HomeMy WebLinkAbout12-05-02
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ESTATE OF LOY T. HEMPT
Deceased
: IN THE CQURT OF COMMON PLEAS
: CUMBERLAND COUNTY, PENNSYL VANIA
: ORPHANS' COURT DIVISION
TRUST CREATED UNDER ITEM
FIFTH OF THE WILL
: NO. 21-77-0231
REPLY TO OBJECTIONS
Gerald L. Hempt ("Trustee"), trustee of the Residuary Trust under Will ofLoy T.
Hempt (the "Trust"), hereby files this Reply to the Objections filed by Robert Hempt Kalbach,
Sr., Robert H. Kalbach, Jr., and Richard C. Kalbach (the "Kalbach Objections") and to the
Objections filed by W. Robert Mark, Forrest H. Mark, and Steven E. Mark (the "Mark
Objections") (together these parties are referred to as the "Objectants") to the Accounting and
Petition for Adjudication filed by the Trustee. Because the substance of the Kalbach Objections
is inclusive of all the objections raised in the Mark Objections, all specific references herein are
to the Kalbach Objections.
INTRODUCTION
The Objections raise two main claims: first, that the Trustee (petitioner)
improperly exercised his discretion by not taking into account the life tenant's personal funds in
determining how much income from the Trust to distribute to the life tenant; and second, that the
Trustee improperly divided the Trust into three new trusts, one for each family line.
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Neither of these claims has merit.
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As to the first claim, the trustee decided to distribute most of the income of the
Trust for the life tenant's basic needs, even though the life tenant had assets of her own. The
express terms of the Trust permit the trustee to make this decision, and the law upholds the
trustee's exercise of discretion in this manner.
As to the second claim, a statute clearly gave the Trustee the power to divide the
Trust into three new trusts. In exercising this power the Trustee meticulously adhered to the
requirements of the statute that each new trust receive the appropriate share of the fair market
value and income tax cost of the assets.
Objectants also raise a large number of relatively minor claims, all of which are
without merit.
All the Objections are addressed seriatim below.
FACTS
Loy T. Hempt died on March 19, 1977 leaving a will dated December 8, 1964 and
a codicil dated December 12, 1969. A copy of the will and codicil are attached as Exhibit A.
The will creates a residuary trust under article FIFTH (the "Trust"). This Trust is
for the benefit ofLoy's wife, Margaret Hempt, and Loy's niece, Jean Hempt, during their lives.
The Trust provides that during the lives of Margaret and Jean, the trustees shall
distribute to them or either of them such amounts of income and principal as the trustees in their
sole and absolute discretion deem appropriate for the "care, support, and welfare" of Margaret
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and Jean.! The Trust also provides that when making distributions to Margaret and Jean, the
"trustees may consider, to such extent as they deem proper, the resources and sources of funds
available to such beneficiary."2
Margaret died on September 4, 1988. Presently the Trust continues solely for the
benefit ofJean.
On Jean's death, the will directs that the Trust terminate and the principal be paid
outright as follows: 40% to Loy's nephew, Max C. Hempt, or his issue; 40% to Loy's niece,
Dorothy Hempt Mark, or her issue; and 20% to Loy's nephew, Robert Kalbach, or his issue.
Max died on May 23, 1999 leaving four children, one of whom, Gerald L. Hempt, is currently
the trustee. Dorothy died on June 15, 1995 leaving three children, who are the Mark Objectants.
Robert Kalbach and his two sons are the Kalbach Objectants. For the convenience of this Court
a family tree is attached as Exhibit B.
Loy's will named Max and Margaret as executors and trustees. Loy's codicil
provided that his niece Dorothy would become a co-trustee in the event that either Margaret or
Paragraph 1 of article FIFTH of the will. It provides in full:
"During such time as either or both of my wife, Margaret, and my
niece, Jean Hempt, are living, trustees shall pay to or expend directly
for the benefit of either or both of my wife and my niece such parts or
all or none of the net income and principal as trustees may determine in
their sole and absolute discretion, to provide for their care, support and
welfare, provided that no principal shall be paid to or used for my wife
so long as any principal remains in trust under Item FOURTH hereof."
2
Article ELEVENTH of the will (emphasis added).
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Max were unable to serve as trustee.3 Upon Margaret's death in 1988, Dorothy became a co-
trustee of the Trust. Loy's will did not provide a mechanism to appoint successor trustees on the
death of the survivor of Margaret, Max and Dorothy.
Jean, the only current beneficiary of the Trust, is mentally retarded and was
declared incompetent by this Court in 1985. Max and Dorothy were thereupon appointed by this
Court as guardians of Jean's estate to manage her finances. Max and Dorothy thus were both
guardians of Jean's estate and trustees of the Trust at that time.4
After Dorothy's death in 1995, Max petitioned this Court to appoint his son,
Gerald L. Hempt, as a co-guardian of Jean's estate (hereinafter all references to Jean and her
estate will be referred to as "Jean") and as a co-trustee of the Trust to fill Dorothy's vacancy.5
This Court granted the 1996 Petition to appoint Gerald L. Hempt as a co-guardian of Jean's
estate and a co-trustee of the Trust.6 Since Max's death on May 23, 1999, Trustee has been both
the sole trustee of the Trust and sole guardian of Jean's estate.
On May 18,2001, Trustee filed a petition with this Court requesting that his
brother, George F. Hempt, be appointed as co-trustee of the Trust and as co-guardian of Jean's
person and estate (the "2001 Petition"). The 2001 Petition also sought court approval for Jean's
guardian to make gifts from her personal estate to her intestate heirs. By making these lifetime
3
Article THIRTEENTH of the codicil.
4
In addition, on May 10, 1990, this Court appointed Max and Dorothy as guardians of the person of Jean.
5
In this same petition, Max also petitioned this Court to appoint his son, Gerald L. Hempt, as co-guardian of
Jean's person.
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gifts from her estate to the eventual beneficiaries of her estate, the federal estate tax and
Pennsylvania inheritance tax due at her death would be greatly reduced.
The Kalbachs are not intestate heirs of Jean and therefore they will not be
beneficiaries of Jean's estate upon her death. The Kalbachs are remaindermen of the Trust.
They thought that the Trust should not have made distributions to Jean if Jean did not need the
funds. The 2001 Petition is currently on hold by agreement of the parties.
Because of the disagreement surrounding the 2001 Petition, the Trustee thought it
best to seek court approval regarding his administration of the Trust through an accounting.
Trustee resorted to this Court because he thought it would be best to get the approval of this
Court before proceeding further in what was an increasingly tense environment.
The Accounting for Loy's Estate and the Trust, filed on July 23,2002, covers the
period from Loy' s death on March 19, 1977 to May 31, 2002. The Kalbach Objectants filed
objections to the Accounting on or about August 23,2002. The Mark Objectants filed objections
to the Accounting on or about August 26, 2002.
~RGlJMENT
Trustee will address the Objections of the Objectants in the order and format in
which they appear in the Kalbach Objections. Because the substance of the Kalbach Objections
is inclusive of the Mark Objections, Trustee does not refer specifically to the Mark Objections.
6
This Court also appointed Gerald L. Hempt as co-guardian of Jean's person.
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Kalbach Objection 1. Because the executors ofLoy's Estate are deceased. an accounting cannot
be filed for Loy' s Estate.
Trustee's Response. Trustee. as current trustee and as an executor of the estate of Max.
who was an executor of Loy's Estate. may file an accountine with this Court on behalf of
Loy's Estate.
Objectants claim that Trustee has no authority to file an accounting with the Court
on behalf of the Estate ofLoy T. Hempt (the "Estate"). Objectants contend that because there is
no acting executor ofLoy's Estate, an accounting cannot be filed on behalf ofLoy's Estate. The
basis of this assertion is incorrect both legally and factually.
Under 20 Pa. C.S. ~ 3324, the account ofa deceased executor of an estate may be
filed by the executor of that deceased executor's estate. Section 3324 provides, "[t]he account of
the deceased... fiduciary may be filed by the fiduciary of his estate...." As a matter oflaw an
accounting can be filed for an estate where the executor of that estate has died.
Loy's wife, Margaret, and Loy's nephew, Max, were appointed as the executors
.,n.,":.'", r;'5t~t(' Margaret died on Septembe!" 4 lQ~~ 1'.,,,,,,: :l:ed en ~'hj' 2~, 1999. Prior tc
Max's death, the administration ofLoy's Estate was long since complete. Therefore, it was not
necessary to seek the appointment of a successor to act as executor of Loy' s Estate.
Max's sons, Gerald L. Hempt (Trustee) and George F. Hempt, were appointed as
executors of Max's estate. A copy of the letters testamentary granting this appointment is
attached hereto as Exhibit C.
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Accordingly, Trustee, as co-executor of Max's estate, has statutory authority to
file an accounting on behalf of Max, the deceased executor ofLoy's Estate.7
Kalbach Objection 2. This Court appointed Trustee as co-trustee of the Trust without notice to
Obiectants. Therefore, the appointment is void and all actions taken by Trustee are void.
Trustee's ResDonse. This Court's appointment of Trustee as co-trustee of the Trust was
valid.
In 1996, Max, the then sole guardian of Jean's estate and sole trustee ofLoy's
Trust, filed a petition with this Court requesting this Court to appoint his son, Gerald L. Hempt
(Trustee), as co-guardian and co-trustee.8
Max Hempt did not give notice to Objectants of the filing of this petition.
Objectants assert that when filling a vacancy in the office of trustee, notice must
be given to all parties in interest. The statute, 20 Pa. C.S. ~ 7101, cited by Objectants, requires
notice be given "to parties in interest as [the Court] shall direct...."
7
20 Pa. C.S. ~ 3324.
8
That petition was captioned "In the Matter of Jean Doris Hempt, an Incompetent." The caption did not
refer to Loy's Trust. Consequently, on this Court's docket the petition and ultimate Court decree appear
under the name of Jean Doris Hempt, and nothing appears in the docket under the name of Loy's Trust.
Objectants cite no legal authority in support of their suggestion that this incomplete caption makes invalid
this Court's appointment of Trustee as co-trustee; and to Trustee's knowledge there is no such law.
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The legislative history of the statute supports the conclusion that notice does not
have to be given to all parties in interest. One of the previous versions of the statute specifically
required that notice be given "to all persons interested, so far as such notice can reasonably be
given... ."9 However, this requirement was removed from the statute in 1949. The fact that this
mandatory requirement of notice to all parties in interest has been removed from the statute
suggests that failure to give notice does not void the proceeding.
Objectants rely on the Official CommentlO to the statute to suggest that notice
must be given to all parties in interest. The legislature has recognized that the comments to a
statute may be indicative of the legislature's intent and useful where the statute is unclear. 11
However, "[ w ]hen the words of a statute are clear and free from all ambiguity, the letter of it is
not to be disregarded under the pretext of pursuing its spirit."12 It would be improper to resort to
the comments to fabricate a new meaning for a statute that is clear on its face.
In the 1996 Petition, Max stated that no one's interests would be adversely
affected by the filing of the petition. He further stated that notice had not been given to Jean
because such notice would be futile, due to her disability. Thus, Max did not give notice to
anyone, (iiSVvaS mad\:: de... jp the 1996 Petition. This Ccu:a piL.:mmduly agreed with this decision
when it granted the 1996 Petition without instructing Max to give notice of its filing.
9
See Act of _ 1917 Pub. L. No. 193, ~ 56(b) (1917).
10
"The requirement for 'such notice to parties in interest as it shall direct' is intended to preserve existing
case law as illustrated by McCaskey's Estate, 293 Pa. 497, 307 Pa. 172, and Zerbey Estate, 356 Pa. 2."
11
~ 1 Pa. C.S. ~ 1921; see also LTV Steel Co. v. Workers' Compo ApJleal Bd. (Mozena), 562 Pa. 205
(2000).
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Objectants further assert that this Court improperly appointed Trustee as a trustee
of the Trust and therefore all of Trustee's actions with respect to the Trust should be void.
Assuming arguendo that this Court improperly appointed Trustee as a trustee, courts have held
that actions of a fiduciary erroneously or improperly appointed are binding where the fiduciary
was acting under the belief that he was properly appointed. 13
Although Pennsylvania courts have reversed court orders where notice was not
properly given,14 those cases are distinguishable from this one. Each of those cases involved a
statute that required notice be given. I 5 The relevant statute with respect to the 1996 Petition is 20
Pa. C.S. ~ 7101, which requires notice be given "to parties in interest as [the Court] shall
direct...." This statute does not mandate notice to all parties in interest, unless directed by the
court, and this Court did not so direct.
12
See 1 Pa. C.S. ~ 1921.
13
See. e.g., Cooke v. Marshall, 196 Pa. 200, 202 (1900) (finding administration of company affairs by
tJ,;:.;.;;;.:,; impr;+;:dy elected "!!lru;~ be regarded as legal in all re>:IX"ts"). BaL': .:....3...lk vi' \Vc,>hihgtl1l1, i 1
Sergo & Rawle 411,413 (Pa. 1824) (roling that officer who was elected at a meeting of the board of
directors which did not comply with the company's bylaws was an officer de facto and his acts were
binding upon the company).
14
See. e.g., Estate of Alexander, 758 A.2d 182, 188 (pa. Super. Ct. 2000) (overturning adjudication of estate
and ordering refund of distributions to charitable beneficiaries where executor failed to give notice to all
beneficiaries under will); In re Sylvester, 409 Pa. Super. 439, 455 (1991) (reversing order approving
permanent guardianship).
IS
See 20 Pa. C.S. ~ 3503 ("No account shall be confirmed unless the accountant has given written notice of
the filing of the account....") (cited in Alexander, 758 A.2d at 187); see also 20 Pa. C.S. ~ 5511 ("Written
notice of the petition shall be g:iven ... to the alleged incapacitated person.") (cited in Sylvester, 409 Pa.
Super. 454) (emphasis added).
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Further, in those cases the effect of voiding the trustee's action was practicable.16
In contrast, if all actions of Trustee were considered void, the task at hand would be
unmanageable, and in some respects impossible. For example, all investment decisions would
need to be undone, all tax returns for the Trust would have to be amended and all distributions,
including the payment of expenses, would have to be refunded and reevaluated - an unfeasible
task.
Finally, Objectants claim that Trustee has a conflict of interest. This assertion
appears in Objections 2, 4, 8 and 13. In the interest of efficiency, Trustee will address and
dispose of this repeated allegation now.
Objectants do not articulate any legal conclusion from the hollow allegation that
there is a conflict of interest. Presumably they are relying on the general legal principle that a
trustee is prohibited from acting when the interests of the trust and the trustee personally
conflict.17 However, where the person creating the trust places the trustee in a position that
creates the conflict of interest, the trust creator is deemed to have waived any such conflict of
interest and the trustee is permitted to act according to the terms of the truSt.18 This is a common
",:iuatlOIl.
16
Alexander, 758 A.2d at 192 (ordering refund from two hospitals who were contingent beneficiaries where
executor misrepresented to court that he made reasonable efforts to locate primaxy beneficiaries); Sylvester,
409 Pa. Super. at 455 (reversing order approving permanent guardianship where incapacitated person did
not receive notice of guardianship proceedings).
17
Steele Estate, 377 Pa. 250 (1954) (rev'd on other grounds); see also Pincus Estate, 378 Pa. 102, 110-11
(1954).
18
Steele Estate, 377 Pa. 250 (1954) (rev'd on other grounds); see also Pincus Estate, 378 Pa. 102, 110-11
(1954).
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In his will, Loy named his nephew Max and his brother J. F. Hempt as co-trustees
and co-executors.19 J. F. Hempt had no beneficial interest in the Trust. Max was a potential
remainder beneficiary of the Trust. The will provided that no trustee who had a beneficial
interest in the Trust could participate in decisions to distribute income or principal. 20 This
provision meant that J. F. Hempt, the only trustee who did not have an interest in the Trust, had
the sole authority to determine the amount of trust distributions.
By codicil to his will, Loy changed the executors and trustees to Max and Loy's
wife Margaret.21 The codicil contained a specific provision that Margaret was never to
participate in any decision to distribute income and principal from the Trust.22 While the codicil
did not specifically revoke the provision in the original will that stated no beneficiary who had an
interest in the Trust was to participate in decisions to distribute income or principal, it is clear
that that result was intended. When executing his codicil, Loy intended that Max, the only other
named trustee, have sole authority to make decisions regarding distributions from the Trust.
Under any other interpretation Loy would have created a trust from which no distributions could
be made. It is black letter law that wills are to be interpreted so as to not reach absurd results. 23
19
Article THIRTEENTH of the will.
20
Article ELEVENTH of the will.
21
Article THIRTEENTH of the codicil.
22
Article THIRTEENTH of the codicil.
23
See. e.g., Estate of Toland, 495 Pa. 482, 490 (1981) ("Indeed, it is a well-settled canon that '[a]
construction which will satisfy the language used without leading to absurd or inconvenient results is to be
preferred. . . .) (quoting Duffy Estate, 313 Pa. 101, 106 (1933)); In re Estate of Gangwisch, 454 Pa. 476,
480 (1973) ("In interpreting a will, construction of the will which leads to an unnatural or absurd result
should be avoided.").
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A codicil and will if possible should be read together so as to make sense of
both.24 However, where the provisions of a will and codicil are in conflict, the provisions of the
codicil govern.25 Here, because the original provision in the will conflicts with the later codicil,
the original provision was implicitly revoked by the subsequent codicil. Cum duo inter se
pugnantia reperiuntur in testamento, ultimum ratum est. 26
Loy waived any conflict of interest with respect to Max when he appointed Max,
a remainder beneficiary of the Trust, as the sole trustee with power to make decisions regarding
distributions. When this Court appointed Max's son, Trustee, as a co-trustee, the Court was
simply extending Loy's waiver of any conflicts of interest to Trustee. Any other interpretation of
the effect of this appointment would mean this Court appointed Trustee as a trustee with no
power to make distributions, again an absurd conclusion.
Kalbach Objection 3. The trustees of the Trust arbitrarily made distributions of income and
principal to Margaret and Jean.
Trustee's Resoonse. The trustees orooerlv exercised the discretion e:ranted to them bv the
term~ oft!lli" Tn.H;! in makiDe: oricdpa! :md ~:~r:':Im' 'J~~tributions to Jean and Man!arrvt.
24
See. e.g., Grimm Estate, 442 Pa. 127,140 (1971); Inre Mc Cune, 705 A.2d 861,867 (pa. Super. Ct. 1997).
25
See. e.g., Elkin's Estate, 339 Pa. 193,200 (1940) ("Where the testator's purpose is clear, we cannot by a
rule of construction restrict the codicil to a meaning which would frustrate its intendment."); see also
Grimm Estate, 442 Pa. at 143-145.
26
Where two things repugnant to each other are found in a will, the last shall stand. See also Grimm Estate,
442 Pa. at 143 (stating that "where a will and codicil are in conflict, the codicil provisions prevail").
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Over a period exceeding 25 years, the trustees made discretionary distributions of
$935,123.77 of income to Margaret and Jean and $20,653.99 of principal to Jean, and
accumulated $522,631.74 of income. See Accounting Table of Contents and pages 41-42 and
166-169.
Objectants admit that the trustees have discretion to make distributions from the
Trust. Objectants challenge the trustees' exercise of this discretion.
The basic legal rule is that "[w]here discretion is conferred upon the trustee with
respect to the exercise of a power, its exercise is not subject to control by the court, except to
prevent an abuse by the trustee of his discretion."27
Objectants offer no facts supporting their hollow allegation that the distributions
have been made without careful consideration. In fact, their claim that Trustee "[a]t all times
since the establishment of the Trust... failed to exercise his discretion and... distributer d] all of
the net income of the Trust" is wrong on its face. 28
Objectants argue that Jean did not "need" the income and principal that the
trusteps rl;;:t,';hvte...r91.o hn from th" T,"t..,t, hel'~'..~~~~ ~'h:;: t::~.d ;r"1:;le funds of her own.30 Tb.!~ is ::1
27
RESTATEMENT (SECOND) OF TRUSTS ~187 (1959) (quoted with approval in Geron v. Kennedy, 381 Pa. 97,
101 (1955)); see also Trexler Trust, 11 Fiduc. Rep. 2d 195, 202 (Lehigh Co. OIphans' Ct. 1991) (noting
trustee abuses his discretion when he "acts dishonestly, with an improper motive, without judgment, or
beyond the bounds of reasonable judgment").
28
The Accounting clearly shows that the trustees have not distributed all the net income. In fact, they have
accumulated $522,631.74 of income or approximately 38% of the Trust's net income. See Table of
Contents of Accounting.
29
Objectants also incorrectly allege that Trustee distributed $125,000 annually from the Trust. From 1998
through 2000, Trustee distributed an average of $54,000 of income to Jean's estate. See p. 169 of
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common issue in the administration of trusts: should the trustee of a discretionary trust require
the beneficiary to expend the beneficiary's own funds before making any discretionary
distributions to the beneficiary?
In this case Loy answered that question. His will does not restrict the trustees to
making distributions only when the lifetime beneficiaries "need" the money. Under the terms of
the Trust, the trustees have broad discretion to determine what distributions of principal and
income should be made.31 The Trust provides that in making discretionary distributions, the
"trustees may consider, to such extent as they deem proper, the resources and sources of funds
available to such beneficiary."32
By providing that the trustees "may" consider Jean's other resources to the extent
"they deem proper," Loy made it clear the trustees are not required to Withhold distributions to
Accounting. In virtually every year, the amount of income distributed to Jean was approximately equal to
her expenses at the Woods School, a residential home for the mentally retarded where she resides. See
attached table of Jean D. Hempt expenses and distributions as Exhibit D.
30
The Objectants relied on Trustee's "2001 Petition for Pennission to Make Gifts Pursuant to 20 Pa. C.S. ~
5536(b)" in stating that Jean's income from her estate was $105,000 per year. Trustee has discovered that
he incorrectly stated Jean's income in that petition by inadvertently including the income she receives both
from her estate and from the Trust. In fact, Jean's income from her estate is considerably less than
$105.000. Jean's :lVerage incom~ for the three-v;~~r ...~n.ul from 1998 through 2000 was $63,000 S~
Income Tax Returns of Jean Hempt Estate attached hereto as Exhibit E. This error may have misled
Objectants into thinking that Jean's resources are greater than they are in reality.
31
Article FIFTH (1) of the will provides:
"During such time as either or both of my wife, Margaret, and my niece, Jean
Hempt, are living, trustees shall pay to or expend directly for the benefit of
either or both of my wife and my niece such parts or all or none of the net
income and principal as trustees may determine in their sole and absolute
discretion, to provide for their care, support and welfare, provided that no
principal shall be paid to or used for my wife so long as any principal remains in
trust under item FOURTH hereof."
32
Article ELEVENTH of the will.
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Jean until her personal assets are depleted.33 The trustees did examine Jean's outside resources
and exercised their discretion by distributing funds to Jean to cover her basic living expenses at
the Woods School where she resides, and by accumulating excess income in the Trust (where it
is added to principal for eventual distribution to all the remaindermen including Objectants). See
Exhibit D.
Because the trustees acted after careful consideration, had no improper motive
and did not act dishonestly in making the income distributions to Jean, they did not breach their
fiduciary duty to the remainder beneficiaries of the Trust.34
Kalbach Objection 4. Trustee had no authority to divide the Trust into three separate trusts
because the terms of the Trust do not specifically allow this.
Trustee's Response. Trustee acted in conformity with the terms of the Trust and under the
authority of 20 Pa. C.S. & 7191 when dividin2 the Trust into three separate trusts.
Trustee, as sole trustee of the Trust, divided the Trust into three separate trusts on
April 25, 2002. The trust division was made pursuant to 20 Pa. C.S. ~ 7191(a), which provides
in part:
33
Even where the terms ofthe trust require trustees to consider the outside resources of a beneficiary, courts
have held distributions could be properly made to the beneficiary even though the beneficiary had other
resources available. Thompson Trust, 22 Fiduc. Rep. 2d 411,414-415 (Butler Co. Orphans' Ct. 2002).
The court held the language of the trust did not require the beneficiary to use all of her personal property to
pay for her expenses before the trustee could make distributions from the trust to cover these expenses.
The trustee only had to consider these other resources in its decision-making process.
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"A trustee may, without court approval, divide a trust into
separate trusts, allocating to each separate trust either a
fractional share of each asset and each liability held by the
original trust or assets having an appropriate aggregate fair
market value and fairly representing the appreciation or
depreciation in the assets of the original trust as a whole."
Because Loy's Trust directs that on Jean's death the principal shall be distributed
40% to the Hempt family, 40% to the Mack family and 20% to the Kalbach family, Trustee
divided the Trust in precisely this way.
Fair Market Value
Appreciation
(Potential capital gains tax liability)
Loy's Undivided Trust
Trust for Hempt family
Trust for Mark family
Trust for Kalbach family
40%*
40%*
20%*
$6,981,911
$2,792,765
$2,792,764
$1,396,382
$4,895,260
$1,958,192
$1,959,171
$977,897
*Remainder interest in Loy's Trust
The fair market value of each new trust is equal to the respective remainder
interest of each branch of the family in the Trust. Each new trust also contains a proportionate
share of the appreciation of the Trust. For example, the new trust for the eventual benefit of the
Kalbach family contains exactly 20% of the fair market value and 20% of the appreciation of the
Trust assets.
34
TrexlerTrus!, 11 Fiduc. Rep. 2d 195, 202 (Lehigh Co. Orphans' Ct. 1991)) (noting trustee abuses his
discretion when he "acts dishonestly, with an improper motive, without judgment, or beyond the bounds of
reasonable judgment").
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Objectants argue that by the division Trustee has placed himself at a financial
advantage. The requirements of the statute ensure total fairness, and Trustee followed those
requirements to the penny. The statute allows the non-prorata division of trust assets so long as
each new trust receives the proper proportion of both fair market value and appreciation. Each
group of beneficiaries receives its pro rata share of fair market value and its share of potential
capital gains tax liability. Trustee has accurately determined the fair market value of all Trust
assets and meticulously divided them proportionately.
Trustee believed that all parties would benefit from the trust division.35 The
trustee did not distribute any stock of the family businesses to the new trust for Kalbach and his
...
issue because those businesses have been managed by the Max Hempt family, not by the
Kalbach family, and relations between the two families have not been easy. In addition, the
Kalbach family runs a business that competes with Hempt Bros., Inc., the primary family
business.
Objectants rely on the Official Comment to 20 Pa. C. S. ~ 7191, regarding the
purpose of the amended statute, to restrict the use of the statute to specific narrow situations.36
Till:'> ";,J,nment Objectants rely on is froid the ,,,0c,i. J.c..:,t:.h amenument tu the statute ill 1999 For
over 50 years trusts could be divided into separate trusts with court approval. The comments to
the pre-1999 versions of the statute discuss some possible purposes for dividing a trust, including
35
Nothing supports Objectants' bare allegation that the only reason Trustee divided the Trust was to create an
"ownership advantage" in family businesses owned by the Trustee.
36
The comment to 20 Pa. C.S. ~ 7191 states it was "intended to aid in the qualification of trusts as qualified
shareholders for Subchapter S corporation purposes as well as for generation skipping tax purposes."
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pursuing different investment policies of the beneficiaries and reducing administrative
difficulties where beneficiaries have different rights to invade principal. 37 The 1999 amendment
allowed the trustee the ability to divide a trust without court approval. The comment to this
amendment noted some of the additional uses for this expanded power.
The language of the statute as presently enacted does not restrict the use of this
power of division to such limited purposes. The comment is an illustration of how the amended
statute could be useful, not an exhaustive list of all situations in which it may be used.38
Objectants offer no legal basis for confining the statute's use to such limited purposes. Here, the
clear language of the statute expressly granted Trustee the authority to divide the Trust.
Objectants claim that Trustee has exhibited "open hostility" toward them. Not
only is this allegation unsupported by specific facts, but Objectants admit that this statement is
false.39 Further, the Kalbach Objections do not state why, even if such facts were true, they
would be legally actionable or otherwise relevant with respect to the trust division.
Finally, to the extent Objectants are arguing that Loy specifically directed that the
Hempt, Mark and Kalbach families each receive a fractional portion of each asset in the Trust, a
review of Loy' s will shows Loy never intended the beneficiaries to have such rights. Loy gave
his trustees broad discretion to manage the assets of the Trust. He did not give the Trust
37
1949 Official Commentto 20 Pa. C.S. ~ 7191.
38
Besides, where the statute is clear on its face, it is improper to look to the comment for the meaning of the
statute. 20 Pa. C.S. ~ 1921.
39
In paragraph J of Objection 4, Objectants assert the trustee has exhibited open hostility to them. Then in
paragraph 0, the Objectants concede, "[n]o evidence exists of any alleged hostility [except for dividing the
Trust)." The Objectants are not consistent in their factual allegations.
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beneficiaries any vested rights to any of the original property in the Trust. The Trust contained a
provision allowing the trustees to retain or sell the assets ofthe Trust in the trustees' discretion.40
The Trust specifically contained a provision giving the trustees the discretionary power "to make
distribution in cash or in kind" of any trust property. 4] Objectants incorrectly interpret the terms
of the Trust to impose a requirement of retention of the original trust assets and ultimate
distribution years later of those assets in kind.
Kalbach Objection 5. 20 Pa. C.S. 97191 (allowing a trustee to divide a trust into separate trusts)
does not apply to trusts existing when it was amended in 1999; and hence does not apply to the
Trust.
Trustee's Resoonse. Section 7191 is clearlv aoolicable to the Trust.
Objectants contend that the legislature did not intend an amendment to 20 Pa. C.S.
~ 7191 to apply to the Trust, and therefore Trustee had no legal authority to divide the Trust.
The original version of ~ 7191 was enacted in 1949 and provided:
"The court, for cause shown and with the consent of all
parties in interest, may ciivici~ ~ tm~t int" tw.-. i)f mNe
separate trusts."
The 1949 Act stated it was effective as of January 1, 1950.42 The Act did not
expressly specify whether this power to divide was applicable to trusts created prior to the
40
Paragraphs (a) and (c) of article NIN1H of the will.
4]
Paragraph (g) of article NINTH of the will.
42
See Act of April 18, 1949, Pub. L. 512, No. 121, ~ 105 (1949).
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statute's enactment. However, courts, without seeing the need for any discussion, applied this
statute to trusts existing prior to the statute's enactment.43
In 1992 this statute was amended to delete the requirement that all parties in
interest consent to the division and to require notice to all parties in interest as directed by the
court.44 Again, the legislature used the same language regarding the applicability of this
amendment - "shall apply beginning with the effective date."45 Because the legislature did not
specify that the 1992 amendment's applicability was limited to instruments executed on or after
its effective date, presumably its applicability is not related to the date the instrument was
executed.
~ 7191, as amended in 1999, provides in part:
"(a). A trustee may, without court approval, divide a trust
into separate trusts, allocating to each separate trust either a
fractional share of each asset and each liability held by the
original trust or assets having an appropriate aggregate fair
market value and fairly representing the appreciation or
depreciation in the assets of the original trust as a whole. "46
43
See Stotesbmy Trust, 3 Fid. Rep. 505, 508 (Montgomery Co. Orphans' Ct. 1953).
44
As amended in 1992, ~7191 provided: "The court, for cause shown, may authorize the division of a trust
into two or more separate trusts upon such terms and c{mditions and with such notice as the court shall
direct. "
45
See Act of December 16, 1992, Pub. L. 1161, No. 152, ~ 27(e) (1992).
46
20 Pa. C.S. ~7191(b)provides: "(b) With court approval. - The court, for cause shown, may authorize the
division of a trust into two or more separate trusts upon such terms and conditions and with such notice as
the court shall direct." This subsection b is identical to ~ 7191 as amended in 1992.
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Objectants aver that the 1999 amendment only applies to trusts created after the
enactment of the amendment.
