Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.8
Income Taxes
12 Months Ended
Dec. 31, 2013
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 4 - INCOME TAXES

 

As of December 31, 2013, the Company had a net operating loss carry forward and other future tax benefits for income tax reporting purposes of approximately $3,060,000 that may be offset against future taxable income through 2032.  Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.  

 

As of December 31, 2011, the Company has a net operating loss (NOL) carry-forward of approximately $5,200,000. This NOL is the result of operating losses over several years. Management established a 100% valuation allowance against this potential future tax benefit due to a greater than 50% chance that the company would not benefit from it. During 2012, the Company used approximately $1,800,000 of the NOL due recognizing a $2,354,988 extraordinary gain on extinguishment of debt. During 2013, the Company used approximately $1,100,000 of the NOL to offset its $1,117,705 realized gain on the sale of investments in marketable securities. Subsequent to December 31, 2013, the company has recognized additional gains from the sale of its investments in marketable securities which Management believes will use the remaining balance of the NOL during 2014. Based on these occurrences, Management has reversed the valuation allowance of $1,747,000 as of the beginning of 2012 and recorded deferred income taxes in the accompanying financial statements for 2012 and 2013. For 2012, the Company recorded deferred taxes of $1,219,000. During 2013, $179,000 in deferred tax was used, leaving a balance of $1,040,000 to be used in future periods.

 

The Company has the following tax assets:

 

    December 31,
    2013   2012
Net Operating Losses   $ 758,000     $ 1,135,000  
Related party accrued interest     282,000       100,000  
Depreciation and Other     —         (16,000 )
Valuation Allowance     —         —    
    $ 1,040,000     $ 1,219,000  
                 

 

The provision for income taxes differ from the amount computed using the federal US statutory income tax rate as follows:

 

    December 31,
    2013   2012
Tax provision at US Statutory Rate   $ (408,000 )   $ 554,000  
Depreciation and Other     16,000       6,000  
Related party accrued interest     182,000       100,000  
Gains & losses on marketable securities     587,000       82,000  
Other differences     (198,000 )     (214,000 )
Increase (decrease) in valuation allowance     —         (1,747,000
 Deferred tax (benefit) expense   $ 179,000     $ (1,219,000 )

 

The Company evaluates its valuation allowance requirements based on projected future operations. When circumstances change and causes a change in management's judgment about the recoverability of deferred tax assets, the impact of the change on the valuation is reflected in current income.