Silicon Valley Circa 1956 – A Valley That is No More

What was it like in Silicon Valley in 1956?

Back then, the Valley lay in the shadow of San Francisco. If you wanted culture, glamor, or riches, you headed to the City. If you wanted farm life, you headed to San Jose. I exaggerate, but not by much. Hard as it is to imagine today, the Valley then was still tied closely to the soil. People knew how to grow things. Things like fruit. Not just as a hobby but as way of life. Above all, they knew how to can and pack that fruit. Not as home preserves but on a large, industrial scale. Before WWII, San Jose had fewer than 100,000 people. Yet no fewer than 18 canneries and 13 packing houses could be found in the Valley. This was then the largest canning and dried fruit packing center in the world. By 1956, this farm-based culture was still largely intact. Today, it is almost entirely gone.

Those of us who have been here awhile may have caught fragments of the old life. I remember doing a summer stint as a student at the Del Monte Cannery off Auzerais Avenue, circa 1970, in which my fingers turned prune-like as I stood there for endless hours throughout each shift “guiding” grapes to the center of a conveyor belt at its drop-off point by repeatedly reaching my arms out as if doing a butterfly stroke and pulling the grapes inward as my arms would pull together. Shifting to the “dry” side later that summer, my brother and I would do the graveyard shift standing at the bottom of a massive slide and scrambling like mad to stack pallets manually with some really heavy boxes whenever the automatic pallet-stacker at the top malfunctioned and some faceless person would switch the boxes to come zinging downward non-stop and with a great force — we felt like Lucy and Ethel trying frantically to handle all the chocolates as the sheer number and frequency of the boxes would overwhelm our ability to stack them. I can assure you that whatever talent we displayed that summer went entirely unrecognized.

But back to life in 1956. Cali Mill sat at the corner of De Anza and Stevens Creek Boulevard. Monte Bello Vineyards quietly grew its grapes in the Cupertino foothills, soon about to realize great harvests that would lead it to become Ridge Vineyards. Paul Masson was even then a Valley winery that would “sell no wine before its time,” as Orson Welles would later put it. Cupertino had just incorporated as a city in 1955, becoming the 13th city in the Valley (Sunnyvale had voted to incorporate in 1912). Cupertino High was about to form in 1958. De Anza College didn’t exist. Nor did El Camino Hospital. Both were about a decade or so off. Santa Clara’s law school was around, and it graduated exactly 13 students that year. Many at the time could remember just a couple of decades earlier when it took the equivalent of a short trip through the country to get from downtown San Jose to Willow Glen. Much of Mountain View remained agricultural not only as of 1956 but even throughout most of the 1960s — during this era, there was still open space between Mountain View and Palo Alto, with row crops and orchards filling in the gap. Moffett Field with its huge hangars filled the Valley with the noise of monster-sized military planes droning continuously as they took off and landed throughout the day.

Prosperity was afoot, however, wholly apart from the agricultural sector. Santa Clara Valley had a massive postwar population explosion and chaotic growth to accompany it. By the mid-1950s, San Jose was well on its way to having over 200,000 people, more than doubling its population within the decade. Electronics companies began to flourish, spurred on initially by WWII. Prominent among these was Hewlett Packard, which in 1956 did $20 million in revenues and employed 900 people while selling test and measurement equipment. By the following year, it would go public and double the number of its employees while doing something very unusual — it gave stock grants and options to all employees with at least six months of service, an almost unheard-of practice at the time.

Shopping malls sprang up as well, even as Woolworth’s and other five-and-ten-cent stores started to falter. In the summer of 1956, one of the first and most notable, Macy’s Valley Fair, opened as a 39-store retail center. Macy’s had wanted to open in downtown San Jose but got stiffed on price. It therefore bought several acres of land along San Jose’s unincorporated Stevens Creek Road and built the center there, amidst a wide open area consisting of orchards and an Emporium department store. When it opened, it had only one floor and a roof deck that was accessible to shoppers by elevator. Macy’s planned to add a second floor. So what did it do in the interim? It did what any good promoter of a new concept would do (and as many other centers of that day did) to attract shoppers — it set up a carnival! Yes, right on the roof deck of its shopping mall, it put not just one but seven carnival rides. It had a merry-go-round and a small train and even a 40-foot ferris wheel! It also had a cafe so that parents could relax and eat as their kids enjoyed the rides. It seems that fast-shuffle types were busy long before startups came along. If it sparkles, they will come!

While Cupertino lagged in seeing its first significant shopping center open, 17 of its largest landowners shortly thereafter sold out to Varian Associates, another thriving electronics firm, which (along with the Leonard, Lester, Craft and Orlando families) developed the center that took as its name an acronym composed of the first initials of each participant: Vallco Park. Vallco, however, did not open until the early 1960s. In 1956, the large tracts of land were entirely undeveloped except for agricultural purposes.

Meanwhile, we had the Dow at about 500. People made just under $5,000 per year on average and paid about $12,000 if they wanted to buy a brand new home. No sticker shock in those days for those moving in from the Midwest.

The Korean War had ended three years earlier and the McCarthy hearings a couple of years before. The shock of Sputnik was still a year away. The Cold War was in full sway, however, and was not helped by the crushing of the Hungarian uprising by Soviet tanks in 1956. Memorable among the oddities of the day were the atomic bomb drills by which school kids would attain assured safety from any nearby neutron blast by being taught to crawl under their desks (confirming that the leaders then were about like those we have today).

Eisenhower was President and Nixon Vice President, re-elected as a team for a second term. Congress adopted “In God We Trust” as the national motto, officially supplanting its unofficial predecessor, E Pluribus Unum. In one of the great ideological misfires of all time, Ike appointed William J. Brennan as an associate justice of the United States Supreme Court. The Supreme Court at the time included not only Justice Brennan but also Earl Warren, Felix Frankfurter, John Harlan, Hugo Black, and William O. Douglas.

Drugs were clearly a problem in metropolitan areas but had not spread as yet to the larger society. In response, Congress held marathon hearings on the issue and passed the Narcotic Control Act of 1956. Prescription drugs and packaged food items, meanwhile, did not have safety caps or seals, and the Tylenol poisoner who brought that constant headache upon us had not yet begun to serve his just judgment of everlasting torture in the lowest of the lowest of the lowest regions of Hades specifically reserved for him, where (I hope) it is EXTRA, EXTRA HOT!

Smoking was cool, however, really cool; so too was drinking (remember the “highball”). Garbage was garbage and weather was weather, since Rachel Carson had not yet had her way. Wonder Bread made up for any nutritional deficit incurred through all that smoking and drinking, or at least that is the conclusion I would have come to as a 5-year old boy at the time had I thought about it (only weird people didn’t like Wonder Bread).

Fireworks were everywhere on the Fourth of July, and there were no forbidden zones. Many an anthill served as a proving ground for mischievous boys in training for the demolition corps. What was done with cherry bombs will be passed over in silence.

Ma Bell introduced three-slot pay phones (for nickel, dime, and quarter) that year. She would lease you a home phone as well but not sell you one. You could, however, listen in for free on someone else’s party-line conversation, and you could make crank calls at will without fear that caller ID would expose you for being the lewd person that you were.

’56 Chevys, costing about $2,000, symbolized the oligopoly (composed of GM, U.S. Steel, and a few others) that John Kenneth Galbraith assured us would forever dominate a new industrial state and crush all future competition. “Made in Japan” meant junk, and Sony took this to heart by shipping its first transistor radio to Canada that year, perhaps sensing that it might ultimately have the last laugh.