However, just as in 1949 and 1992, in 1999 the legislature specified that the
statute "shall apply beginning with the effective date...." which was December 12, 1999.47 The
consistent use of this language after the courts interpreted it to mean the statute applied to
existing trusts shows the legislature assumed the meaning of this language was self evident.
There is no reason to suppose that the legislature intended the 1999 statute to
apply differently from the 1949 statute. Quite the contrary. The 1949 statute was a more drastic
change from the law prior to its enactment than the amendment to the statute in 1999, which
merely extended the power to divide a trust to trustees. Because the legislature made the original
version of ~ 7191 applicable to trusts existing prior to its enactment, it is reasonable to assume
the legislature intended the subsequent amendments also to apply to existing trusts.
The amended statute grants trustees the power to divide trusts, a power previously
reserved to the courts. Obviously the drafters of future trusts could include this power in their
trust instruments if they saw a need to do so. Consequently the statute is of little use for new
trusts. But for old trusts - particularly those written before the subchapter S rules and GST tax
-the statute can be very useful. The statute was, and has always been, intended as a remedy for
circumstances unforeseen when trusts were previously created. The comments to ~ 7191
substantiate this conclusion that the statute was enacted as a remedy to apply to trusts existing
47
See Act of October 12, 1999, Pub. L. 422, No. 39, ~ 13(8) (1999).
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prior to its enactment. One of the comments to the 1992 version of ~ 7191, states that the statute
is "intended to aid in the qualification of trusts as qualified shareholders for Subchapter S
corporation purposes as well as for generation skipping tax purposes.,,48
Trustee divided the Trust into three separate trusts on April 25, 2002, which was
after the effective date of the amended statute. Thus, the division of the Trust was a proper
exercise of this statutory power by Trustee.
Objectants appear to argue that Trustee seeks to use this statutory power
retroactively. Objectants state that there is a general presumption against giving a statute
retroactive effect.49 Even though this statement of the law is correct, Objectants misunderstand
the application of the law to the facts of this case.
Trustee is not requesting that the division ofthe Trust be made retroactive to the
original date of the creation of the Trust or any other date prior to the effective date of the statute
on December 12, 1999. Rather, Trustee is merely using the statutory power prospectively - on
April 25, 2002, which is after December 12, 1999 - to an existing trust. Objectants confuse the
use of the terms "retroactively applied" and "prospectively applied" to an existing trust.
Objectants' reliance on the law at the time ofLoy's death is unfounded. 20 Pa.
C.S. ~ 7191 is the applicable law regarding the Trust as of the effective date of that statute. The
law at the time ofLoy's death is irrelevant.
48
1992 Official Comment to 20 Pa. C.S. ~ 7191.
1 Pa. C.S. ~ 1922(3).
49
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Objectants contend they are legally entitled to in kind distribution of their pro rata
share of each asset owned by Loy at his death. 50
The Objectants fail to note that the Trust contains a specific provision giving the
trustees the discretionary power to sell assets at anytime during the existence of the Trust and to
make distribution in cash or in kind when the Trust terminates. 51 This specific authorization in
the Trust negates any alleged "right" of beneficiaries to demand a distribution of property in
kind. Courts have held that a beneficiary has no right to demand an in kind distribution of
property where the will contains language granting the trustee discretion to sell property or
distribute it in kind. 52 Because Loy specifically included this language, the beneficiaries are not
entitled to demand an in kind distribution of property.
The division of the Trust is therefore consistent with both 20 Pa. C.S. ~ 7191 and
the terms of the Trust.
50
"Distribution of an estate in kind is always the exception and not the rnle." McTague's Estate, 18 A.2d
532,534 (pa. Super. Ct. 1941).
51
Paragraphs (c) and (g) of article NINTH of the will.
52
Abdoe Estate, 20 Fiduc. Rep. 2d 159, 165 (Lawrence Co. Orphans' Court 1999). See also McTague's
Estate, 18 A.2d 532,534 (pa. Super. Ct. 1941).
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Kalbach Objection 6. The legislature's decision to apply ~ 7191(a) to existing trusts is
unconstitutional.
Trustee's Resoonse. The aoolication of & 719Ha) to the Trust is constitutionallv valid.
Objectants contend thatthe application of20 Pa. C.S. .~ 7191(a) to the Trust
constitutes a constitutional violation because it is a "taking of property." Objectants contend that
the division of the Trust deprives some of the beneficiaries ofa vested right in the trust property.
In Estate of Bernardi v. Bernardi/3 the Court noted "one of the stronger
presumptions in our law is that an enactment of the legislature is constitutionaL.. ." The Court
then reiterated the "well established" rule that "the burden of proving clearly and unmistakably
the unconstitutionality of a legislative enactment is upon the person so asserting."54
Obj ectants aver that they had, prior to the 1999 amendment of ~ 7191, a vested
right to have the assets of the Trust maintained intact and to have a fractional share of each and
every asset distributed to them upon termination of the Trust. From this premise - which the
Trustee's response in objection 5 above shows does not accord with the law or the terms of the
T:"tlst C~jectant5 conclude that the aiTH;ndn:lcil~ to ~ 1191, granting the trustee the powm [n
divide the trust without fractionalizing each and every asset, is an unconstitutional taking of their
53
22 Fid. Rep. 2d 282,285 (Cumberland Co. Orphans' Ct. 2001), incorrectly cited by Objectants as 22 Fid.
Rep. 282.
54
See id. (citations omitted).
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property. In fact, the same "unconstitutional retroactive taking" argument was made against the
prior version of ~ 7191 and was rejected.55
The legislature typically makes statutory changes to matters of trust
administration apply to existing trusts and they are not considered "takings." For example, the
Principal and Income Act changed the definition of what trust property was "income." In Arrott
Estate,56 the Pennsylvania Supreme Court specifically held that the application of the Act to
receipts and disbursements received and made by existing trusts after the enactment of the statute
did not result in a constitutional taking of property. "Although enjoying a vested right to income,
[an income beneficiary] has no vested interest in a definition or method of ascertaining
income." 57 The Court held that the Act only changed the method of ascertaining the
beneficiary's specific property interest and did not take away a vested property right.
This same result was reached in Catherwood Trusf8 in which the Pennsylvania
Supreme Court held that the application of Principal and Income Act to existing trusts was valid
and did not result in a constitutional taking of property. The Court made clear that beneficiaries
55
Stotesbury Trost, 3 Fid. Rep. 505, 508 (Montgomery Co. Orphans' Ct. 1953) ("[I)t would not appear that
there is any constitutional objection on account of the retroactive feature of the act as applied to this case
because the beneficiaries receive the exact proportion of the property they would otherwise receive.").
56
ArrottEstate, 421 Pa. 275 (1966).
57
See id. at 282.
58
Catherwood Trost, 405 Pa. 61 (1961).
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have no vested property rights "to any particular mode or method of ascertaining what is or is not
income."59
Consistent with the holdings in Arrott Estate and Catherwood Trust, the
legislature has made many other statutory changes to matters of trust administration applicable to
trusts existing when the statutory change is made (but only to acts performed after the legislative
change) believing such legislation is constitutional, including: 20 Pa. C.S. ~6102 (termination of
trusts), 20 Pa. C.S. ~6104 (the wait and see Rule Against Perpetuities), 20 Pa. C.S. chapter 37
(apportionment of death taxes60), and 20 Pa. C.S. ~7203 (the prudent investor rule).
Section 7191 is constitutionally valid and its application does not result in a
taking of property rights of any beneficiary.
Kalbach Obiection 7. The Trustee's valuation of shares of stock ofC. A. Hempt Estate, Inc. for
purposes of dividing the Trust is low.
Trustee's Resoonse. The valuation of C. A. BernDt Estate. Inc. shares held bv the Trust
reDresent~ their fair J!!!.r~1..y"!lue~
Objectants argue that the stock of the closely-held family business C. A. Hempt
Estate, Inc. was valued too low in the Accounting and does not reflect its fair market value.
59
See id. at 74.
60
The Supreme Court held the application of legislation that provided for the apportionment of death taxes
among the beneficiaries to an existing trust was an "administrative provision governing the distribution of
estates..." and thus was constitutional. Harvev Estate., 350 Pa. 53, 57 (1944).
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The Trustee determined the fair market value of the stock of C. A. Hempt Estate,
Inc. by using a recent real estate appraiser's valuation of the shopping center owned by the
company and then making appropriate and generally accepted adjustments for lack of
marketability of the corporation's stock and minority ownership. A copy of the C.A. Hempt
Estate, Inc. Appraisers Report is attached as Exhibit F.
Objectants do not challenge the appraised value of the shopping center owned by
C. A. Hempt Estate, Inc. Instead, Objectants question Trustee's application of two standard
discounts to this value: a minority discount and a lack of marketability discount of the
company's stock. Objectants' offer no law to support their contention that these discounts were
inappropriate.61
A minority discount is a discount for lack of voting control. It is used when
valuing interests of a corporate shareholder who owns 50% or less of a closely-held business
because the holder of such an interest has no ability to control salaries, dividends, corporate
policies or any other corporate actions. Courts and even the hard-nosed Internal Revenue
Service recognize the use of a discount for a minority interest. 62 In this case, Loy's Trust owns
6,000 of the 24,00:) share50fC A. Ht:mpi. Estate, 1he. thai ale issued and o'ltstanding, whil:h is
61
The C. A. Hempt Estate, Inc. appraisal was distributed to all of the shareholders along with a letter dated
August 24,2001 explaining that the value in the report was the value of the company as a whole. The letter
went on to explain that it did not accurately reflect the value of each of their individual minority interests in
the company and that a 30% discount for minority ownership and a 30% discount for lack of marketability
is standard and applicable to such interests. No shareholder who received this report and letter, including
Kalbach and the Marks, questioned or challenged the discounts at that time.
62
Edwin T. Hood, Valuation of Closely Held Business Interests, 65 UMKC L. REv. 399,442 (1997) ("both
the courts and the Internal Revenue Service permit a discount from underlying asset value when valuing a
minority interest"); see also Viener v. Jacobs, 52 Pa. D. & C. 4th 353,382 (Berks Co. Orphans' Ct. 2001).
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25% of the company stock. The Trust thus has a minority interest.
Trustee used a standard 30% minority interest discount for valuing such a non-
controlling interest. Courts have regularly upheld minority discounts significantly higher than -
sometimes double - the discount used by Trustee.63
The minority discount is distinct from a lack of marketability discount. A lack of
marketability discount is a discount for stock in a closely-held company that cannot be sold
publicly. Investors are not eager to purchase such illiquid shares because they are very difficult
- indeed often virtually impossible - to sell. The lack of marketability discount is allowed
when valuing both controlling and minority interests in stock for which there is not a public
market. 64
Trustee used a 30% discount for lack of marketability. The combination of these
two 30% discounts results in a combined discount of 51 %.
When valuing closely-held stock courts have deemed appropriate combined
minority and marketability discounts of up to 70%.65 Thus, the 51% combined discount taken by
Trustee in the Accounting is entirely reasonable and proper.
63
See. e.g., Estate of Della Walker van Loben Sels, 52 T.C.M. (CCH) 731 (1986) (upholding 60% minority
discount in valuing closely-held stock).
64
Edwin T. Hood, Valuation of Closely Held Business Interests, 65 UMKC L. REv. 399,438 (1997) (citing
inter alia Estate of Frank v. Commissioner, 69 TC.M. (CCH) 2255 (1995)).
65
See. e.g., Martin v. Commissioner, 50 TC.M. (CCH) 768 (1985) (upholding 70% minority and
marketability discount); Estate of Baird v. Commissioner, 82 TC.M. (CCH) 666 (2002) (upholding 55-
60% combined discount for valuing closely-held stock); Estate of Bailey v. Commissioner, 83 T.C.M.
(CCH) 1862 (2002) (upholding a combined valuation discount of 50% for closely-held stock).
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Business appraisers routinely use such discounts and courts have regularly
approved such discounts. Objectants assertion that such discounts are merely fictional tax
concepts and have no legal basis is simply false.
Kalbach Objection 8. The Trustee's valuation of shares of stock ofHempt Bros., Inc. for
purposes of dividing the Trust is low.
Trustee's Resoonse. The Trustee's valuation of Bemot Bros.. Inc. shares held bv the Trust
reo resents their fair market value.
Objectants question the valuation ofHempt Bros., Inc., the primary Hempt family
business. Objectants simply claim they cannot verify the value ofHempt Bros., Inc. because the
buy-sell agreement, which sets the value of the Hempt Bros., Inc. shares, has not been supplied
to them.
A copy of the Hempt Bros., Inc. buy-sell agreement is attached hereto as
Exhibit G.
It will be noted that the buy-sel! :l,greement has been in effect since October 19,
1964. It was signed by all of the then-shareholders ofHempt Bros., Inc., including Loy T.
Hempt. By its terms the buy-sell agreement is binding on all of their successors and assigns,
which includes Loy's Estate and Trust and, after the Trust terminates, the Trust remaindermen.
The buy-sell agreement restricts the transfer ofHempt Bros., Inc. shares by
requiring shareholders to offer to sell shares to the company or to other shareholders at book
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value before selling the shares to third parties. Book value is defined in the buy-sell agreement
as the tangible book value on the date of the otTer to purchase as determined by the company's
regular auditors. Any third party purchaser is bound by these restrictions in the buy-sell
agreement. The book value of the company is $643.49 per share as of August 31, 2001.
The stock transfer restrictions imposed by the buy-sell agreement are valid under
Pennsylvania law. 15 Pa. C.S. ~ 1529 expressly permits restrictions that require shareholders to
otTer shares to the corporation or any other person before selling them to third parties. In
addition, the use of "book value" as the option price has been upheld by the Supreme Court of
Pennsylvania. 66
Because each Hempt Bros., Inc. shareholder is bound by the stock transfer
restrictions in the buy-sell agreement, which caps the option price at book value, no reasonable
investor would pay more than book value for the shares. Therefore, the valuation used in the
Accounting at book value is appropriate.
Finally, Objectants state that Trustee has a direct personal interest in
"manipulating" the distribution of the Hempt Bros., Inc. stock among the remaindermen ofthe
Trust. In dividing the Trust into three trusts, Trustee allocated no stock ofHempt Bros., Inc. to
the Trust for Kalbach.
66
Mather Estate, 189 A.2d 586, 591 (pa. 1963) ("[A)n option to purchase the same at an agreed price or the
then-existing book value before offering the stock for sale to an outsider, is a valid and reasonable
restriction and binding upon stockholders.") (internal quotations and citations omitted).
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Trustee has been a shareholder ofHempt Bros., Inc. for 36 years and an
employee, officer and director for nearly as many years. Trustee has a genuine and valid concern
that Hempt Bros., Inc. not suffer from constant disagreement among its shareholders.
Objectants' descriptions of Trustee's actions as "manipulative," "disingenuous" and "abusive"
do not bode well for Objectants ever being cooperative shareholders in a family business
managed by Trustee. 67
Kalbach's Objection 9. Because the valuation of Valley Land Company was determined by
using the common level ratio method, it is low.
Trustee's ResDonse. The valuation of Valle v Land Companv shares was not based on a
common level ratio. The valuation was based on an appraisal of the real estate owned bv
the com~anv and reD resents the shares' fair market value.
Valley Land Company's sole asset is a parcel of undeveloped real property in
Cumberland County. Valley Land Company has never leased, subdivided or sold any of the real
property held by the company.
Ohj,"-ctants erroneously state that T~.,~<.tt-:, ~"'!':! ~ "('nnfllon Le';d Ratio" approach
in valuing the land. In fact, Valley Land Company recently had its sole asset appraised by an
independent real estate appraiser, and Trustee used that appraised value as the basis of his
valuation of the shares.
67
Further, Kalbach himself owns a business in direct competition with Hempt Bros., Inc.
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The appraiser used a sales comparison approach, which is considered to be the
most reliable method in appraising real property like that owned by Valley Land Company. This
appraisal valued Valley Land Company's real estate at $4,700,000. A copy of the Valley Land
Company Appraisal Report is attached hereto as Exhibit H. Trustee used the appraised value as
a base to determine the value of the Trust's shares in Valley Land Company.
It is well accepted that when valuing closely-held businesses, the built-in tax
liability of the assets held by the company must be taken into consideration.68 After the payment
of these taxes, Valley Land Company would have approximately $2,585,000 remaining in cash.69
Thus, each of the 100 outstanding shares is worth $25,850. Because no reasonable purchaser of
the stock would pay more than the after-tax value of the company's only asset, this is clearly the
value of the stock.
.:2
~ DUlin v. C'dlirrU.:i.>i'Jner, 301 F.3d 339 (5th Cir. 7~r.~; \'1\.:.')::"5 Pf"Alr c. AI", V ALuii'HJ A BLSli,r.sS, at
47 ("Tax consequences of ownership and/or transfer of stock... usually are quite different from those of
ownership and/transfer of direct investment in underlying assets. These tax implications often have a
significant bearing on value.")).
The Court in Dunn held as a matter oflaw that the built-in capital gains tax liability of company assets
must be considered as a dollar for dollar reduction when calculating the asset -based value of the company.
The Court emphasized, "[iJt is inconceivable that.. . any reasonably informed, fully taxable buyer.. . has not
insisted that all... of the latent tax liability of assets held in corporate solution be reflected in the purchase
price of such stock." Id.
69
Because Valley Land Company's tax basis in its sole asset is nominal, if it sold the land it would recognize
a gain of approximately $4,700,000. The company would have to pay capital gains tax on the sale at a rate
of approximately 35% for federal income tax purposes and 9.99% for Pennsylvania income tax purposes.
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.
The Trust owns 89 out of the 100 shares of Valley Land Company, so the fair
market value of the shares held by the Trust is $2,300,650.70 This is the figure shown in the
Accounting.
Kalbach Objection 10. Trustee did not fully justify why he made a distribution of principal to
Jean in 2000; the subsequent refund of this distribution was inadequate.
Trustee's Resoonse. The Trustee. relvin2 on professional tax advice. made a orincioal
distribution to Jean. When the advice was determined to have been erroneous. the Trustee
collected the distribution from Jean.
Objectants contend that that the December 21,2000 principal distribution to Jean
in the amount of$218,565.41 was improper.71
As discussed above in Objection 3, Trustee has discretion to make distributions of
principal to Jean. "Where discretion is conferred upon the trustee with respect to the exercise of
a power, its exercise is not subject to control by the court, except to prevent an abuse by the
trustee of his discretion."72
70
Fair market value of land (per appraisal)
Federal and state taxes payable as a result of sale ($4,700,000 X 45%)
Cash in company after sale
$4,700,000
2.115.000
$2,585,000
Per share value (post sale cash -;- 100 shares)
Value of 89 shares owned by the Trust
25,850
$2,300,650
71
See p. 42 of Accounting.
72
RESTATEMENT (SECOND) OF TRUSTS ~187 (1959) (quoted with approval in Geron v. Kennedy. 381 Pa. 97,
101 (1955)); see also Trexler Trust 11 Fiduc. Rep. 2d 195, 202 (Lehigh Co. Orphans' Ct. 1991) (noting
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This particular distribution was made on the advice of Trustee's accountant, who
misinformed Trustee that the Trust would save capital gains tax if it made such a distribution.
On January 28, 2002, after seeking advice of legal counsel, Trustee realized that
no such tax benefit existed. Accordingly, as Jean's guardian, Trustee refunded the distribution to
the Trust.73
In this case, Trustee clearly exercised his discretion with care, not arbitrarily. The
fact that Trustee sought the professional advice of an accountant and legal counsel demonstrates
that the decision to distribute principal was not made haphazardly.
Objectants make two minor arguments with respect to this principal distribution.
First, they argue that the Trust incurred capital gains taxes when Trustee sold the stock to make
the cash distribution. This argument makes the incorrect assumption that Trustee sold the stock
in order to make the principal distribution. In fact, Trustee sold the stock - Keystone Financial
-on September 15,2000 as an investment decision because of that company's anticipated
merger with M&T Bank, which occurred in October of 2000. Trustee was concerned about how
well the post-merger company would do. Thus, the capital gains tax paid by the Trust would
have been incurred by the Trust regardless of whether or not the cash was distributed to Jean.
trustee abuses his discretion when he "acts dishonestly, with an improper motive, without judgment, or
beyond the bounds of reasonable judgment").
73
December 21, 2001
January 28, 2002
February 1,2002
Net effect of distribution
Distributed to Jean (cash)
Refunded from Jean (municipal bonds)
Refund to Jean (cash)
-$218,568.41
+$219,139.00
-$57359
$0.00
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Objectants next claim that the Trust was not fully reimbursed after Jean refunded
the principal distribution. Objectants argue that the Trust lost income on the cash distribution for
approximately one year between the distribution and the reimbursement. The amount of income
that could have been earned in that period of time on the $200,000 distribution is about $9,900.74
Any alleged damages claimed by Objectants are merely speculative.
Kalbach Obiection 11. Five unclear entries out of thousands of entries in the Accounting
constitute failure to properly maintain records.
Trustee's Response. Trustee orooerlv maintained records ofthe Trust.
Objectants contend that entries in the Accounting indicate a lack of attention of
Trustee to his fiduciary record keeping duties. This alleged pattern of inattentiveness consists of
5 entries worth a total of$I,158.09. This complaint about a trust accounting of 170 pages
covering over 25 years is trivial. Trustee will not waste this Court's time justifying small
ordinary75 expenses of the Trust incurred in its administration. De minimis non curat lex. 76
H
In De~'eB1b..;r of 2000, Trustee pl.tnJta!>('(~ a .1llil:1I..:lpal bond with an interest ratt of 4,4'%, FOl .:akuldtioli
purposes, Trustee has assumed that the $200,000 distribution to Jean would have been invested similarly.
If a $200,000 bond with a 4.4% interest rate had been purchased on December 21, 2000, the total interest
paid through January 28,2002 would have been $9,922. If, however, the $200,000 was invested in the
Merrill Lynch Ready Asset Trust, the Trust's money market account, on December 21,2000, the total
interest earned through January 28, 2002 would have been approximately $8,352.
75
Three of the entries (3/14/95, 3/10/81 and 2/21/90) are for expenses related to balancing the checkbook of
the Trust and total $83.09. Under paragraph (1) of article NINTH of the will, the trustees may employ and
compensate agents to perform accounting services for the Trust. Further, the Trust specifies in
paragraph (1) of article NINTH that the compensation paid to any such agents is not to diminish the
compensation paid to the trustees for their services.
Here the trustees, all individuals, realized their limitations to perform complicated trust accounting services
for the Trust and relied on an experienced professional, a bank, to ensure the records of the Trust were kept
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Kalbach Obiection 12. Loy's Estate did not timely file tax returns; consequently the families of
Trustee and the executors ofLoy's Estate should be surcharged $8.512.49 as a result.
Trustee's ResDonse. The executors of Loy's Estate timely filed all tax returns for the Estate
and did not breach any fiduciary duty.
Objectants claim that the executors ofLoy's Estate filed late federal estate and
income tax returns, resulting in the imposition of interest and penalties to the Estate. Further,
Objectants assert that the executors' family and Trustee's family should be surcharged for this
alleged breach offiduciary duty in the amount of$8,512.49.
The bulk of the $8,512.49 that Objectants attribute to an allegedly late filed tax
return is attributable to interest properly paid on the federal estate tax. Loy's Estate had nine
months from the date ofLoy's death to file the federal estate tax return and pay the tax. The
Estate's estate tax return, and a check for the tax due, was received by the Director ofInternal
Revenue in Harrisburg, Pennsylvania, on December 19, 1977, exactly nine months after Loy's
date of death. A copy of the time-stamped letter to the IRS is attached hereto as Exhibit I. Thus,
the executor timely filed the federal estate tax return.
The IRS audited Loy's Estate, as is common in large estates owning interests in
family businesses, and increased the federal estate tax by $11,430.65 from the amount originally
paid. This amount was paid on August 30, 1983. Whenever taxes are paid after the date they are
in order. These minimal expenses were reasonable, specifically authorized under the tenus of the Trust,
and further evidence of the trustees proper maintenance of the records of the Trust.
76
The law does not care for, or take notice of, very small or trifling matters.
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originally due, the IRS charges interest on these unpaid taxes from the date the taxes were
originally due until they are paid. Because the audit ofLoy's Estate lasted for approximately
four years, interest accrued on the additional tax assessed. This interest was $8,107.50.77 The
payment of this interest was entirely proper.
Although it is not entirely clear from the drafting of Objection 12, Objectants
appear to challenge various other interest expenses and penalties in the amount of $404.99.78
These expenses allegedly were incurred in connection with the late filing of tax returns for the
Estate and the Trust. This amount, $404.99, is trivial considering the fact that the Estate and
Trust have been operating for over 25 years. The executors and trustees have consistently timely
filed or timely requested extensions to file79 on behalf ofLoy's Estate and the Trust, at all times
complying with their fiduciary duties to the beneficiaries of the Estate and Trust.
Kalbach Objection 13. Trustee may not participate in decisions to distribute income and
principal from the Trust.
Trustee's Resoonse. Under the terms of the Trust. Trustee is oermitted to make
discretionary distributions of income and orincioal from the Trust.
77
See p. 31 of Accounting.
78
There is no single entry for this amount. The $404.99 is the difference between the amount challenged by
Objectants and the interest paid on the audited federal estate tax return for Loy's Estate. There are other
miscellaneous tax related expenses shown in the Accounting that are presumably not challenged by
Objectants.
79
In some years where financial information was not readily available by the due date of the return,
extensions to file were properly requested.
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Objectants claim that Trustee was not authorized to distribute income or principal
from the Trust. This claim is repeatedly asserted by Objectants (Objection 2, 4, 8 and this
Objection 13). Trustee addressed this objection initially in its response to Objection 2.
Kalbach Obiection 14. Valley Land Company expenses that were paid from the Trust were not
properly chargeable to Loy's Estate.
Trustee's Resoonse. The disbursements shown as Vallev Land Exoenses in the Accountinl!
were in fact loans from the Trust to Vallev Land Comoanv.
Objectants have drawn to Trustee's attention that the Accounting shows expenses
for Valley Land Company as being paid from the Trust. Trustee has corrected the Accounting,
as shown in the supplemental accounting ftled herewith, to show that these disbursements were
loans from the Trust to Valley Land Company. The original Account mistakenly did not
characterize them as loans.
The supplemental accounting makes several changes with respect to Valley Land
Company.
The supplemental accounting shows that the disbursements shown as Valley Land
Expenses in the original Accounting were in fact loans from the Trust to cover Valley Land
Company's expenses.80 Theses loans totaled $44,818.20.8)
80
See pages 3-5 of Supplemental Accounting.
See pages 35-38 of Accounting.
81
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In addition, upon reviewing the Trust's attorney fees, Trustee discovered nine
entries listed as fees for the Trust that were in fact attributable to fees for Valley Land Company.
These nine entries, which total $9,655.63, are also now properly shown in the supplemental
accounting as loans from the Trust to Valley Land Company.82
These loans to Valley Land Company constitute an additional $54,473.83 of
assets held by the Trust.83 The supplemental accounting shows how these additional assets are to
be distributed to the divided trustS.84 Each of the divided trusts received the proper proportion of
the loans. Thus, the trust for the benefit of the Hempt family received 40% of the loans (or
$21,789.53), the trust for the benefit ofthe Mark family received 40% of the loans (or
$21,789.53) and the trust for the benefit ofthe Kalbach family received 20% of the loans (or
$10,894.77).
Finally, the supplemental accounting shows the interest on these loans to the
Trust. The interest on all Valley Land Company loans, including those reported in the original
Accounting, have been calculated based on the long term federal interest rate on the date the loan
82
See page I of Supplemental Accounting.
83
Valley Land Company Loans (previously shown as Valley Land
Company Expenses)
$44,818.20
Plus Valley Land Company Loans (previously shown as Trust attorney fees)
+ $9,655.63
Total Valley Land Company Loans
$54,473.83
84
See page 2 of Supplemental Accounting.
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was made.85 As with the principal value of the Valley Land Company loans, this additional
interest ($18,896.94) has been distributed proportionally to the three divided trusts. Thus, the
trust for the benefit of the Hempt family received 40% of the interest (or $7,558.78), the trust for
the benefit of the Mark family received 40% of the loans (or $7,558.78) and the trust for the
benefit ofthe Kalbach family received 20% of the loans (or $3,779.39).
Kalbach Objection 15. The payment of interest on Loy's bequest to Margaret violated the
executors' fiduciary duties.
Trustee's ResDonse. The executors oaid interest on the specific bequest to Mal1!:aret as
required by Pennsvlvania law.
Objectants claim that the executors should not have paid interest on the specific
bequest to Lay's wife Margaret. This claim is contrary to Pennsylvania law, which statutorily
sets the rate of interest that must be paid on specific bequests.
Loy bequeathed the sum of $200,000 to a trust for the benefit of his wife
Margaret.86 The trustees decided not to create the $200,000 trust for the benefit of Margaret and
instead pay her this sum outright 87 This sum was paid tn her over the course of five years, 88
85
See pages 6-7 of Supplemental Accounting.
86
Article FOURTH of the will.
87
The trustees were directed to transfer to Margaret as much or as little of the principal of the Trust as
Margaret requested in writing at any time. Margaret could have requested all of the principal be paid to her
at any time. Further, the trustees had discretion to distribute principal to her at any time.
88
See p. 41 of Accounting.
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Under Pennsylvania statutory law, interest must be paid on a specific bequest of a
set dollar amount.89 The interest was calculated at the rate set by statute of3% annually prior to
July 11, 1980 and 5% thereafter.9O
Objectants claim that the payment ofthis $25,623.20 in interest was a waste of the
assets ofLoy's Estate, and that the executors' estates should be surcharged in this amount.
Presumably Objectants mean no interest would have been owed had the $200,000 been paid
immediately after Loy's death.
The $25,623.20 in interest that was paid to Margaret is far less than the interest
actually earned on the $200,000 while it was held in the Estate. The rate of return on the Estate's
89
20 Pa. C.S. ~ 3543(a), which provides:
"Pecuniaxy legacy. - A pecuniaxy legacy bequeathed in trust shall bear
interest at the rate of 5% per annum from the death of the decedent
until the payment of the legacy, and when not in trust shall bear interest
at the rate of 5% per annum from one year after the death of the
decedent until the payment of the legacy."
90 Balance Interest
Rate Date Payment Due Due Days
3% 3/19n7 $200,000
3% 9/13n7 10,000 19C',OllO $ 2,966.67 178
3% 8/06n9 10,000 180,000 10,798.33 682
3% 4/25/80 4,000 176,000 3,930.00 262
30/0/5% 9/15/80 10,000 166,000 1,129.33 77 at 3%
1,613.33 66 at 5%
5% 9/25/80 80,000 86,000 230.56 10
5% 11/19/80 10,000 76,000 656.94 55
5% 6/15/81 10,000 66,000 2,301.11 218
5% 9/24/81 10,000 56,000 925.83 101
5% 11/11/81 5,000 51,000 373.33 48
5% 1/25/82 10,000 41,000 538.33 76
5% 2/22/82 41. 000 0 159.44 28
$200,000 $25,623.20
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money market account ranged from 15% in 1977 to 11.5% in 1983. The Estate earned
approximately $149,000 in interest on the undistributed bequest to Margaret over those four
years but paid only $25,623.20 in interest to her. The Trust therefore benefited by earning
approximately $123,000 in income~ income which otherwise would have been for Margaret's
sole benefit. The Objectants have not been deprived of anything by this payment of interest to
Margaret.
Kalbach Obiection 16. No basis exists for the trustees to have distributed $65,083.76 of income
to Margaret.
Trustee's Resoonse. The trustees acted well within the discretion exoresslv 2ranted to
them bv Lov's will in distributin2 $65.083.73 of income to Lov's widow Mar2aret.
Objectants claim that the trustees erred in distributing income from the Trust to
Margaret.
