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v2.4.0.6
Note 10 - Income Taxes
12 Months Ended
Dec. 31, 2011
Notes  
Note 10 - Income Taxes

NOTE 10 – INCOME TAXES

 

The effective tax rate varies from the maximum federal statutory rate as a result of the following items for the twelve months ended December 31, 2011 and 2010:

 

December 31,  2011

December 31, 2010

Tax benefit computed at the maximum federal statutory rate

(34.0)%

(34.0)%

State tax rate, net of federal tax benefit

( 4.0)%

( 4.0)%

Increase in valuation allowance

38.0%

38.0%

 

Effective income tax rate

 

0.0%

 

0.0%

 

The Company recognized deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carry forwards.  The Company will establish a valuation allowance to reflect the likelihood of realization of deferred tax assets.  Deferred income tax assets and the related valuation allowances result principally from the potential tax benefits of net operating loss carry forwards.

 

The Company has net operating loss carry forwards for tax purposes totaling approximately $6,028,305 as of December 31, 2011, expiring through 2031. There is a limitation on the amount of taxable income that can be offset by carry forwards after a change in control (generally greater than a 50% change in ownership).  Temporary differences, which give rise to a net deferred tax asset, are considered below.

 

Significant deferred tax assets at December 31, 2011 and 2010 are approximately as follows:

 

 

       2011

 

 

     2010

 

Gross deferred tax assets:

 

 

 

 

 

 

      Net operating loss carry forwards

 

$

6,028,305

 

 

$

2,614,640

 

     Total deferred tax assets

 

 

2,290,756

 

 

 

993,563

 

      Less: valuation allowance

 

 

(2,290,756

)

 

 

(993,563

)

Net deferred tax asset recorded

 

$

-

 

 

$

-

 

 

For financial statement purposes, no tax benefit has been reported as we have had significant losses in recent years and realization of the tax benefits is uncertain.  Accordingly, a valuation allowance has been established in the full amount of the deferred tax asset.

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not, that some portion or all of the deferred income tax assets will not be realized.  The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.  Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance as of December 31, 2011 and 2010, respectively.

 

At the present time, tax returns have not been filed for the most recent years.