| HTF,Ltd. NEWSLETTER #2. | 01-30-81 |
Some things I do I do because I am trying to prevent IRS misconstruing what I do. Clear? The incorporation papers say we have one class of stock. Doing what I did night have raised the question as to whether the pre-incorporation bit constituted a second type of stock. All I wanted was a little capital for starting expenses. Some other little angles but this one the most. So forget the pre-incorporation stock. It has been destroyed.
The 10 share gift returned. Gave owners a chance to add the survivorship bit. Equally at the bottom where it specifies "gift" you will note additional wording. As it was it might have been construed as a gift from the corporation when what was needed was for it to be clearly a gift from me so as to reduce the amount of stock in my estate.
I exchanged a deed to the TF property for 700 shares of HTF stock prior to giving away the shares. I am now getting ready (done 01-20-1981) to exchange 170 (I think) shares of HTF for the unfinished house and land at the Mile Post, about $50,000 for the same reason as the TF exchange. Shortly (enclosed) I will be making you a 1981 Christmas gift, (well in advance) of 5 more shares which should reduce my entire estate to a no tax level I think.
This will still leave a lot of stock in my estate, and as time passes, inflation and growth of the trees will increase the value of the TF and of the stock so subsequent gifts may be needed. From 1944 I have devoted much of my time and effort to the TF and hope to do much more during the next several years. I have lots of dreams some of which I hope can be realized, with your encouragement and help.
Aims and problems are many and very entwined. First to protect the TF as a family heirloom with chief benefactors being the family, not IRS. This involved two items; avoiding as much inheritance tax as possible when I die, and providing a smooth continuance of the TF management. Incorporation seemed to make both possible. Management as presently viewed is contingent upon making the situation such that R3 can take over.
Development and natural growth is now at such a point that year round residence at the TF is becoming rather essential. Road systems not cared for erode and have to be rebuilt. Caring for them and salvage of down trees (widely scattered,) further road development, etc. indicates more equipment. Salvage and possible income for R3 points to some kind of a small mill. The later need becomes more important as thinning increases. The first and most important being providing adequate living quarters at the TF for R3, improving the road (rocking) so as to make it an all year road.
Our present thought is to convert the shop building down by the garden into living quarters by adding to it and other remodeling which it would seem can be done this summer or next. We have our eyes on a tractor which was used with much success on our logging last year and which is going to be traded in to the dealer this spring. We have a smaller and inadequate tractor on hand which could be traded in. Our stock is non-assessable and I hope as far as possible to handle minor outlays out of my regular income and perhaps infrequent income from sale of thinnings, etc.
As soon as I get immediate manipulations taken care of (OK now) I plan to announce that some of the stock I own is for sale, some to produce capital and some to produce additional personal monthly income. The first would be plowed back into the TF and completion of the MP (on which there is no indebtedness.) Building the MP without borrowing or indebtedness has meant either reducing other savings and income to a very low point. Presently my principal monthly income is from Calif. Retirement and SS, total under $800 per month.
(As you can tell from page 1, it was written some time ago but never sent. I still thought I could get everything I wanted to say at the time on that page but have decided to make use of a second page.)
I plan to live in the old house next summer. I want to repair, restore it as much as possible. It has deteriorated a lot the past few years. Possible live there a part of each year in the near future. If and when new facilities are completed for R3 the upper cabin would be available for guests. It might also be a good idea for R3 and Voni to find a compatible couple to live there during the winter if they decide to try all year living (in new quarters) at the TF.
The one cost of operation which we can not avoid during the next few years are property taxes. Curry County presently has the lowest tax rate in the state. Also tax is only on the land and improvements. Trees are not taxed until cut. Corporate taxes about nil due to lack of income.
As mentioned I have met the taxes, etc. and the cost of building MP out of my current income and savings. These sources for me have not kept up with inflation. I have given my time and labor with a "little" time off for a little travel and its costs. I would like to increase the income a little. Of course I could have sold everything and arranged a very substantial income. But that was not what I wanted.
If some of you can now see future value in owning more shares of stock this could meet the needs not only for me but for the needs of the corporation. If I sell some of my stock it further reduces my estate and reduces the possibility of inheritance tax. From the standpoint of my income it would be advantageous to sell it with a minimum cash down payment so that interest would be an addition to my income and reduce your income tax. Let me assure you the major part of my income will go back into the corporation through the taxes, etc., and completion of the Milepost. The sale of the stock on a cash basis would provide funds for machinery needed. The machinery would probably be in my name as the stock I refer to is mine, the machinery being leased on "most favorable" terms to the HTF. This permits me to use depreciation and maintenance costs as an offset on my personal income taxes. I referred to the tractor being traded in this spring. Spring is nearly here. (My Brookings plum trees, some azaleas and other ornamentals in bloom. Too early.) So any of you see where you might get into the picture?
SEE YOU IN SANTA BARBARA IN JUNE 1981.
R.W. Hendrick, President
Hendrick Tree Farm, Ltd.
PS: Would appreciate a note letting me know you received your stock. Also reactions; suggestions. You (20) now own about 1/3 of the Mile Post and TF, approx a $250,000 property. Begin to think as owners.