The Trust provides that the "trustees shall pay to ... my wife and my niece such
parts or all or none of the net income and principal as trustees may determine in their sole and
absolute discretion to provide for their care, support and welfare, provided that no principal shall
be paid to or used for my wife so long as any principal remains in trust under Item FOURTH
hereof"91 The executors' and trustees' authority to distribute income to Margaret simply could
not be any clearer. As discussed above, where a trustee has discretion to make distributions from
91
Article FIFfH of the will.
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a trust, it will only be overturned where an abuse of discretion can be established.92 Objectant
offers no evidence in support of his claim that the trustee acted improperly.
Kalbach Objection 17. Trustee improperly paid attorney fees from the Trust.
Trustee's Response. The le2al fees Daid bv the Trust and the le2al services Drovided benefit
all the remainder beneficiaries of the Trust. not iust Trustee.
Objectants aver that the attorney fees paid by the Trust are in connection with
advice that only benefits the descendants of Max. This argument has no basis. All of the
decisions made by Trustee as trustee of the Trust, including the division of the Trust - and all
the legal services sought by the Trustee - have been made with the well-being of all
beneficiaries in mind.
The trust division benefits the Hempt family, the Mark family and the Kalbach
family. The Hempt family benefits by not having a minority stockholder in the family
businesses with whom their relations have never been easy. The Kalbach family benefits by
receiving fair value in readily marketable securities rather then a minority interest in Hempt
family businesses over which they have no control. Under the same rationale, the Mark family
received as little as possible of the family businesses. Where, in order to comply with the statute,
it was necessary to distribute shares in the family businesses, the Mark family trust received
92
RESTATEMENT (SECOND) OF TRUSTS ~187 (1959) (quoted with approval in Geron v. Kennedy, 381 Pa. 97,
101 (1955)); see also Trexler Trust, II Fiduc. Rep. 2d 195, 202 (Lehigh Co. Orphans' Ct. 1991) (noting
trustee abuses his discretion when he "acts dishonestly, with an improper motive, without judgment, or
beyond the bounds of reasonable judgment").
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shares ofe. A. Hempt Estate, Inc., which is an income producing company that holds investment
properties.
Trustee acted in good faith when making decisions with respect to the trust
division. He sought the advice oflegal counsel because the trust division involved complicated
legal and tax issues. To comply with the statute, it was imperative that each new trust consist of
the proportionate fair market value and appreciation, a complicated task because there were great
variations in the appreciation of trust assets. Because Trustee's actions were for the benefit of
the Trust, the legal fees are properly paid by the Trust.
CONCLUSION
For the reasons outlined above, all of the Kalbach Objections and Mark Objections should be
dismissed. Despite 17 attempts, Objectants have failed to state actionable claims as a matter of
both law and fact.
Respectfully submitted,
~~
Iv V. Otto, III
Attorney ID # 2 1" ;1
Martson, Deardorff, Williams & Otto
11 East High Street
Carlisle, P A 17013
Dated ~ S
,2002
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~~MJ ~~
chard W. Stevenson
ttomey ID # 0'1 '-z...o
McNees Wallace & Nurick LLC
100 Pine Street
P.O. Box 1166
Harrisburg, P A 17108
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Dated ~~~ 2...
,2002
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TABLE OF EXUffiITS
A. Will dated December 8, 1964 and codicil dated December 12, 1969 ofLoy T. Hempt
B. Hempt Family Tree
C. Letters Testamentary for Estate of Max C. Hempt
D. Jean D. Hempt Expenses and Income
E. Income Tax Returns for Jean D. Hempt
F. C. A. Hempt Estate, Inc. Appraisers Report
G. Hempt Bros., Inc. Buy-Sell Agreement
H. Valley Land Company Appraisal Report
I. IRS Stamped Letter (Loy's estate tax return)
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EXHIBIT A
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I, LOY T. HEJ1PT, of Mechantcsburg, \,;umoer.Lanc. ""v........~, ~-_._.-.T-
vania, declare this to be the sole Codicil to my Last Will and
Testament dated December 8, 1964.
1. I hereby revoke Item Thirteen of my Last Will and Testa-
ment, and in lieu the=eof provide as follows:
THIRTEENTH: I appoint my nephew, !-fa,,: Hempt, and my
w~fe, Nargaret Hempt, as E::::ecutors and Trustees;
PROVIDED, HOt'lEVE~, that my said wife, Nargnret Hempt,
shall not participate in any discretionary decision
relating to her ri~ht to any principal or income in
the trust created ~n Item Five of my Last Will and
Testament. I further appoint my niece, Dorothy Hempt
Mark, as co-E:cecutQr and co-Trustee in the event either
H~~ Hempt or Margnret Hempt are unable or unwilling to
act or continue to act, for any reason. No fiduciaries
serving hereunder shall be required to enter bond or
other security in any jurisdiction.
2. In all other respects I hereby ratify, confir.n and repub-
lish my Last Will and Test~~ent dated December 8, 1964, together
with this sole Codicil as and for my 'Last Will and Testament.
IN WIT~~S v~EREOF, I have her~unto set my hand and seal this
, 2~ day of December, 1969.
-7'
//7 / ./., /' I
,-/ / ;' /". /;,f'/ :7""T .
~ -:/'~'>/ ;:/71' ./-:,/ /(SEAL)
Loy'T. He~p~ ~-
I
Si.gned, published and declared on the date thereof, by the
above named Loy T. Hempt, as and for the sole Codicil to his Last
Will and Testa~ent dated December 8, 1964, in the presence of us,
who, a this reques t, in his pre$ence, and in the presence of each
other, have subscribed our names as witnesses hereto.
~\l.k~
o.M.I.. ~ f,t ;?;::. ,,:,-,'''~.
[/ i V
..'
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I, LOY T. i1K1PT, of Z'iechanicsburg, Ctm.berland
County, Pennsylvania, make this r:1Y .,:ill, hereby revoking all
prior wills and codicils.
FIRST: I desire that my body be cremated
and that my remains be disposed of without a funeral.
SECOND: I bequeath my automobiles and all
my articles of personal .and household use, equipment and ornament,
together vith all policies of L~surance thereon, to my wife,
Margaret, if she survives me.
THIRD: I bequeath the sum of , One Thousand
($1,000.00) Dollars to Virg~ia Bricker, now of North Second
Street, Harrisburg, Pennsylvania, if she survives me.
FOURTH: I bequeath the sum of Two Hundred
Thousand ($200,000.00) Dollars to my tr~staes hereL~after named,
in trust as follows:
(1) Trustees shall pay the net
inco~e ~~ually or ~ore fre~uently to my wife, Mar~aret, for life.
(2) Trustees shall transfer' to
my wife, free of all trusts, such parts or all of the principal
as she mal from ti!::le to time request i1'1 ....-riting.
(3) Trustees are authorized to
pay to or e~end directly for the benefit of my wife such parts
or all of the principal as they ~7 determine in their sole and
absolute disc~et10n to provide for her care, support and welfare.
(4) Upon my wife's death, trustees
shall tr&nsfer any re~allling prL~cipal to such one or ~ore
a?poL~tees (L~cluding, without l~it~tion, her estate), in such
amounts, for such estates, or upon such trusts as she may appoL~t
.--- .-....... ---.-- -- - --- ... - . ..
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by specific reference to this power 1n her will. To the extent
my w~fe fails to exercise effectively her po~er of appointment,
trustees shall pay to her estate or to the t~~ authorities, an
amount e~ual to any increase in estate, inheritance and other
death taxes, and interest and penalties thereon, payable because
of the inclusion of the principal of this trust in her estate for
tax pUJ'poses. The principal remaL",ing after such pa~lent shall
be added to the principai of the trust created in Item FIFTg hareo .
(5) In the event that assets of
my estate are allocated to this trust in kind, such assets shall
be valued as of the date of distribution of said assets to this
trust. If any unproductive property is allocated to this trust,
my wife, Margaret, shall have the power to re~uire that trustees
either ~e the property productive or dispose of it and reinvest
the proceeds in productive property within a reaso~able ttme.
~
FIFTH: I devise and beq~eath all the rest
of my estate, of whatever kL~d and wherever situate, to my
trustees hereinafter n~ed, in trust as follows:
(1) Du.r:!..~g such ti:!le as either
or both of my w~fe, Margaret, and ~1 niece, Jean Hempt, are
liVing, trustees shall pay to or expend directly for t~e benefit
of either or both of =Y wife and my niece such parts or all or
none of the net income and principal as trustees may deterz:1ne
in their sole and absolute discretion, to provide for their care,
support and welfare, provided that no principal shall be paid
to or used for ~y ~ife so long as any principal remains in trust
under Item FOu~Ta hereof.
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110....-__ .
(2) Upon the death of the
survivor of my wife, Margaret, and my niece, Jean Hempt, or upon
my death if both my wife and niece predecease me, trustees shall
transfer the remaining prL~cipal as follows:
(a) Forty per cent (40%)
thereof to my nephew, Max Hempt, if he is then living, but if he
is then dead, to his then living issue, per stirpes.
(b) Forty per cent (40%)
thereof to my niece, Dorothy Mark, if she is then l1vL~g but if
she is then dead, to her then living issue, per stirpes.
(0) Twenty per cent (20%)
the=eof to my nephew, Robert Kalbach, if he is then living, but
if he is the~ dead, to his then living issue, per stirpes.
(d) If any of the abGve
n~ed beneficiaries ~~der this Item FIFTH Pa=agr&ph (~) snaIl not
be livL~g at the t~e above set forth for distribution of the
prL~cipal of this trust, leaving no issue survivi.~g h1!!l., the
share of pr~cipal to which such beneficiary or his issue would
have been entitled, if living, shall be transferred to the other
livi.~g beneficiaries under this Item FIFTH Paragra~h (2), in
proportion to their respective interests in ~y estate.
SIXTH: Any principal or income to which a
minor becomes entitled absolutely under my ft~l may nevertheless
be retained by I:1Y trustees durL"1g the minority of the benefic:iarJ,
and income may be acc~ulated and L"1vestedin accordance with the
invest::ent po\:ers hereinafter given m~l fiduciaries. !-Iy trustees,
havL~g regard for the minor's assets and resources, may apply such
part or all of the L~come and principal as they, in th~ir sole
discretion, 02.j deter:ine, for the education, I:1ainten~~ce and
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welfare of the minor, either by the p~y~ent of bills therefor, or
by pay:ent to such persons as they ~ay select. My trustees
shall distribute the remaining balance of principal and
acc~ulated income to such beneficiary absolutely at age
t'len ty -one.
SEVmlTH:
No principal or 1nco~e of %y
estate shall be li~ble for any debt, contract or engage~ent of
.
any beneficiary, nor liable to any legal process, nor subject to
assig~ent, transfer or ~~ticipation; prOVided, however, that
any beneficiary may disclaim and renounce any part or all of his
interest L~ ~y estate, or assign any,~art or all of his interest
in my estate to one or more of his or my descendants.
EIGHTH:
All estate, L~eritance or other
death taxes ~~d any inte=est and penalties thereon imposed by
reason of ~y death ~ith respect to any property or L~terests in
property, .hether passL~g under my will or not, shall be paid out
of the prL~cipal of my residuary estate. Taxes on future interest
may be prepaid in the discretion of my executors. .
!HNTR:
I give my fiduciaries the following
discretionary powers during the administration and until the
completion of distribution of my estate and of the trusts created,
to be exercisable in ajdition to any authority given by law and
withou~ court approval:
(a) To retain and invest in all
for~s of real or personal property, includL~g stock and coomon
trust fu.~ds of ~y corporate fiduciary, if any, without beL~g
limited to "legal L~vestments."
\
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(b) To joL~ in any merger,
consolidation, reorganiz~tion, voting trust plan or other concerte
action of invest~ent holders and to delegate discretionary powers
or duties with respect thereto.
(c) To sell or exchange, and to
give options for sales or exchanges, or otherwise dispose of
real or personal property, for any purpose, at public or private
sale, for casn or credi~.
(d) To lease, or to give options
to lease, real or personal property, for any period of time,
irrespective of whether the ter~ of such lease shall exceed the
period perAitted by law or the probable period of any trust
hereby created, ~~d to renew or modify any such leases.
(e) To renew notes or debts of
mL~e, and to borrow ~oney for any purpose from any person ~r
persons L~cludL~5 my corporate fiduciary, if any; to execute
promissory notes or other obligations for amoa~ts so borrowed,
and to secure the paY!:1ent of any amoa~ts so borrol-ted by :::lortgage
or pledge of L~y real or personal property.
(f) To cocpro~ise or settle
claiJ:;ls by or agaL~st r:q estate, "tithout obtaL"ling the consent of
any beneficiary.
(g) With the exception of property
specifically devised or bequeathed, to make distribution in cash
or in kind.
(h) To apply directly any payment
to ~hich any beneficiary shall be entitled hereunder for the
maL~tenance L"ld welfare of such beneficiary, should such bene-
ficiary by reason of illness or ar.y other cause, in the Op1niOR
of ~y fiduciaries, be incapable of disbursL~g it.
--..--
_.1
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(i) To join with my ~~fe or her
estate in the fil1..'"lg of any federal incoc.e tax return for any
year for which I have not filed such return prior to my death,
and to consent to any gifts made by her as beL~g made one-half
by me for gift tax purposes,; and my executors may take such
action even though it may result in additional liabilities for
my estate. }~y L~come or gift taxes due on such returns and any
deficiencies, interest, penalties, or refunds thereon, shall be
allocated between my estate and my w~fe or her estate, or all
to any of them, in such m~~er as they may agree.
(j) With respect to the trust
under Item FIFTH hereof only, to make repairs, replacements, and
1oprove~ents, structural or otherwise, of any real or personal
property, and to charge the expense thereof to principal or
income, or partly to each, as they may deem proper.
(k) So long as there is no
corporate fiduciary,to e~~loy L~vest~ent counsel and,~ith respect
to the trust under Ite: FIFTH only, to allocate charges therefor
to principal or L~co:e, or to both 1..'"'1 such proportions as they
deem ~ise, wit:~ut di~L~uti~n of co~pensation otherwise properly
payable t~ my fiduciaries.
(1) So long as there is no
cor;orate fiduciarY,to arrange for custodian and/or accounting
services, and,w1th r~spect to the trust under Item FIFTH only,
to allocate the charges therefor to prL'"lc1pal or income, or to
both in such proportions as they deem wise, without d~1nution
of co~?ensation ot~erwise properly payable to my fiduciaries.
(n) To mal:e the elections no'\{ or
hereafter per::litted by the Internal Revenue Code with respect to
the date for valuL'"'1g the assets of my estate and with respect to
---..---------
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administration and medical expenses as income or estate tax de-
ductions, without making any compensating adjustments bet....een _
principal and inccme and between beneficiaries or trusts in
consequence of such elections.
TENTH: In addition to and not in limita-
tion of any other powers give~ my fiduciaries by law or by other
provisions ~f this Will, but subject to the right given my wife
in paragraph (5) of Itea FOURTH to require trustees to convert
unproductive property, I hereby make the following e:~ress pro-
visions with respect to Hempt Brothers, Inc., and any successor
corporation or corporations of this company, and I expressly
authorize my fiduciaries:
(a) To retain, invest or reinvest
in the stocks, bonds, debentures, notes or accounts of said com-
pany ~~~~out regard to any principle of diversification, and
whether or not such investuents would noI'"~a1.ly be considered
sui table invest::lents for fiduciaries.
(b) To vote the stock in said
co:pany in whatever oanner my fiduciaries de~ desirable, includ-
ing the power to vote at corporate meetings by special, limited,
or general proxy, and to enter into voting trust agreements and
stockholder.agre~ents.
(c) To cause or join in or to
prevent the recapitalization, merger, consolidation, reorganiza-
tion, or liquidation of said company.
(d) To elect or employ as direc-
tors, officers, e~,loyees or agents of said company any persons,
inClUding a trustee hareu.~ier or a director, officer, ~ployee
or agent of a trustee hereunder, and to compensate such elected
or e~ployed person.
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. .. .. -:--- ....---- -- ..-.. -.... - .. --
-...---..---...-.--
.- --..... .. - -... _. .'.
-. ....... -. - -- ...
... - 0._., _.. __.._______ _ ____. ___ _ __.._______ ___.... __
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(e) To sell to or buy from a
trustee hereunder stocks, bon~s or ~ecent~.es of said company at
such prices and u~on such teres and conditions as my fiduciaries
in their sole and absolute discretion, may dedU fair and proper,
without the necessity of obtaL~L~g any court approval thereofl
and without liability for self-dealing.
(f) In general, to deal with such
company ~nth the s~e f~eedow of action, I now have.
E.'LEYE!;TE:
~'lerever in this trust trustees
are given a discretionary power to dete~ine whether or to what
extent principal or income shall be distributed to or used for
the benefit of a beneficiari, trustees ~ay consider, to such
extent as they dee~ 9.oper, the resources and sources of funds
available to such beneficiary.
No trustee .nlo is also a beneficia~
hereu.~der shall participate in decidL~g whether or to ~hat extent
~rL~ci;al or inco~e shall be districuted to or ~sed for the benefi
of a beneficiary or ljlether ~~y ite~ of charge or credit shall be
allocated in whole or in part to principal or inco~e, ~~ those
instances ,dlere the trustees have the discretion to determine
the s~e, ~~t all such decisions shall be made solely by the
other trustee.
TWELl:'.rE:
"
If my wife, Hargaretl and I shall
die ur.der such circumstances that there is no sufficient evidence
that we have died other~ise then s1cultaneously, then my wife,
'1~rbaret, shall be conclusively presumed to have survived me.
TriIRTEEriT:i:
I appoint !-lax He::.?t Wld J. F. Hempt
executors end trustees. If at any time either of the above naced
persons is unable or un\T1l1ing to act or continue to act as such,
-8-
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...-...
then I authorize the remaining co-fiduciary to designate any
individual or cor~oration to serve as co-fiduciary and I authorize
such re~ining co-fiduciary to enter into any agree~ent with such
individual or corporation as he ~aJ desi&n&te providing for the
payment of compensation to such designated co-fiduciary L~ such
amounts and upon such terms and conditions as the said re~ining
co-fiduciary may, in his sole and absolute discretion, determine
to be appropriate; provi~ed, however, that at all t~es there
shall be serving hereunder at least one co-fiducic:ry ",ho is not
a beneficiary under this In.ll and any codicils hereto.
No fid~ciary serving hereunder
shall be re~uired to enter bond or other security in any
jurisdiction.
IN vaTNESS l:HiP.EOF, I have set my ha."ld and seal
.....
\Ulto thi~, ~y "Till,jo.ntai.."ling nL'1e (9) :;lages, this .~~/..
day of )f.iC~'[i)lfl..t./Z_> ,19 {f
SIGN:D, S~t~BD, PUELISELD and
DECI.;..fiJ;jj by LOY T. RciJPT,
Testator above n~ed, as ar.d
for his Will ~~d Test~ent,
on the day ~d year last above
written, L'1 the presence of us,
who, at his re~uest, ~ his
presence, 'Od L'1 the presence
of each other, all being ?rese~t
at the sa=e ti:lle, have heret::lto
subscribed our n~es as ~itnesses.:
.-I/' /'/)~:. -: ...
. .,t; I v/ .~ ~/ ~ }
.~./ fl..,' ~/if . ..0 ~EAL)
7-l=a>T1 . I
a/~/ ff:...,~_
;7
(fCc- ,. (M t./,.,.
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, .,:
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/t'/~7 ~..~ ( ;:rz Ilk(c; /l.,laf
I
,t.t (Yo' i } \ II
H~
I h II kr.,.J -Ii) ($ "1flr-rll:C B
l I
.-----.... ------
-9-
---.--. - - ".
EXHIBIT B
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i II
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Q. U ~
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ClI ~
N
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EXHIBIT C
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Deceased
Social Security No. 1~2=f~=fZ2Z_
WHEREAS, on the ___~tb___ day of__~~n~_________~~__._____ 1922 an instrument
dated _JgDYgr~___,2~b_12aZ_________________________________________
wa~ admitted to probate as the last will of HEMPT MAX C
- {[AST~-FIRST:-AIOO[ET----------------
Register of Wills of YORK County, Pennsylvania
C e f' t i f "i cat e 0 f G r~ ant 0 f Let t e r' S
No. 6799-00768
ESTATE OF
HEMPT MAX C
T[lST~-FIR~T~-RIOO[ET---------
Late of
FAIRVIEW TOWNSHIP
YORR-COOATY:------------------~----------
late of _E8IBYlEW_IQW~5HIE____________. YORK County, who died on the
_f~rd day of ~~y______ 1222 and,
WHEREAS. a true copy of the will as probated is annexed hereto.
THEREFORE, 1. _Wlbbl~~_~_W~bIEB~____________. Register of Wills in and for
the County of YORK in the Commonwealth of Pennsylvania. hereby certify
that I have this day granted Letters IESIBM~~I8BI_______________________________
to-~EMeI_GEQBGE_E_________________gng__~EMEI_GEB8LQ_L___________________________
who b~~~ duly Qualified as __E~e~utQrlri~l_______________________________________
and be~~ agreed to administer the estate according to law, all of which fully
appears of record in my Office at YORK COUNTY COURT HOUSE.
YORK, PENNSYLVANIA.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed the seal
of my Office the _~tb day of ~YD!_____ 1999.
-----ftl~f.I-~n
1-28-87
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.".
j,lLk
Qf.
MAX C HEMPT
I, MAX C. HEMPT, presently of Cumberland County, Pennsylvania, declare
this to be my will and hereby revoke all prior wills and codicils made by
me.
1. Personalty. I bequeath such items of my tangible personal prop-
ertyas are specifically itemized on a list, if any, in my handwriting,
signed and dated by me at the end thereof, and attached to this, my Will, to
the person(s) named thereupon to receive such items, and all of my remaining
tangible personal property not used in business or for the production of
income, including without limitation furniture, furnishings, clothing,
jewelry, objects of art and decoration, and the like, and any motor vehicles
which I own, together with the insurance thereon, I bequeath to my wife,
Martha D. Hempt, if she survives me, and if my wife does not survive me, I
bequeath such property equally among my children. If anyone of my children
does not survive me, his or her share shall be distributed per stirpes among
those of his or her issue who survive me. If there are no such issue, said
property shall go equally to my other children, or if anyone_of my other
child is not then living, shall be distributed per stirpes among those of
his or her issue who survive me. With regard to the property passing
hereunder, distribution shall be made among my children on the basis of
choices made in order determined by lot and by rotation, and the values as
~
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..
finally determined for federal estate tax purposes shall be determinative
with regard to the values of the property chosen, and any ultimate disparity
among my children shall be equalled by such payments between them as may be
necessary. If anyone of my children is not then living, the choices to
which he or she would have been entitled shall be made by his or her issue
in order determined by lot and by rotation. The aforegoing provisions of
this Section 1 notwithstanding, any livestock (including, but not limited
to, horses and cattle) owned by me, and any tangible pers9nal property owned
by me and used to administer, care for, or otherwise deal with such
livestock, shall not be considered as tangible personal property for
purposes of this Section " but rather, shall be included with the residue
of my estate.
2. Residue. I bequeath, devise, and appoint all the rest of my
property, of whatever nature and wherever situated, including property over
which I hold a power of appointment', except that I do not exercise any power
of appointment given to me by my wife, to my sons, George F. Hempt and
Gerald L. Hempt, as Trustee(s) under an Agreement of Trust executed by me on
I~ll\~ '1Q ,1987, to be held by said Trustees and added to and
administered as part of the trust established by said Agreement. Said trust
is in existence as of the date of execution of this will, and ,it is my
intention, if necessary to validate the foregoing gift to the Trustees, to
incorporate herein by reference its terms and any amendments thereto.
3. Survival. If my wife and I should die under such circumstances
that it cannot be determined which of us survived, she shall be deemed to
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have survived me for all purposes hereunder. If any other beneficiary
should die within sixty (60) days after me, he or she shall be deemed to
have predeceased me for all purposes of this will.
4. Spendthrift Clause. No interest (whether in income or princi-
pal, whether or not a remainder interest, and whether vested or contingent)
of any beneficiary hereunder shall be subject to anticipation, pledge,
assignment, sale or transfer in any manner, nor shall any beneficiary have
power in any manner to charge or encumber his or her sai~ interest, nor
shall the said interest of any beneficiary be liable or subject in any
manner while in the possession of my fiduciaries for any liability of such
beneficiary, whether such liability arises from his or her debts, contracts,
torts, or other engagements of any type.
5. Facility of Payment for Minors or Incompetents. Any amounts or
assets which are payable or distributable to a minor or incompetent here-
under may, at the discretion of my" fiduciaries, be paid or distributed to
the parent or guardian of such minor or incompetent, to the person with whom
such minor or incompetent resides, or directly to such minor or incompetent,
or may be applied for the use or benefit of such minor or incompetent.
6. Powers. In addition to such other powers and duties as may be
granted elsewhere herein or which may be granted by law, my ~!duciaries
hereunder shall have the following powers and duties, without the necessity
of notice to or consent of any court:
(a) To retain all or any part of my property, real or
personal, in the form in which it may be held at the time of its
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receipt, including any closely held business in which I have an
interest and the stock of any corporate fiduciary hereunder, as
long as in the exercise of their discretion it may be advisable
so to do, notwithstanding that said property may not be of a
character authorized by law.
(b) To invest and reinvest any funds held hereunder in
any property, real or personal, including, but not by way of
limitation, bonds, preferred stocks, common stocks .and other
securities of domestic or foreign corporations or investment
trusts, mortgages or mortgage participations, mutual funds with
or without sales or redemption charges, and common trust funds,
even though such property would not be considered appropriate or
legal for a fiduciary apart from this provision.
(c) To sell, convey, exchange, partition, give options to
buy or lease upon, or otherwise dispose of any property, real or
personal, at the ttme held by them, at public or private sale or
otherwise, for cash or other consideration or on credit, and upon
such terms and for such price as they may determine, and to
convey such property free of all trusts.
(d) To borrow money from any person, including~y
fiduciary hereunder, for any purpose in connection with the
administration hereof, to execute promissory notes or other
obligations for amounts so borrowed, to secure the payments of
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such amounts by mortgages or pledges of any property, real or
personal, which may be held hereunder.
(e) To make loans, secured or unsecured, in such amounts,
upon such terms, at such rates of interest, and to such persons,
firms, or corporations as they may deem advisable.
(f) To renew or extend the time for payment of any
obligation, secured or unsecured, payable to or by them as
fiduciaries, for as long a period or periods of ttme and on such
terms, as they may determine, and to adjust, settle, and
arbitrate claims or demands in favor of or against them.
(g) In dividing or distributing any property, real or
personal, included herein, to divide or distribute in cash, in
kind, or partly in cash and partly in kind.
(h) Without limitation of powers elsewhere granted
therein, to hold, manage and develop any real estate which may be
held by them at any time, to mortgage any such property in such
amounts and on such terms as they may deem advisable, to lease
any such property for such term or terms and upon such conditions
and rentals as they may deem advisable, whether or not the term
of any such lease shall exceed the period permitted by law or the
probable period of retention under this instrument; to make
repairs, replacements and improv~ents, structural or otherwise,
in connection with any such property, to abandon any such prop-
erty which they may deem to be worthless or not of sufficient
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value to warrant keeping or protecting, and to permit any such
property to be lost by tax sale or any other proceedings.
(i) To employ such brokers, banks, custodians, investment
counsel, attorneys, and other agents, and to delegate to them
such duties, rights and powers as they may determine, and for
such periods as they think fit.
(j) To register any securities at any time in their own
names, in their names as fiduciary, or in the names ,of nominees,
with or without indicating the trust character of the securities
so registered.
(k) With respect to any securities forming a part of the
trust, to vote upon any proposition or election at any meeting of
the corporation issuing such securities, and to grant proxies,
discretionary or otherwise, to vote at any such meeting; to join
or become a party to any reorganization, readjustment, merger,
voting trust, consolidation or exchange, and to deposit any such
securities with any committee, depository, trustee or otherwise,
and to payout of the assets held hereunder, any fees, expenses
and assessments incurred in connection therewith, to exercise
conversion, subscription or other rights, and to receiv~ or hold
any new securities issued as a result of any such reorganization,
readjustment, merger, voting trust, consolidation, exchange or
exercise of conversion, subscription or other rights and
- 6 -
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generally to take all action with respect to any such securities
as could be taken by the absolute owner thereof.
(l) To engage in sales, leases, loans, and other trans-
actions with the estate of my wife or any trust established by
either of us, even if they are fiduciaries or beneficiaries
thereof.
(m) To exercise all elections which they may have with
respect to income, gift, estate, inheritance and otner taxes,
including without limitation execution of joint income tax
returns, election to deduct expenses in computing one tax or
another, election to split gifts, and election to payor to defer
payment of any tax, in all events without their being bound to
require contribution from any other person.
(n) To operate, own, or develop any business or property
held hereunder in any form, including without limitation sole
proprietorship, limited or general partnership, corporation,
association, tenancy in common, condominium, or any other,
whether or not they have restricted or no management rights, as
they in their discretion think best.
(o) To elect to qualify any trust created by m~_.as
"qualified terminable interest property" within the meaning of
Section 2056 of the Internal Revenue Code of 1986, as amended.
7. Taxes. I direct that all estate, inheritance, and succession
taxes that may be assessed in consequence of my death, of whatever nature
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and by whatever jurisdiction imposed, other than generation-skipping taxes,
may be paid out of the principal of my probate estate to the same effect as
if said taxes were expenses of administration, except that any such
additional taxes (and interest and penalties thereon) imposed on account of
my interest in or power over any trust established by my wife shall be paid
out of the property held in such trust, and all other property includible in
my taxable estate for federal or state tax purposes, whether or not passing
under this will, shall be free and clear thereof; provided, however, that my
executor(s) may in the discretion of my executor(s) request that any portion
or all of said taxes (to be paid out of the principal of my probate estate)
shall instead be paid out of the principal of any trust established by me,
to the extent expressly authorized under the terms of said trust.
8. Gender. Unless the context indicates otherwise, any use of
either gender herein shall also include the other gender.
9. Fiduciaries. I appoint my sons, George F. Hempt and Gerald L.
Hempt, as Executors and Trustees hereunder. If ever either of my sons is
unable or unwilling so to serve or to continue so serving, no successor
shall be appointed to serve in his place, and if ever neither of my sons is
able or willing so to serve or to continue so serving, Dauphin Deposit Bank
and Trust Company shall serve as such Executor and Truste.
My fiduciary(s) hereunder shall serve as guardian(s) of the property
of any minor beneficiaries hereunder, under any instrument of trust executed
by me, under any policies of insurance on my life, and in any other situa-
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tion in which the power to make such appointment exists under the laws of
Pennsylvania.
No individual fiduciary shall be liable for the acts, omissions or
defaults of any agent appointed and retained with due care or of any co-
fiduciary.
No fiduciary named herein shall be required to furnish bond or other
security for the proper performance of his duties hereunder.
IN WITNESS WHEREOF, I, MAX C. HEMPT, herewith set my hand to this, my
last Will, typewritten on ten (10) sheets of paper including the self-
proving attestation clause and signatures of witnesses, this ~9~y of
t~' 1987.
I \
I
~~/~
~ C. HEMPT ' i
--
(SEAL)
residing at _~JJJU1I1ull,~ tPA
j
residing a~ ......ry l PIT
residing at ~ frrJ at-
- 9 -
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--
COMMONWEALTH OF PENNSYLVANIA
SS:
COUNTY OF (\oM.~~ 4A ~
MAX C. HEMPT (the testator), \)IIlH,Q..~f\ k). L~\/~
('A~A. QlAOJ ., and -lo~~P(J L. Tkiru~~ (the witnesses),
whose names are signed to the oregoing instrument, being first duly sworn,
each hereby declares to the undersigned authority that the testator signed
and executed the instrument as his last will in the presence of the
witnesses and that he had signed willingly, and that he executed it as his
free and voluntary act for the purposes therein expressed, and that each of
the witnesses, in the presence and hearing of the testator, signed the will
as witness and that to the best of his or her knowledge the testator was at
that tUne eighteen years of age or older, of sound mind and under no
constraint or undue influence.