Dairy Queens proliferated, having just introduced dilly bars to complement the banana splits they had been serving up for five years, but no trace could yet be found of McDonald’s (nor of the infamously-named and now near-defunct Sambo’s Restaurant which some of us may remember while eating those awful 3:00 a.m. fries in student mode during the 1960s and 1970s).

Gas stations were full service and gas was priced at about $.22 per gallon. The road culture ala Jack Kerouac held sway. Drive-in theaters flourished as part of a nationwide phenomenon which saw them quintuple in number from 1948 until they hit their peak by 1958 even as indoor theaters shrank by one-quarter during that same period. President Eisenhower signed the Federal Highway Act that gave impetus to the federal interstate system we know so well today. Commercial flying had gone mainstream, was highly regulated and expensive, and enabled you to get a hot meal with your flight.

Kodak dominated film. Polaroid was in its third decade of existence and had managed to sell its one millionth camera that year, though the Instamatic was still well off into the future. IBM had invented the world’s first hard disk (5 MB storage) for use on mainframes. Of course, the people of that day could scarcely dream of personal computers or hand-held digital devices or email or the Internet.

TVs were in about half of all households and had become the center of family activity, having supplanted radio and undercut the cinema. Almost all were black and white, as color sets did not catch on until the early ’60s. It took a U.S Supreme Court decision in 1955 to pave the way, but TV quiz shows were held not to constitute illegal gambling and so the $64,000 Question was eagerly watched to see if contestants could win individual prizes of as much as $100. Also eagerly watched were Chet Huntley and David Brinkley, who premiered their hugely popular Huntley-Brinkley Report on NBC in October, 1956, bumping Douglas Edwards of CBS from the top spot in ratings for television news. TV poured forth a wealth of wholesome family entertainment, with Father Knows Best, the Danny Thomas Show, the Phil Silvers Show, the Loretta Young Show, Playhouse 90, Alfred Hitchcock Presents, and Caesar’s Hour coming to mind as standouts among the offerings. No VHS to record any of it with, however, and no TiVo either.

Hollywood released Cecil B. DeMille’s The Ten Commandments, with its nearly 4-hour runtime, whose very ponderousness is rumored to have prompted a prominent Jewish wag of the time to stand up in the middle of the screening and cry out, “Cecil, let my people go.” While it no doubt went unnoticed here in the Valley, Ed Wood also produced what is reputed to be the worst movie ever made, Plan 9 from Outer Space, whose star (Bela Lugosi), having died after only four days of shooting, was represented by a double through most of the movie! More likely to be found at the local Odeon were Bus Stop (Marilyn Monroe), Picnic (William Holden), The Searchers (John Wayne), Giant (Rock Hudson), Moby Dick (Gregory Peck), The Solid Gold Cadillac (Judy Holliday), Forbidden Planet (Walter Pidgeon), Anastasia (Ingrid Bergman), Friendly Persuasion (Gary Cooper), Around the World in 80 Days (David Niven and about 100,000 other stars in cameo appearances), Patterns (Van Heflin), and (my favorite) Invasion of the Body Snatchers (Kevin McCarthy). All in all, an OK but not a great year for Hollywood, as the great stars of the 1930s and 1940s had either retired or were past their prime and as the film noir fashion had pretty much reached the end of its tether, yielding place, on the one hand, to Doris Day fluff films and, on the other, to hothouse films of the William Faulkner variety featuring sweaty male leads and ever sultry and much abused ladies. Arghhh! No wonder the cinema was in decline.

The “beat” movement was in full swing, Elvis appeared on the Ed Sullivan show, and the movie “Rock Around the Clock” was released, causing rock-and-roll riots, of all things, throughout much of Europe. The vinyl LP had been around just shy of a decade and was hugely popular. Hugh Hefner had begun his mischief, and Marilyn Monroe and Marlon Brando each were promoting their own versions of sex appeal. Grace Kelly caused the nation to swoon with her marriage to Prince Rainier in Monaco. And Pete Seeger protested and sang folk songs. Kids played Monopoly and rode Schwinn bikes. The Yankees won the World Series, beating the Dodgers (the Brooklyn Dodgers, that is), with Don Larsen pitching a perfect game and with such stalwarts as Mickey Mantle, Whitey Ford, Yogi Berra, Jackie Robinson, and Pee Wee Reese gracing the field. Professional basketball remained largely segregated, though amazing players did some incredible things in what were then known as the Negro Colleges and a certain Bill Russell had led the University of San Francisco to the NCAA championships that year for the second time running; today the ratio of white to black players in the NBA has shifted, to put it mildly. Martin Luther King’s Montgomery bus boycotts had just come to a successful conclusion, spurred by a post-Brown v. Board of Education decision of the U.S. Supreme Court brought about by a legal team led by Thurgood Marshall.

Schools had discipline, and prayer. Knuckle-rapping with rulers was OK. Girls were of the marrying kind or of the “other” kind. Boys were the same drips then as they are today. Latin was still taught as a required language, though Greek had been routed by well-meaning but thoroughly befuddled language latitudinarians. Grade inflation had not yet taken hold, and the dread of flunking out remained very real for those who didn’t meet standards.

Perhaps the greatest news of 1956 came with the discovery of a vaccine for the prevention of polio — one of the great medical breakthroughs ever. The Valley, and the nation, gave a huge sigh of relief.

Law practice was characterized by mostly male lawyers who never touched a typewriter and who dictated profusely, wore suits and ties, and addressed one another as Mr. or Mrs. or Miss (no Ms. at the time and no casual first-name familiarity). Typewriters abounded. Plain paper photocopying was still several years off, but law firms could still use cruder mechanisms for making copies. Lawyers will be lawyers, after all. Early fax machines existed but were few and far between and very expensive. An “express message” meant a telegram from the one company that then held a monopoly over that mode of communication. Literal cut-and-paste constituted the editing process. Manual redlining was laboriously done in larger firms but not much elsewhere. Even “large” firms were midgets compared to today’s giants (even as of the early 1960s, the then 80-year-old firm I began with in 1980, McCutchen, Doyle, Brown & Enersen, had just 20 or so lawyers!). Lawyers did not advertise, and collegial relationships tended to characterize what were then true partnerships where lawyers, once established, planned to spend their entire working careers.

“Silicon Valley” did not then exist, but all that was about to change. It began quietly enough and many did not notice. In the late 1930s, a pointy-headed Englishman named Alan Turing had taken his vast knowledge of high-level mathematics, had assumed infinite resources, and had set about to develop a logical model of incredible theoretical power that he called his “universal computing machine.” He saw that a vast number of complex functions could be mimicked and processed through logical representations contained in simple “on” and “off” states. Thus was born the digital model (or at least its modern and truly effective incarnation). But a small problem remained: what to do about those “infinite resources” that higher mathematicians could take for granted in their theorems but that did not in fact exist. The analog world was one of heavy machinery, the bigger and more powerful the better. And yet, and yet . . . Maybe with the right materials, the power of electricity could be harnessed to give us real-world computers as so envisioned.

Enter William Shockley. The date: February 13, 1956. The place: 391 South San Antonio Road, Mountain View. The goal: to make the world’s first semiconductors. Yes, right at the time the Valley struggled to retain some semblance of its agricultural roots, Shockley announced the formation of Shockley Labs. While really a division of a larger enterprise, this little outfit ultimately set the model for many startups that would follow. How? Well, in spite of all-pervasive genius, it never made a dime of profit. Only red ink. A true model for the Valley!

