Mr. Thompson heads over to a library to look at the diary of a man called "Walter Parks Thatcher." The secretary gives him some strict rules that he must follow while looking at the diary.
Thompson sits down and reads from the diary, where Thatcher talks of how he first met Charles Kane in 1871 at his mother's boarding house.
We flash back to 1871, where Charles Kane's mother signs some papers with Mr. Thatcher. Apparently, one of the old tenants at her boarding house tried to pay her with mining rights that were supposed to be worthless.
Well, now it turns out they're not and that Mrs. Kane has a lot of money. But another condition of her getting the money is that the bank will take her son Charles away and raise him as it sees fit until he turns 21. At this time, he'll come into full possession of his fortune.
Mrs. Kane goes outside with Mr. Thatcher and tells little Charles that he needs to go away with Mr. Thatcher to live with him.
Charles takes his winter sled and shoves it into Mr. Thatcher, knocking the man down. Then Charles tries to run away but his mom catches him. Mr. Kane thinks his son needs a good beating… and this is exactly why Mrs. Kane wants to get Charles as far away from his father as possible.
We hear the train heading away from the Kane house while snow collects on the top of Charles' old sled. In the next cut, we see Charles getting a brand new sled from Mr. Thatcher for Christmas.