WITNESS:
D Lu\ ~JJ
\ L "i ~. } 1 Li
TESTATOR:
Subscribed, sworn to and acknowle d before me by MAX C. HEMPT, the
testator and subscribed and sworn before me by ~wtlQ~~L~~,
~ ~. ~~~I1J, and Jtx:'l::~ L. TH~E~, the witnesses, this 1C\TH day
of J"~AJt;>~ , 198U.
WITNESS:
~~a~
. ~ /'/J
LL-1-<-......-<t. _' ~ a./I'....Y....L-<-Ir-
- - Notary Publio v
ANNA JANE FARLEY, Notary Public
(SEAL) My ConM1Iiaion Expires Feb. 29, 1988
Mechanlcsburg, PA Cumberland Co.
- 10 -
EXHIBIT D
e
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JEAN O. HEMPTEXPENSES AND INCOME
Jean's
Jean's Miscellaneous Jean's Income
Expenses for Expenses Federal Distribution
the Woods (Clothing, Income Jean's from
Date School Travel. etc.) Taxes Paid Total Expenses loy's Trust
1982 $ 19,638 $1,198 $0 $ 20,836 $ 5,000
1983 19,108 213 0 19,921 8,500
1984 20,904 707 0 21,611 15,000
1985 21,146 1,799 1,686 24,631 9,000
1986 25,828 526 1,338 25,830 5,000
1987 25,507 573 4,135 30,215 21,428
1988 50,045 0 1 ,489 51,534 33,500
1989 49,660 343 5,492 55,495 61,000
1990 52,284 1 ,454 14,879 68,617 50,000
1991 35,324 352 16,353 54,029 63,000
1992 60,666 721 4,261 65,648 68,500
1993 59,627 1,509 4,176 65,312 53,000
1994 42,915 1,756 8,306 52,977 73,166
1995 42,549 2,670 10,090 55,309 51,100
1996 42,756 2,605 8,185 53,546 50,500
1997 43,795 242 18,664 62,701 53,500
1998 46,096 1,363 11,921 61,380 70,000
~999 49,170 632 9,719 59,521 37,000
2000 58,601 7,263 829 66,693 55,000
2001 54.300 6.950 80.829 142.079 100.000
$822,519 $32,876 $204,352 $1 ,057,885 $883,194
EXHIBIT E
j1040
Check only
one box.
exemptions
If more than six
deperldeIltS,
see page 1 9.
Income
Attach
Cop, . of your
Forma W-2,
W-~, .nd
1011-R here.
If you dicl not
get a W-2,
see page 20.
Enc:Iose, but do
not staple, any
payment. Also,
please use
Form 1040-V.
Adjusted
Gross
Income
Une 33 is under
$30.095 (under
S10.030 If a child
did not live with
YCIUl, see EIC
inst. on page 36.
e
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Oepenmem of the Treuury-lntemal Revenue Servic.
U.S. Individual Income Tax Return
~@98
(8)
For the yur Jan. 1-Dec:. 31, 1998,01 other talC Y_ begiming.
IRS Un ~ not write 01 staple in lIlis spece.
. 1998, ending . 19 OMS No. 1~S-0074
Your social security number
Do you want $3 to go to this fund? . . . . . . . . .
If a joint return, does spouse want $3 to to this funcl? .
X Single
Married fIling joint return (even If only one had income)
Married fiHng separate return. Enter spouse's social security no. above and fuI name here. ~
Head of household (with qualifying person). (See page 18.) If the quaIlfying person is a child but not your dependent,
enter this child's n.-ne h<<a. ~
5 With chid died ~ 11 11.
e. 13 VourMIf. If your parent (or someone else) can d8lm you as a ~ on his or her _ }
return, do not check box Ia. . . . . . . . . .' . . . . . .
b
VZ
JEAN DOR1S
PO BOX 278
205 CREEK RD
CAMP H1LL PA
S28 80
I
R
S o.
Label
(See
instructions
on page 18.)
Use the 'RS
'abe..
Otherwise,
please print
or type.
Presidential
election Campaign ~
See a 18. ,
1
Filing Status 2
3
4
d Total number of oem claimed...
7 Wages, salaries, tips, etc. Attach Fonn(s) W-2 .
.. Taxable interest. Attach Schedule B if required
b Tax-exempt interest. 00 NOT Include on line Sa .
8 Ordinary dividends. Attach Schedule B if required
10 Taxable refU"lds, credits, or offsets of state ancIlocal income taxes (see page 21) .
11 Alimonyreceived . . . . . . . . . . .
12 Business income or (loss). Attach Schedule C or C-EZ .
13 Capital gain or (Iou). Attach Schedule 0 .
14 Other gains or (losses). Attach Fonn 4797. . . . . . . . . . . . . .
158 Total IRA distributions. l..!!!.J L-J b TIXabIe arncMr4 (see page 22)
16a Total pensions and annuities ~ L.J b Taxable amount (see page 22)
17 Rental real estate. royalties, partnerships, S corporations, trusts, etc. AttIlch Schedule E
18 Farm income or (loss). Attach SchecIuIe F. . . . . . . . . . . . . .
19 Unemployment compensation . . . . . . . . . . . . . . . . .
20a Social security benefits . 1201 I 1,853 I 60 I b Taxable amount (5.. page 24)
21 Other income. Wst type and amount-see page 24....................................
22 Add the amounts in the far ri h1 column for lines 7 throu h 21. This is total Income ~
23 IRA deduction (see page 25). . . . . . .. 23
24 Student loan interest deduction (see page 27) . .. 24
25 Medical sayings account deduction. Attach Form 8853 25
26 Moying expenses. Attach Fonn 3903 . . . " 28
27 One-half of .elf-emp/oyment tax. AttIlch Schedule se. ~
28 Self-employed health insurance deduction (see page 28) 21
2t Keogh and self-employed SEP and SIMPLE plans 2t
30 Penalty on early withdnlwaI of savings. . 30
31a Alimony P8icI b RecIpient', SSN ~ 31.
32 AcId lines 23 through 31a. . . . . .
33 Subtract line 32 from line 22. lhls is' 1rt00fM
For 1HscIosur., PrIvacy Act, and Paperwork Reduction Aclt Notice,... page 51.
HEHPT
17011-7418
c
o Spouse . . . . . . . . . . . . . . I. .
Depenclenta: (Z) OIpIndenrs (". " ~~;:
IOCIII SlCUrIty IlIIIlIber rtIItIonIIIIp III
(1) Firat IIIIIlI LIst IlIIIII - 191
, [J
, ,
,
0
[]
0
0
0
Ib
24;167
. . . . ~
Cat. No. 113208
Spouse'llOCiaIlecurtty number
.A IMPORT ANn .A
You rnuat enter
your SSN(s) above.
Ve. No Note: Checking
X "Yes- w//J not
change J'OlIIU or
f8duce J'OlI fIIund.
.... If ...
...... ..
.....
.... If,..,
cIIIldrIII H Ie
WIIr.
. .....,..
. lIIlI III "" ..
,.. .. II ..".,.
or I.,.....
(.., Ill.. 11)
De"""'" 'I Ie
lilt '1IIIIId ,110ft _
~..... CJ
1Itt1'lll.
.IM.", to
1
8
10
11
12
13
14
1.
1Gb
17
18
18
20b
21
22
..0-
104 '!E1 29
Form 1040 (1998)
SCHEDULES A&B
(Form 1040)
e
e
Schedule A-Itemized Deductions OMS No. i54S-0074
(Schedule B is on back) ~@9 8
Attachment
~ Attach to Fonn 1040. ~ See Instruction. for Schedule. A and B (Fonn 1040). Sequence No. 07
Your social security number
196 : 38 : 8211
~_ 01 the T,..,&My
Inl...... Aevwr.. SeMce (8)
N8I'M(s) &hown on Form 1040
Medical
and 1
Dental 2
expenses 3
4
Taxes You 5
Paid 6
(See 7
page A-2.) 8
9
Int....st 10
You Paid 11
(See
page A-3.)
Note:
Pnonal 12
Interest is
not
deductible. 13
14
Gifts to 15
Charity
" you made a 16
gift and got a
benefit for it, 17
... P9 M. 18
Casualty and
Then lOSles 19
Job ExpeIll8. 20
and Moal
Other
Miscellaneous
Deductions
21
(See 22
page A-6 for
exP8l"lleS to
deduct here.)
23
24
25
26
Otber 27
Miscellaneous
Deductions
Total 28
Itemized
Deductions
Caution: Do not include expenses reimbursed or paid by others.
Medical and dental expenses (see page A- 1). . . .
Enter amount from Form 1040, line 34. 2
Multiply line 2 above by 7.5% (.075). . . . . " 3
Subtract line 3 from line 1. If line 3 is more than line 1. enter -0-
State and local income taxes . . 5
Real estate taxes (see page A-2). . . . . . " 6
Personal property taxes. . . . . . . . . " 7
Other taxes. Ust type and amount ~ ....................
48,096 41
40,253 86
.............................................................................................................
Addlines5thro h8. . . . . . . . . . . .
Home mortgage interest and points reported to you on Form 1098
Home mortgage interest not ntpOl'ted to you on Form 1098. 11 paid
to the person from whom you bouglt the home, see page A-3
and show that person's name,ldentifyilg no., and address ~
2,657 86
.......................... -........................... ................ -... ...... -................................
...................................................... ............... -........................................
.......................................................... ........... ......... ..... ...........
Points not reported to you on Form 1098. See page A-3
for special rules. . . . . . . . . . . . " 12
Investment interest. Attach Form 4952 if required. (See
page A-3.) . . . . . . . . . . . . . " 13
Add lines 10 throu h 13. . . . . . . . . . .
Gifts by cash or check. 11 you made any gift of $250 or
more. see page A-4 . . . . . . . . . . . .
Other than by cash or check. 11 any gift of $250 or more,
s.. page A-4. You MUST attach Form 8283 11 over $500
Canyover from prior year . . . . . . . . . .
Add lines 15 th h 17. . . . .' . . . . . .
Casual or theft Ioss(es). Attach Form 4684. (See pa
Unreimbursed employee expenses-job travel. union
dues, job education, etc. You MUST attach Form 2106
or 2106-EZ if required. (See page A-5.) ~ ...............
....... ............... ..... ..... ...... ................. .... .... ..... ......
............ ................. ........ ........ a......... ........ _............... .....................
Tax preparation fees . . . . . . . . . . . .
Other expenses-investment, safe deposit box, etc. Ust
type and amount ~..... .... ............... ......... ........
........................... ................................... ...........................................
Add lines 20 through 22. . . . . . . . . . .
Enter amount from Form 1040. line 34. 24
Multiply line 24 above by 2% (.02) . . . . . " 25
Subtract line 25 from line 23. If line 25 is more than line 23, enter -0- 26
Other-from list on page A-S. Ust type and amount ~ .... __... _................ _. _. ~.
.Js;jJal. fees.J;8id.............. ............ _.. _........................................... ~
27
985 96
Is Form 1040. line 34. over $124.500 (over 562,250 if married filing separately)?
NO. Your deduction IS not limited. Add the amounts in the far right column }
for lines .. through 27. Also. enter on Form 1040, line 36. the larger of ~
this amount or your standard deduction. .
YES. Your deduction may be limited. Se&page A-6 for the amount to ent....
43,897 68
For p~ Reduction Act Notice, ... Form 1040 Instruc:tIons;
Cat. No. 11330X
Schedule A (Form 1040) 1_
e
e
SCHEDULE D
(Form 1040)
Capital Gains and Losses
OMS No. 1545-0074
~ of ltle TIMSUI'y
......... Revenue s.Mce (8)
Name(I) shown on Form 1040
JeBn D. H:np:
Short-Term Ca itar Gains and Losses-Assets Herd One Year or Less
(I) Description of property lbJ oltl (e) Date IOId (d) s.- price (e) Co8t ~ (t) GAIN or (LOSS)
acquired other bu.. Su from
(EqmpJe: 100 lit. XVZ Co.) (Mo., dl,.) (Mo., day, yr.) (- page 0-6) (see page 0-6) btraet (e) (d)
~ Att8ch to Form 1040. ~ See Instructlona for Schedule 0 (Form 1040).
~ U.. Schedule 0-1 for more apace to lIat tranaactlona for linea 1 and 8.
~~98
AttKhment
Sequencl No. 12
Your lOCieIaecurlty number
196 : 38 :8211
1
M:!:rill. I?frrh
2 Enter your short-term totals. If any. from
SdMtctuIe 0-1. line 2. . . . . .. 2
3 Total short-term ..... price amounts.
Add column (d) of Unes 1 and 2 . " 3
4 Short-term gain from Form 6252 and short-term gain or 0081) from Forms
4684. 6781. and 8824 . . . . . . . . . . . . . . . . .. 4
5 Net short-term gain or Ooss) from partnerships, S corporations, estates. and
trusts from Schedule(s) K-1 .. . . . . . . . . . . . . .. 5
6 Short-term capital loss carryover. Enter the amount. If any, from line 8 of your
1997 Cap/taI Loss Carryover Worksheet . . . . . . . . . . " 6
7 Net short-term capital gain or (loss). Combine lines 1 through 6 in
column . . .. . . . . . . . . . . . . . . . . . . . ~ 7
-Term Ca itar Gains and Losses-Assets Herd More Than One Vear
Cel 0eIcrIpti0n of PAlPII1Y t!.= Ce) Date IOId Cd) s.Ia price L ec:: (t) GAIN or (LOSS)
(ExMlpIe: 100 lit. x:z CoJ (Mo., dl , (Mo., Clay, yr.) (III page D-6) (... Subtract (I) from (d)
8 .
M:c:ill var. 958 : 45
CIJ.~MTlCWN
* or tL08Il
(III lnatr.
268 ~ 37
t Enter your long-term totals. if any. from
Schedule 0-'. line 9. , . . . . .
10 Total long-term sales price amounts.
Add column (d) of lines 8 and 9 . ., 10
Gain from Form 4797, Part I; long-term gain from Forms 2439 and 6252; and
long-term gain or Qoss) from Forms 4684,6781. and 8824 . . . . . ,
12 Net long-term gain or (loss) from partnerships, S corporations, estates, and
trusts from Schedule(s) K-'. . . . .
9
11
11
12
13 Capital gain distributions. See page 0-2
14 Long-term capital loss carryover. Enter in both columns (1) and (g) the amount,
if any, from line 13 of your 1997 Capital Loss Carryover Worksheet
13
. 15 Combine lines 8 through 14 in column (g). . . . . . . . .
16 Net long-term capital gain or (los.). Combine lines 8 through 14 in
column (f). . . . . . . . . . . . . . . . . . . . . . ~
Next: Go to Part III on the back.
*
28% Rate Gain or Lou includes an "collectibies gai". and losses- (as defined on page 0-6) and up to 50% of the eligible gain
on Qualified small business Itock (see oaae 0-51.
For Peperwoft( Reduction Act Notice, ... Form 1040 Inatructlona. Cat. No. 11338H Schedule 0 (Form 1040) 1888
e
e
~_ of II.. "Maury
.......1 "-- SeMce
Name
Foreign Tax Credit
(Individual, Eltate, 'lhaat. or Nonrelldent Allin Individual)
~ Attach to Form 1040, 1040NR, 1041, or HO-T.
~ 1M.. me Instruction..
OMS No. 1S4S-o'21
FOfTft 1116
~~97
Anachmlnl
SeQuence No. 19
Id~"" numb... u shown on Pipe 1 of your lax return
Jean D. Hem t
Use a separate Form 1116 for .ach category of Income lIst.d below. See Categol1e. of Incom. on page 3 of the instructions. Check only one
box on each Form 1116. R.port an amounts in U.S. dollar$ except where speclf'lId in Part II below. Complete this form for credit fOr taxes on:
. (!) Passive income d 0 Shipping income g 0 Lump-sum distributions (see page 3 of the
b 0 High withholding tax . 0 Dividends from a DISC or former instructions before completing form)
interest DISC h 0 General limitation Income-an other income fron1
C 0 F"mancial services Income f 0 Certain distrfbUtIons fron1 . foreign sources outside the Unitecl States (InCluding
SIIes ~ (FSC) or former FSC income from SOI.Res within U.s. possessions)
l.Jnit: . 'Ces
I Resid.nt of (name of countrY) ~
Not.: If you paid rues to only one foreign country or U.S. poaession, use column A in Part I and line A in Part II. If you paid taKes to
more than on. foreign country or U.S. possession. use . ..,... column and line for each country or possession. However. see the
exception untJer How To CompI.ta Form 1111 on ~ 1 of the inst1UCtions.
FI urln Taxabl. Incom. or Lo.. From Sourc.. OUtaId. the UnltMl StIlt.. for Calt
Foreign Country or U.L Po..aaIon
I C
. .......................... ........ ............ .....
A
Checked Above
Tot8l
(Add ccIa. A., B. and C.)
Enter the name of the f.....gn oountry or u...
,.....aon.......... .~
1 Gross income from sources within country
shown above and of the type checked above.
See page 5 of the instructlonI: .................
DeductIona and 10.... cc.utIon: See pages 6 end 7 of
the instnIdions):
2 Expenses definlt.1y related to the Income on
One 1 (attach stat.ment). . . . . . . .
3 Pro rata share of other deductions not definitely
related:
. CIrtain . itemized deducticlnl or standard
deductIOn. See instructIClnI. . .
b Other deductiON (attach statement) . . . ~
c Addlines3aand3b . . . . . . . . .
d Oro.. foreign source income. See instructions .
, Groa Income from .. 1OUrCeI. See inItructions
f DIvide fine 3d by ine 3e. Do not anler mort 1hIn .1.
II Multiply line 3c by line 3f. . . . . .
4 Pro rata shar. of interest expe.... See
instNctions:
. Home mortgage interest. (Use worksheet on
page 7 of the instructions) .
b Other int.ru1 expense . . . . . . . .
5 Losses from foreign sources . . . . . .
. Add lines 2. 3 . 4a, 4b and 5 . . . . . .
7 Subtract Iin, & from line 1. Enter the retult here and on line 1~. a 2. .
Forel Tax.. Paid or Accrued See a I 7 0 the Instructions.
CrMtl Ie clellftM FONIgrI ta_ ..lei or HCNed
tor taKa.
r; CYov""'lIt otIeck -I
I CkI PaiG
(,)
. . . . ~
In fcnlgn ~
In u.s. CSOIlafl
tClIOINr
tcnlgn laQI
Col "'"" ... or
(nI DIvlcIIndI InCl royalllol fpllrllOfllt ICCIVecl
Taua wlltlI'lolCIlt IOUICI on:
Tu.. withhold at ._ on:
MOther
f~ .....
Plldor
accrllOCl
M Total foNign
tall.. paICl or
accf\IeG CIGCl COlI.
\It ttwougI'l lull
III RanIa
(r1 DMclana. IIlCl roy... 1II1nlar1l1
. Add lines A ttw C. COlumn M. Enter the total here and on line t. pa 2. . . . . . . . ~
For PaperwOftt lIIecNct10n Act NotIoe, ... Hperate Inarucuona. Cat. NO. "UOU
1,016.99
FOfTft 111 e (1117)
12"0117 1 .859
e
m 40 5::h:d1le A & B
'lax YeD::' 1998
JEBn D. H3tp: 19&-38-8211
Divid:rrl Im:rre:
A1.l.ied Ir.i.S1 B3rK
I.c:!{ T. H3tp: EState
CA. H3tp: EState, Irx::.
fv\:orTi 11, INn:h P. F. & Snith, Irx::.
Int:eI:esL Im:rre:
I.c:!{ T. 1Slp: EState
M!I:rill INn:h P. F. & Snith, Irx::.
. F.iJ:st N9.tia1al ISnk d leNb:w1
F.iJ:st Urim N:tti.a1al B3rK
F.iJ:st N:tti.a1al ISnk d M)
u. s. 'In:asuty
e
$ 13,175.68
56,374.04
10,(0).00
13,079.43
$ 92,629.15
$
125.96
97 . 92
109.51
137.23
538.67
26.57
$ 1,035.76
SCHEDULE K.'
(Form 1041)
e e
B.n.nclary's Share of Income, Deductions, Credits. etc.
OCPlI'lIIlefll "Wle TfUlVry
I"'...... R~, S..-...:.
Name of truSI 0' Oec:e~enrs estIIl!
I., "'e celt""' yea, u... .. n.cal y...
beglr\nll1" - - EH ~.., 1995- _ _ '"111"1_ ~_~ 1999 _ __
~ Com "Ie... .r.'. Schellule K.1 Jot ..cf1 baMflcl ,
1)@98
Iqr T. H:npt EState
I,
Am81'OC.cl i(.,
"".ncl.,.,', ld.rnllytftg "um. ~ 1 C}f;..1A-J:I? 11
BenefiCiary's ~ aocnss. ;nd ZIP COlSe
Jean D. H:npt
C/o l-Sx C. & <?erald L. H31p:,TlIES
R:B 278
C:rrp Hill, PA 17011
ra&lf.'. Of truat. E'N ~ ...,., .. -
Fiduciary', nllTle. 1lddre:s3, and lIP COOe
Lot T. Harp: EState
~MmC.&~L.~,~
R:B 278
'C:IrP Hill, ~ 17011
UItl:lII(.,
(a) AllOQIllle sha~ item
-'-
leI Calendar )'elll' , 998 Form 1040 filers enler
.. ~~~CIUnrs in calumn (0) on:
Schedule B, PII'I. lit,. 1
~,..tledlll<! R. PM ". line 5
Scfledule O,line S
Scheclule O. line 12. CDlumn (Q)
Line 11 of !he WOl'Qtleet fOt Sc:tleduIe O. line 25
SctlecIuIe 0 Iifte 12 ..
(0) Amount
, Inlerecl
,.. ..
2 Oi\'i<'encls '" . , .
3 Net Ihon.tlrm c:api:aI gain. "
4 Net lang.term cap/\a/ g..u 28% 'lie gan " ..
b Unr~ed 21CllOn 12SO sam .......
cT._ for WI<<
,. Annullies. rO)'tlliel, and otw ~ inc:arne
before CIlredly appotboned deductions ......,
b Oeprec:iatian " " . . "
cDepletlOn .... . ..... .
IIIAmortization '" ...... '"
I. TraCIe or buaineu. rental rail ..... and ... rentII inczlme
befcq dlr8ctty apponlantl:l deduoriOtll (.. inIIruc:lIona) . .
t10eprlCiation... " ........
~eliOn .. " . . . . . . . . .
r 1 '
~J!. _.
.. ~c
h
.n, , ,.
Ie
.J~._..
E. PI/t III, CDUnn en
;"\
!~
iJ
l"CIulla on the applicable tine of lhe
approprill. lax form
Amor1i%aPon ~..... . .
Income tor minimum lax putIlOteI '. . . .
Income fer reVUlar lax ~ (MId lines ,. 2.3. 4<<:.
Sa, IIICl 5.). ... " .. ..
, A41jualme'" for minimum \ax DU,... (___. h
__~I'__7) .
10 !stare lU OCd:Iction Cinc:lucfL"ll Dr1.Iift ~ po
'klPl>lftS transfer 1._) ...... ....,..
11 Forlian m.. . .' ...,......
1 Z AdjllS",*", ane: lalt I)f'{_ee item, r.......):
. Acce~ec1 :leprecil1icln . .. ...,
.. Oeptclion. ..
e
II
7
I
s.
Ib
Ic
Id .
7 i
i !
.
;
.
Sdw:t\lie E. Part III
Include .0111". apellie.ble line 01 1M
approprl.re lax form
O'*,UUJ.uu
64,CXXl.OO
---
Form 12S1.1i11t 12
..!!" .
11
1.,1bS.56
ScheCllIle A 1in127
_form" 16 or SctleGlIle A (Farm 'OCO) line a
,
,. 011'1" tol....~):
· Payments of esli:n&lee :~ .:rocS1ed 10)'OU .
o Tax..n"'DI r.l:"eal
e Amorl/%l1lOt\ . . .
d !lctuaion items _", ._ _ .
13 OcduClions in UIc ''''11I)/1.'81 or ,~ Off ~'. ,.lIte:
· E.~. deductions on lelm'''lIion (see inatI\Ictiona) 1 ~
It SlIort-t,rm ClPIlII '.. ClI")'OIIer.. .... . .... 13 ~,
c lOlll-,erm c.DlleI lOSS ca~ . '" . ... Uc
· NelllPD"'ling 'ou lNO~J a.'T~ for rwvvaar lax P\IIlIOSu . :' "
· NOI r..lI'ryover for tnirWnum :ax DUr'POSN ... . 13.
f -.. _ _ _____________________________ JJf
lUg
--t~---__~-----__.
./,../
I
. ~
I,.c ,-
Il --------------------- ----------/1..
. ------------. ._-----------------1,..
. 12.
. ill~, .
1Ie
12t1
.
, } Indude on tile Ipplicallle
, line ", rorm 1251
"'-
f In Form lao,
- ----
Schedule A. Ii... 22
SChecl&,I. D. ine 5
S~,~ 0 line' 2. columna (I) II'Id (!Ill
Form 10",,0, line:t1
Se. Ille inSlrUc:1ions lor Form 6251.lilll: 20
'\.. InClude on tile allOlo~ble line
.. L of Ine 'DClI'llllr!"e lax form
c
. _ Form 1040. "ne~
~OI'm '0.0, ';". It
. . --I \.. Include 011 'he l)PpltclNlv .'"
'j 01 .oprOj),ill. '~Ir /0Nn
'fH "'P_o.. "ecluctlon ACI NOlie., IN tile 11I.slUC1lOna fo, F_ 1041.
$ChHUI. 1(., ('_ 10411 "'1
J~&
e
e
Form 1 040
label
(S.. in.tructions.)
Use the
IRS I.bel.
Otherwise,
please print
or type.
Presidentl.'
Election
c.mp.ign
(See in.truction..)
Filing Status
Check only
one box.
Exemptions
11 more than
six dependents,
see instructions.
Income
Attach c:opy .
of your Forms
W.z Md W-2G
hent.. Also attKh
Form(s) 1CI9I-R if
tax was withheld.
It you did not
get a W-2. see
instructions.
Enclose, but do
not staple, any
payment. Also,
please use
Fonn lIMO-V.
Adjusted
Gross
Income
e
.
Oeplll1ment of lie T rusury - Interr181 Rev_ Servic.
U~S. Individual Income Tax Return 1999
For th~.)lear Jan I-Dee 31,1999, or other tax
, 1999. endi
IRS use only - 00 not write or .tapl. in this spllC..
OMS No. 1545'()()74
Your Socia' S.c.rIty Humb..
V'L
JEAN DORrs HEMPT
205 CREEK RD
PO BOX Z78
CAMP RILL P A 1"7001-0278
818 80
I
R
S ,ent No.
.. Do you want $3 to go to this fund? ....................................................
If a joint return, does our spouse want $3 to 0 to this fund? ............................
1 ingle
2 Married filing joint return (even if only one had income)
3 Married filing separate retum. Enter spouse's SSN above & full name here .~
4 Head of household (with qualifying person). (See instructions.) If the qualifying person is a child but not your
dependent, enter this child's name here . . . ~
0uaI;' wide er with d endent child, ear died · 19 ee instructions.
~~..J'~~~~~) :-~~.m.~ ~~~~.h;~<<... ..} ?,;-::-. .W
5 ............................................... .,......................._ N..afyour
(2) Dependent's (3) Dependent's (4) if :c~r: 0" 0
c Dependents: social security relationship quAfyina child . lived
number to you ~tu liilIIyo. .....
~) . .4IIlOtIv.
.... you 41.. to
..reo.,.... 0
..... c_
ilI8ftcf...) ..
00........
0lI Ie oot r-I
=~.. . .. .. L-J
AlIlII......1lI
d Total ,.."mber of ex tions claimed ...................................................... ==:.:'. . ~
7 Wages, salaries, tips, etc. Attach Form(s) W-2 .. . .. .. .. .. . . . . . .. . .. . . . . . .. . . . .. . . .. .. . 7
8a Taxable interest. Attach Schedule B if required. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .~ ..
b Tax-u.rnpt interest. Do not include on line 821 ............. 8b ;l . 0
!J OrCfitwy dividends. Attach ScheckJie B if required ..................................... 9
10 Taxable refunds, credits, or offsets of state and local income taxes (see instructions) . _ . .. 10
11 Alimony received ..................................................... _ . . . . . . . . . . .. 11
12 Business income or (loss). Attach Schedule C or C-EZ . . . . . . . . . . . . . . . . . . . . . _ . . . . . . . . . " 12
13 Capital gain or (loss). Attach Schedule 0 if required. If not required, check here .... ~ 0 13
14 Other gains or (losses). Attach Form 4797 ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 14
15. Total IRA distributions. . '" ~ 959. " J....I b Taxable amount (see instrs) .. 15b
16a Total pensions & annuities . ~ I b Taxable amount (see instrs) .. 16b
17 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E " 17
18 Farm income or (loss). Attach Schedule F ...... . . . . .... . . . . . . . . . . . . . . . . .... . . . . . ... " 18
~. ~:7:"e:;:~~~m.~~~~atio~. . . . i~ ft8~ .~ .~. . i 'b . i-~~~,~ .~.~~~ (~~ 'j~~~)' :: ~b
21 Other income. List type & amount (see instrs) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 21
22 Add the amounts in the far ri ht column for lines 7 throuah 21. This is your total income ~ 22
23 IRA deduction (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . " 23
24 Student loan interest deduction (see instructions) ........... 24
25 Medical savings account deduction. Attach Form 8853 . .. . . .. 25
26 Moving expenses. Attach Form 3903. . . . . . . . . . . . . . . . . . . . . .. 26
Zl One.halt of self-employment tax. Attach Schedule SE ... . . .. Zl
28 Self-employed health insurance deduction (see instructions) . 28
29 Keogh and selt-employed SEP and SIMPLE plans.......... 29
30 Penalty on early withdrawal of savings . . . . . . . . . . . . . . . . . . . .. 30
31 . Alimony paid b Recipient's SSN . . . . ~ 31 .
3Z Add lines Z3 through 31a ................................................................ 32
3! Subtract line 32 from line 22. Thts is eel s Income ...... . . . . . . . . , 3S
8AA For Ofsclosunt. Privacy Act. and P~erwork Reduction Act NotIce. He instructions.
,FOIA01l2 111\6199
5
Sa
b
First name
Last name
spou.... Soda' Security Numb.r
A Important! A
You must enter your social
security number(s) above.
Yes No
.te: Chockill\l
os- will not change
your tax or reduce
your relund.
I
J
FQrm 1040 1999
Tax and
Credits
Standard
Deduction
for Most
People
Single:
$4,300
Head of
household:
$6,350
Married filing
jointlx or
Qualifying
widow(er):
$7,200
Married filing
separately:
$3,600
Other
Taxes
Payments
Refund
Have it direcUy
deposited! See
instructions and
fill in 66b, 66c,
and 66<1.
Amount
You Owe
Sign
He,.
Joint return?
See instructions.
Keep a coPY
for your records.
Paid
Prep.rer's
Use Only
34 Amount from line 33 (adjusted gross income) ............................. . . .. ... .. . ..
35a Check if: [9-vou were 65/01der, 0 Blind; 0 Spouse was 65/01der, 0 Blind.
Add the number of boxes checked above and enter the total here. . . . . . . . . . . . ~ 35a I
.
b If you are married filing separately and your spouse itemizes deductions ,
or you were a dual-status alien, see instructions and check here. . . . .'. .. . . . . . ~ 35b 0
36 Enter your itemized deductions from Schedule A, line 28, Or standard deduction
shown on the left. But see instructions to find your standard deduction if you checked
any box on line 35a or 35b or if someone can claim you as a dependent . . . . . . . . . . . . . . . .. 36
~ Subtract line 36 from line 34 ........................................................ ~
38 If line 34 is $94,975 or less, multiply $2,750 by the total number of exemptions claimed on line 6d. If line 34
is over $94,975, see the worksheet in the instructions for the amount to enter. . . . . . . . . . . . . . . . . . . . . . .