What is more, it became a prototype of a startup that is begun, controlled, and dominated by an engineering genius who proceeds to suffocate the life out of it. Today such engineers are kept caged in a back room, carefully guarded, and periodically fed big helpings of stock options to keep them tamed. Back then people didn’t know any better. And so William Shockley ultimately destroyed the company of which he was the brainchild. And brainchild he was — the Nobel-Prize-winning inventor of the world’s first transistor, a key foundational piece upon which the digital model could be built. A man with enough stature to assemble what was perhaps the world’s most famous founding team. But it all came to naught, and Shockley took his Nobel Prize and moved to Stanford to expound upon wild racial theories.

But what a founding team he had assembled! Gordon Moore. Robert Noyce. The founders of Fairchild Semiconductor and, ultimately, Intel, Advanced Micro Devices, and all the “fairchildren” that eventually came to the fore. From failure came spectacular success. Thus, the great companies of the Valley were poised to come into existence and realize the great digital vision of Alan Turing. The world of startups, venture capital, and explosive growth was about to begin. And Santa Clara Valley was never to be the same again. Silicon Valley was born.

Limited Liability Corportations and Foreign Investment in California Real Estate

There is some exciting news for foreign investors due to recent geo-political developments and the emergence of several financial factors. This coalescence of events, has at its core, the major drop in the price of US real estate, combined with the exodus of capital from Russia and China. Among foreign investors this has suddenly and significantly produced a demand for real estate in California.

Our research shows that China alone, spent $22 billion on U.S. housing in the last 12 months, much more than they spent the year before. Chinese in particular have a great advantage driven by their strong domestic economy, a stable exchange rate, increased access to credit and desire for diversification and secure investments.

We can cite several reasons for this rise in demand for US Real Estate by foreign Investors, but the primary attraction is the global recognition of the fact that the United States is currently enjoying an economy that is growing relative to other developed nations. Couple that growth and stability with the fact that the US has a transparent legal system which creates an easy avenue for non-U.S. citizens to invest, and what we have is a perfect alignment of both timing and financial law… creating prime opportunity! The US also imposes no currency controls, making it easy to divest, which makes the prospect of Investment in US Real Estate even more attractive.

Here, we provide a few facts that will be useful for those considering investment in Real Estate in the US and Califonia in particular. We will take the sometimes difficult language of these topics and attempt to make them easy to understand.

This article will touch briefly on some of the following topics: Taxation of foreign entities and international investors. U.S. trade or businessTaxation of U.S. entities and individuals. Effectively connected income. Non-effectively connected income. Branch Profits Tax. Tax on excess interest. U.S. withholding tax on payments made to the foreign investor. Foreign corporations. Partnerships. Real Estate Investment Trusts. Treaty protection from taxation. Branch Profits Tax Interest income. Business profits. Income from real property. Capitol gains and third-country use of treaties/limitation on benefits.

We will also briefly highlight dispositions of U.S. real estate investments, including U.S. real property interests, the definition of a U.S. real property holding corporation “USRPHC”, U.S. tax consequences of investing in United States Real Property Interests ” USRPIs” through foreign corporations, Foreign Investment Real Property Tax Act “FIRPTA” withholding and withholding exceptions.

Non-U.S. citizens choose to invest in US real estate for many different reasons and they will have a diverse range of aims and goals. Many will want to insure that all processes are handled quickly, expeditiously and correctly as well as privately and in some cases with complete anonymity. Secondly, the issue of privacy in regards to your investment is extremely important. With the rise of the internet, private information is becoming more and more public. Although you may be required to reveal information for tax purposes, you are not required, and should not, disclose property ownership for all the world to see. One purpose for privacy is legitimate asset protection from questionable creditor claims or lawsuits. Generally, the less individuals, businesses or government agencies know about your private affairs, the better.

Reducing taxes on your U.S. investments is also a major consideration. When investing in U.S. real estate, one must consider whether property is income-producing and whether or not that income is ‘passive income’ or income produced by trade or business. Another concern, especially for older investors, is whether the investor is a U.S. resident for estate tax purposes.

The purpose of an LLC, Corporation or Limited Partnership is to form a shield of protection between you personally for any liability arising from the activities of the entity. LLCs offer greater structuring flexibility and better creditor protection than limited partnerships, and are generally preferred over corporations for holding smaller real estate properties. LLC’s aren’t subject to the record-keeping formalities that corporations are.

If an investor uses a corporation or an LLC to hold real property, the entity will have to register with the California Secretary of State. In doing so, articles of incorporation or the statement of information become visible to the world, including the identity of the corporate officers and directors or the LLC manager.

An great example is the formation of a two-tier structure to help protect you by creating a California LLC to own the real estate, and a Delaware LLC to act as the manager of the California LLC. The benefits to using this two-tier structure are simple and effective but must one must be precise in implementation of this strategy.

In the state of Delaware, the name of the LLC manager is not required to be disclosed, subsequently, the only proprietary information that will appear on California form is the name of the Delaware LLC as the manager. Great care is exercised so that the Delaware LLC is not deemed to be doing business in California and this perfectly legal technical loophole is one of many great tools for acquiring Real Estate with minimal Tax and other liability.

Regarding using a trust to hold real property, the actual name of the trustee and the name of the trust must appear on the recorded deed. Accordingly, If using a trust, the investor might not want to be the trustee, and the trust need not include the investor’s name. To insure privacy, a generic name can be used for the entity.

In the case of any real estate investment that happens to be encumbered by debt, the borrower’s name will appear on the recorded deed of trust, even if title is taken in the name of a trust or an LLC. But when the investor personally guarantees the loan by acting AS the borrower through the trust entity, THEN the borrower’s name may be kept private! At this point the Trust entity becomes the borrower and the owner of the property. This insures that the investor’s name does not appear on any recorded documents.

Because formalities, like holding annual meetings of shareholders and maintaining annual minutes, are not required in the case of limited partnerships and LLCs, they are often preferred over corporations. Failing to observe corporate formalities can lead to failure of the liability shield between the individual investor and the corporation. This failure in legal terms is called “piercing the corporate veil”.

Limited partnerships and LLCs may create a more effective asset protection stronghold than corporations, because interests and assets may be more difficult to reach by creditors to the investor.

To illustrate this, let’s assume an individual in a corporation owns, say, an apartment complex and this corporation receives a judgment against it by a creditor. The creditor can now force the debtor to turn over the stock of the corporation which can result in a devastating loss of corporate assets.

However, when the debtor owns the apartment building through either a Limited Partnership or an LLC the creditor’s recourse is limited to a simple charging order, which places a lien on distributions from the LLC or limited partnership, but keeps the creditor from seizing partnership assets and keeps the creditor out the affairs of the LLC or Partnership.

Income Taxation of Real Estate

For the purposes of Federal Income tax a foreigner is referred to as nonresident alien (NRA). An NRA can be defined as a foreign corporation or a person who either;

A) Physically is present in the United States for less than 183 days in any given year. B) Physically is present less than 31 days in the current year. C) Physically is present for less than 183 total days for a three-year period (using a weighing formula) and does not hold a green card.

The applicable Income tax rules associated to NRAs can be quite complex, but as a general rule, the income that IS subject to withholding is a 30 percent flat tax on “fixed or determinable” – “annual or periodical” (FDAP) income (originating in the US), that is not effectively connected to a U.S. trade or business that is subject to withholding. Important point there, which we will address momentarily.

