cc: file, Mom, Sara and Des, Lloyd and Luana Warner, Darrell and Nancy Krueger, Diane Cluff, Tony Hafen, Claude and Katherine Warner, Forest and Amy Warner, Ivan and Chell Warner, and Eric and Renee Miner
"Roice had an interview dinner Thursday, when we usually eat dinner together, and so we went to a Chinese lunch buffet on Friday. I told him about a big tax surprise we received Thursday evening, your Mom's reaction, and the implications. He was kind of quiet during lunch, and I said something like `I have sure screwed things up, but at least you kids will do better than I have.' He responded he wasn't so sure about that. I sure hope you each learn from my mistakes and do a better job than I have. This is a major motivation for writing out this reference manual for you, one week at a time.
We have never talked much about money and taxes and so I am going to take this opportunity to share what happens when one is not careful enough, hears what you want to hear, make assumptions, and doesn't ask enough questions. You are all aware that in 1991 I helped start a company named HyperMedia Corporation. We had (still have, since I use it every day I'm consulting at the Bureau of Economic Geology) an excellent hypertext documentation tool. Like NetScape. In fact, we were three years ahead of NetScape and have some parts of the technology that are better than NetScape. I can point fingers at Bill Rollwitz (who was hired to run the company), lack of sufficient capitalization, being too early to the market, only running on a UNIX platform, bad marketing, or lack of focus. However, if I do, there are three fingers pointing back at me. The bottom line is we ran out of money in a $500,000 line of credit several months before a $500,000 sale to Saudi Aramco happened and just as Landmark stock (which was guaranteeing the line of credit) went from $23 per share to $8 per share. There was a total of $1.2 million in outstanding debts and equity investment. We laid off 17 employees and it looked like HyperMedia Corporation would have to declare bankruptcy. I was too proud to allow that to happen and figured if I just worked hard enough we would be able to make it. We worked hard, we sold the $500,000 site license to Saudi Aramco (remember when I want to Deharan for 7 weeks?), Landmark stock came back up to $20 per share, and we were able to get some companies to write off debt. Then we were able to do about $500,000 in business with Fletcher Challenge Petroleum in Auckland, New Zealand. However, we never made enough margin to be pay off all of the bills and in 1996 we shut down the company and provided investors with paperwork so they could write their investment off on their taxes. HyperMedia Corporation, with a federal tax loss carry forward of $463,700, became a wholly owned by Walden 3-D, Inc.
I have never made much money in Walden 3-D. This is where I work on long-term projects and `far out' ideas. In fact, there have been over $250,000 in personal loans to Walden 3-D over the years to fund various ideas and projects. I thought I had a basically unlimited tax right-off. Thursday evening I learned otherwise. During 1996 your Mom and I sold the remaining shares of Landmark stock we had in three separate sales (February, August, and December). The total from the stock sales was $393,937.26 and our basis, or the amount we paid for the stock, was about $2,000. That means it was almost all profit and therefore almost all taxable. We had faithfully paid our tithing by transferring, about $50,000 worth of stock to the church over the same time-frame. $100,000 was put into a retirement fund. $75,000 was loaned to Walden 3-D, which came back to the family as salary and helped pay for the trips to Grandpa's funeral, and to see Paul off (Walden still has some debt associated with those trips). The rest of the money went into paying off family credit cards bills, helping with replacing three cars, and also became the financial basis for the divorce. I had understood we would owe no taxes on the sales because of HyperMedia, etc. However, Thursday I learned I have a $103,000 tax bill this year. The reason is I have no significant basis (cash investment nor profits) in the HyperMedia stock I own. We had transferred Landmark stock (which we had a 5 cent basis in) to HyperMedia in exchange for HyperMedia stock to pay off the $500,000 line of credit and keep the company from going bankrupt. So this tax news was the latest result of trying to walk the line between integrity and pride. I hope you all can understand why your Mom is very upset with me this weekend. I hope none of you make a mistake like this.
Saturday we received a letter from some friends we were very close to in Dallas. I Home Taught Julia when she was baptized. Ken Yano was my First Counselor in the Elders Quorum Presidency in the Dallas First Ward. He is of Japanese family origin and was afraid to ask Julia out. I encouraged him. They live in Spring and we got our families together at least once while all of you kids were home. The letter reads:
I am pretty calm about the tax issue. My grief concerning Katie's death flows from my eyes as I write this. Perspective. Not from a fear of my death, but for seeing such a special life cut so short. What wonderful blessings we have to be alive, healthy, and living in such a wonderful and exciting time. There will still be grief, and yet, as we heard at General Conference this weekend, calm and peace will accompany us through times of trial when we have faith and trust in our Savior. I know this is true, even though we all still face taxes and death."