39 Taxable income. Subtract line 38 from line 37. If line 38 is more than line 37, enter -0-
40 Tn (see instrs). Oteck if any tax is from a 0 Form(s) 8814 b 0 Form 4972 ............ . . . . . . . . .
41 Credit for child and dependent care expenses. Attach Form 2441 .......... 41
42 Credit for the elderly or the disabled, Attach Schedule R . . . .. 42
43 Child tax credit (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . .. 43
44 Education credits, Attach Form 8863 , . . . . , . . . . . . . . . . . , , . , ,. 44
45 Adoption credit. Attach Form 8839. . . . . . . . . . . . . . . . . . , . . . . ., 45
46 Foreign tax credit. Attach Form 1116 if required. . . . . . . , . . . .. 46
47 Other. Check if from. , a B Form 3800 b 0 Form 8396
c 0 Form 8801 d Form (specify) 47
G Add lines 41 throuoh 47. These are)'Our total credlts .....,.............,...,............,........
49 Subtract line 48 from line 40. If line 48 is more than line 40, enter .(). , . . . , . . . . . . . . . . . . ,
50 Self-employment tax. Attach Scmlule SE . . . . , . . . . . . . . , . . . , . . . . . . . . . . . . . " . . , . . , . . . . . . . . . . . . , , .
51 Alternative minimum tax. Attach Form 6251 . . ,.... . . .. . . . ... " . . , . ,. . .. ... . . . . , .. " . "
52 Social security and Medicare tax on tip income not reported to employer. Attach Form 4137 ,........"......
53 Tax on lRAs, other retirement plans, and MSAs. Attach Form 5329 if required. , . . ....., , .
54 Advance earned income credit payments from Form(s) W-2 ,.".,.........,...,.,..,...
55 Household employment taxes. Attach Schedule H .. . . . . . . . . . . . . . , . . . . , . . . . . . . . . . . . . , , .
56 Add lines 49-55, This is ur total tn , . . . . . . . . . . . . . . . . . . . , . . . . . . . . , . . . , . , . . . . . . . . . . , . , . . . ,
57 Federal income tax withheld from Forms W-2 and 1099 . . . . ., 57
58 1999 estimated tax payments and lITIount applied from 1998 return. . , . . . .. 58
59a Earned Income credit Attach Schedu Ie Ele if )'OU have a qualifying child.
b Nontaxable earned income: amount . ~
and type . ~ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 59a
10 Additional child tax credit Attach Form 8812 ...,.......,.., 60
61 Amount paid with request for extension to file.{see instructions) .. . . . , . . ,. 61
62 Excess social security and RRTA tax withheld (see instrs) ... 62
63 Other payments. Check if from . . , . , . 0 Form 2439
b 0 Form 4136 ........,..,..,.....",.....,."......., 63
64 Add lines 'S7, 58, 598, and 60 thrOll!11 63. These are your
total a ments .............,...,.....,....,..,........,..".",........,...,..,.
65 If line 64 is more than line 56, subtract line 5& from line 64. This is the amount )'OU Ove,.,ald ...... . . . . . , , : .
66a Amount of line 65 you want Refunded to You ............... . . . . . . . , . , . . . . . . , . . . , . ., ~
.. b Routing number ...,.,. .. c Type: 0 Checking 0 Savings
.. d Account number . . , . . . ,
fi7 Amount of line 65 want A lied to Your ZOOO Estimated Tn . . . . . . . .. 67
e
e
68 If line 56 is more than line 64, subtract line 64 from line 56. This is the Amount You
Owe. For details on how to pay, see Instructions ..........,........,................ ~
69 Estimated tax enaltv. Also include on line 68 ..............1 69
Under p.nalties of p.l'JUry, I declare "at I heve examined I"a relum and accompanying achedutea and alll.....n... and 10 the beat of my knowledve and
belief. l1el' are ""e, correct. and complete. Oeclanltion of preparer (oller than taxPayer) is based on aU inform.tion of ....ich poepa.... lias any knOwledg..
Your Signa Dale
OY-(2 -C 0
Date
..
..
Spouse's occupation
SP
Must Sign.
Eft
ZIP CocIe
FOlA0112 11115199
I
Form 1040 (1999)
Schedule A
(Form 1040)
e
e
Itemized Deductions
OMS No. 1545'()()74
Oepllftnent at the Treasury
In.mal Rev...... SeMc. (99)
.. Attach to Form 1040.
.. See Instructions for Schedule A (Form 1040).
Name(s) Shown on Form 1040 ~ 7:>. /~
Medical Caution: Do not inclu expenses reimbursed or id by others.
and
Dental 1 Medical and dental expenses (see instructions) ......,..,......
Expenses 2 Enter amount from Form 1040, line 34 ,..,./ 2 I ~ '0
3 Multiply line 2 above by 7.5% (.075) ......,......,.,..,......, 3
4 Subtract line 3 from line 1. If line 3 is more than line I, enter .0- ...........................
5 S tate and local income taxes .............".....,..,."..... 5
6 Real estate taxes (see instructions) , . . , , , . . , . , . . . , , . . . , . . . . . . . 6
7 Personal property taxes . . . . . . . . . . . . . , . . . . . . . . . . . . . . . . . , . . . . . 7
8 Other taxes. List type and amount ..
8
-------------------------------
9 Add lines 5 through 8 . . . . . . . . . . . . , . . . . . . . . . . . . . . . . . , . , . . . . . , . . . . . . . . . . . , . . . . . . . . . . , . . . . 9
10 Home mortgage interest and points reported 10 )'IlU on Form 1098 ,........... 10
Taxes Vou
Paid
(See
instructions.)
Interest
Vou Paid
(1-(,1) ~
~ "3.21
11 Home mortoaae interest not reported III )'IlU on Form 1098. If paid 10
the penon froln whom )'lIU bought the home, .. instructions and show
(See that person's name, identifying number, and address ..
ins1ructions.)
Note:
Persona'
interest is
not
deductible.
Gifts to
Charity
It you made
a gift and
got a benefit
for it, see
instructions.
~and
Theft Losses
Job Expenses
Md MOst
Other
Mlsceflaneous
Deductions
(See
instructions
tor expenses
to deduct
here.)
O1her
Miscellaneous
Deductions
Total
Itemized
Deductions
-------------------------------
-------------------------------
-------------------------------
15 Gifts by cash or check. If you made any gift of $250 or more,
see instructions ...,............................,........... 15
16 Other than by cash or check. It any gift ot $250 or more,
see ins1ructiOns. You Must attach Form 8283 if
over $500 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1&
17 Carryover from prior year . . . ',' . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
,. . Adcllines 15 thr 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . .. '8
19
ee instructions. .......................,.,.. 19
20 Unreimbursed employee expenses - job trave', union dues,
job education, etc. You Must attach Form 2106 or 2106-EZ
if required. (See instructions.) ..
--------------
------------------_____________ 20
21 Tax preparation fees ............................,........... 21
22 Other expenses - investment, safe deposit box, etc. list
type and amount ..
-------------------~
-------------------------------
-------------------------------
., 26
------------------------------------------
28 Is Form 1040, line 34, over $126,600 (over $63,300 it married tiling separately)?
o No. Your deduction is not limited. Add the amounts in the far right COILmn tor 1
lines 4 through 27. Also, enter this amount on Form 1040, line 36.
o Ves. Your deduction may be limited. See instructions for the amol.l'lt to enter. _
Z7
28
c.{.a, 7~~15 J
~mr';f~ ~~)f'1~ ". ~ : ;~~~~ /.t"
BAA For Paperwork Aeduc:tlon Act Notice,..e separate instructions.
FDlAOJOl 10127199
Schedule A (Form 1040) 1999
Schedules A&8 (Fonn 1040) 1999
Narnefs) shown on Fonn 1040. Do not enter N1me and
Part I
Interest
(See page 8-1
and the
instructions for
Form 1040,
line 8a.)
Note. If you
received a Fonn
l099-INT, Form
1099-010, or
substitute
statement from
.~flnn,
IIat the firm'.
name as the
pay. and enter
the 10taI interest
shown on that
form.
Part II
Ordinary
Dividends
(See pege B-1
and the
IrwtmctIona for
Form 1040.
1M 9.)
Note. If you
~. Form
1099-01V or
aubatitute
statement from
. brokerage fInn.
1st the firm's
name as the
payer and enter
theordlnary
dlYidencts shown
on that form.
. ,,(',',': .:~ ~*';:..;~-,.,~ .;"...~
e
e
Amount
1
2
1
Schedule B-Interest and Ordinary Dividends
u had over $400 in taxable interest, u must also complete Part 11/.
3
4
Amount
5
6 Add 'fli;; "amounts" 0';' iiii.' 5:" Enter"thetOt"ai here' and or; Fo;m--'i04O~"li,;e9' .~.~ 6
You must complete this part if you Ca) had over $400 of interest or ordinary dividends; (b) had a foreign
account; or Cc) received a distribution from, or were a grantor of, or a transferor to. a foreign trust.
Part III
Foreign
Accounts
and Trusts
(See
.-ge B-2.)
-...... -.. -.............. -..-.............. --................................... --............ -............... ..-........... --......-....................-.. -.... -.. ----.....
......... -..-.............. -..... ......... -.................................... -.. ................ -..-...... --..-.......... ----.. --.......... -..-.. --...................
.... -......... -........ -- -. -.... -..........-........... -. ... -. -...... -. -- -....... - --. -... ..... - - -.-. -...... -... ---- .--...
--.. ............. -.. ..-.---.......... -.. - -. -..... ...-- -....... -. ......-. ..- ...... -... -....... - -...404O4O ._..
..4O. ..404O4O.4O.4O.4O....... .".4O - ... ... ... ...... _............ ......4O .... - _....... _.........4O.. iio _. _... .. _..4O _.... .
-... ..... ..--. --. ..-. -.-............ .--.-.-....... ... ...... ..-.. ..-... ..... ... ... ... .........
-. -...-. -.. -... - -........ -. - -..-...... -... -.... -.......... -. - ......... --... ..... - ....... ........
...... -.. ...... ... .... .... - -...... .... ........ ...-......... ..... ............. -. -....... ............
...... -........ .......... - - -........... -. ...-... -.... -..... -.... - .-.- -... -. -........ -... ....-.
....... -... -.. -............ -.... -.... ............ -........... .-... -.. -............... ... ..... .
-............... ................ -. ..... - -.....-...... -......... -.....-.. -. -. -............. -.......
2 Add the amounts on line 1-. . . . . . . . . . . . . . . . . .
3 Excludable interest on series EE and I U.S. savings bonds issued after 1989
from Form 8815, line 14. You MUST attach Form 8815 . . . . . . . .
4 Subtract line 3 from Une 2. Enter the result here and on Form 1040 line 8a ~
Note. If ou had over $400 in ordin dividends, must also co ete Part III.
5
.... ....... ... ............... -.......... -...
.................. -. -.... - -. -. -....... -. ........ - -......... ..... - .................. ...-... - ......
..... -............. -....... -. -... -. - -.... ..... -...... ...- ....... .............. .-...-. ... .-.. -.
....... ..-.... .-................... . -........-.... -........ -......... -..................... ..-...
-....... -. -.. - -..-......... -. -.............. -. .--....... .... -....- -.-............. - -. -. .-.. -....
. -.......... -.. .-... .-... -.. ....... - -.... -... -. - ......... -........... -..... -.-.. -..... .-. - .....
- --.............. -..-......4O.. _........ ... _............. _........ ...._ _. _. _.......... ._..... _.
... -....... -......... -. -. - -.. .. -.. -... -. -...... -................ - ... -........... -..... -.... ......... -.
.... .....-...... -... ..........- ..-. -... ..-... --.... ...4O. _.. ._._.. ...._...... _... ... .........._._
... -...... - ..-.-...-.-... -..... -.... - -. -..-... -... .....- ......-... ........ .... .....-.-.......
. ...-.................-.-...4O... ... _4O __.. ___ _. _....... ... ....... ..............._. _._. ....._._
................. .......................... -.-................... ...... ........... .-.. - ...... ......
-......................-.-.................. ........... -........ .....-.. ............ ....... -. -.......
7. At any time during 1999. did you have an interest in or a signature or other authority over a financial
account in a foreign country, such as a bank account. securities account. or other financial
account? See page 8-2 for exceptions and filing requirements for Form TO F 90-22.1 . . . .
b If "Yes," enter the name of the foreign country ~ .......................................................
8 During 1999. did you receive a dlstributJon from, or Went you the grantor of, or tnlna1eror to. a ;>
1N$f1lf "Yes." ma have to file Form 3520. See . B-2 . . .
For Pep.. work Reduction Act Nottoe, ... Form 1040 InstrucUona. Schedule 8 (Form 1040) 1181
$i.olii~
e
e
Schedule D
(ronn 1040)
Capital Gains and Losses
OMS No. 1545..0074
(a) Description of
p~ (Example:
100 shares XYZ Co)
Short-Term Ca .tal
(b) Data acquired
(Mo, day, yr)
ins and Losses - As ts Held One Year or Less
(c) Date sold (d) Sales price (e) Cost or (f) Gal. or (Lo..)
(Mo, day, yr) (soe instructions) olher basis SUliltact (0) from (d)
(soe instructions)
1999
12
. Yo.rso'~B:?~11
e:..,.~::":-s=:ury (99)
Hame(s) Shown on Form 1040
.. Attach to Form 1040. .. See instructions for Schedule D (Form 1040).
.. Use Schedule 0-1 for more space to list transactions for lines 1 and 8.
1
2 Enter your short-term totals, if any,
from Schedule 0- 1, line 2 . . . . . . . . . . . . . . . 2
3 ToW short-term sales price wnounts.
Add COkmn (d) of lines 1 and 2 ......... 3
4 ~h3r-=~ ~~~ .~~.~.~. ~-~~. ~ ~. ~~~~~ .~~~ :.~~ .~'. . . . .. ;
5 Net short-term gain or (loss) from partnerships, S corporations, estates, and trusts
from Schedule(s) K-l ...........................................................
6 Short. term capital loss carryover. Enter the amoll1t, if any, from line 8 of your
1998 Capital loss Carryover Worksheet. .. . .. .. ....... .... .... .... .. . .. . .... . . . '"
4
5
6
.'13)
(g) 21% Rata Gaf.
. (- ina~ below)
9 Enter YOU-Iong-term totals, if any,
from Schedule 0-1, line 9............... 9
10 Tota/long-term sales price amounts. I
Add colLmn (d) of lines 8 and 9 ......... 10 ~
11 Gain from Form 4797, Part I; long-term gain from Forms 2439 and 6252; and
long-term gain or (loss) from Forms 4684,6781, and 8824..................... ..... 11
12 ~~~S'J:~I~S~O~? fr~~ .~~~~~~~~'.~.~~~~~~~~~ .~t~~e~,. ~~.~.......... 12
13 Capital gain distributions. See instructions. . . . . . .. . . . . . . . . . . . . . . . . . .. . . . . . . . . . . '" 13
14 Long.term capital loss carryover. Enter in both columns (1) and (g) the amount,
if any, from line 13 of your 1998 CapItal Loss Carryover Worksheet.. . .. . . .. . . .. . .
15 CombIne lines 8 through 14 in column (g) . . . .. . . '" . .. . . . .. . . . . . . . . . . . . . . . . . . " " .
16 Ntrt long-term capital gain or (loss). Combine lines 8 through 14 in column (f) . . . . . . .
Next: Go to Part III on p e 2.
.. .28% Rate Gain or Lou includes all 'collectibles gains and losses' (as defined in the instructions) and up to SO% of the eligtble gain on
qualified small business stock (see instructions).
8M For Papel'WOI'k Reduction Act Notice. He Form 10040 instructions. Sctledule tJ (Form 1040) 1999
FOlAOti12 12121'"
e
e
F~ 1116
Foreign Tax Credit
(Individual, &ute, Trust, or Nonresident Alien individual)
~ Attach to Form 1040, 1040NR, 1041, or 99O-T.
~ See selMrete instructions.
OMS No. 1545'()121
P.:,':'R':,,::,:.~re:.sury (99)
Name
1999
19
rd--.'N=3a_~2 ( (
..
~ ld- /~
Use a separate Form 1116 for ea tegory of income listed bel . See Categories of Income in the instructions. Check only one box on
each Form' 116. Report all amounts in U.S. dollars except where specified in Part" below.
· ~assive income d ~ Shipping income 9 ~ Lump-sum distributions
b High withholding tax interest e Dividends from a DISC or tormer DISC h Section 901(j) income
c Financial services income t Certain ~istributions from a foreign sales i Income re-sourced by treaty
corporatIon (FSC) or former FSC j General limitation income
k Resident of name of coun ~
Nota: If you paid taxes to only one foreign country or U. S. possession, use column A in Part I and line A in Part II. If you paid taxes to nror.
than one foreign country or U. S. possession. use a separate column and line for each country or possession.
Taxable Income or Loss from Sources Outside the United States for Cate 0
Foreign Country or U.S. Possession
ABc
I Ent... the name of the foreign country or
U.s. possession ...............................
1 Gross income from sources within COlntry
shown above and of the type checked above.
See instructions:
-------------------------
Checked Above
Total
(Add cols A, S, and C.)
-------------------------
Deductions ....Iosses (Cwt/Dn: See instructions):
2 Expenses definitely related to the income on line ,
(attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
Ss,-t'{7S: 97
3 Pro rata share of other deductions
not definitely related:
a Certain itemized deductions or standard deduction. See instructions
b Other deductions (attach statement) . . . . . . . . . . . . . . . .
c Add lines 3a ar1d 3b ..............................
cI Gross foreign sOt.rce income. See instructions ......
· Gross income from all SOlI"ces. See instructions. . . . .
f Divide line 3d by line 3e, See instructions . . . . . . . . . . .
9 MJ,tlp/y line 3c by line 3f . .. . .. .. .. .. . .. .. . .. . . . . . .
.. Pro rata share of Interest expense. See instructions:
a Home m~age interest (use worksheet in
the instructions) .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b Other interest expense . . . .. .. .. . .. . .. .. .. .. .. . .. ..
5 Losses from foreign sources . . . . . . . . . . . . . . . . . . . . . . .
6 Add lines 2, 3 ,48, 4b, and 5 ..................... 6
7 Subtract line 6 from line 1. Enter the result here and on line 14, a e 2 . . . . .. .. . .. . .. .. . . . . .. . .. . . . .. . .. .. ~ 7
Fore; n Taxes Paid or AcclUed see instructions
~t a(y a Foreign taxes paid or accrued
'''' ues ou
must check one) In foreign currency
m) Paid
Accrued
(0) Date paid (P) (q) Rents &
or accrued Dividends Royalties
s. 'Ii
In u.s. dollars
Taxes withheld at source on:
(r)
Interest
(5) Other
foreign
taxes paid
or accrued
Taxes withheld at source on:
(t)
Dividends
(u) Rents &
Royalties
(v)
Interest
(w) Other
foreign
taxes paid
or accrued
(x) Total foreign
taxes paid or
accrued (add
columns (t)
through (w))
'-"
2....... ........ ........ .......
3.?3'''7
Form 1116 (1999)
e
e
Form 1116 ~1999)
-. Figuring the Credit
9 Enter amount from line 8. These are your total foreign taxes paid or accrued for ~
the category of income checked above Part I .................................. 9 v.
10 Carryback or carryover (attach detailed computation) ........... . . . . . . . . . . . . . . .. 10
11 Add lines 9 and 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 11
~r", 17
12 Reduction in foreign taxes. See instructions ................................... 12
13 Subtract line 12 from line 11. This is the total amount of foreign taxes available for credit. . . . . . . . . . . . . . . . . . . .. 13
14 Enter amount from line 7. This is your taxable income or (loss) from sources
outside the United States (before adjustments) for the category of income
checked above Part I. See instructions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 14
15 Adjustments to line 14. See instructions. . . . . . .. . . . . . . . . . . .. . . . . . . . . . . . . . . . . . .. 15
55,975,91
16 Combine the amounts on lines 14 and 15. This is}'Ol.M' net foreign source taxable
income. (If the result is zero or less, you have no foreign tax credit for the 5:, 07 5, ('J 1
category ot income you checked above Part I. Skip lines 17 througtl21.) ......... 16 ~_ 7 7
17 IncIividu.Is: Enter amOl.llt from Form 1040, line 37. It you are a nonresident
alien, en~ amOl.llt from Form 1~, line 36.
~~=:t1~~~ .~~~~r. ~~ .~~.'~.i~~~. ~~.~. ~~ .~~~~~~.~~. . . . . . . . . .. 17 'J.
Caution: If you figured your tax using the special rates on capital gains, see instructions.
18 Divide line 16 by line 17. If line 16 is more than line 17, enter 'I' .. . ...... ... .. .. . . . " ... .. '" ..... .. . . . .. . .. 18
l' IndIvlduals: Enter amount from Form 1040, line 40, less any amounts on Form 1040, lines 41 through 45,
.-ld any mortQa~e interest credit (from Form 8396) and Disbict of Columbia first.time homebuyer credit
(from Form 885! on line 47. If you are a nonresident alien, enter amount from Form 1040NR, line 39, less
an}' amount on arm 1040NR, hnes 40, 41, 42, and any mortgage interest credit (from Form 8396) and District
of Columbia first-time homebuyer credit (from Form 8859) on line 44.
Estates and trusts: Enter amount from Form 1041, Schedule G, line Ie, or Form 99Q-T, lines 36 and 37 ........ 19
20 MJltiply line 19 by line 18 (maximum amount of credit) .................................................... 20
21 Enter the MlOUnt from line 13 or line 20, whichever is small.r. If this is the only Form 1116 ~ou ..e
comple~::~art2fv~~~~~.~~.~~.~.'~~.~..~~,. ~~~. .~.............. ~ 21
_ Summary of Credits from Separate Parts III (see instructions)
Page 2
. ?..I
3.656.-00
~~9~
3e 93l,.t7
22 Credit for taxes on passive income .. .... ... ... ...... ... ....... ....,....... ... 22 i. '3'. /1
23 Credit for taxes on high withholding tax interest .......... .......... .... '" ..... 23
24 Credit for taxes on financial services income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2S Credit for taxes on shipping income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2S
2& Credit for taxes on dividends from a DISC or former DISC and certain distributions
from a FSC or former FSC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
27 Credit for taxes on lump-sum distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
28 Credit for taxes on income re-sourced by treaty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
29 Credit for taxes on general limitation income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
30 Add lines 22 through 29 . ... . . . . .. ... .. . . . . . . .. .. .. . . .. . .. '" . . . .. . ... . .. .. ... . .. .... . . . .. . .. .. . . . . . . . . . 30 3. 93~, 17
31 Reduction of credit for international boycott operations. See instructions for line 12. . . . . . . . . . . . . . . . . . . . . . . . . . . J1
32 SUbtract line 31 from line 30. This is your fcnlgn tax cr.dIt. Enter here and on Form 1040, line 46; 4.93' ,/7
Form 1()4()t1ft. line 43; Form 1041. Scheci.de G, line 2.; or Form 99O.T line 58 ............ .. . '" .. ... .. .. ~ II
FDlZ2&12 1111 Cl/II
Form 1116 (1999)
e
e
~
.
J~1040
e
Department of the Treasury - Internal Revenue Service
U.S. Individual Income Tax Return
e
2000
(S9) IRS U.. Only - 00 no! WIlte or ... in lh/. SlMCe.
. 2000. ending ,20 OMS No. 1545-0074
Your social securl!Y number
196-38-8211
For the ~r JII'I. 1 - Dee. 31, 2000. or other tax ~ beginning
Your first name and inillal Last name
Jean D. Hernpt
label
(See L
A
instruclions B If a jOint return. spouse's lirst name and inillal Last name
on page 19.) E C/O Gerald L. Hernpt, Trustee
Use the IRS L
label. H Home addresa (number and streel). If~ haw a P.O. box, see page 19.
OthetVfise, E 205 Creek Rd., POB 278
please print ~ City, lown or post omce. state, and ZIP code. If}'au haw a foreign address, see page 19.
OI'p ~d' nt' I Carn Hill PA 17011
resl e la
Election Campaign ~ Note. Checking "Yes" will not change your tax or reduce your refund.
(See page 19.) , Do you, or your spouse if filing a joint retum. want $3 to go to this fund? . . . . . .. . .. . . . '" ~
1 X Single
2 Married filing joint retum (even if only one had income)
3 Married filing separate retum. Enter spouse's social security no. above and full name here. ~
4 Head of household (with qualifying person). (See page 19.) If the qUalifying person is a child but not your dependent,
enter this chAd's name here. ~
Qualifying 'Nidow(er) with dependent child (year spouse died ~ ). (See page 19.)
6a IiJ Yourself. If your pa-ent {or sanecne else) can claim you as a dependent on his or her tax retum,
do not check box 6a ...................................................
29 Self-empl~ SEP. SIMPLE. and qualified plans . . . . . . . . . . .. 29
30 Penalty on ear1y withdrawal of S8IIings . .. . .. . .. . .. .. . .. . '" 20
31 a A1lmcnypaid b Recipienrs SSN ~ 31.
32 Add lines 231hrough 318.. .. . ...... ... . .... '" .. .... .... ......... . ... .... . ..... .
33 S II fnm . T Is II In. . . . . . . . . . . . . . . . . . . . . .
For DtscIosure. Privacy Act. and PapelWOrk Reduction Act Notlce.,s" pag. 56.
ISA
S11"FlDal1F.l
Filing Status
Check only
one box.
5
Exemptions
Copr C For EMPLOYEE'S RECORDS /2000 OMB No.
- '8.1 1545-0008
. ConwI 1 Weges. rIpS, Other Camp 2 Federal Income Tax Withheld
0000279 1858.57 0.00
b fmpIo,....1O 3 Social security wages 4 Social security tax withheld
1858.57 115.26
231322002 5 Medicare wages and lips 8 Medicare Tax Withheld
1858.57 26.94
C EmpIoyw'a name, address, and ZIP code
Wood. Servlcea-Sludent Pay
RT 213
LANGHORNE, PA 19047
('~ ~'. social security number 198-38-8211
. name, ad4res., .,., zip code
~ :.~
,PA 19CU7
7 SocIII-.curuy lips 8A11ocatedrlpll i Adv8nce EIC payment
0.00 0.00 0.00
to o.p."lt cant benefit. 11 Nonqualified plans 12 Benefits incl. in Box 1
0.00 0.00 0.00
t3 See Instrs. for Box 13 14 Other
15 SlaIuby Dec:eaaed Pension Legal Deferred
Employee plan rep. compensation
tep~:EnIpIoywa alate 10 17 State wages, lips, ecc. 18 Stale income lax
PA 23-t322002 1858.57 52.00
1i Locality name 20 Local wages. lips. etc. 21 Local income tax
Fomt W..z Wage and Tax Sbltement Dept. of Jhe Treasury _ IRS
................................-... .,....--............... ..........~-....
~...- ,...... .................. .............
--.. _...~.-I-- "---. ...__. _. _. - __
Spouse's social security number
Apt no.
A Important! A
You must enter
your S'SN{s) above.
No
.,..
~Ho.ofbo_
dIecIcacI on
.. and Ib
1
Copy 2 To Se FII~ WI1tI Employ.... State, T 2000 OMS No.
-I~ .. 11- m 1545-0008
a ContlOl 1 Wages. rIpS. Other Camp 2 Federal Income Tax Withheld
0000279 1858.57 0.00
b Employer's 10 3 Social security wages 4 Social security tax Withheld I
1858.57 115.26
231322002 5 Medicare wages and tips 6 Medicare Tax Withheld
1858.57 26.94
c Employer's name. address. and ZIP code
Woods Services-Sludent Pay
RT 213
LANGHORNE, PA 19047
d. Employee's social security number 196-38-8211
e Employee'. name, addren. and zip COde
Jean Hempt
WdOda Services
Sherwood
LallQhome, PA 19047
7 Social security tips a AIIocaled r~ 9 Advance EIC payment
0.00 0.00 0.00
10 Dependent care benefits 11 NonquaIitIed plan. 12 Benellts incl. in Box 1
0.00 0.00 0.00
13 See /nstrs. for Box 13 14 Other
15 Stetutory Deceased Pension Legal Defened
Employee . plan rep. compensation
16 Star Employer'. state 10 17 Stele weges. lips. eJc. 18 Stale income lax
PA 23-1322002 . 1858.57 52.00
19 Locality name 20 Local wages, lips. etc. 21 Local income talC
Form W.2 Waoe and Tax Statement
Dept. of the Treasury - IRS
;"
-0-
Form 1 040 (2000)
1",-
e
e
j1040 Department of the Treasury -Internal Revenue Sen,;ce 2000 t (99)
U.S. Individual Income Tax Return IRS u.. Only - 00 not write or.... in 11111 lpace.
For the )'UI' Jan. 1 - Dee. 31. 2000. or other tax ~r beginning .2000, ending .20 I OMS No. 15.5-007.
Label Your first name and initial Last name Your SOCIal secu, nimb.r
L Jean D. Hempt I 196-38-8 1
(See A I
instructions B If a joint return. spouse's first name and initial Last name I Spouse's social security number
on page 19.) E C/O Gerald L. Hempt, Trustee I
Use the IRS L
label. H Home address (number and street). II you ha". a P.O. box. see page 19. I Apt. no. A Important! A
Otherwise. E 205 Creek Rd. , POB 278
please print R City. town or post office. stale. and ZIP COde. If you ha". a Ioreign address. see page 19. You must enter
or type. E your SSN(s) above.
Presidential Caron Hill, PA 17011
Election Campaign ~
(See page 19.) r
1
2
3
4
d Total nulTlber of ~ claimed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7 Wages. salaries, lips, etc.. AtbIch Fames) W.2. . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
8a Taxable Interest Attach Schedule B If requl/'8d ...................................... Is
b tax-exempt Interwt Do not include en line 8a' ......... . . . . 8b .::if
9 Ordinary dividends. Attach Schedule B./f required.. .. . .. . . .. . .. . . . . .. . .. .. . . .. .. . . . .. . 9
10 Taxable refunds. credits, or offsets d slate and local income taxes (see page 22) . . . . . . . . . . . . 10
11 Alimony received ........ . . . . . . . . . . . . . . . . . . . . . . . .'. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
12 Business inoome a (Iosa). Attach Schedule C orC-EZ . .. . .. .... . . ... .. . .. . ... .. . .. .. . 12
13 Capital gain Cll" (loss). Attach ScheduJe 0 if requlllld.1f not required, check here ~... .. . .. .0 13
14 Oth<< gains a (losses). Attach Form 4797 ........ .. .. .. . .. . .. .. .. . . .. .. . .. .. .. .. . .. 14
15a Tol8llRA dlslltbullona .. .. . ~ 7 e 6 .d Q I b Taxable 8/nOunt (see page 23). 1 Sb
16a Total pensions and annuities l1!!] , b Taxable amount (see page 23). 16b
17 Rental real estate, royalties, P81nerships, S corporations, trusts, ate. Attach Schedule E ... .. . 17
18 Farm income or (loss). AttaCh Schedule F .......................................... 18
19 Unemployment compensation. . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
20 a Sociaisecurily benefila .. .. ~I 2 . 0 1 6 . 0 0 I b Taxable amount (see page 25). 20b
21 Other income. Ust type and amount (see page 25) 21
22 Add the amounts in the far ri t column for lines 7 thr h 21. This is r total income. . .. ~ 22
23 IRA deduction (see page 27) . . . . . . . . . . . . . . . . . . . . . . . . . . .. 23
24 Student Joan interest deduction (see page 27). . . . . .. . . . . . . .. 24
25 Medical sailings account deduct/on. Attach Form 8853. . . . . . .. 25
26 MoIling expenses. Attach Form 3903. . . . . . .. . . . . . . . . . . . . .. 26
27 One-half c:A Self-employment lax. Attach Schedule SE ........ 27
28 Self-employed health insurance deduction (see page 29) .. . . " 28
29 Self-employed SEP, SIMPLE, and qualified plans . . . . . . . . . . . .
30 Penalty on early withdl'l1W8l of savings . .. . .. . .. .. . . . . .. . . .. 30
31 a Alimony paid b Recipienfs SSN ~ 31.