Tax rates imposed on NRAs may be reduced by any applicable treaties and the Gross income is what gets taxed with almost not offsetting deductions. So here, we need to address exactly what FDAP income includes. FDAP is considered to include; interest, dividends, royalties, and rents.

Simply put, NRAs are subject to a 30 percent tax when receiving interest income from U.S. sources. Included within the definitions of FDAP are some miscellaneous categories of income such as; annuity payments, certain insurance premiums, gambling winnings, and alimony.

Capital gains from U.S. sources, however, are generally not taxable unless: A)The NRA is present in the United States for more than 183 days. B) The gains can be effectively connected to a U.S. trade or business. C) The gains are from the sale of certain timber, coal, or domestic iron ore assets.

NRA’s can and will be taxed on capital gains (originating in the US) at the rate of 30 percent when these exceptions apply.Because NRA’s are taxed on income in the same manner as a US taxpayers when that income can effectively be connected to a US trade or business, then it becomes necessary to define what constitutes; “U.S. trade or business” and to what “effectively connected” means. This is where we can limit the taxable liability.

There are several ways in which the US defines “US trade or Business” but there is no set and specific code definition. The term “US Trade or Business” can be seen as: selling products in the United States (either directly or through an agent), soliciting orders for merchandise from the US and those goods out of the US, providing personal services in the United States, manufacturing, maintaining a retail store, and maintaining corporate offices in the United States.Conversely, there are highly specific and complex definitions for “effectively connected” involving the “force of attraction” and “asset-use” rules, as well as “business-activities” tests.

Generally and for simplistic explanation, an NRA is “effectively connected” if he or she is engaged as a General or limited partner in a U.S. trade or business. Similarly, if the estate or trust is so engaged in trade or business then any beneficiary of said trust or estate is also engaged

For real estate, the nature of the rental income becomes the critical concern. The Real Estate becomes passive if it is generated by a triple-net lease or from lease of unimproved land. When held in this manner and considered passive the rental income is taxed on a gross basis, at a flat rate of 30 percent with applicable withholding and no deductions.

Investors should consider electing to treat their passive real property income, as income from a U.S. trade or business, because the nature of this type of holding and loss of deduction inherent therein is often tax prohibited. However, the election can only be made if the property is generating income.

If the NRA owns or invests in or owns unimproved land that will be developed in the future, he or she should consider leasing the land. This is a great way to generate income. Investment in income-generating allows the NRA the ability to claim deductions from the property and generate a loss carry-forward that will offset income in future years.

There are many tools we can use to assist our NRA clients in avoiding taxation on Real Estate income property, one of which is ‘portfolio interest’, which is payable only on a debt instrument and not subject to taxation or withholding. There are several ways to fit within the confines of these ‘portfolio interest’ rules. NRAs can participate in the practice of lending through equity participation loans or loans with equity kickers. An equity kicker is like a loan that allows the lender to participate in equity appreciation. Allowing the lender to convert debt into equity in the form of a conversion option is one way that this can be accomplished as these provisions usually increase interest rates on a contingent basis to mimic equity participation.

There are two levels of tax applicable to a foreign individual or a foreign corporation who owns a U.S. corporation.

The U.S. corporation will be subject subjected to a 30 percent withholding tax on its profits, when the income is not re-invested in the United States and there will be a tax on dividends paid to the foreign shareholders as well. When the U.S. business is owned by a foreign corporation, whether directly or through a disregarded entity, or through a pass-through entity. The branch profits tax replicates the double tax.

The U.S. has treaties covering the ‘branch profits tax’ with most of the European nations, reducing the tax to between 5 and 10 percent. The 30 percent tax is onerous, as it applies to a “dividend equivalent amount,” which is the corporation’s effectively connected earnings and profits for the year, less investments the corporation makes in its U.S. assets (money and adjusted bases of property connected with the conduct of a U.S. trade or business). The tax is imposed even if there is no distribution.

Foreign corporations are taxed on their effectively connected income and on any deemed dividends, which are any profits not reinvested in the United State under the branch profits tax.

The rules applicable to the tax on the disposition of real estate are found in a separate regime known as the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA).

Generally, FIRTPA taxes an NRAs holdings of U.S. real property interest (USRPI) as if he or she were engaged in a U.S. trade or business. As mentioned earlier, this means that the traditional income tax rules that apply to U.S. taxpayers will also apply to the NRA. Obligation to withhold 10 percent of the amount realized on any disposition falls on purchasers who acquire a USRPI from an NRA.

Ownership and interests of Real Estate Property include: fee ownership, co-ownership, leasehold, timeshare, a life estate, a remainder, a reversion or a right to participate in the appreciation of real property or in the profits from real property. For purposes of definition interest in real property would include any ownership of personal property used to exploit natural resources, land, buildings, mineral deposits, crops, fixtures, operations to construct improvements, the operation of a lodging facility, or providing a furnished office to a tenant (including movable walls or furnishings) as well as Improvements, leaseholds, or options to acquire any of the above.

There are several ways in which a partnership interest is treated as a USRPI: A domestic corporation will be treated as a U.S. real property holding corporation (USRPHC) if USRPIs are equal to or exceed 50 percent of the sum of the corporation’s assets. OR when 50 percent or more of the value of the gross partnership assets consists of USRPIs – Or when 50 percent or more of the value of partnership gross assets consist of USRPIs plus cash and cash equivalents. The disposition of partnership interest will be subject to FIRPTA. To the extent that such partnership continues to own USRPIs they will remain subject to this withholding.

The good news is that disposition of an interest in a USRPHC is subject to the FIRPTA tax and withholding but is not subject to state income tax. There is an obvious benefit when compared with the disposition of a USRPI owned directly. USRPI which are owned directly are subject to the lower federal capital gains rate as well as state income tax. If, however on the date of the disposition the corporation had no USRPIs and the totality of the gain was fully recognized (no installment sales or exchanges) on the sale of any USRPIs sold within the past five years Then this disposition cannot be subject to these rules.

Any USRPI sold by an NRA (individual or corporation) will be subject to 10 percent withholding of the amount realized. Withholding applies even if the property is sold at a loss.

The purchaser must report the withholding and pay over the tax, using Form 8288 within 20 days of the purchase. This is to be duly noted because if the purchaser fails to collect the withholding tax from the foreigner, the purchaser will be liable for not only the tax, but also any applicable penalties and interest. The withheld taxes are later credited against the total tax liability of the foreigner.

Instances wherein withholding is not required, are the following:

The seller provides a certificate of non-foreign status. Property acquired by the purchaser is not a USRPI. The transferred property is stock of a domestic corporation and the corporation provides a certificate that it is not a USRPHC.

The USRPI acquired will be used by the purchaser as a residence and the amount realized by the foreigner on the disposition is $300,000 or less. The disposition is not subject to tax, or the amount realized by the foreigner on the disposition is zero.

Estate and Gift Tax: In determining who is an NRA and who is excluded the test is completely different for estate tax purposes. The focus of inquiry will centers around the decedent’s residence. This test is very subjective and focuses primarily on intent.The test considers factors from across the board, such as how long the NRA has been in the United States, how often he or she travels as well as the size, and cost of home in the United States. The test will also look at the location of NRA’s family, their participation in community activities, participation in U.S. business and ownership of assets in the United States. Voting is also taken into consideration.

A foreigner can be a U.S. resident for income tax purposes but not be domiciled for estate tax purposes. An NRA, whether a nonresident alien or non-domiciliary, will be subject to a different transfer taxes (estate and gift taxes) than a U.S. taxpayer. Only the gross part of the NRA’s Estate that at the time of death is situated in the United States will be taxed with the estate tax. Although the rate of NRA’s estate tax will be the same as that imposed on U.S. citizens and resident aliens, the unified credit is only $13,000 (equivalent to about $60,000 of property value).

