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Acharei Mos-Kedoshim – Dividing investment income between unequal partners



My brother and I have been joint owners of our company for decades. About fifteen years ago we decided to establish a charitable foundation which we registered in the same manner as our business is registered, as equal partners. We transferred thirty million dollars from the business to the foundation. We agreed further, that each of us could place our personal tsedoko money in the foundation with the stipulation that each of us could give donations up to the value of his stake in the foundation. Initially, I placed more money in the foundation than my brother. However, as time went by I also gave more tsedoko than my brother. Thus, although initially I had more personal capital in the foundation than my brother, in recent years my brother has had a larger amount. Today, he has about fifty-two percent and I have forty-eight percent.

The issue that we have concerns the investment income earned by the foundation. Since the foundation always had excess capital we invested the funds, primarily in real estate but also in stocks and money market funds. Recently, we decided to break up our partnership in the foundation. Since Baruch Hashem we have been successful in our investments, after we divide the principal we are left with a few million dollars. Our question is how to divide this amount. I feel that just like our business is jointly owned and we don’t compute how much each works, so too these funds should be split equally. My brother argues that this amount should be split in the same proportion that the principal is split today. Who is correct?


There is a complex section of Gemoro that deals with your type of situation. We will first study the Gemoro and the Rishonim and then consider how to apply the Gemoro to your particular situation.

The Gemoro (Kesubos 93A) cites a ruling of Shmuel that if two people pooled some of their money in order to earn a profit, with one contributing one hundred and the other two hundred, the profits earned by their partnership are shared equally. The Gemara discusses the case where Shmuel’s ruling applies. The authoritative opinion in the Gemoro is that he ruled that the profits are divided equally even if the partnership bought an ox for plowing and then the partners decided to slaughter and sell it. Rashi explains that plowing implies that the profits are split equally because each partner requires the other in order to earn income. Therefore, even if the partners later decided to slaughter the animal they still split the profits equally.

There is a major dispute among the Rishonim how to understand the conclusion of the Gemoro. The Prisho discusses five opinions. However the two opinions that we must consider are the Rosh (Kesubos 9, 6-7) and the Rambam since the SA rules like the Rambam and several key poskim, like the Taz and Shach, rule that we must take the Rosh’s opinion into account. The Chasam Sofer (Res. CM 123, cited by Pischei Teshuvo (176, 5)) in fact rules that one cannot force someone to pay anything if according to the Rosh he is not obligated to pay.

The Rosh understands that even if the partners originally purchased the animal in order to slaughter it (and not for plowing), if they sold the animal before it was slaughtered they split the profits equally. Similarly, he rules that if they buy and then sell goods, since they did not divide up the goods before they were sold, the profits are split equally, even if the goods could have been divided before they were sold. Only if the goods were actually divided by them or if the ox was slaughtered and the meat was split between them and then sold, do we say that they divide the profits according to their relative percentages.

The Rosh explains that the rationale of the Gemara is that we understand that if the partners had intended to split the profits according to their relative percentages they would have stipulated this at the outset. Since they did not stipulate this we assume their intention was to split the profits equally. We explain that the reason the one who had a larger share agreed to split equally is because he felt that it was worthwhile for him to share the profits equally. The reason we are willing to accept even a flimsy reason to justify our understanding that the intention of the partners was to share the profits equally is because the partners’ failure to stipulate that profits will be split according to percentage ownership is considered conclusive evidence that the partners’ intention was to split the profits equally, in spite of their unequal ownership of the principal.

Thus, in your case since the assets were bought and sold at a time when they were jointly owned, the Rosh rules that the profits are divided equally.

The Rambam (Shutfim 4, 3) agrees with the Rosh that even if the partners bought an ox with the intention to eventually slaughter it, nonetheless if they sold the animal before they slaughtered it, the profit is divided equally. However, unlike the Rosh who explained the rationale, the Rambam just recorded his rulings in the case that is discussed by the Gemara without explaining the rationale. As a result, there is a dispute whether the Rambam’s rationale is the same as the Rosh’s or not.

According to the Levush their rationale is identical and therefore, their rulings coincide as well. The Sema (176, 15), however, disagrees with the Levush and claims that the Rambam’s rationale is that in the case of an ox, even if they intended to eventually slaughter it, since they sold it at a time when each one owned a vital part of the ox, the profits are divided equally.

The difference between the Sema and Levush manifests itself in case partners buy goods that would normally be split when sold. An example is if partners own a grocery store and as partners they purchase a thousand bottles of oil to sell in their store. According to the Levush the profits from selling the oil are split equally whereas according to the Sema profits are split according to percentage ownership. We note that the Veshov Hakohein (res 65) cites both opinions and agrees with the Levush.

In your case where the partnership purchased real estate, stocks and the like which are not necessarily sold piecemeal and, in fact, generally not sold that way, the Sema agrees that the Rambam maintains that profits are divided equally. Thus both the Rosh and Rambam agree that in your case profits are split equally. We note that the Nesivos (chiddushim 176, 14), even though he has an independent approach to this issue, also agrees (din 1) that in your situation where both you and your brother were involved in investing the assets, profits are split equally.

Thus, we have established that according to the halocho as ruled by the Rambam, Tur and Shulchan Aruch and its commentaries it is clear that the profits are divided equally.

The only reason it is not one hundred percent certain that we should rule this way, is the position of several contemporary poskim. These poskim base their position on the Rosh who writes that inherently profits are split based on percentage ownership and it is only because we have an umdeno (a clear indication) that they did not intend to split profits according to ownership that we split the profits evenly. They maintain that nowadays people always intend to split profits according to relative percentages, and therefore, even if nothing was stipulated at the outset, we assume that their intention was to split based on percentage ownership.

We must clarify that your brother’s position that profits should be divided based on current percentage of ownership is incorrect according to everyone and was never even contemplated by the Gemoro and poskim. The correct way to rule in case we don’t rule that the profits are equally owned is to examine the ownership of each and every asset at the time it was bought since ownership of an asset is determined at the time of its purchase. In order to determine how much money goes to each partner we have to then examine how much profit (dividends as well as capital gains) or loss was realized by each investment and divide that according to the percentage ownership of each asset. This would apply to all the investments that were made in the lifetime of your foundation and each investment would affect ownership of the foundation since ownership is determined not only by the amount that each partner contributed and took out but also by their relative percentages in every realized gain from investments that were sold in the interim. Thus, it is not obvious that your brother’s position is really advantageous for him especially since at the beginning you had a larger stake which means that you were the larger owner of the early investments.

We discussed your particular situation with two poskim and they were divided how to rule. One poseik ruled that you should divide based on percentages as we explained in the previous paragraph and you have to go through the tedious process of examining each investment and then divide the profits. The other poseik ruled that based on the fact that the largest amount was the amount contributed by your jointly owned company and the other amounts were significantly smaller, it stands to reason that your intention was to split profits equally. We would add that the fact that during the life of the foundation no one ever computed relative ownership which seems to be clear proof that no one intended to split profits in an unequal manner.

We note further that the entire approach of these poskim, namely to reconsider the Gemoro and Shulchan Aruch’s clear ruling in light of contemporary behavior, is controversial. Furthermore, the biggest contemporary poseik, Rav Eliashev (Kovetz Teshuvos 2, 159), rules like the Rosh, basing himself on the Veshov Hakohein. Obviously, he did not maintain that the halocho should be changed.

In conclusion: You should divide the profits equally.




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