32 Add lines 23 through 31... '" ............ '" .... ... . . . . ... . .. . .... '" .' . . . . " . .. .
33 Subr;.ct line 32 from I 22. This is u ross income . . . . . . . . . . . . . . . . . . . . .
For DiSclosure. PrIvacy Act. and Paperwork ReductIon Act Notice, see page 56.
ISA
SlFFEDIll"F. ,
Filing Status
Check only
ooe box.
exemptions
If I1lCr8Ihan six
dependents.
see page 20.
Income
Attach
r=onn. W-2 and
W-2G here.
Also attach
Fonn{s)1099-R
If tax was
withheld.
If )'GU did not
get a W-2,
see page 21.
Endose, but do
not attach, any
P8)ment. Also,
..... use
Form 1040-V.
Adjusted
Gross
Income
Note. Checking "Yes- win not change your tax or reduce your refund.
Do you, or your spouse if filing a joint return, want $3 to go to this fund? . . . . . . . . . . . . . : .. ~
.X Single
Married filing joint return (even jf only one had income)
Married filing separate return. Enter spouse's social security no. above and full name here. ~
Head of household (with qualifying person). (See page 19.) If the qualifying person is a child but not your dependent,
enter this child's name here. ~
5 QUalifying widow(er) with dependent child (year spouse died ~ ). (See page 19.)
6a fi] Yourself. If)OUr parent (a saneone else) can claim )OU as a dependent on his or her tax return,
do not check box 6a ...................................................
b 0 Spouse................................................. <. . . . . . . . . . . . . . . . . . . .
c
Dependents: (21 Oependent's (31' Oependent's (4)JI"i'~
nllitlonshlp to chid for cllilcllax
(11 First name Last name social security number you c:redt C- pave 20)
-
-
-
r-
r-
No
}No.ofbo_
cMckMl on
Ia .nd Ib
Ho.ofyau,
chIldnn on
Icwho:
1
· lived with you
· did not Uvewlth
you due to dlvOl'Ce
0' .....tIon
C... pale 20)
Dependents on 8c
not entered Ibove
Add numb...
enterwdon
"_.bove ~
1 ,008.
70 492.00
,/
-0-
Form 1 040 (2000)
e
e
Tax and
Credits
Form 1040 (2000)
34
35a
Page 2
70 492.00
Amcuntfrom line 33 (adjUSted gross Income) ............................ .. .. .. .. .. .. .. .
Check if: ~ You were 65 or older, 0 Blind; 0 Spouse was 65 or older. 0 Blind.
Add the number at boxes checked above and enter the total here . . . . . . . . . . . . . .. ~ 35a
b If you are married filing separately and your spouse itemizes deductions, or you were
a dual-status allen, see page 31 and check here. . . . . . . . . . . . . . . . . . . . . . . .. . .. ~ 35b 0
36 Enter your Itemized deductions from Schedule A, line 28. or standard deduction
shown 00 the left. But see page 31 to find your standard deduction if you checked any box on
line 35a or 35b or if someone can claim you as a dependent. . . . . . . . . . . . . . .. . . . . . . . . . .. . . . . .
37 Subtract line 36 from line 34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38 If line 34 is $96,700 or less, mUltiply $2,800 by the total number of exempti01s dairned on line Sd. If
line 34 is over $96.700, see the worksheet on page 32 for the amount to enter .. . . . .. . . . . . . . . . . .
39 Taxable income. Subtract line 38 from line 37. If line 38 is more than line 37, enter..(J... . . . . . . . . . .
40 Tax (see page 32). Check if any tax is from a 0 Form(s) 8814 b 0 Form 4972 .... . .. .. . .
41 Alternative minimum tax. Attach Form 6251 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
42 Add lines 40 and 41 ............................................................. ~
43 Foreign tax credit. Attach Form 1116 if required. . . . . . . . . . . . . . . .. 43
44 Credit for child and dependent care expenses. Attach Form 2441 . .. 44
45 Credit tor the elderly cr the disabled. Attach Schedule R . . . . . . . . .. 45
46 EducatlO1 credits. Attach Form 8863 .. .. .. . .. . . .. .. . .. .. . .. .. 46
47 Child tax credit (see page 36) . : . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 47
48 Adoption credil Attach Form 8839 .......................... ',,~
49 Other. Check if from . 0 Fam 3800 b 0 Form 8396 ~i;.
c 0 Form 8801 d 0 Form (specify) 49
50 Add lines 43 through 49. These are your total credits ....................................
51 Subtract line 50 from line 42. If line 50 Is mere than One 42 enter..(J.. .. . .. .. . .. . .. .... . .. .. . .
52 Self-elT'lp/O)llnent tax. Attach Schedule SE . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . . . . . . . . . . . . . . . .
53 SocIal seaJrity and Medicare tax 01 tip income not reported to empIO)I8f'. Attach Form 4137. . . . . . . .
54 Tax 01 IRAs, other retirement plans, and MSAs. Attach Form 5329 if required .'. . . . . . . . . . . . . . . . .
55 Advance earned income credit payments from Form(s) W-2 . . . . . . . .. . . .. . . . . . .. . .. . . . . . .. ..
56 Household employment taxes. Attach Schedule H . .. . .. .. . . . . . . . .. . . .. . .. . . .. .. . .. . . . . . . .
57 Add lines 51 th h 56. This is total tax ........................................ ~
Payments 58 Federal income tax Mthheld from Forms W-2 and 1099 .......... 58
59 2000 estimated tax payments and amount appOecf from 1999 return. 59
60. Eatned Income credft (ElC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. l50a
b' NCJ'1taxable earned lname: amamt . . . " ~ I I
and l)pe ~
61 Excess social security and RRTA tax Mthheld (see page 50) ...... 61
62 AddItlCJ'1al chilcllax credll Attach Fam 8812 .. .. . .. . .. . .. . .. .. '. 62
83 Amount paid with request fer extension Ie file (see page 50) . . . . . .. 83
64 Other PII)'I1\ants. Check if from . 0 Form 2439 b 0 Form 4138 64
65 Add lines 58 59. 60s. and 61 64. These are total menta. .. .. . . . .. .. . .. ... ~
86 If line 65 is more than line 57. subtract line 57 from line 65. This Is the amount you overpaid . . . . . .
87 a Amount of line 66 you want refunded to you ......................................... ~
~ b Routing number . ~ c Type: 0 Checking 0 Savings
~ d Account number
68 Amount of line ee 6
Amount 69 If line 57 is more than line 65. subtract line 65 from line 57. This is the amount you owe. For
You Owe details CJ'1 hON to pay. see page 51 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ~ 69
70 Estimated tax penalty. Also indUde 01 line 69 .................. 70
Under penalties of perjury, J declare tIlatl have examined tIlis retum and accompanying sChedules and SlIlemants. and to the best of my knowledge and belief,
they are true, correct, and complete. Declaration of preparer (other than lalcpa)'8r) is basecl on all information of which preparer has any knowledge.
~ Your signalu Date Your occupation Qilltllme ~WllW 1 1
. 03/29.01 Trustee 71/-1.n-~4
Spewe' . Dale Spouse's occupelioll
Standard
Deduction
for Most
People
Single:
$4,400
Head of
household:
$6,450
Married filing
jointly or
Qualifying
widow(er):
$7,350
Married filing
leperately:
$3.875
Other
Taxes
1f)'llU ~.
CIUIIl'JiftI
cHd. atIlIclI
Schedule Be.
Refund
Have It
dlrldfy
depoailedl
Seepege50
and fill In 87b,
87c:, IIIld 87 d.
Sign Here
Joint return?
See page 19.
KeIIo . copy
liar )IOU/'
I.
10 000.00
62,183.63
8 308.37
10,000.00
9 171.00
Paid Preparer's
Pre parer's ;::n~lU':'" (or ~r ~
Use Only )OUI'II' H1f-em~),
addresl, and ZIP code
SlFFEDZI11F.2
Dale
03/29/01
Form 10 (2000)
; 1 ".j,-: ..,~
e
e
SCHEDULES A&8
(Form 1040)
Schedule A - Itemized Deductions
OMS No. 1545-0074
~I alllle Tru.1/IY
hIelMI Rewnue SeNee (99)
Name(s) shown on Form 1040
(Schedule B is on back)
~ Attach to Form 1040. ~ See Instructions for Schedules A and B (Form 1040).
2000
Altachment
Sequence No. 07
Your social security number
196-38-8211
Is Form 1040, line 34, over $128,950 (over $64,475 if marri~ filing separately)?
Ii] No. Your deduction is not limited. Add the amounts in the far right COlUmn}
for lines 4 through 27. Also, enter this amount on Form 1040, line 36. ..
o V... Vour deduction may be limited. See page A-6 for the amount to enter.
For Paperwork Reduction Act Notice, s.. Form 1040 Instructions.
!SA
SlF FED2I13F
Medical
and
Dental
Expenses
Taxes You
Paid
- (See
page A-2.)
Interest
You Paid
(See
page A-3.)
Note.
Persa1al
Im.est Is
not
deductible.
Gifts to
Charity
1f}'QU n'8:Ie a
gift and got a
beneftt fa' it,
see PIIge A-4.
Cuualty and
Theft Losses 19
Job Expenses 20
and Most
Othar
Mlacallaneous
Deductions
(See
page A-5 fOf
ltlIp8nSes to
deduct here.)
23
24
25
26
Other 27
Miscellaneous
Deductions
Total 28
Itemized
Deductions
m t
Caution. 00 not include expenses reimbursed or paid by others.
1 Medical and dental expenses (see page A-2) .......... 58 , 601 . 46
2 Enter amount from Form 1040, line 34. 2 70, 492.00
3 Multiply line 2 above by 7.5% (.075) . . . . . . . . . . . . . . . . . 3 5 , 286 . 00
4 Subtract line 3 from line 1. If line 3 is more than line 1, enter -0-. . . . . . . . . . . . . . . .
5 State and local income taxes . . . . . . . . . . . . . . . . . . . . . . 5 00
6 Real estate taxes (see page A-2) ......,............. 6
7 Personal property taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 7
8 Other taxes. List type and amount ~
fnr~i'Jn i-~y~lC: pn -TRRT.ANn 8 3,773.67
9 Add lines 5 through 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10 Home mortgage interest and points reported to you on Form 1098 ... 10
11 Home mortgage interest not ~ to you on Form 1098. If paid to
the person from whom you bought the home, see page A-3 and show
that person's name, identifying no., and address ~
53,315.46
6,225.67
11
12 Points not reported to you on Form 1098. See page A-3
for special rules. . . . . . . . ._. . . . . . . . . . . . . . . . . . . . . .. 12
13 Investment Interest. Attach Form 4952 if required. (See
page A-3.) .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 13
14 Add lines 10 through 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15 Gifts by cash or check. If you made any gift of-$250 or
more, see page A-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16 Other than by cash or check. If any gift of $250 or more,
88;8 page A-4. You must attach Form 8283 if over $500
17 Carryover from prior year. . . . . . . . . . " . . . . . . . . . . . .. 17
18 Add lines 15 through 17 . . . . . . . . . : . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . .
-0-
-0-
Casualty or theft loss(es). Attach Form 4684. (See page A-5.) . . . . . . . . . . . . . . . . .
Unreimbursed employee expenses - jab travel, union
dues, job education, etc. You must attach Form 2106 or
2106-EZ if required. (See page A-5.) ~
-0-
21
22
-0-
Tax preparation fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expenses - investment, safe deposit box, etc. Ust
type and amount ~
Add lines 20 through 22 . . . . . . . . . . . . . . . . . . . . . . . . . .
Enter amount from Form 1040, line 34. 24
Multiply line 24 above by 2% (.02) ... . . . . . . . . . . . . . .. 25
Subtract line 25 from line 23. If line 25 is more than line 23, enter -0- . . . . . . . . . . . .
Other - from list on page A-6. Ust type and amount ~
l~g~l ~yp~n~~~. f~~~
2,642.50
"
Schedule A (Form 1040) 2OCJO
e
e
Schedules A & B (Form 1040) 2000
Name(l) shown on Form 1040. Do nol enter name end social security number if shown on other side.
Part I
Interest
(See page B-1
and the
instructions for
Form 1040,
line 8a.)
Note. If you
receiYed a
Form 1099-INT,
Form 1099-010,
or substitute
slafement from a
bracerage firm,
IIat the linn's
nane as the
pa)IW a1d enter
!he totaIlnterest
shown on that
ram.
Part II
Ordinary
Dividends
(See page B-1
n1the
Instrucacr1s for
Form 1040,
line 9.)
Nota. If)QJ
I'IlC8MId .
Form 10&9-0/V
or substitute
sfat8rna1t from a
~flrm,
1st the firm's
name as the
pa)IW a1d enter
the cnInary
dMdends shown
on that form.
Schedule 8 -Interest and Ordinary Dividends
Note. If au had over $400 in taxable interest, au must also com lete Part III.
1 List name of payer. If any interest is from a seller-financed mortgage and the buyer
used the property as a personal residence, see page B-1 and list this interest first.
Also, show that buyer's social security number and address ~
Loy T. Rempt ~~tarc
1111fir~t- ~<=Ink
Fir~~ National Bank of Newtown
First Union National Bank
2 Add the amounts on line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 Excludable interest on series EE and I U.S. savings bonds issued after 1989 from
Form 8815, line 14. You must attach Form 8815 . . . . . . . . . . . . . . " . . , . . . .
4 Subtract line 3 from line 2. Enter the result here and on Form 1040, line 8a .. ~
Note. If au had over $400 in ordina dividends, ou must also com lete Part III.
5 List name of payer. Include only ordinary dividends. If you received any capital
gain distributions, see the instructions for Form 1040, line 13 ~
C.A. Hempt E&tat~, Tn~
~gy To S~~pr ~cr~r~
A]';A~ T~ich ~ank
i"ll to" Fi nan~; a 1 ,C'"'nrp
Rl1~~("'n C'"'nrpnr<=lt-ion
MQrri 11 T.ynch Readv Asset Tr.
0M8No.1~74 Page 2
Your social security number
196-38-8211
Attachment
Sequence No. 08
Amount
1
2
3
Amount
10
24
26
1
1
1
5
6 Add the amounts on line 5. Enter the total here and on Form 1040 line 9. . " ~ 6 66 327. 36
You must complete this part if you (a) had over $400 of interest or ordinary dividends; (b) had a foreign
account; or (c) received a distribution from, or were a grantor of, or a transferor to, a foreign trust.
7 a At any time during 2000, did you have an interest in or a signature or other authority over a financial
account in a foreign country, such as a bank account, securitJes account, or other financial account?
See page B-2 for exceptions and filing reqUirements for Form TO F 90-22.1 . . . . . . . . . . . . . . . .
b If "Yes." enter the name of the foreign country ~
8 During 2000, clld you receive a distribution from, or were you the grantor of, or transferor to, a
for . n trust? If "Yes.- you may have to file Form 3520. See page B.2 .... . . . . . . . . . . . . . . . . X
Far Paperwork Reduction Act NotIce, s.. Form 1040 Instructions. Schedule B (Form 1040) 2000
!SA
S". FeDze1 CF
Part III
Foreign
Accounts
and Trusts
(See
page 8.2.)
e
e
Form 1116 I
Dopanrnent of IIIe Treasury
'nlarnal RllY."... S.Nic:. (99)
Name
Use a separate Form 11 for each cateoDry of income listed below. See CateBories of Income in the instructions. Check only one box on
each Form 1116. Report all amounts in U.S. dollars except Where specified in Part II below.
a ~aSSive income d ~ Shipping Income 9 ~ Lump.sum distributions
b High withholding tax interest e Dividends from a DISC or former DISC h Section 9010) income
c Financial services income f Certain <<:1istributions from a foreign sales i Income re-sourced by treaty
corporation (FSC) or former FSC. j General limitation income
Foreign Tax Credit
(Individual, Estate, Trust, or Nonresident Alien Individual)
~ Attach to Form 1040, 1040NR, 1041, or 990-T.
~ See separate instructions.
OMS No. 1545.0121
1999
19
Identifying Number
'Z3- '657</;-7
k Resident of (name of coun ) ~
Note: If you paid taxes to only one foreign country or U. S. posseSSion, use column A in Part I and line A In Part II. If you paid taxes to more
than one foreign country or U.S. po:ssesSion, use a separate column and line for each country or po:ssession.
:. .'<:tI.mL ~ Taxable Income or Loss from Sources Outside the United States for Cate 0
Foreign Country or U.S. Possaslon
ABC
-------------------------
Checked Above
Total
(Add cols A, 8, 8ncI C.)
I Enter the name of the foreign counby or
U.s. Possession ...............................
1 Gross income from sources within country
shown above and of the type checked above.
See instructions:
-------------------------
Deductions and losses (Caution: See instructions):
2 Expenses dellnitely related to the income on line 1
(attach statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
>9, '15" Z. IS
3 Pro rata stuve of other deductions
not definitely rel..ted:
.. Certain ilamizad deductions or standard deduction. See instructiOns
b Other declJetions (attach statement) . . . . . . . . . . . . . . . .
c Add lines 3a and 3b .,............................
d Gross foreign source income. See instructions ......
e Gross income from all sources. See instructions.....
f Divide line 3d by line 3e. See instructions . " . . . . . . . .
9 M.J/t1ply line 3c by line 3f '" .. . . . . .. . . .. . .. . . . . . . ..
4 Pro rata share of Interest expense. See instructions:
.. Home mortgage interest (use worksheet in
the ins1ructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b Other interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5 Losses from foreign sources . . . . . . . . . . . . . . . . . . . . . . .
6 Add lines 2, 3 , 48. 4b, and 5 .....................
7 Subtract line 6 from line 1. Enter the result here and on line 14. paoe 2
.. Fore; n Taxes Paid or Accrued (see InstructJonsl
red s c auned F'oreign taxes paid or accrued
lor taxIS (you
must check one)
m) Paid
n) Accrued
(0) Date paid
or accrued
In foreign currency
In U.S. dol/ars
Taxes withheld at source on:
(r)
Interest
(s) Other
foreIgn
taxes paid
or accrued
Taxes Withheld at source on:
(I)
DiVIdends
(u) Rents '&
Royalt.es
(v)
Interest
(w) Other
forelon
taxes paid
or accrued
(x) T olal foreign
taxes paid or
accrued (add
columns (t)
througn (wi)
I
J a
I
I ...
I
3.773,
Form 1116(1999)
S .C.dd Jines A tltro r.. ColUmn (xl. Enter ':he totai here lII'1d I)n line '? :.lace ::: . .
BAA For PaperwOrl< Reduction Act NotIce. see separate instructions.
F'DI~61;: 11110199
e
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Form 1116 (1999)
tBJmI~ Figuring the Credit
9 Enter amount from line 8. These are your total foreign taxes paid or accrued for
ltIe category of income checked above Part I .................................. 9
."t ,
3,773.~7
10 Carryback or carryover (attach detailed computation) ........................... 10
1 1 Add lines 9 and 10 .. . . . . . . . .. .. . .. . . . .. . . . .. .. .. .. . .. .. .. . . .. . .. . .. . . . .. .... 11
3.73."7
12 Reduction in foreign taxes. See instructions ................................... 12
13 Subtract line 12 from line 11. This is the total amount of foreign taxes available for credit . . . . . . . . . . . . . . . . . . . " 13
14 Enter amount from line 7. This is your taxable income or Ooss) from sources
outside ltIe United Slates (before adjustments) for ltIe category of income
checked above Part l. See instructions. . .... . " .. .... . .. . .... ..... .. .. . . . . . . .. 14
15 Adjustments to line 14. See instructions. " " . " . . ..... .. . . . .... _. . .. .. .. . . . . .. 15
59, '15"2./
16 Combine the amoLllts on lines 14 and IS, This is your net foreign source taxable
~~ 0:, ~~~~~~~ :~~~Je:o~~'f S~j~O~ l'X~;~f~ ~~ . . . . . . .. 16". >" ~ '+'2.15
17 Indiviw.fs: Enter amount from Form 1040, line 37. If you are a nonresident
alien, enter amount from Form 1040NR, line 36.
Estates and iru.sts: Enter your taxable income without ltIe deduction for
your exemption . . . . . . . . - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 17
Caution: If you figured your tax usIng the SPecial rates on capital gaIns, see Instructions.
18 Divide line 16 by line 17. If line 16 is more 1han line 17, enter '1'........,.............. ..................... 18
75,5a~,'81
19 Individuals: Enter amount from Form 1040, line 40, less any amounts on Form 1040, lines 41 through 45,
and any mortoage interest credit (from Form 8396) and District of Columbia first-time homebuyer credit
(from Form 8859) on line 47. If you are a nonresident alien, enter amount from Form I040NR, line 39, Jess
any amount on Form 104ONR, hnes 40, 41, 42, and ~!"ortgage interest credit (from Form 8396) and D!strict
of Columbia first-time homebuyer credit (from form.B659J on line 44.
Estates and trusts: Enter amount from Form 1041, Schedule G, line Ie, or Form 99O-T, lines 36 and 37 .... .... 19
20 Multiply line 19 by line 18 (maximum amount of credit) ...... .... , . " . , . .. . ... . . . .. .... . " ..... . " " '" .... 20
21 Enter the amount from line 13 or line 2), wtlk:hever Is smaUer. If this Is the only Form 1116 ~ are
COmpl.~ ,::rI~~2fV~S~nL~ ~.~.'~ .~~t.~~.'~~.~'. ~~~i~~: ~~~~. .~..... _.........
-- Summary of Credits from Separate Parts III (see instructions)
21
22 Credit for taxes on passive income ...........................................
22 i.. 77'3.61
.
23
24
25
26
2:7
2B
29
23 Credit for taxes on high wi1tlholding tax interest ........................ . . . . . . . .
24 Credit for taxes on financial services income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25 Credit for taxes on shipping income. . . . . . . . . . . . . . . . . . . . . , . . . . . . . . . . . . . . . . . . . . .
26 Credit for taxes on dividends from a DISC or former DISC and certain distributions
from a fSC or former FSC . . . . . . . . . . . . . . . . . . . . . . , . . . . . . . . . . . . . . . . . . . . , . . . . . . .
2J Credit for taxes on lump,sum distributions.. '" . . " .. '" . . . , . ... ,. . .. . . . .. . . . _.
28 Credit for taxes on income re-sourced by treaty. . . . , . . . . . . . . . . , , . . . . . . . . . , , . . . .
Z! Credit tor taxes on general limItation income. .. . . . .. . . .. . . . . . .. ... .. .. . . . .. . . . ..
30 Add fines 22 through 29 . . . . . . . . , . . . . . . . . . . . . . . . . . . . . . . . . . . , . . . . . . . . . . . . . . . .'. . . . . . . . . . . . . . . . . . . . . . . . . . ,. 30
31 Reduction at credit for international boycott operations. See instructiOns for line 12. . . . . . . . . . . .'. . . . . . . . . . . . . .. 31
32 Subtract line 31 from line ~O. This is VClU' foreign tax cndlt. Enter here and on Form 1040, line~: 'J, ..~ I
FYm 104tlNP. line.13: Form 104.1. SCnedule G. line 18: or Form 99O.T. line :;9a ........................" -.
FOIZ2612. 11/10199
Pa~
3 .??7.b /
. 7~'S
~, ? 7()lC
3.773. tt,...
/
"3.77'3.'7
Form 1116 (1999)
8enefi'-"'s Share of Income, Deductls, Credits, etc.
'. 0 3 'bt~e calendar year ~999, ?f ~7~19'?{j 0
beginning , 1999, ending .
,.. Complete a separate Schedule K-1 for each beneficiary.
"",-nCUULt: K-1
(Farm 1041)
o.per1ment at tha TrelSuty
rm.m.. R_a SeMca
Name of trust or decedent's estate
Loy T. HEmpt Estate
Beneficiary's identifying number,.. 1 96- 3 8 - 8 2 1 1
Beneficiarys name, address, and ZIP code
Jean D. Hempt
c/o Gerald L. Hempt, TTEE
POB 278
Camp Hill, PA 17011
(a) Allocable share item
1 Interest...................................
2 Ordinary dividends. . . . . . . . . . . . . . . . . . . . . . . . . . .
~ Net short-term capital gain. . . . . . . . . . . . . . . . . . . . .
4 Net long-term capital gain: a 28% rate gain . . . . . . . .
b Un recaptured section 1250 gain. . . . . . . . . . . . . . . . .
c Total for ear _ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . :
5a Annuities, royalties, and other nonpassive income
before directly apportioned deductions: . . . . . . . . . . .
b Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
c Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
d Amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6a Trade or business, rental real estate, and other rental income
before directfy apportioned deductions (see instructions) . . . . . . .
b Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
c Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
d Amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7 Income for minimum tax purposes . . . . . . . . . . . . . . .
a Income for regular tax purposes (add lines 1, 2, 3, 4c,
Sa, and 6a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9 Adjustment for minimum tax purposes (subtract line 8
from line 7 ................................
10 Estate tax deduction (InclUding certain
generation-skipping transfer taxes) . . . . . . . . . . . .. . .
11 Forei n taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12 Adjustments and tax preference items (itemize):
a Accelerated depreciation ......................
b Depletion . . . . . . . . . . . . . . . . . " . . . . . . . . . . . . . . .
c Amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
d Exclusion items . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13 Deductions in the final year of trust or decedents estate:
a Excess deductions on termination (see instructions). .
b Short-term capital loss carryover . . . . . . . . . . . . . . . .
c Long-term capital loss carryover ........ . . . . . . . .
d Net operating loss (NOl) carrYover for regular tax purposes . . . . .
eNOL carryover for minimum tax purposes ........ .
f
9
14
~
Other (itemize):
a Payments of estimated taxes credited to you . . . . . .. 14a
b Tax-exempt interest . . . . . . . . . . . . . . . . . . . . . . . . " 14b
c 1~
d 1~
e 14e I
, 141
9 1
h 14M I
For P-perwork Reduction Act Nolice.. s" the Instructions for Fa"" 1041.
~ FE0:s21. I
OMs No. 1545-oo~
1999
Estate's or trust's EIN ~ 23 - 6 6 5 7457
Fiduciary's name, address, and ZIP code
Loy T. Hempt
C/o Gerald L. Hempt
FOB 278
Camp Hill, PA
(b) Amount
o Amended K-
o Final K-1
17011
1
2
3
4a
4b
4c
(C) Calendar year 1999 Form 1040 tilers enter
the amounts in column (b) on:
Schedule B, Part J, line 1
Schedule B, Part II, line 5
Schedule 0, line 5
Schedule 0, line 12, column (g)
wne 11 of the worksheet for Schedule 0, line 25
Schedule D, line 12, column f)
87.54
24,912.46
Sa
5b
5c
5d
Schedule E, Part III, column (f)
} Include on the applicable line of the
appropriate tax form
6a
6b
6c
6d
7
Include on the applicable line of the
appropriate tax form
8
9
10
11
12a
12b
12c
12d
}
Include on the applicable
line of Form 6251
2000 Form 8801
l~W#.~ !IW?jf~~JS~fijl~t~;:~:::.'::::" .:.::~;
--: ". "::it~il~~!Wm~~~W~~mf ::::~~fMt.j~*;;~;~t
13a
13b
13c
13d
13e
131
139
Schedule A, line 22
Schedule 0, line 5
SChed~.de 0, line 12, columns (f) and (g)
Form 1040, line 21
Seethe instructions for Form 6251, line 20
} Include on the applicable line
of the appropriate tax form
,.
Form 1040, line 58
Form 1040, line 8b
} Include on the applicable line
of the appropriate tax form
/.
./
ISA
scnedUle K-1 (Fann 1041) 1999
EXHIBIT F
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C .A. BEMPT ESTATE, IRC.
IBDBPERDER'r AUDITORS' REPORT
Dece.ber 31, 2000
-~_.
ASHWAY, RAAR de FULLER
CERTIFIED PUBLIC ACCOUNTANTS
CAMP HILL, PENNA.
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C. A. HEMPT ESTATE, INC.
INDEPENDENT AUDITORS' REPORT
December 31, 2000
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ASHVVAY, fUlAR&FULLER
A Professional Corporation
Certified Public Accountants
Camp Hill, Pennsylvania
Independent Auditors' Report
Board of Directors
C. A. Hempt Estate, Inc.
We have audited the accompanying statement of assets, liabilities and
equity-income tax basis of C. A. Hempt Estate, Inc. as of December 31,2000, and the
related statement of revenue, expenses and retained eamings-income tax basis for the
year then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on. these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disdosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well
as evaluating the overall financial ~tatement presentation. We believe that our audit
provides a reasonable basis for our opinion.
As desaibed in Note 1, these financial statements were prepared on the
basis of accounting the Company uses for income tax purposes, which is a
comprehensive basis of accounting ~ther than generally accepted accounting principles.
In our opinion, the financial statements referred to above present fairly, in all
material respects, the assets, liabilities and equity of C. A. Hempt Estate, Inc. as of
December 31,2000, and its revenue, expenses and retained earnings for the year then
ended, on the basis of accounting described in Note 1.
MEMBERS
American Institute of Ceni8ed Public Accountants
Pennsylvania Institute of CeniOed Public Accountants
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Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying summary of cash receipts
and disbursements and schedule of'income (income tax basis) by property for the year
ended December 31, 2000 are presented for purposes of additional analysis and are not
required parts of the basic financial statements. Such information has been subjected to
the auditing procedures applied in the audit of the basic financial statements, and, in our
opinion, are fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
February 1, 2001, except for
Notes 6 and 8, as to which
the date is April 19, 2001
d4,~- 74-
Certified Public Accountants
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C. A. HEMPT ESTATE, INC.
STATEMENT OF ASSETS, LIABILITIES AND EQUITY-
INCOME TAX BASIS
As of December 31, 2000
ASSETS
Cash in bank and broker's account
$25,000 Erie Water Authority Water Revenue
Bonds, 7.15%, due July 1, 2002, at cost
(Fair value $26,073)
$35,000 Pittsburgh General Obligation Bonds,
6.125%, due September 1, 2002, at cost
(Fair value $36,809)
Land
Parking lots
Bank/office building
Customer call center
Total fixed assets, at cost
Less accumulated depreciation
Net fixed assets
Deferred lease expense, less amortization
TOTAL ASSETS
LIABILITIES
Demand note payable to bank, 9.5%
STOCKHOLDERS' EQUITY
Common stock, $1 par value,
authorized 100,000 shares,
issued and outstanding 24,000 shares
Capital in excess of par value
Retained eamings
Total stockhholders' equity
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$- 24,334
32,589
826,064
1,662,518
2,545,505
1,046,819
$ 24,000
8,400
1,182,322
The accompanytng notes are an Integral part of the financial statements.
$ 302,309
26,565
36,718
1,498,686
25,444
$1,889,722
$ 675,000
1,214,722
$1,889,722
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C. A. HEMPT ESTATE, INC.