These may be ameliorated by any existing estate tax treaty. European countries, Australia, and Japan enjoys these treaties, The U.S. does not maintain as many estate tax treaties as income tax treaties.

The IRC defines the following property as situated in the United States: A) Shares of stock of a U.S. corporation. B) Revocable transfers or transfers within three years of death of U.S. property or transfers with a retained interest (described in IRC Sections 2035 to 2038). C) Debt issued by a U.S. person or a governmental entity within the United States (e.g., municipal bonds).

Real estate in the United States is considered U.S. property when it is physical personal property such as works of art, furniture, cars, and currency. Debt, however is ignored if it is recourse debt, but gross value is included, not just equity. U.S.-situs property is also a US property if it is a beneficial interest in a trust holding. Life insurance is NOT included as U.S.-situs property.

The estate tax returns must disclose all of the NRA’s worldwide assets, in order to determine the ratio that the U.S. assets bear to non-U.S. assets. The gross estate is reduced by various deductions relating to the U.S.-situs property. This ratio determines the percentage of allowable deductions that may be claimed against the gross estate.

As mentioned earlier, when real estate is subject to a recourse mortgage, the gross value of the real estate is included, offset by the mortgage debt. This distinction is very relevant for NRAs whose debts are subject to apportionment between U.S. and non-U.S. assets and therefore not fully deductible.

Accurate planning is crucial. Let us illustrate: An NRA can own US property through a foreign corporation and this property is not included in the NRA’s estate. This means that the US Real property owned by the NRA has now effectively been converted into a non-U.S. intangible asset.

And with Real Estate that was not initially acquired through a foreign corporation, you can still avoid future taxation to the estate by paying an income tax today on the transfer of the real estate to a foreign corporation (usually treated as a sale).

An NRA donor is not subject to U.S. gift taxes on any gifts of non-U.S. situs property gifted to any person, including U.S. citizens and residents. Gift taxes are imposed on the donor. Gifts from an NRA that are in excess of $100,000 must reported on Form 3520.46 by citizens and residents, however, Gifts of U.S.-situs assets are subject to gift taxes, with the exception of intangibles, which are not taxable.

If it is physically located in the United States tangible personal property and real property is sited within the United States. The lifetime unified credit is not available to NRA donors, but NRA donors are allowed the same annual gift tax exclusion as other taxpayers. NRA’s are also subject to the same rate-schedule for gift taxes.

The primary thrust of estate tax planning for NRAs is through the use of; the following: Foreign corporations to own U.S. assets, and the gift tax exemption for intangibles to remove assets from the United States. It is very important that the corporation have a business purpose and activity, lest it be deemed a sham designed to avoid U.S. estate taxes. If the NRA dies owning shares of stock in a foreign corporation, the shares are not included in the NRA’s estate, regardless of the situs of the corporation’s assets.

Let us break this down into one easy to read and understand paragraph:

In a nutshell, shares in U.S. corporations and interests in partnerships or LLCs are intangibles and the gift of an intangible, wherever situated, by an NRA is not subject to gift tax. Consequently, real estate owned by the NRA through a U.S. corporation, partnership, or LLC may be removed from the NRA’s U.S. estate by gifting entity interests to foreign relatives.

Ownership Structures: Here we discuss the ownership architectures under which NRA’s can acquire Real Estate. The NRA’s personal goals and priorities of course dictate the type of architecture that will be used. There are advantages and disadvantages to each of these alternatives. Direct investment for example, (real estate owned by the NRA) is simple and is subject to only one level of tax on the disposition. The sale is taxed at a 15 percent rate If the real estate is held for one year. There are many disadvantages to the direct investment approach, a few of which are: no privacy, no liability protection, the obligation to file U.S. income tax returns, and if the NRA dies while owning the property, his or her estate is subject to U.S. estate taxes.

When an NRA acquires the real estate through an LLC or an LP, this is considered an LLC or a limited partnership structure. This structure provides the NRA with protection of privacy and liability and allows for lifetime transfers that escape the gift tax. The obligation to file U.S. income tax returns and the possibility for U.S. estate tax on death remain, however.

Ownership of real estate through a domestic corporation, will afford privacy and liability protection, obviate the foreigner’s need to file individual U.S. income tax returns and allow lifetime gift tax-free transfers. *this refers to a C corporation, since a foreign shareholder precludes an S corporation.

Ownership of stock will not trigger a return filing obligation, unlike engaging in a U.S. trade or business which requires a U.S. tax return

Ownership of real estate through a domestic corporation has three disadvantages: Federal and state corporate income tax at the corporate level will add a second layer of tax. Dividends from the domestic corporation to its foreign shareholder will be subject to 30 percent withholding. Shares of the domestic corporation will be included in the U.S. estate of the foreign shareholder.

Furthermore, the foreign shareholder will be subject to FIRPTA, because the corporation will be treated as a USRPHC (upon the disposition of the stock in the corporation). The purchaser of the shares is then required the file a U.S. income tax return with 10 percent tax withholding. Actual ownership of the real estate may be held by the U.S. corporation directly, or by a disregarded entity owned by the corporation or through a U.S. partnership. An LLC that chooses to be taxed as a corporation can also be the corporation.

There are several advantages to foreign corporation ownership:

Liability protection– There is no U.S. income tax or filing requirement for the foreign shareholder. Shares in the foreign corporation are non-U.S. assets not included in the U.S. estate.

Dividends are not subject to U.S. withholding. There is no tax or filing requirement on the disposition of the stock. There is no gift tax on the transfer of those shares of stock.

Disadvantages of using the foreign corporation: A) just like with the domestic corporation, there will be corporate level taxes, because the foreign corporation will be deemed engaged in a U.S. trade or business. B) Possibly the largest disadvantage of ownership of U.S. real estate through a foreign corporation would be that the foreign corporation will be subject to the branch profits tax.

One of the most advantageous structure for ownership of U.S. real estate by NRAs is a hybrid foreign and U.S. corporation. It runs like this: The NRA owns a foreign corporation that in turn owns a U.S. LLC taxed as a corporation. The benefits to this type of structure is paramount to a good tax shield and offers: privacy and liability protection, escaping U.S. individual income tax filing requirements and it also avoids U.S. estate taxes. On top of that it allows for gift tax-free lifetime transfers, and avoids the branch profits tax.

The beauty and benefit of this is that the timing and the amount of this dividend is within the NRA’s control even though distributions from the U.S. subsidiary to the foreign parent are subject to the 30 percent FDAP withholding.

There are many things to consider and several structures available to limit tax liability, preserve and protect anonymity and increase profits of US Real Estate investments by foreign investors. We must keep in mind that each investment presents its own challenges and no structure is perfect. Advantages and disadvantages abound which will require a tailored analysis in light of the individual or group objectives.

It’s really about implementing a structure which will successfully carry the NRA through to his or her END GAME, with the utmost protection from liability and the maximum return on investment.

Food Additives Exposed – What’s in Frozen Pizzas

Cheap Pizza

Ferrous Sulfate:

Is a waste product of steel after being washed with sulfuric acid. It was given to slaves in the 18th and 19th century to “cure” them of aliments. Many slaves died from this practice, its also used in Inks and Wool Dyes.

