenting Opinion by Mr. Justice Eagen. Mr. Justice Cohen and Mr. Justice O'Brien join in this dissenting opinion.
Order affirmed by an evenly divided Court.
Dissenting Opinion by Mr. Justice Cohen:
The sole issue involved in this matter is whether a limited partner's share of income earned by a partnership is subject to Philadelphia Net Profits Tax. The Tax Review Board and the trial court held this to be earned income and therefore taxable under the Philadelphia Code, § 19-501 et seq. The Superior Court reversed.
Our Court now adopts the Superior Court's determination and analogizes the income of a limited partnership allocated to a partner to dividends of a corporation. I think our Court is in error in so doing. A corporation pays a tax on its earnings before it declares
dividends. A partnership pays no tax -- the tax on its earnings is paid through the partners; for taxing purposes the partnership is but a pass through device. Thus the majority permits the partnership business activity to escape ...