STATEMENT OF REVENUE, EXPENSES AND RETAINED EARNINGS-
INCOME TAX BASIS
,
For the Year Ended December 31, 2000
REVENUE FROM RENTS
Customer call center at 3025 Market Street
Bank/office building at 3045 Market Street
Restaurant site at 32nd and Market Streets
Total revenue from rents
$184,391
129,083
70,000
OPERATING EXPENSES (NET OF RELATED RECEIPTS)
Management services
Repairs and maintenance
Maintenance of grounds
Insurance
Real estate taxes
Depreciation of parking lot and buildings
Amortization of deferred lease expense
Rental commissions
State capital stock taxes
Electric, water and sewer
Legal and accounting fees
Directors' fees
Miscellaneous expense
Total operating expenses
17,500
10,734
19,298
10,674
12,974
53,485
6,982
1,055
8,963
14,771
20,262
10,000
588
NET OPERATING INCOME
OTHER INCOME (DEDUCTIONS)
Interest eamed
Loss on sale of municipal securities
Interest expense
42,523
(12,816)
(21,456)
NET INCOME BEFORE INCOME TAXES
Federal income taxes
State income taxes
69,114
24,459
NET INCOME FOR THE YEAR
RETAINED EARNINGS. Beginning of year
Cash dividend paid-$5.00 per share
RETAINED EARNINGS, End of year
Net income per share
The accompanying notes are an integral part of the financial statements.
$ 383,474
187,286
196,188
8,251
204,439
93,573
110,866
1,191,456
1,302,322
120,000
$1,182,322
$4.62
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C. A. HEMPT ESTATE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company prepares its financial statements on the cash method of
accounting used for Federal income tax purposes, but includes depreciation and
amortization of capitalized assets. Under this basis, revenues are recognized when
collected rather than when earned, and expenses are recognized when paid rather than
when incurred. Consequently, certain revenues and expenses are recognized in the
detennination of income in different reporting periods than they would be if the financial
statements were prepared in accordance with generally a~pted accounting principles.
Although income tax rules are used to detennine the timi~g of the reporting of revenues
and expenses, nontaxable revenues and nondeductible expenses are included in the
detennination of net income. .
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Fixed assets are carried at cost. Depreciation is computed using Federal
income tax methods and lives, rather than relating the cost of the assets over their
estimated useful lives. The useful lives used in computing depreciation are: bank and
office building-7 to 39 years; customer call center-S to 39 years; and parking lot-15
years.
Deferred lease expense is amortized over the terms of the related lease
agreements.
2. CONCENTRATION OF CREDIT RISK
The Company maintains at' two banking institutions deposits which may
exceed federally insured limits at times. At December 31,2000 the deposits exceeded
the insured limits by approximately $192,000.
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I
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. OPERATING EXPENSES REIMBURSED
The lease agreements provide for the reimbursement of certain operating
expenses by the tenants. During 2000 the Company received reimbursements covering
expenses paid in 1999. The following direct expenses for 1999 were reimbursed during
2000:
3025 3045
Category Total Market Market
Real estate taxes $ 228 $ $ 228
Repairs and maintenance 3,382 680 2,702
Maintenance of grounds 7,624 6,279 1,345
Insurance 9,380 7,072 2,308
Electric, water and sewer 6.916 2.530 2.846
$27.530 $ 16.561 $ 9.429
4. LEASE TERMINATION
32nd &
Market
$
1.540
$ 1.540
The lease between the Company and Giant Food Stores, Inc. for the store
building located at 3025 Market Street was terminated on May 15, 2000.
5. BUILDING LEASE - 3025 MARKET STREET
During July 2000 the Company leased the building located at 3025 Market
Street to Williams-Sonoma Direct, Inc. for a term of ten years. The lease grants
Williams-Sonoma options to renew the lease for two additional five-year terms.
Under the terms of the lease the Company agreed to install a new roof and to
pay up to $1,251,250 for renovations to the interior and exterior of the building. The
Company also paid for new landscaping.
The lease term began on September 1, 2000. The minimum annual rental is
$480,883 during the first five years of the lease term. During the second five years of
the lease term each year's minimum rental increases two percent over the prior year's
minimum. In addition to the minimum annual rentals the lease provides for the Company
to be reimbursed by Williams-Sonoma for certain expenses.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. RENTALS UNDER OPERATING LEASES
The following is a schedule by year of minimum future rentals on
noncancelable operating leases:
Year ending December 31:
2001
2002
2003
2004
2005
After 2005
$ 662,446
652,921
643,195
480,883
484,089
2.389.085
Total minimum future rentals 55.312.619
7. INCOME TAXES
A Federal taxable income reconciliation follows:
Income before income taxes
Adjustments to taxable income:
Loss on sale of municipal securities
Tax-exempt interest
State income taxes
Federal taxable income
$ 204,439
12,816
(14,708)
(24.459)
5 178.088
The Company has a capital loss carryover of $12,816 available through the
year 2005.
8. SUBSEQUENT EVENTS
On January 4, 2001 the Company leased the vacant 1,359 square feet of
office ~pace on the second floor of the bank/office building for a term of three years. The
annual base rents are: 2001, $19,026; 2002, $19,407; and 2003, $19,787.
In April 2001 Williams-Sonoma Direct, Inc. requested reimbursement of
nearly $200,000, a part of the excess and unanticipated costs Williams-Sonoma incurred
in the customer call center renovations. The Company agreed to reimburse Williams-
Sonoma the sum of $46,922, which was paid on April 9. The Company also agreed to
reimburse Williams-Sonoma the sum of $54,818 in the form of a rent credit at the rate of
$4.568 against the monthly installments of minimum annual rent for the months of May
2001 through April 2002. inclusive.
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C. A. HEMPT ESTATE, INC.
SUMMARY OF CASH RECEIPTS AND DISBURSEMENTS
For the Year Ended December 31, 2000
I
CASH BALANCE, JANUARY 1
CASH RECEIPTS
Rents collected
Operating expense reimbursements
(contra disbursements):
Allfirst Bank
Insurance & Surety, Inc
Friendly Ice Cream Corporation
Giant Food Stores, Inc.
Williams-Sonoma Direct, Inc.
Interest received
Investments matured or sold
Loan from Allflrst Bank
Total cash receipts
$ 276,341
$ 383,474
37,382
228
14,597
23,941
11,155
45,991
1 ,235,480
750,000
Total cash available
2,502,248
2,778,589
CASH DISBURSEMENTS
Operating expenses (Note)
Interest paid
Federal and state income taxes
Expenses reimbursed (contra. receipts)
Investments purchased
Customer call center project costs
Deferred lease expense-legal fees
Loan payment to Allflrst Bank
Cash dividend paid
Total cash disbursements
126,819
21,456
93,573
87,303
507,023
1,432,058
13,048
75,000
120,000
CASH BALANCE, DECEMBER 31
2,476,280
$ 302,309
NOTE-operating expenses
The cash disbursements for operating expenses represents the net amount after
excluding items not requiring an outlay of cash during the year 2000, as set forth
below:
Total operating expenses
Less amortization and depreciation
$ 187,286
60,467
$ 126,819
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C. A. HEMPT ESTATE,INC.
SCHEDULE OF INCOME (INCOME TAX BASIS) BY PROPERTY
For the Year Ended December 31, 2000
3025 3045 32nd &
Total Market Market Market
RENTS COLLECTED $ 383,474 $ 184,391 $129,083 $ 70,000
DIRECT EXPENSES
Rental commissions 1,055 1,055
Real estate taxes (Note) 12,913 4,379 8,534
Repairs and maintenance (Note) 10,734 (680) 11,414
Maintenance of grounds (Note) 19,298 11,497 7,801
Insurance (Note) 10,674 8,094 1,498 1,082
Electric, water and sewer (Note) 14,771 .640 14,131
Legal and accounting fees 7,440 .5,178 2,064 198
Interest expense 21,415 21,415
Miscellaneous expense 25 25
Total direct expenses 98,325 50,523 46,522 1,280
GENERAL EXPENSES (ALLOCATED) 49,950 23,976 16,983 8,991
Total expenses 148,275 74,499 63,505 10,271
EXCESS OF RENTS COLLECTED
OVER TOTAL EXPENSES 235,199 109,892 65,578 59,729
LESS NON-cASH DEDUCTION
Depreciation and amortization 60,467 50,428 6,608 3.431
NET INCOME BEFORE INCOME TAXES,
EXCLUDING OTHER INCOME AND
DEDUCTIONS $174,732 $ 59,464 $ 58,970 $ 56,298
NOTE: The following direct expenses for 2000 were billed to the tenants in January 2001, and had
not been reimbursed at December 31, 2000:
3025 3045 32nd &
Catagol}' Total Market Market Market
Real estate taxes $ 341 $ - $ 341 $ -
Repairs and maintenance 4,806 4,806
Maintenance of grounds 20,157 16,575 3,582
Insurance 13,802 10.997 2,805
Electric, water and sewer 7,429 1,677 4,212 1,540
$ 46,535 $ 29,249 $ 15,746 $ 1,540
EXHIBIT G
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EXHIBIT H
\ee
r..
LIMITED SUMMARY APPRAISAL REPORT
-+-
VALLEY LAND CO., INC.
97.67 TRACT
EAST PENN DRIVE
EAST PENNSBORO TOWNSHIP
CUMBERLAND COUNTY
ENOLA; PENNSYLVANIA 17025
FOR
MR. GERALD l. HEMPT
205 CREEK ROAD
CAMP Hill, PA 17011
DATE OF REPORT
JANUARY 1, 2002
PREPARED BY
RSR APPRAISERS & ANALYSTS
308 EAST PENN DRIVE
ENOLA, PA 17025
(717) 763-1212
~-
r..
RSR ~praiSerS
analysts
April 12,2001
Mr. Gerald L. Hempt
205 Creek Road
Camp Hili, PA 17011
RE: 87.67 Acres wlo Improvements
East Penn Drive
East Pennsboro Township
Cumberland County
Enol.. PA 17025
Our File # 01-89R
Dear Mr. Hempt,
At your request, RSR Appraisers & Analysts have completed a Limited Summary Appraisal
Report on the above referenced property. WiIllamF. Rothman, IFAS, prepared the report and
inspected the subject site. The date of the report is January 1, 2002.
The site consists of 97.67 effective aaas, without improvements, and the land lays along the
recently built East Penn Drive.
The report that follows provides a. summary description of the property, and the basis upon
which the estimated values have been developed. In this report, we have provided value
estimates developed through a Limited Summary assignment and is subject to the Departure
Provision of Uniform Standards of Professional Appraisal Practice.
The value opinions reported is qualified by certain definitions, limiting conditions and
certifications that are set forth at the end of this report.
The property rights appraised in this report are the fee simple interests. The report that follows
provides a summary desaiption of the property and the basis for the estimated market values.
308 East Penn Drive. Enola, PA 17025 · t\one (717) 763-1212 · Fax (717) 763-1656
\-
(..
Mr. Gerald L. Hempt
April 12,2002
Page - 2-
Therefore, based on our inspection of the subject property, the investigation and analysis
undertaken, and subject to the "Underlying Assumptions and Limiting Conditions" noted in the
addenda to this report, it is our opinion that the estimated market value of the fee simple interest
in the subject property in its "as Is" condition, as of January 1, 2002 is:
* * * FOUR MILLION SEVEN HUNDRED THOUSAND DOLLARS * * *
($4,700,000) .
This report has been prepared in accordance with the Uniform Standards of Professional
Appraisal Practice of the Appraisal Foundation, and the Code of Ethics and Standards of
Professional Practice of the Appraisal Institute. The report conforms to the regUlations of the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA).
This report has been developed as if the property were free and clear of any liens or
encumbrances. We have assumed that there are no hazardous materials on site. The
discovery of such materials will necessitate re-evaluation of the property and this appraisal will
be void.
This report was not requested with a minimum valuation, a specific valuation, or the approval of
a loan. Our compensation is not contingent on the value estimate and we will be available to
discuss the findings of the report at your request and convenience.
RJclfullY submitted,
William F. Roth an,lFAS
Pa. Certified G eral Real Estate Appraiser No. GA 000303-L
3
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REAL ESTATE APPRAISAL REPORT SUMMARY
Property Type:
Undeveloped Land.
Owner's Name:
Valley Land Co., Inc.
Location:
East Penn Drive
East Pennsboro Township
Enola, PA 17025
Tax Map Parcels:
09-17-1040-038
Effective Date of Appraisal:
January 1, 2002
Date of the Report:
January 2, 2002
Property Rights Appraised:
Fee Simple Interest
Site:
The subject site consists of 97.67 effective acres.
Existing Improvements:
None
Zoning:
Office Apartment (30%) approximate
Professional Offices (70%) approximate
Utilities:
All Public Utilities Available - Water not yet
extended, but available at either end of tract.
Hlgh_t& Best Use as Improved:
Office Park Development
Value Estimates:
Sales Comparison Approach:
Cost Approach
Rnal Value Estimate
Vaiue
$4,900,000
NJA
NJA
Interest
Fee Simple
Fee Simple
Fee Simple
Effective Date
1/1/02
1/1/02
1/1102
4
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Subject Property - Viewing North
Subject Property - Road Frontage Viewing North
5
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Subject Property - Viewing South
Subject Property- Road Frontage Viewing South
6
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Subject Property- Creekside Rd. Frontage
7
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Subject Property- Creekside Road Frontage
8
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LIMITED SUMMARY APPRAISAL REPORT
This is a Limited Summary Appraisal Report, which is intended to comply with the reporting
requirements set forth under Standards Rule 2-2(b) of the Uniform Standards of Professional
Appraisal Practice for a Summary Appraisal Report. . .
The Limited Summary Appraisal Report, which follows, presents only summary discussions of
the data, reasoning, and analyses that were used in the appraisal process to develop the
appraiser's opinion of value. Supporting documentation concerning the data, reasoning, and
analyses is retained In the appraiser's file. The depth of discussion contained in this report is
specific to the needs of the client and for the intended use stated below. The appraiser is not
responsible for unauthorized use of this report.
Appraisal Development and Reporting Process: The appraisal process included an
inspection of the subject property by William F. Rothman, IFAS, January 1, 2002 and April 11,
2002. The development of research and collection of data on comparable sales in the subject's
neighborhood; verification of all information with buyers. sellers, brokers, public records, and/or
with other knowtedgeable sources; analysis of market conditions;. Iocational factors, physical
attributes and other pertinent factors. .
In this appraisal report. the Sales CQmparlson Approach was used to value the subject
property. This approach is considered the most reliable in appraising a property like the
subject's that is regularly bought, sold in the market.
However. due to the employment of the Departure Provision of USPAP, only one approach was
utilized in estimating the market value, which was viewed as most relevant, has been presented
in this report.
This ~ Summary Appraisal Report is a brief recapitulation of the appraiser's data.
analyses,' and conclusions. Supporting ~ocumentation is retained in the appraiser's file.
Client:
Valley Land Co., Inc.
C/O Gerald L Hempt
205 Creek Rd.
Camp Hili, PA 17011
RSR Appraise... & Analysts
William F. Rothman
308 East Penn Drive
Enola. PA 17025
Appraiser:
Subject:
Parcel# 09-17-1040-038
Land unimproved
East Penn Drive. East Pennsboro Township
Cumberland County
Enola, PA 17025
Owner:
Valley Land Co., Inc.
9
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Intended Use of Report: This appraisal report will be used in the valuation determination for
marketing purposes. .
Purpose of the Appraisal: The purpose of this appraisal is to arrive at a supportable estimate
of the market value of the subject property (land value) as of the effective date of this report,
June 5, 2001, the date of the inspection.
Effective Date of Value: The effective date of the appraisal is January 1, 2002, a date which
establishes the context for the market value.
Date of Report: The date of the appraisal report is January 1, 2002, the date on which the
subject site was physically inspected. The date of the report indicates the perspective from
which the appraisers' are examining the market.
Property Rights Appraised: The property rights under appraisal in this report are the Fee
Simple ownership in the subject property.
Fee Simple ownership is defined as "absolute ownership unencumbered by any other interest
or estate, subject only to the limitations imposed by the gov~mmental powers of taxation,
eminent domain, police power, and escheat..
Definition of Market Value: Market value is the major focus of most real property appraisal
assignments. Both economic and legal definitions of market value have been developed and
refined. A current economic definition agreed upon by federal financial institutions in the United
States is:
-rhe most probable price which a property should bring in a competitive lIl1d open market under all conditions
requiIite to a f8lr ...., the buyer and aeIIer each acting prudentty and knowledgeably, and 8AUI'I1ing the price is not
afrected by undue 1tImuIus. ImpIIc:lt In this definition is the consummation of a .... as of a spedfted date and the
paatng of. from ....... to buyer under c:ondItiona whereby:
I) buyer and seier are typIcaHy motivated; .
ii) both parties are weB informed or well advised and acting In what they consider their belt
interest;
ill) a reasonable time is allowed for exposure in the open market;
iv} payment is made in tem\l of cash in UnIted States dollars or in terms of financial arrangements
compatible thereto; and
v) the price represents the normal consideration for the property sold UlI8ffected by special or
creative financing or sales concessions granted by anyone associated with the 18le.1
Marketing Time: Discussions with various real estate professionals indicated a 6-12 month
period of time to market the subject.
Exposure Time: Exposure time is also estimated at 6-12 months based on similar discussions
and the sale history of the comparable properties based in this report.
1 Appraisal Foundation, Standards of Professional Aooralsal Practice of the ADoraisallnstitute. 1995
Edition, (Wash. D.C.: 1995) Pages 7-8.
10
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REGIONAL ANALYSIS
The basic forces that motivate human beings within a given mai'ket area have a direct impact on
the area's real estate values. These are usually considered in four major categories: 1) social
standards and ideas, 2) economic conditions, 3) government controls and standards and 4)
environmental conditions. Below is an analysis in brief, which outlines the general economic
condition and future trends of the subject area.
Regional Overview
The subject property is located (3) miles to the west of the City of Harrisburg, in East Pennsboro
Township, Cumber1and County, Pennsylvania, as shown on the Regional Map on the
preceding page. Cumberland County is bordered by Perry County to the north, Franklin
County to the west, the Susquehanna River and Dauphin Counties to the east, and York County
.." to the south. East Pennsboro Township, in Cumberland County, is part of the Capital region of
Pennsylvania, Dauphin County together with Cumberland County, Lebanon and Perry County
form the Harrisburg Metropolitan Statistical Area (MSA).
At the heart. of the MSA is the City of Harrisburg, the Capital of the Commonwealth of
Pennsylvania which is conveniently located 70 miles from Allentown, 80 miles from Baltimore,
90 miles from Philadelphia, 110 miles from Washington D.C. and 200 miles from Pittsburgh.
Interstate highway routes 76, 78, 81 and 83 run through the MSA and provide access to these
markets.
The Harrisburg MSA had a 1990 Census population of 587,986, a 5.7% increase over the 1980
census population of 556,242. As of 1990, the Harrisburg MSA had the fourth highest
population out of 14 MSA's statewide. The current 1999 population is,projected at 615,139 and
is expected to grow an additional 1.04-%, to 621,543 by the year 2000.
In terms of employment, the Pennsylvania Department of Labor and Industry, Bureau of
Research and Statistics reported total employment within the MSA of 331,900 as of February
2000. Unemployment for the same month was running at a low 3.2%, well below the statewide
and national unemployment rates of 4.7% and 4.4% respectively (unemployment rates are
unadjusted).
12
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Historically, unemployment rates in the Harrisburg MSA are typically lower than the statewide
and national averages due to the large number of state and federal jobs located here. The state
government alone has approximately 31,200 employees, and t~e . local and federal government
has 24,300 and 12,800 respectively.
Population
The historic population growth (Based on 1970, '80 & '90 Census Data) and projections for the
counties within the MSA are summarized in Table 1.
Dauphin
Cumberland
Lebanon
Peny
Totals
223,713
158.1n
99.665
28,615
510,170
232.317
179.625
108,582
35.718
556.242
237,813
195,257
113,744
41,172
587,986
242.101
209,992
120,323
48.327
621,543
*Project/otta complied by PennayIv8n/a Dept. of EnvItonmentIIJ ReSOf.ltC8$, 1991
Dauphin County is the most heavily populated county in the MSA. while Perry County has
experienced the highest rate of growth. Cumberland County has also experienced a high rate of
growth and is expected to see the greatest volume increase in population by the year 2000.
Lebanon County has been growing at a rate consistent with the overall population growth of the
MSA. Population growth rates are summarized in Table 2.
Dauphin
Cumberland
Lebanon
Peny
OVerall MSA Growth
3.85%
13.56%
8.95%
24.82%
9.03%
2.37%
8.70%
4.75%
15.27%
5.71%
2.14%
7.55%
5.78%
12.52%
5.70%
*Projec;tJona complied by Pennsylvania Dept. of EnvItonmental Resoun::ea, 1991
Dauphin County included 44% of the MSA's total population in 1970, and is expected to include
only 39% of the population by the year 2000. Cumberland County is projected to include 34% of
the total population in the year 2000, up from 31% in 1970. Lebanon County's share of the
population will remain stable (19%), and Perry County is projected to include 9% of the total
population in the year 2000, up from 5% in 1970.
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The 197o-2000-population distribution broken down by county, as a percentage of the total
MSA population, is shown on the following charts.
MSA Population Distribution 1970-2000
1870
1180
Perry
lAbIInon 5%
20% ~.. .. DauphIn
~44%
c:un..
lend
31%
Perry
Lebanon 1%
11% ..u.u:-
Cumller.
IancI
U%
1990
2000
Perry
~n 7%
1"' ~... Dliuphln
~41%
Cumber-
land
33%
Perry
"::"_--=-
CumIMr.
land
34%
Within Dauphin County, the City of Harrisburg has experienced the greatest overall decline In
populatiOn, decreasing 22% from 197:0(68,061) to 1990 (53,430), although the city has
reported that its population is now beginning to increase, and home sales in the first quarter of
1997 were up by 43.3% from a year ago. Growth in the surrounding suburban areas, in
particular Susquehanna, Swatara and Lower Paxton Townships have offset the population loss
in the city in Dauphin County, and Hampden Township in Cumberland County. This outward
suburban migration has been the trend in most metropolitan areas since the 1950's, as families
move to the suburbs in search of better schools, lower taxes, and less crime.
Employment
The Harrisburg area employment base has historically been built on the state and federal
government, but private sector employment has made strong gains in the 1990's. Overall labor
force growth of 13.86% (1.73%Nr.) since the first quarter of 1990, has been led by the private
sector. The service industries in particular have added 33,400 new jobs resulting in a growth
rate of 6.03% per year.
14
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Other noted employment groups adding to the growth include Transportation & Utilities,
Finance, and Insurance & Real Estate, which have offset job losses in Manufacturing and
Government. Companies have added 43,300 new workers fron:' 1990 through the 3rd quarter of
1998, bringing non-farm employment within the MSA as of August 1998, to 355,600 employees.
Table 3 shows the MSA's nonagricultural employment distribution for the years 1990 and 1998.
. . . . .
.. -, '
~ -,.,
Manufacturing
Construction & Mining
Transport. & Utilities
Trade
Rn., Insur. & Real Estate
Services
Government
Totals
49,800
14,000
19,600
89,100
20,700
69,200
69,200
31~300
45,806
14,000
23,100
10,100
26,000
102,600
63,300
355,600
(-1.00)
0.00
2.23
1.97
3.20
6.03
(-1.07)
1.73
Soutce: Pennsylvania Dept of Labor and Industry, Based 011 1990 & 1997 Data
The growth of the employment base has resulted in an increase in population and a decrease in
the unemployment rate. As of May 2001, the Harrisburg MSA had an unemployment rate of
3.2%, the 3rd lowest of all MSA's in the state, just behind Lancaster MSA with an unemployment
rate of 2.8% and the State College MSA with an unemployment rate of 2.9%.
During the past five years the region has experienced unemployment rates consistently lower
than those of the Commonwealth of Pennsylvania and the United States, as shown in Table 4.
1995
1996
1997
1998
1999
4.6% 6.2%
3.2% 5.3%
3.3% 5.0%
2.7% 4.2%
3.3% 4.9%
Source: Pennsylvania Dept. of Labor and Industry
5.7%
5.1%
4.8%
4.5%
4.8%
Major Employers
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The public sector is led by the state government, which employs approximately 31,200 and
continues to expand. A 400,000 square-foot building for the Department of Environme~al
Resources was occupied in 1993, and the 350,000 square-foo~ Pennsylvania Higher Education
Assistance Agency was occupied in 1994. In July 1996 the Pennsylvania Department of
Transportation leased and occupied 145,000 square feet of office space in Harrisburg. In the
Spring of 2001, the new Keystone Building (400,oosf) opened at the site of the former
Transportation Building on the Capital Mall.
On the federal government side, several military installations are prominent in the area including
the Mechanicsburg Naval Ships Parts Control Center (SPCC) employing 4,900; the New
Cumbertand Army Depot, with the massive Defense Distribution Region East facility, employing
4,136; and the U.S. Army War College at Cartisle, with 1,440 employees.
The top 10 private sector employers in the area are led by the electronic company Amp Inc.,
with 8,000 employees; followed by health insurer Blue Shield with 7,647 employees, Hershey
Food~ Corp., which is the headquarters for Hershey candies and other food products, employs
7,300; and Hershey Entertainment, which operates Hersheypark and the world-famous Hotel
Hershey, employing 4,151.
Within the top 10, there are four health care companies (Blue Shield, Polyclinic, Capital Health,
and Capital Blue Cross) that comprise one of the fastest growing employment segments in the
local economy. ~ere are currently 43 CQmpanies in the MSA with 1,000 or more employees; as
of 1989, there were only 18 employers in the MSA with 1,000 or more employees.
Much of the Harrisburg area's large industrial base has shifted from manufacturing to
warehousing, storage, and distribution. The region is a hub for the. distribution of goods due to
its proximity to the major metropolitan areas in the mid-Atlantic area including Philadelphia, New
York, Washington, and Baltimore.
Trucking and transportation make up a strong industry for the area, with Harrisburg becoming a
center for motor-carrier truck terminals. There are approximately 30 terminals and 75 carriers
operating in the region. The growth related to these industries has provided economic strength
to the area as witnessed by the 3.72% annual employment growth in the transportation sector,
in the past 6 years.
.
Organizations such as Capital Region Economic Development Corporation (CREDC), Capital
Region Chamber of Commerce. Dauphin County Economic Development and others have
16
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played a significant role in attracting new business to the region. With the effort of these
organizations and the continued presence of the state government and the military, the
Harrisburg MSA should continue to enjoy a stable economic ba~e ~nd growth.
I
Income
The consistent employment growth in the Harrisburg MSA has also brought a corresponding
growth in workers income as indicated by the growth in the effective buying income (ESI). ESt is
defined as the income after taxes and otl'1er government obligations. The median household
ESt for the years 1990-96, is shown in Table 5.
1990
1991
1992
1993
19M
1995
1996
$28,332
$30,928
$34,835
$36,317
$37,938
$38,675
$39,410
NA
9.2%
12.6%
4.3%
4.5%
2.0%
1.9%
Soun::e: s.tes & Mer#ceting Management Magazine, August 1990-96.
Between :1990 and 1~5, the median household EBI increased 41% in the Harrisburg MSA,
which depicts a stable, growing economy. During the period from 1990 to 1994 the number of
households remained fairty constant, increasing from 231,200 to 234,800.
Data from the 1980 & '90 Census indicate that per capita income increased over 90% from
$7,502 (1980) to $14,659 (1990), and median household income increased n%, from $17,891
(1980) to $31,637 (1990).
Real Estate Markets
The Harrisburg real estate market is loosely defined by the Susquehanna River, which divides
the area into two sections, the east and west shores. The east shore includes the City of
Harrisburg and townships of Swatara, Susquehanna, and lower Paxton; the west shore
inetudes Borough of Camp Hill, lemoyne, Wormleysburg and New Cumbertand, and the
townships of East Pemsboro, Hampden, Upper and lower Allen and Silver Spring.
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The Harrisburg MSA continues to improve across all commercial and industrial real estate
market segments, with positive absorption in Class A and Class B Office, Retail, and Warehouse
space. The glut of speculative space in the market as a resul~ of the building boom of the late
1980's has been absorbed by the expanding local economy I and now new speculative building
is occurring especially in the office and warehouse markets. Since 1993, the available supply of
space in all markets has dwindled significantly, causing lower vacancy rates and corresponding
higher rental and sale prices.
Real ..esta~e M'"arkets: The following discussion on national real estate trends is taken from
. Emeraina Trends in Real Estate 2001, published by Lend Lease Real Estate Investments and
Prieewaterhouse Coopers.
On a national basis, institutional real estate investors are becoming more cautious, as the
prospects of a recession are increasing due to higher interest rates. Another potential drag on
real estate investment is the continuing .evolution of e-commerce. The largest negative impact is
expected to be felt in the retail market, as the demand for retail space is expected to decrease
over time, due to e-commerce.
Retail: The best bets in this sector are fortress malls and grocery-anchored neighborhood
centers. These properties are viewed as excellent core holdings. The fortress centers are
viewed a$ best positioned to weather the e-commerce threat. Grocery anchored strips offer
excellent Cash flows and insulation from the on-going shakeout.
Essentially, the retail market continues to be over-built. Retail space per capita increased 34%
in 12 years. Redeveloping old regional shopping centers into "town centers- with a mix of office,
residential and retail space holds some promise. Institutional investors recommend selling
weaker malls as well as most power Centers.
The main concerns for retail real estate are oversupply, shopper's time constraints, suburban
congestion and changing consumer tastes. E-commerce potentially exacerbates the impact of
these issues.
Office Markets: It is expected that properties located in central business districts are the best
bet for investment in 2001, while it is suggested that suburban office markets will weaken due to
.
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over-building. Vacancy rates are expected to increase marginally as development continues. It
is suggested that holders of suburban Class B properties unload these properties while the
market is still strong, before the next downturn.
Market rents in central business district properties are expected to continue to rise, while those
in suburban properties will level off due to the over construction.
Industrial Markets: Big box distribution properties continue to be the rage, as demand for these
properties with 30 foot ceilings, super-flat floors, efficient loading schemes, sprinklers and
enhanced HV AC and lighting offer the flexibility increasingly sought by major manufacturers and
shippers. It is expected that the need for this type of space will steadily increase. It is expected
that industrial properties as a whole will continue to produce double digit returns with excellent
cash flows. Most markets should remain in equilibrium with vacanCies under 10%.
Apartments: The strength of this market aPpears to be in the Class B type space with strong
locations. These types of apartments attract people who cannot afford to own a home, and this
will especially be the case as interest rates rise. East and West Coast cities are especially
attractive, while those in the Sun Belt states should be avoided, due to over building. Declining
vacancy rates in these strong locations are expected continue to put upward pressure on market
rents. This real estate sector continues to be attractive due to its comparatively strong rates of
return, especially compared to offices and warehouses. Since 1987, apartments have averaged
a 10.8% annual return, compared with 4.3% for offices and 7.7% for warehouses.
The strength of this sector is expected to continue into the foreseeable future, as many markets
are not keeping up with housing demand.
Hotels: It is suggested that most properties in this sector are fully priced. Further, occupancies
are down modestly, and room revenue growth is slipping. New supply in the development
pipeline will combine with a slowing in the overall economy to calm down the industry's robust
profit growth rate.
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This is the one sector that has been constructing new product ahead of its long-term industry
average. Upscale properties offer the best prospects for investment inthis sector, while Iimited-
service and older midscale properties should be avoided.
Harrisburg Regional Real Estate Market
Empirical evidence in the local real estate market suggests that the market is quite robust. This
is based upon the number of transactions publicized in Cumberland and Dauphin County
courthouse records. Leasing activity has also been quite brisk, as demand for space in all asset
categories is quite strong. Further evidence of the activity in commercial real estate markets is
the record performance in 2000 by Commercial Industrial Realty (CIR). Sizable sales and lease
transactions occurred in all types of commercial real estate, including shopping centers,
industrial buildings and office facilities.
The retail market in the area began its recovery period in late 1994 and is now quite strong, as
evidenced by new developments in both Cumberland and Dauphin Counties. This recovery has
resulted in the attainment of stabilized occupancy levels throughout the region.
Clearly the strongest location for retail space in the Harrisburg region remains in Lower Paxton
Township along Route 22. Since the development of Colonial Commons in 1992, there has
been . Significant development along this heavily traveled highway. Recent deVelopments include
Builders .Square, Dick's Sporting Goods and Media Play. A new power center to be anchored
by a 125,000 square foot Target store is also now open on the south side of Route 22 in Lower
Paxton Township.