Ferrous Sulfate is used to treat iron-deficiency anemia, people after treatment felt nausea & epigrastric (Epigastric problems may cause tension with Asthma)

Mozzarella Cheese Subtitute:

Is made with (See hydrogenated oils) partially hydrogenated oils.

Sodium Aluminum Phosphate:

Autopsies on a large amount of people who have died of Alzheimer’s disease showed accumulations of up to four times the normal amount of aluminum in the nerve cells in the brain, especially in the hippo campus which plays a central role in memory. Also increased aluminum can cause low **reproduction development of the ovarian lesions.

Aluminum in the body can cause kidney damage this is because it can interfere with phosphate metabolism.

Things to look out for in Aluminum based products

Antacids (There is some without check the labels) Antidiarrheal Products (There is some without check labels)

Buffered Aspirin (Regular Aspirin does not have aluminum)

Containers (Aluminum coated waxed containers, used especially for orange and pineapple juices, causes juices inside to absorb aluminum. Beer and SOFT drinks that are stored in aluminum cans also absorb small quantities of aluminum. Bottled beverages are better.

Deodorants (Natural Deodorants do not add Aluminum) Douches (Natural Douches do not add aluminum you can also use vinegar and water)

Food Additives (Like The processed cheeses used on cheese burgers at fast food restaurants, which contain aluminum, which is added to make the cheese melt better. To self-rising dough and processed cheese food.)

Shampoos (Some add aluminum some don’t check labels to make sure)

Potassium Chloride:

The chemical compound potassium chloride (KCl) is a metal halide salt composed of potassium and chlorine. In its pure state it is odorless. It has a white or colorless vitreous crystal, with a crystal structure that cleaves easily in three directions. Potassium chloride crystals are face-centered cubic. Potassium chloride is also commonly known as “Muriate of Potash”.

Potash varies in color from pink or red to white depending on the mining and recovery process used. White potash, sometimes referred to as soluble potash, is usually higher in analysis and is used primarily for making liquid starter fertilizers. KCl is used in medicine, scientific applications, food processing and in judicial execution through lethal injection.

You can also find Potassium Chloride in waters as well, although Potassium Chloride is a used substance in the human body, consume it naturally!

From personal experience potassium chloride in my water caused irregular heart beat when I worked out, it also caused retained ear-pressure.

Sodium Benzoate:

Benzene in soft drinks (and food additives) has received some scrutiny because benzene is a carcinogen, or cancer-causing agent. Its levels are regulated in drinking water nationally and internationally, and in bottled water in the United

States, but only informally in soft drinks. Within recent years, some soft drinks have been found to contain high levels of benzene. Benzene contamination of soft drinks is a public health concern and has caused significant outcry among environmental and health advocates.

In combination with ascorbic acid (vitamin C, E300), sodium benzoate and potassium benzoate may form benzene, a known carcinogen. Heat, light and shelf life can affect the rate at which benzene is formed. Other factors that affect the formation of benzene are heat and light. Storing soft drinks in warm conditions speeds up the formation of benzene.

Sodium Phosphate:

Some foods contain phosphate but are not labeled as such (i.e. dehydrated onions). Other symptoms of phosphate intolerance may include severe and sudden diarrhea, vomiting, skin eruptions, bladder infection, bloating and abdominal cramping.

(common)

Phosphate additives have also been linked to ADD in children in Australia.

Retrieved from:

Wikipedia

Titanium Dioxide:

Used as a white food colouring it also acts as a pigment to provide whiteness and opacity to products such as paints, coatings, plastics, papers, inks, foods, medicines (i.e. pills and tablets) as well as most toothpastes.

Its also used in sunscreens & if you are not aware most cases of skin cancer are formed from the Sunscreen we use in combination of not being able to absorb energy from the Sun which is very important, recently I heard there is more suicides in the winter because there is a lack of sunlight and the energy is like a anti-depressant so to say keeps your psychically and mentally healthy, so if you ingest Titanium Dioxide it could settle in your skin and you be putting on a shield against your Sun energy (which I believe is a certain vitamin D).

Magnesium Oxide:

May cause irritation in eyes or respiratory tract May lead to muscle weakness, lethargy and confusion. This is in its real form why would you want to eat this?

Sodium Nitrite:

Recently, sodium nitrite has been found to be an effective means to increase blood flow by dilating blood vessels, acting as a vasodilator. While this chemical will prevent the growth of bacteria, it can be toxic for mammals. A principal concern is the formation of carcinogenic N-nitrosamines by the reaction of sodium nitrite with amino acids in the presence of heat in an acidic environment. Sodium nitrite has also been linked to triggering migraines.

Recent studies have found a link between high processed meat consumption and colon cancer, possibly due to preservatives such as sodium nitrite. On top of this I believe Sodium Nitrite acts as a catalyst (from the dilation is does to your veins) which aids in all these other nasty ingredients to hurry themselves through your body just like Cayenne pepper and other foods with sculville units in them (hotness).

BHA, BHT & TBHQ:

In high doses, it has some negative health effects on lab animals, such as precursors to stomach tumors and damage to DNA. A number of studies have shown that prolonged exposure to TBHQ may induce carcinogenicity. Other studies, however, have shown protective effects for TBHQ and other phenolic antioxidants.

BHA, BHT & TBHQ are petroleum based that’s why it keeps food preserved (it will preserve your body which is bad times).

Partially Hydrogenate Oils:

Trans fats are neither essential nor salubrious (useful) and, in fact, the consumption of trans fats increase one’s risk of coronary heart disease by raising levels of “bad” LDL cholesterol and lowering levels of “good” HDL cholesterol. 1 gram of trans fat a day has been linked to a 33% higher chance of catching the coronary heart disease. A 6 piece of chicken nuggets has 6 grams of trans fat, fries have 4 grams of trans fat.

Its common name is monounsaturated or polyunsaturated fat.

The human lipase enzyme is ineffective with the trans configuration, so trans fat remains in the blood stream for a much longer period of time and is more prone to arterial deposition and subsequent plaque formation. While the mechanisms through which trans fats contribute to coronary heart disease are fairly well understood, the mechanism for trans fat’s effect on diabetes is going to find that it increases symptoms.

Monocalcium Phosphate:

Calcium dihydrogen phosphate (also called mono-calcium orthophosphate) Ca(H2PO4)2 is a chemical compound. It is commonly found as the dihydrate, Ca(H2PO4)2·H2O, which releases a water molecule before it melts at 109 °C. It decomposes at 203 °C.

Phosphorus is an important nutrient and so is a common component of fertilizers Calcium dihydrogen phosphate is also used in the food industry as a leavening agent to cause baked goods to rise. Because it is acidic, when combined with an alkali ingredient – commonly sodium bicarbonate (baking soda) or potassium bicarbonate

– it reacts to produce carbon dioxide and a salt.

Xanthan Gum:

(Allergy Warning)

Some people are allergic to xanthan gum, with symptoms of intestinal gripes and diarrhea. Workers exposed to xanthan gum dust exhibit nose and throat irritation as well as work-related illness, with symptoms becoming more prevalent with increasing exposure.

Also, since xanthan gum is produced by a bacterium that is fed corn to grow, some people allergic to corn will also react to it.

MSG/Natural Flavors:

The 1987 Joint Expert Committee on Food Additives of the United Nations Food and Agriculture Organization and the World Health Organization placed mono sodium glutamate in the safest category of food ingredients.

