Frequently Asked Questions

Answers to some commonly asked questions about Kauai Tropical Timbers and about owning tropical hardwood trees for later harvest, for profit.

1. What types of trees are you planting?
2. Are the hardwood prices of all of your species the same?
3. Will you plant each of the species every year?
4. When is the first harvest?
5. How does planting tropical hardwood trees compare with leaving my money in a savings account or CD's to accumulate interest for 20 years?
6. Do I have to pay income tax on the increase in value of my trees each year?
7. Can I own trees in my IRA?
8. Will the harvest schedules be the same for all of the species?
9. What if I need cash before my trees are harvested?
10. If I travel to Kauai to inspect my trees, is the cost of my trip deductible?
11. Are forest fires a problem?
12. Are there diseases or pests which will destroy my trees?
13. Will too many plantations result in lower prices for my hardwoods?
14. What reports will I receive?
15. Are you cutting down any existing forest to plant your trees?
16. If I have other questions?  

1. What type of trees are you planting?
   
   We are primarily growing teak and mahogany as our precious tropical hardwood trees, carefully chosen by our specialists for their beautiful hardwoods, excellent growth potential, and high value, both on the local and international markets. We are planting limited amounts of koa which is a valuable local hardwood.
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2. Are the hardwood prices of all of your species the same?
   
   Yes, currently the prices for our hardwood species are the same. All of our selected species of tropical hardwoods are valuable. Teak for example sells for nearly four times the price of black walnut, considered to be one of the finest hardwoods grown in North America. And some of our hardwood species sell for even more than teak. We expect the prices of our hardwoods to go much higher as the world's remaining tropical rainforests are either destroyed or placed off limits to logging.
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3. Will you plant each of the species every year?
   
   No. Which species we plant in any year will depend upon the availability of quality seeds and seedlings, and the availability of planting areas within the farms which match each species' requirements.
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4. When will the first harvest be?
   
   For teak, we project that the first commercial thinning harvest will be in the 8th year after field-planting, followed by additional thinning harvests approximately each 3 or 4 years and continuing until the final harvest in about the 20th year. After each harvest, if you wish we will sell your hardwoods for you and send you the proceeds.
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5. How does planting tropical hardwood trees compare with leaving my money in a savings account or CD's to accumulate interest for 20 years?
   
   It is difficult to predict what future interest rates on savings accounts and CD's will be. However, as an example, if you were to put $5,600, the price of 100 teak trees, into savings or CD's today at 5% compound interest and allowed the interest to accumulate for 20 years, you would have a total of $15,191 at the end of the 20 years. That compares to the approximately $114,000 projected cumulative harvest proceeds over the next 20 years from planting 100 teak trees.
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6. Do I have to pay income tax on the increase in value of my trees each year?
   
   No. Even though your trees are growing in size and value, you will not have to report their increase in value or pay any income tax until you actually receive the proceeds from the sale of your hardwoods. This is unlike many other investments where you have to pay tax on the interest you earn each year, even if the interest is not paid out to you.
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7. Can I own trees in my IRA?
   
   Yes. Growing tropical hardwood trees is definitely an investment that qualifies for your IRA.
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8. Will the harvest schedules be the same for all of the species?
   
   The harvest schedules will vary from species to species, depending upon their growth rates and silvicultural requirements. Because many of our species are rare and have not previously been grown in plantations, their growth rates are not as well documented as teak
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9. What if I need cash before my trees are harvested?
   
   You have the right to sell or transfer your trees at any time to whomever you choose. We will be happy to assist in preparing appropriate transfer documents. We cannot guarantee the sale or value of your trees, but because we are constantly in contact with tree owners and others interested in owning trees, it is possible that we may be able to help find a buyer for your trees.
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10. If I travel to Kauai to inspect my trees, is the cost of my trip deductible?
    
    You should consult your tax advisor to answer this question. Generally, you are allowed to deduct the transportation and lodging costs of a trip if the principal purpose of your trip is for business, and your purpose and activities on the trip are well documented. Even if your trip does qualify for a business deduction, only a portion of your food and beverage expenses are deductible. Again, ask your tax advisor for details.
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11. Are forest fires a problem?
    
    Forest fires are not normally a problem in the humid tropics. In these humid tropical areas, where trees and forest are growing the natural moisture and humidity are retained. For example, when farmers clear their land of forest, they first cut the trees and let them dry in the hot sun for weeks or months before they can burn the area being cleared. Even so, our workers keep the areas around our trees clear of brush and debris.
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12. Are there diseases or pests which will destroy my trees?
    
    We have chosen only those species which thrive in the area of our plantations and for which there are no known problems of pests or disease. Even so, our workers will continue to monitor all of the trees, and can respond quickly at the sign of any problem.
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13. Will too many plantations result in lower prices for my hardwoods?
    
    Plantations today produce less than 1% of the tropical hardwoods consumed in the world. Meanwhile, nearly 50 million acres of rainforest are being destroyed every year. It is unlikely that enough plantations can ever be established to keep tropical hardwood prices from spiraling out of sight.
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14. What reports will I receive?
    
    After your trees are planted and marked in the field, we will send you a certificate, showing the exact quantity, species and planting year of your trees, and rows where they are planted. At least 90 days before we harvest any of your trees, we will send you a report of our foresters' recommendations of the number of your trees to be harvested, and when the harvest is planned. After each harvest, we will send you a precise accounting of the number of your trees harvested, the costs incurred in the harvest of your trees and the processing of your logs into marketable lumber, the amount of our care and management fee, and if you choose to have us sell your hardwoods for you, the exact amount of your net proceeds from the harvest.
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15. Are you cutting down any existing forest to plant your trees?
    
    No. We are planting our trees only in areas which have been previously deforested - primarily former pasture and sugar cane fields.
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16. If I have other questions?
    
    We invite you to contact us if you would like more information, or if you have any questions at all.
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