Annual report pursuant to section 13 and 15(d)

Note 9 - Income Taxes

v2.3.0.11
Note 9 - Income Taxes
 12 Months Ended
Dec. 31, 2011
Notes to Financial Statements  
Note 9 - Income Taxes

NOTE 9 – INCOME TAXES

 

No provision for income taxes for the years ended December 31, 2011 and 2010 has been made.

 

Deferred tax assets reflect the net tax effects of net operating losses and tax credit carryforwards and temporary differences between the carrying amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:

 

  2011 2010
Net operating losses $625,794 $449,935
Common stock for services - -
Capital loss carryover 10,496 10,496
Contributions 333 314
  636,623 460,745
Less: deferred tax liabilities (1,772) (24,932)
  634,851 435,813
 Valuation allowance (634,851) (435,813)
 Net tax asset $ - $ -

 

 

A reconciliation of income tax at the statutory rate to the Company’s effective rate is as follows:

 

  2011 2010
Computed tax at the expected statutory rate 15.00% 15.00%
State income tax – net of federal tax benefit 4.68% 4.68%
Income tax expense – effective rate 19.68% 19.68%

 

Realization of the deferred tax asset is dependent on future earnings, if any, the timing of which is uncertain. Accordingly, the Company’s net deferred tax asset has been fully offset by a valuation allowance.

 

The Company has the following net operating  
  loss carryovers for income tax purposes:  
      Expiring 2026    $     82,899
      Expiring 2027         131,828
      Expiring 2028         236,311
      Expiring 2029                           1,202,060
      Expiring 2030                             633,736
Expiring 2031 803,923
  3,180,757

  

For tax year 2008, the Company has applied for a change in accounting method with the Internal Revenue Service to report under the accrual method of accounting rather than report under the cash-basis method.

 

This change in accounting method will require the Company to recognize additional taxable income of $100,456. The Internal Revenue Service allows for this income to be recognized pro rata over four years. To that end, the Company recognized $-0- and $25,114 of additional income for the years ending December 31, 2011 and 2010, respectively.