A 1991 report by the European Community’s (EC) Scientific Committee for Foods reaffirmed mono sodium glutamate safety and classified its “acceptable daily intake” as “not specified”, the most favorable designation for a food ingredient. In addition, the EC Committee said, “Infants, including premature, have been shown to metabolize glutamate as efficiently as adults and therefore do not display any special susceptibility to elevated oral intakes of glutamate.”

A 1992 report from the Council on Scientific Affairs of the American Medical Association stated that glutamate in any form has not been shown to be a “significant health hazard”.

A 1995 FDA-commissioned report acknowledged that “An unknown percentage of the population may react to mono sodium glutamate and develop mono sodium glutamate symptom complex, a condition characterized by one or more of the following symptoms:

Burning sensation in the back of the neck, forearms and chest Numbness in the back of the neck, radiating to the arms and back Tingling, warmth and weakness in the face, temples, upper back, neck and arms Facial pressure or tightness,Chest pain, Headache, Nausea, Rapid heartbeat, Broncho spasm (difficulty breathing), Drowsiness, Weakness Sweating.

A 2002 report from researchers at Hirosaki University in Japan found rats fed on diets very high in glutamate (up to 20%) suffered eye damage. Lead researcher Hiroshi Ohguro said the findings might explain why, in eastern Asia, there is a high rate of normal-tension glaucoma.

Monosodium glutamate has been shown to indirectly cause obesity in lab rats by down regulating hypothalamic appetite suppression and, thus, increasing the amount of food the lab rats consumed Because glutamate is absorbed very quickly in the gastrointestinal tract (unlike glutamic acid-containing proteins in foods), glutamate could spike blood plasma levels of glutamate.

Glutamic acid is in a class of chemicals known as excitotoxins, high levels of which have been shown in animal studies to cause damage to areas of the brain unprotected by the blood-brain barrier and that a variety of chronic diseases can arise out of this neurotoxicity.

The debate among scientists on the significance of these findings has been raging since the early 1970s, when Dr. John Olney found that high levels of glutamic acid caused damage to the brains of infant mice.

Updated Information 04/02/09:

Keep in mind that the MSG/excitotoxins also contribute to addictive behaviors (gambling, overeating, violence, mood swings, depression, etc.) since the excitotoxins stimulate other hormones in the brain. when they’re stimulated, your dopamine and other hormone levels go haywire.

changing your diet is all it takes to snap out of it. its amazing how simple it is, but so many are hooked on junk food and processed foods.

Sorbitan monostearate (also known as Span 60):

Is an ester of sorbitan (a sorbitol derivative) and stearic acid and is sometimes referred to as a synthetic wax. It is primarily used for emulsifying water and oils together. Sorbitan monostearate is used in manufacture of food and health care products, and is a nonionic surfactant with emulsifying, dispersing, and wetting properties.

It is also employed to create synthetic fibers, metal machining fluid, brighteners in the leather industry, as an emulsifier in coatings, in pesticides, and various applications for the plastic, food and cosmetics industries.

Cheats For Webkinz – Three Ethical Cheats For You

While one should never use illegal and unethical cheats for Webkinz, such as using stolen or hacked codes, there are still plenty of ethical ways to get more out of the games. These are methods most people don’t know, so while still ethical they can certainly be considered cheats. Read on for three of my favorites.

Webkinz Cheat #1: Locations For Rare Gems

As you know, some of the rarest gems like the corona topaz and earth emerald are needed to create such valuable items as the Crown of Wonder. The trick is knowing that each of these rare gems is only available in particular mine. Word has it that the corona topaz can be found in the Barking Mad Mine. If you’re searching for the Earth Emerald, check out the Flea Floater Mine.

Webkinz Cheat #2: Make Insider Friends

As in real life, the people with insider knowledge in the Webkinz world are the ones who will get ahead quickest. To do this in Webkinz, you need to make good friends with the people who can let you in on secrets. For example, Arte over at the Curio Shop will share the exact date and time rare items will go on sale – but only to people who have treated him nicely on a regular basis. Hint: The tip jar is there for a reason!

Webkinz Cheat #3: Keep Up To Date On The Latest Tips

Being the first to use newly discovered tips is another great way of always having an advantage in the Webkinz world. Keep in mind, if you use actual cheats, and not just good tips and tricks with games like Wheel of WOW, you risk having your account banned. There are some websites that stay up to date with the latest glitches that are true cheats. You should never use these though, as it is against Webkinz terms of service.

Ophir – Tiny Town in the Oquirrh Mountains of Utah That Refuses to Die

“Then thou shalt lay up gold as dust, and the gold of Ophir as the stones of the brooks”

Job 22:24

About 4 miles up a deep canyon on the west slope of the Oquirrh Mountains is a town that was too tough to die and that town is called Ophir. In this article I will give a brief history of the place and pay tribute to a town that really epitomizes the old west and spirit of a growing Nation. It all started back in 1863 when General Patrick Edward Connor granted leave for a large number of his soldiers at Fort Douglas to go and prospect in the mountains of Utah for gold.

Mr. Lineback, a soldier in Connor’s prospector army located the first claim about 300 feet up Graveyard Gulch from what would become the center of town. Soon afterwards many other claims were located by soldiers hearing the stories of claims as rich as those of King Solomon’s mines in the land of Ophir from the Old Testament. The soldiers were lured to the Oquirrh Mountains by the fact that the local Indians for years had been making lead bullets and crude ornaments out of gold and silver from ores they found in the mountains. Mr. Lineback with the help of a Mr. Moore, laid out the town of Ophir and continued working his claim and even though it never paid the dividend’s he had hoped for, he ended up operating a lucrative property near the mouth of the canyon where he had several orchards of fruit trees.

The population of Ophir began to swell with miners, prospectors, merchantmen, gamblers, women of ill repute, and outlaws swarming in from California, Nevada, and Colorado. Many claims were staked and numerous profitable mines were opened. The names of these mines were interesting in and of themselves, some of which were the Ophir Hill, Cliff Mine, Chloride Point, Buckhorn, Montana, Hidden Treasure, Miner’s Delight, Pocatello, Wild Delirium, and Velocipede.

The usual collection of buildings sprang up in the deep narrow canyon, stretched out in a ribbon. Ophir had several saloons, 2 general stores, 2 hotels, a post office, churches, jail, and all manner of other establishments one can imagine. One miner described the town when viewed from above as a fantastic collection of shacks, saloons, brothels, and dance halls. The leading business was the Ophir Mercantile which was said to carry a most complete line of general utilities. As increasing amounts of ore came forth from the mines, and enterprising individual named Mack Gisborn opened a toll road Stockton to Ophir and heavy, ore laden wagons rumbled back and forth along this road nearly all hours of the day and night. Some of the ore went to the Stockton Smelters and some of it went to Lake Point where it was put on barges and floated across the Great Salt Lake to Corrine and the Railroad.

In 1873 traveler and writer John Codman visited Ophir as part of his research for his book “Mormon Country – A summer with the Latter Day Saints”. As his stage wound up the steep canyon towards town Codman was surprised to find the following tucked away in the mountains of Utah. “As we approached town we saw a French Sign in the wilderness stating CafĂ© et Restaurant kept by a Monsieur Simon. He and his wife were fresh from Paris and were trying to keep up Parisian style in the mountains of Utah complete with white apron, menu, and white cap”.

Several very prominent men made their fortunes in Ophir and went on to become famous. One of these individuals was Marcus Daly. Daly was fired for some reason or another from the Emma Mine at Alta and drifted as miners did in those days from camp to camp until he landed in Ophir. The Walker brothers decided to take a chance on Daly and hired him as superintendent of their “Zella” claim. With money earned and saved from this rich mine Daly went on to Montana to open up a new prospect which would later be known as the “Anaconda Mine” and he would become wealthy beyond his wildest dreams. Daly was eventually elected to represent the people of Montana as a United States Senator.