In Cumberland County, the strongest retail locations are along the Carlisle Pike in Hampden and
Silver Spring Townships. The largest new developments here include Circuit City and Home
Depot at the old Capitol Products site, next to Kmart in Hampden T~wnship. A new 100,000
square foot Kohl's department store was recently constructed at the former Silver Spring Drive-
In site on the Carlisle Pike (Route 11). Another 100,000 square foot shopping center anchored
by Giant Foods was completed in Summer 1999 in East Pennsboro TownShip along East Penn
Drive. Giant Foods has recently constructed new stores in Silver Spring, Derry, and Upper Allen
Townships, and has just opened in Kline Village-Harrisburg. Construction is underway for anew
store at the Point Mall in Lower Paxton Township.
.
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I
The office market is also exhibiting substantial strength, with speculative buildings be
constructed throughout the region. Vacancy rates for Class A space have been in the 3-4%
range for the past three years, while vacancy rates at Class ~ and C buildings are stabilizing
below 10% for the first time in years. Market rents appear to be topping the $20 per square foot
level at prime locations.
Clearly, the Harrisburg region has the strongest office sector in South Central Pennsylvania.
followed by York County. Lancaster County is the weakest of the three, but is showing signs of
improvement. The strength of the Harrisburg market may be seen in several new
developments, including some large projects in the Rossmoyne and Westport Business Centers
in Cumberland County and in areas of Susquehanna Township in Dauphin County.
The. industrial sector in the Harrisburg region is quite strong, as evidenced by the amount of new
development in the past five years, and current projects in the works. It is clear that market
rents have surpassed the highs set previously in the decade before the onset of the real estate
recession of the early 1990's.
As a result of the strength in the market, a substantial amount of speculative space is planned.
The stabilized vacancy rate for high cube distribution space is currently under 5%. The strength
of this market has attracted investment from institutional as well as local investors.
With the development of new industrial space resulting in more jobs, the residential sector of the
market has been a direct beneficiary of this jOb creation. Hampden and Silver Spring TownShips
appear to be the strongest locations for single-family residential development within Cumberfand
County, while Lower Paxton and Derry Townships are the strongest locations in Dauphin
County. This sector should continue to benefit from the historically low interest rates pervasive
throughout this economic boom.
Transportation
The major traffic arteries and highway system that run through the MSA provide important links
to other primary and secondary markets in Pennsylvania and the northeast. Interstate 76, also
known as the Pennsylvania Turnpike, links the area with Pittsburgh to the west and Philadelphia
to the east. Interstate 78 runs from Interstate 81 in Lebanon County, eastward to Allentown and
21
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northern New Jersey. Interstate 83 runs from Harrisburg to Baltimore, and Interstate 81 runs
north to New York State and Canada, and south to Tennessee.
Other major roads in the area include U.S. Route 283, which runs from Harrisburg to Lancaster,
U.S. Route 11-15, which runs north to New York State and south to Maryland, and U.S. Route
581. which runs from Harrisburg westward to the Naval Ships Parts Control Center in
Mechanicsburg. Both of these roads are 4-lane limited access highways. A 6-mile extension of
Route 581 is now completed. Since completion in the fall of 1995, Route 581 now ties directly
into Interstate 81, and couples with portions of Interstates 81 and 83, forming a "Beltway" around
Harrisburg.
Financing
Within the current environment, the real estate financing market has become increasingly
competitive. Prior to 1996, lenders were unwilling to finance speCulative projects, particularly in
the office market. Since that period of time, lenders have offered extremely competitive rates
while reducing fees.
However, due to the rising market interest rates since late 1998, investors have been shocked to
hear quotes involving 9% mortgages. Current financing terms available in the Harrisburg market
for the various types of real estate are as follows:
Cateaorv Interest Rate LTV Amortization Debt Coveraae
Retail 7.5-9.5% 65-80% 15-20 years 1.20-1.40
Office 7.5-8.5% 70-80% 15-25 years 1.25-1.40
Industrial 7.75-8.5% 70-80% 20-25 years 1.20-1.30
Apartments 7.5-8.5% 70-90% 15-30 years 1.20-1.30
Economic Outlook
With unemployment below 3.50% and a stable population, the Harrisburg MSA is outperforming
the state's two largest metropolitan areas. The cost of doing business in Philadelphia's is 10%
above the national average. In Pittsburgh's its 3% above the national average. While these
areas are home to twe-thirds of the state's residents, they only captured one-third of the new
Pennsylvania Business sites in 1999, according to a Mellon Bank report. Harrisburg has
developed a reputation as a low-cost business location as more and more finns outsource
business away from other highly populated metropolitan areas in the northeast. The area
appears poised for long-tenn growth.
22
.
I
Conclusion
The Harrisburg Region continues to be an attractive secondary market for business and
industry. Many of the services found in larger metropolit~n . areas may be found in the
Harrisburg area. Also, Harrisburg is located within two hundred and fifty miles of 25% of the
I
nation's population.
The Mure outlook is for continued economic growth in the Harrisburg area. Low interest rates
and a pent-up demand for real estate should spark new construction in 2001. Commercial,
industrial and residential development will expand in response to the expansion and growth in all
market segments of the regional economy, which should have a positive influence on the
subject property.
23
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t
NMap
24
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,
NEIGHBORHOOD ANALYSIS
The neighborhood analysis provides a bridge between the A~ Analysis and the study of the
subject property. As in the Area Analysis, the goal of the Neighborhood Analysis is to determine
how the operation of social, economic governmental and environmental factors influence the
value of real estate.
Geographical Boundaries and Access
The subject's neighborhood may be defined as the Condoguinet Creek to the east and west,
Highmark (formerly Blue Shield) to the south, and Wertzville Road to north.
Adjacent Land Use Description
The subject property is surrounded by office development to the south and east, incfuding
approximately 50 buildings comprising over 2 million square feet of office space, located in
portions of East Pennsbore Township and the boroughs of Camp Hill, Lemoyne, and
Wormleysburg. A wide range of building sizes exist within the neighborhood, from small 2 story
medical offices of 2,000 to 4,000 square feet, to approximately 20 buildings of 8,000 to 15,000
square feet, to another 20 buildings totaling greater than 20,000 square feet.
Hlghmark:. the largest private employer in Central Pennsylvania, Is located just south of the
subject property, and includes 508,952 square feet, the largest building In the neighborhood.
Other large buildings incfude the Rite Aid Corporate Headquarters Building with 178,000 square
feet, the Electronic Data Systems building with 220,000 square feet, and the subject property
with 185,000 square feet. Highmark owns the 65 acre vacant parcel just south of the subject.
Other development in the neighborhood includes Holy Spirit Hospital and several small medical
offices that serve the hospital. Adjacent to the hospital is a large high-rise retirement apartment
building. Retail development includes a small shopping center located close to the hospital just
off Routes 11 & 15, which is anchored by a Weis Supermarket. A new 109,000 square foot strip
center Pennsboro Commons opened in 1999 and is 1.5 miles north of the subject.
Other retail developments include a small strip center on Erford Road. There are other small
commercial nodes in the neighborhood.that include a Texaco a gas station, Perkins, Taco Bell
25
.
t
and McDonald's restaurants, a branch office of Fulton Bank and the Camp Hill Post Office. Also
located in this vicinity is the Raddison Hotel, an older refurbished hotel along Erford Road and
Walnut Street (Rt. 11/15).
Demographics
The subject's neighborhood is heavily populated (see addendum for demographics). The largest
population concentration in the neighborhood is the Camp Hill Borough, located just west of the
subject property. East Pennsboro and Hampden townships also contribute heavily to the area's
population. Lemoyne and Wormleysburg are two smaller boroughs located to the east and south
of the subject. As there is little room for further growth in the boroughs, most population growth
is project to occur in Hampden and East Pennsboro Townships.
East Pennsboro Township had a 1990 population, of 15,185, which was an increase of 8.1%,
over the 1980 population of 13,955. The 1990 population represented approximately 7.8% of the
total county population. By the year 2000, the Township's population is projected to increase to
16,429. The 1990 median household income in the Township was $33,482, and the median
family income was $41,457.
Development
In the pa$t ten years there has been significant commercial development within the area. The
dominant commercial use in the neighborhood is office space, due to its ctose proximity to
Harrisburg and the State CapitOl Complex. Most new office development has been focused to
the south of the subject neighborhood along Erford Road, and along the south side of the Camp
Hill By-Pass in Lemoyne Borough. At present, the offace market is basically built-out with the
subject property comprising one of the few remaining vacant land parcels.
A great deal of new residential development has been focused in the immediate area of the
subject's neighborhood in both Hampden. and East Pennsboro Townships. New construction
includes single family dwellings, townhouses and apartments. The home prices in these new
developments range from $80,000 in the townhouse developments to over $300,000 in the
single family developments. Some of the developments include: Laurel Hills North, Floribunda,
Treemont, Penn Valley and Logan's Run.
26
.
.
These new residential developments have corresponded with the location of large employers
within the neighborhood in the past decade. In 1995, there were 32 new subdivisions proposed
for review in East Pennsboro Township, second only to Lower.AI!en Township, which received
34 proposals. There were no new proposals in Lemoyne, Camp Hill, or Wormleysburg boroughs
where there is little or no room for further residential development.
There has been little development of new office buildings in the neighborhood for approximately
5 years. This has been true throughout the greater Harrisburg area as the market has been
continuing to absorb the glut of office space that became available during the late 1980's. A new
office building of 24,000 square feet was developed on Erford Road for Post & Schell Law firm
about 2 years ago, and another medical office building of similar size was just completed in the
same area on Poplar Church Road.
In the past 5 years several new restaurants have been developed in the neighborhood including
J.C. Dunphy's, Perkins, Taco Bell, and Hot and Now (recently closed).
Real Estate Markets
The neighborhood's prime location accounts for the relatively high overall office occupancy rate.
In Class A space, vacancies are at ::t:16 to ::t:19 per square foot, based on a gross office lease.
These rents are at a level rivaling similar types of Class A buDdings in the Harrisburg CBD and
office parks in Susquehanna Township.
Land prices for smaller office sites, are in the range of $125,000 to $150,000 per acre.
Conclusion
The subject's area is considered one of the premier office locations .,in the region and is well-
positioned for future prosperity due to its close proximity to the City of Harrisburg and the State
Capital Complex. The strength of the local office market is evidenced by its low vacancy rates
and gross rents in the range of $16.00 to $19.00 per square foot.
The area offers a wide variety of amenities and is convenient to all locations in the Harrisburg
region. These characteristics should prove to be a positive influence on the future prospects of
the subject properties since people like to live near to where they work.
27
.
,
DESCRIPTION OF REAL ESTATE
Ownership/History: The subject was acquired January 17, 1~57, by deed 17P, page 178, by
Valley land Co., Inc., from Vernon R. Bowman for $16,000.
Site Description: The subject tract runs from East Penn Drive on the west to the Condogouient
Creek to the west and from the Ricci tract (zoned R-2) in the north to the Highmark tract in the
south. The topography is part sloped and there is some flood plain on the eastern portion.
Creekside Road forms the effective boundary in this area, (refer to flood map in addendum).
Flood Zone: A 9.0 acre +/- portion on the eastern boundary of the subject is located in the flood
zone A18, according to HUD Flood map #420359B, dated April 15, 1977 (see addendum).
Zoning: The subject is zoned PRO, professional office, and OA, office apartment in the zoning
regulations of East Pennsboro Township. A zoning map and the regulations can be viewed in
the addendum.
Highest and Best Use: The highest and best use of the subject based on the Regional and
Neighborhood Analysis, would be for professional. office development. The zoning districts of
office apartment (OA) and profeSSional office (PRO) are among the highest density allowed in
the township. OA allows apartments and restaurants, which are complimentary uses, and allow
for maximum financial return, and provide good planning.
Improvements: There have been three (3) access points built in conjunction of the East Penn
Drive improvement project. These roads have been constructed as to allow limited access to the
new road, and will necessitate traffic controls.
Sewer is located along Creekside Drive, the eastern boundary of the subject. Public water is
located at the new U.S. Post Office to the north of the subject and at Highmark's office complex
to the south. No estimate is available to determine the cost involved in extending this line to the
subject.
28
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ASSESSMENT AND TAXES
In 2000, the subject property was assessed for a total of $2,520 as follows:
Building:
Land:
Total:
$ 0
$2.520
$2,520
The 2000 common level ratio in Cumberland County was 6.6%, which represents a market
value of the property, of $38,182 ($2,520+ .066).
East Pennsboro Township, Cumberland County, and East Pennsboro School system have-the
following tax rates and combined with the assessment obligation of $402.62 ($2,520 x .15977).
29
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LAND VALUE
The value of the land is determined by its potential highest and best use as if it were vacant and
available for development. There are several methods of estimating land value including:
Sal.s Comparison
Allocation
Extraction
Ground Rent Capitalization
land Residual
Subdivision Development
Of these approaches, the Sales Comparison Approach is the most prevalent, due primarily to
the quantity and quality of available market data. In this analysis, sales of similar sites are
researched, analyzed, compared and adjusted to arrive at an indicated value. Adjustments are
made for differences in the sales that refled market readion. In the valuation of the subjed
property, the Sales Comparison Approach was used for land valuation.
The Sales Comparison method is based on the Principle of Substitution, which states that when
several similar commodities, goods, or services are available, the one with the lowest price will
attrad the greatest demand. This method is predicated upon two fadors: 1) there is an adive
market for the type of property being appraised and, 2) the data available on comparable
properties is adequate.
Subject Property
The site consists of 97..67 effective acres, which is the basis of the value estimate. A 9.0 acre
portion is located in the flood plain and an area of 7.95 acres is located along the western side of
the new East Penn Drive and is -Iandlocked-. These unusable tracts can be included in the
-open space- requirements of the zoning and allow for higher density.
Units of Comparison
Vacant land is typically valued on a price per acre or price per lot or unit basis. In the analysis of
the subjed site, the price per acre was chosen as the appropriate unit of comparison.
Comparable Land Sales
Comparable land sales were identified in the regional market. A Land Comparable Map and five
sales are presented on the following pages, are considered to be most comparable to the
.
30
e
.
subjed property and refled a similar highest and best use of the subjed as if vacant. The sales
chosen represent the best available after studying sales from Adams, Cumberland, Dauphin,
Berks, and York Counties. Sales of trads of both multi-family and office/retail uses were
considered viable due to the broad range of uses allowed in the zoning.
31
""1:';:;;;
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COMWARABLELANDSALESMAP
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COMPARABLE LAND SALE 1
Identification
Development:
Paxton Towne Center
.
Lower Paxton Township, Dauphin County, PA
Tax Map 35-043, Parcel 008
Park C. Sheesley Trust
PTC Holdings, LLC
Location:
Legal Description:
Grantor:
Grantee:
S./e Data
Sel. Price:
hi. Data:
Property Rights:
Racordad:
Condition of Sale:
V.rlflcatlon:
Financing:
$3,800,000
June 28,1999
Fee Simple
Deed Book 3441, Page 0607
Arm's Length
Grantor Rep
Cash
Physical Description
Site Description:
SIze:
Shape:
Topography:
UtIlities:
59.34 acres
Irregular-shaped
Rolling
All Available
Zoning:
Proposac:l Us.:
Commercial General
Retail Development
Appraisal Measures
Sal. Price/Acre:
$64.038
Comments
ThIs Is the sale of a large retail tract located along Allentown Blvd. (Route 22) in Lower Paxton Township. A -power
center" setup was deveIopecI with a Kohl's, Target, and Wels Markets being the anchors. There was significant site
work needed and wetlands relocation was necessary.
33
e
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,
\
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\
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COMPARABLE LAND SALE 2
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identification
Development:
Ahold
Location:
Forsythe Blvd. - NE Intersection of 181 & Wertzvllle Rd.
Hampden Township, Cumberland County, PA
Tax Map 10-13-0995, Parcel 020, 021 and 022
Michael Serluco, et al
ARP Wertzville Road LLC
Legal Description:
Grantor:
Grantee:
SaIeOata
Sale PrIce:
Sale Date:
property Rights:
Recorded:
CondItIon of Sale:
Verfftcatlon:
Financing:
$5,002,631
February 5, 2001
Fee Simple
Deed Book 0239, Page 0096
Arm's Length
Grantor- Michael Serluco
Cash
Physical Description
Site Description:
Size:
Shape:
Topography:
Utilities:
64.1 acres
Irregular-shaped
Roiling
Needs extension
ZonIng:
Proposed Use:
ApptW/ul Measures
Sale Price/Acre:
Commercial
Office/Retail
$78,000
Comments
The properties were purchased by the parent of Giant for speculation and were actually three separate tracts.
34
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IdentJfl~tlon
Development:
Location:
Legal Description:
Grantor:
Grantee:
Sa" Data
Sa" Price:
.... o.te:
Pn>>perty Rights:
Recorded:
Condition of Sale:
VerlflClltlon:
Financing:
Physical Description
Site Description:
SIze:
Shape:
Topography:
UtIlities:
Zoning:
Proposed Un:
AppralNl Measure.
Sale Price/Acre:
Comments
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COMPARABLE LAND SALE 3
Cumberland Technology Park
Technology Parkway
Hamden Township, Cumberland County, PA
Tax Map 10-14-0839, Parcel 029
Mt. Zion Association, LP
Pinnacle Health
$3,700,000
December 1, 1998
Fee Simple
Deed Book 0189, Page 0724
Arm's Length
Dan Alderman, Broker, CIR - 761-5070
Cash
37 acres
Rectangular
Level
All Available including gas
Business Park
Hospital
$100,000
Thi8 was sold for outpatient surgery facility for Pinnacle Health (formerly Harrisburg Hospital), and was completely
developed.
35
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ldentltlc.tlon
COMPARABLE LAND SALE "
Development:
Creekvlew Road
Location:
Creekview Road
Hampden Township. Cumberland County, PA
Tax Map 10-177-1031, Parcel 005
581 Associates LLC
Classic Communities, Inc.
Legal Description:
Gnlntor:
Gnlntee:
Sale Oatil
Sale Price:
Sale D8te:
Property Rights:
Recorded:
Condition of Sale:
Verification:
Financing:
$1,471,942
December 2000
Fee Simple
N1A
Arm's Length
Sale verified with Grantor
Cash
Phys/c.l Description
Site Description:
Size:
Shape:
Topography:
Utilities:
23.25 acres
Rectangle
Gently Rolling to creek
All Available
ZOning:
Proposed Use:
Appraisal Measu....
Sale Price/Acre:
Residential Towne
Town homes
$63,309
Comments
This was the sale of a town home project with all approvals, In place, for 132 units. Price range for finished product Is
$140,000 to $175,000.
36
e
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Discussion of Comparable Land Sales
In general, an upWard adjustment will be made if the comparable is Inferior to the subject for a
given element of comparison and downward where the comparable is superior to the subject
for a given element of comparison.
Elements of Comparison
Key value elements under scrutiny that may require adjustments are conditions of sale,
financing terms, time, location, and physical characteristics including topography, shape, and
size. These factors are the primary influences on site prices and tend to affect the differences
in price levels. Price adjustments are on a percentage basis and reflect price per acre.
Conditions of Sale
This adjustment is applied if there are any unusual circumstances surrounding the transaction,
such as foreclosures, bulk sales, related parties, assemblages and the like. All the sales were
arms' length, verified to have taken place under conditions requisite of a market transaction.
No adjustments are warranted.
Flnanclng Adjustments
The comparable sales have been adjusted first for financing terms if applicable. This
adjustment renders the sales price to cash equivalent terms. Where favorable (below market
rate) financing terms are made available by the seller, the difference between the favorable
terms and the market rate terms is estimated. All of the sales were reported to be cash
transactions and no adjustments are warranted.
Market Conditions (Time)
After adjusting the sale com parables for financing and conditions of sale, the sales must be
brought current by means of a time adjustment if the market warrants. Real estate
professionals in the area indicated that real estate prices have been appreciating in the years
since 1990. Since all sales have occurred between December 1998, and February 2001,
adjustments were made for the sales factored at 2.0% per year, for sales 1, 3 and 4. This
represents data for this period as provided by Central Penn MLS and equals about 2%.
Location Adjustments
These reflects the increase or decrease in value due to major surrounding neighborhood uses,
demographics, compatible properties and similar buyer preferences. The subject and the four
(4) sales are similar with the exception of sale #1, which is located in a heavily retailed area
along Allentown Blvd. in east Harrisburg. A downward adjustment was warranted for this sale.
Visibility and Access
Closing aligned with location this adjustment has to do with the proximity to major highway
systems and the ability of the public to locate and find the site to do business or to attract
employees to a potential site for living, working, or personal services. Sale 1, and 2 are more
accessible and visible than the subject and are so adjusted.
Physical Characteristics
These include topography, shape, terrain, utility availability, wetlandlftood plain condition, and
other factors that inhibit. development. There is some wetlandlflood plain located on the
subject. Sale #1 involved cutting and filling almost the entire site and the relocation of
37
e
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wetlands. Sale #2 will necessitate extension of utilities (similar to subjed) and large volumes of
excavation. Sale #3 was approved and developed with utilities, at the curb, and finished
streets. The final construction phase required excavation but there was no wetland. Sale #4
was approved but undeveloped and necessitated site work and utility extension. There is some
wetland on this parcel. The adjustments can be seen on the a~mpanying grid.
Zoning
The subjed enjoys office apartment (30%) and professional office (70%) zones. Sale #1 was
Commercial General which, is a broaded zone and allows for increased rental rates. Sale #2 is
also Commercial and again allows for higher returns, due to increased rents. Sale #3 is similar,
and Sale #4 is considered a lower zoning and therefore inferior. All the adjustments can be
seen on the grid.
Size
The size adjustment is applied after all prior adjustments are made to the sales. Normally
economies of scale dictate that a larger property will sell for a lower unit value than a smaller
property. The subjed consists of a parcel with 97.67acres. All the sales were smaller and
needed adjustment to refted this condition.
Conclusion Land Value
The adjustments to the comparable sal.es are indicated on the Vacant Land Sal_ Summary
shown on the next page. The unadjusted price per acre of land ranged from $63,609 to
$100,000. The adjusted price per acre of land ranged from $43,705 to $53,000, with a mean
of $48,156, and a median of $47,960.
In the final analysis, the greatest weight was placed on the central tendency of the sale
comparables. Based on the foregoing analysis, we estimate a price per acre at $48,000.
Therefore, the estimated Fee Simple Value of the subjed's land as of January 1, 2002
estimated to be:
Acres
97.67
Price/Acre.
$48,000
Total
$4,688,160
Rounded:
* * FOUR MILLION SEVEN HUNDRED THOUSAND DOLLARS * * *
($4,700,000)
38
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VACANT LAND SALES ADJUSTMENT GRID
~ SALE
SALE 1
SALE 2
SALE I
SALE 4
LOCATION
TOWNSHIP
COUNTY
Puton Towne
LO\WI' Puton
o.uphIn
WI/tzYille Rd.
Hampden
Cumberland
Cumberland Technology
Hampden
Cumbertand
CrMkvlew Rd.
Hampden
Cumberland
t . ,': I'!",'t>. . ~ ~~
DATE OF SALE
CONSIDERATION
ACRES
Jun-99
$3,800,000
58.34
Feb-01
$5,002,631
84.14
0Ic-88
$3,700,000
37
Dec-OO
$1,471,942
23.25
.~-~~~
F..
$78,000
~t..~:r,7?~;,. ,
$84,038
$78,000
F..
$84,013
Cash
$84,038
, " ", "lii~:1~::.~,."tJ~'.,
CONDITIONS OF 8ALE Anna lAnQIh
ADJUSTED PRICE $84,038 $78,000
" ,,~:".~~R:t;;~~i~;)tW.~~i?:ii&~~
TIME 5'" 216
ADJUSTED PRICE $67,238 $79,560
I~\I{~~.;':{~~1':'~f~:;~~:'-':""~;~---- ,~.~:,,'<.:':~: '~'::'~_,~1~~~;i~~:~~~
ADJUSTED PRICE PER ACRE $67,238 $79,560
<~ ," '?;,~~~T~:!";::~i/<;~~:"
LOCATION
Vl8ABILlTY -ACCESS
PHYSCICAL CHARATERISTICS
ZONING
SIZE
NET ADJU81MENT ($tACRE)
ADJUSTED PRICE PER ACRE
-5'" 0% 0% 0'"
-10'16 -20% 0% 0%
0"" 0% -40% ~O'"
-15'" -15% 0% 5%
-5'" -5'" -10% -10%
'1T,}~~;'j~~~',Ji;iil'};~;S~~"'~!~~'l1r~:.1Mi""'~~
~--.~~ ~
-35'" ~ ~ -25'"
$43,705 $47,738 $53,000 $48,184
, b~J... '-Ji_~J~c-;'"o'''''':~~'''''' -it~7~1~':'t:~~~(
LAND SALES ADJUSTMENT
$100,000
$110,000
$110,000
$4O.GOO
$20,000
$0
. PRICE PER ACRE
.ADJUSTED PRICE PER ACRE
2
,3
4
39
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CERTIFICATION
I certify that, to the best of my knowledge and belief:
1. The statements of fact contained in this report are true and correct.
2. The reported analyses, opinions, and conclusions are limited only by the reported
assumptions and limiting conditions, and are my personal, unbiased professional
analyses, opinions, and conclusions.
3. I have no present or prospective interest in the property that is the subject of this report,
and I have no personal interest or bias with respect to the parties involved.
4. My compensation in not contingent upon the reporting of a predetermined value of
direction in value that favors the cause of the client, the amount of the value estimate,
the attainment of a stipulated result, or the occurrence of a subsequent. event.
5. My analyses, opinions, and conclusions were developed, and this report has been
prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.
6. I have made a personal inspection of the property that is the subject of this report.
7. No one provided significant professional assistance to the person(s) signing this report.
8. The reported analyses, opinions, and conclusions were developed, and this report has
been prepared, in conformity with the requirements of the Code of Professional Ethics
and the Standards of Professional Appraisal Practice of the Appraisal Institute.
9. The use of this report is subject to the requirements of the Appraisal Institute relating to
review by its duly authorized representatives.
10. As of the date this report, I have completed the requirements of the continuing
education progra of the~APpraisall~stitute.
Signature: / i . I J ... ... . --...: Date: 4. {.6 ~ L
twimam l=. RO;h an, IFAS'
\
PA Certified General Real Estate Appraiser No. GA-QOO303-L
40
.
.
ASSUMPTIONS AND UMITING CONDITIONS
1. . No responsibility is assumed for the legal descriptions provided or for matters pertaining
to legal or title considerations. Title to the property is . assumed to be good and
marketable unless otherwise stated.
2. The property is appraised free and clear of any or all liens or encumbrances unless
otherwise stated.
3. Responsible ownership and competent property management are assumed.
4. The information furnished by others is believed to be reliable, but no warranty is given
for accuracy.
5. All engineering studies are assumed to be correct. The plot plans and illustrative
material in this report are included only to help the reader visualize the property.
6. No survey has been made by the appraiser and no responsibility is assumed in
connection with such matters.
7. It is assumed that there are no hiaden or unapparent conditions of the property, subsoil,
or structures that render it more or less valuable. No responsibility is assumed for such
conditions or for obtaining the engineering studies that may be required to discover
them.
8. It is assumed the property is in full compliance with all applicable federal, state, and local
environmental regulations and laws unless the lack of compliance is stated, described,
and considered in the appraisal report.
9. It is assumed that the utilization of the land and improvements is within the boundaries
or property lines of the property described and that there is no encroachment or
trespass unless noted within the report.
10. The distribution of the total valuation in this report between land and improvements
applies only under the stated program utilization. The separate allocations for land and
buildings must not be used in conjunction with any other appraisal and are invalid if so
used.
11. Acceptance and/or use of this appraisal report constitutes acceptance of the foregoing
Assumptions and Limiting Conditions.
12. The appraiser of this property will not be required to give testimony or appear in court
because of having made this appraisal, unless arrangements have been previously
made.
41
EXHIBIT I
GlLalllT NUlIIClt
IOWAIlO C. "lIST ,.I1l.
lIOelllT H. OllllWOLD
oIo\IIlU H. IUlIO
MClSU It.lIOeElIKRO
....nlllOll C._1WlT
_II W.l4AGAII
",""UII L. IPGIII
FIIAllClI 1.1IAAI..I11.
O. TItOMAS MlLLEII
DONALD II. WAlKL
IIlCHAIID II. LEFEVIR
.I. TItOMAS ME.....ltEII
CLYDI W.MClNTYIIE
I.II:IINI'IMITH
ROD .I. "RA
EDWAIID W. ROTHMAN
_EIIT A. MILLS
In Re:
.
.;
w. .n:....IIY .lAMOUNEAU
HERIEIIT II. NURICK
DAVID E. LEHMAN
_MAN I. WHITE
... MURRAY IRYAN
"'CHARD W. STl:VDlSOM
HENRY R. MAcNICHOLAS
WILLIAM M. YOUNG. .IA.
_EIIT M. CHEARY
DAVID I. DISNEY
H. LEE ROUSSEL
C. GIlAINGEII IIOWMAN
LUTHEA E. MILSPAW. .IA.
IURTON H. SNYDER
.IOHN S.OYLEA
DELANO M. LANlZ
JOSEPH A. ..ANOtIE
HARVEY Fllt:EDENBEAG
STEAUNG G. MellEES
1N3'1851
DAVID M. WALLACE
I_'IM?
McNEES, WALLACE & NURICK
ATTORNEYS AT LAW
100 PINE STREET
P. O. BOlC lIee
HARRISBURG, PA.17108
TELEPHONE (717) 238' 9341
.lAMES H. IOOIEA
HARAY H. ""ANK
0.. COUNSEL
December 19, 1977
WASHINGTON Ol'I'ICE
1778 I' STREET, N.W.
WASHINGTON, D.C. 2000e
TELEPHONE (202) 293'1516
WILLIAM A. CHESNUTT
ESTATE OF LOY T. HEMPT
Our File: 5672-001
CERTIFIED MAIL
Internal Revenue Service Center
11601 Roosevelt Blvd.
Philadelphia, PA 19155
Gentlemen:
Enclosed is Form 706 (Federal Estate Tax Return) for
the Estate of Loy T. Hempt, who died on March 19, 1977. The
Executors of the Estate are the decedent's widow, Margaret R.
Hernpt, and the decedent's nephew, Max C. Hempt. This firm is
counsel to the Estate.
Please note th~'~ there is enclosed with the Return a
copy of a Protective Elec ion to pay estate tax (initial and
deficiency) in installmen s .respecting closely held business
in~erest (s) owne9..by....~e Estate.
\'. ."'_, .....-:r.,'~:~". i~
~~l'" ;~ C 1 \) \9'"
Ot._ ....;~.
. '~'.', i. \ '''.I --
.: "..) ..,.,. '"
0\0.;' ,c.;.! '': cr.' P ~
.. ,..~ .-.,~.),\,~.
t\to,,-;", ~ .....'
RRL/ba"f
"
Enclos~e
Very truly yours,
McNEE
.{
& NURICK
l
Richard R. Lefever
.
.
ESTATE OF LOY T. HEMPT
Deceased
IN THE COURT OF COMMON PLEAS
CUMBERLAND COUNTY, PENNSYL VANIA
ORPHANS' COURT DMSION
TRUST CREATED UNDER ITEM
FIFTH OF THE WILL
NO. 21-77-0231
CERTIFICATE OF SERVICE
I, Carl C. Risch, certify that a copy of the foregoing was served by First Class Mail as
follows:
Joel R. Zullinger, Esquire
ZULLINGER-DA VIS, P.C.
14 North Main Street, Suite 200
Chambersburg, P A 17201
Howell C. Mette, Esquire
Daniel L. Sullivan, Esquire
Vicky Ann Trimmer, Esquire
3401 North Front Street, P.O. Box 5950
Harrisburg, PA 17110-0950
Date: December 5,2002