Another individual who struck it big and quite possibly did more for Ophir than any other person was Mr. William A. Clark. Clark made his fortune from Ophir’s largest and oldest producer – The Ophir Hill mine, and was instrumental in bringing heavy machinery and state of the art mining technology to Ophir including intricate tram systems that would carry the ore from the mines high up in the hills down to where it could be processed and sent via wagon or train to far away smelters. Mr. Clark interestingly enough would also become a U.S. Senator for the State of Montana. Even more interesting than that is the fact that Marcus Daly and W.A. Clark both married the daughters of a Mr. Evans of Ophir.

While these two gentlemen made their fortune and fame in Ophir and then went on to bigger and better things, some prospectors, even when they struck it rich, could not stand to leave the place. The following tale comes from Codman’s book “A poor German named Hirsch discovered what would become the Kelly Consolidated claims. He worked himself weary, starving himself so that he could employ necessary assistance, and then selling his ore to develop still further with the proceeds. Finally he sold his property to Col. Kelly for a very high price which would enable him to live in luxury for all his remaining days. But now he insists that the little hut, half stone and half log, in which he has lived the life of a hermit for so many winters and summers, shall remain his property, for he cannot live anywhere else. Here then he will remain, prospecting for another mine. He has mining on the brain. He can think, nor talk of nothing else. Mines are the idols to which he is joined and he prefers to be let alone”.

Some of the hardest workers in the mines were not miners but mules. If you go to the Northwest Utah Heritage website you can read the interesting story of old “Jeff” of Ophir who was a hard working mule for sure. Another hard worker who loved the mines at Ophir was a horse named “Old Charlie”. Charlie’s story is told by Mary Helen Parsons in “History of Tooele County – Vol I”. Charlie used to haul ore cars out of the mine to the mill at the Ophir Hill mine. He worked at this job for many years with only the light of a candle placed in a gallon can to light his way. Even though it was dark in the mine Charlie knew all the stations along the drift. Charlie was very business like and he knew where to go to be loaded, how fast the cars should be going and he would use his hips as breaks if they started to get out of control. He slept in a barn very near the entrance of the mine every night.

When the company finally installed an electric pump to take the place of Charlie’s labor, the mine manager arranged for Charlie to live out his remaining days in a green pasture in the canyon bottom. The next day after Charlie was taken to the pasture however, when the miners arrived at work, Charlie was standing tall at the mine ready to go to work. He was then transported back down the canyon to the pasture. The following day he showed up again at the mine. This cycle repeated itself until finally one day Charlie died, many of the miners believe of a broken heart because he loved his work and loved the mine from which he was separated.

Miners and mules were not the only residents in Ophir however. Gamblers and card sharks a plenty there were too. One of the most notorious tales of the wild days of Ophir was that of a famous poker game where the stakes got really high. One evening a man named Frank Payton sat down to a game of Poker with a miner named Digger Mike. Digger started betting with a poke of gold dust. Payton raised him $250.00. A friendly game this was not. Digger saw it and raised Payton $500.00 in gold dust. This exchange continued until there was more than $12,000.00 in various denominations and collateral heaped in the middle of the table. Digger, being out of cash called for a showdown. By this time many people had gathered all around the table. Payton had been bluffing and laid down a pair of “4’s”. Digger had run an even bigger bluff though and angrily slapped down a pair of treys. Payton happily and lustfully scooped up the pot. Unfortunately for him however, Payton was found several days later in a ravine outside of town with his skull bashed in. He had been drygulched and all his money was gone. It is said that no culprit was ever arrested.

As Ophir continued to grow, it settled down a bit from the crazy days and men like W.A. Clark got serious about making improvements to their properties. His main dream was to have a rail spur built into Ophir so that he could haul more ore to be processed and make a better profit. Finally, primarily through his hard work and capital, the St. John and Ophir railroad was finished in 1912. In some areas its grade reached 7% and was very steep. In order to deal with this type of incline, two climax type locomotives were used to haul trains 2 times a day each way. This service lasted for 16 years when in 1928 the railroad ceased operations. In 1938 the tracks were taken up and an old combination car that was deemed unsafe to travel the rails, was left in place and it’s skeletal remains can still be seen today on the south side of the road as you enter town.

Throughout its lifespan Ophir’s mines produced nearly 50 million dollars in Silver, Lead, Zinc, and Gold. In those days the mountains were a wild place where journals talk of how the residents would hear the Mountain Lion’s scream at night as they ventured near the settlement looking for food. The large number of catamounts that lived in the area are the reason Lion Hill has its name.

After the railroad left town, Ophir dozed into a state of lazy rest for over 70 years with the weeds, and elements reclaiming old mining shacks, homes, and structures one at a time. In recent years however, Ophir has seen a revival, due in great part to the hard work and community service of several preservation minded individuals. Through generous donations from local citizens and Mr. Leo Ault in particular, a picturesque and quaint little historic village has revived the center of town, not far from where Mr. Lineback made his first claim.

If you go there on a Saturday before 3pm you can usually find friendly people there who are more than willing to walk you through the collection of historic structures that have accumulated there, including an original caboose from the St. John and Ophir Railroad which was donated by Mr. Ault. A walk through this old rail car is a fascinating step back in time.

On the occasion of my visit, a Mrs. Maxine Shields walked me through house #5 and explained how generations of her family had lived in it for years and years. She then told me a tale of how in 1910, her grandfather, Patsy Vario emigrated from Italy to America at age 7. It was a classic tale of a young boy who couldn’t speak a lick of English, hit the shore alone and the people he was supposed to meet never showed up. Somehow he made his way to Ophir and there have been generations of Varios in Tooele County ever since. This tale and many others were related as Maxine walked my family and I through many other old structures including the post office. Several other family names live on in the canyon from the earliest days of Ophir including the relatives of early camp pioneer George St. Clair who operated and worked in the Chloride Point mine on Lion Hill.

I also visited Minnie’s which is the only type of store or establishment in the town. It is owned and operated by the current Mayor Walt Schubert. He is a laid back old fellow who is obviously enjoying life up in Ophir and has put in many, many hours of work making Ophir the wonderful place that it is today. The town council still meets in the old city hall building which dominates the center of town. This structure which was built around 1908 is quaint and charming inside. The council members hold their meetings here every Tuesday as they have done for many, many years and there is an antique ballot box, and old wood stove in the corner. Across the street in the park you can see the old fire apparatus that used to be housed in this building.

One article is not nearly enough to describe the history of this place or the interesting things that one can still see in Ophir today. As always, do a little bit of research before you go up there and your visit will be much more meaningful. 90% of the Canyon is Private Property so be respectful of that fact and always request permission from land owners before you enter such places. I have found that the people there are friendly and willing to answer questions about their pretty little town.

To get there, take Utah Highway 36 south out of Tooele, through Stockton to the Junction with Utah Highway 73. Turn left on highway 73 and in about 5 miles you will come to a sign at the edge of a ravine which points the way east to Ophir. Turn left on this road and follow it for about 4 miles up to town. Along the way up the canyon, look for the old remains of a train trestle that can still be seen in the wash.

As you stand in the middle of town, gazing up at the towering limestone cliffs covered with pines, think about all the stories of Old Ophir. Visit the sites and take it all in, remembering the old adage, “take nothing but pictures – leave nothing but footprints.”