Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.1
Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

Note E – Income Taxes

Significant components of the income taxes were as follows for the years ended December 31, 2021 and 2020.

    2021     2020  
Current                
   State and local   $ 144,000     $ (34,000 )
   Federal     2,808,000       (430,000 )
Total Current Tax Expense (Benefit)   $ 2,952,000     $ (464,000 )
                 
Deferred                
   State and local     83,000       (32,000 )
   Federal     1,425,000       (458,000 )
Total Deferred Tax Expense (Benefit)     1,508,000       (490,000 )
                 
Total Income Taxes   $ 4,460,000     $ (954,000 )

 

Significant components of deferred tax assets as of December 31, 2021 and 2020 consisted of the following:

Schedule of components of deferred tax assets   2021     2020  

Deferred tax assets (liability):
Net operating loss carry forwards

   $
—		     $ 1,665,000  
                 
Deferred Tax Liability(1)     (554,000 )     (711,000 )
                 
Total deferred tax assets (liability)   $ (554,000 )   $ 954,000  

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(1)   Deferred tax liability as a result of a temporary difference related to the Company’s equity method investment.

 

There was no valuation allowance as of December 31, 2021. As of December 31, 2020, the Company relieved a valuation allowance of $490,000.

The reconciliation between the taxes as shown and the amount that would be computed by applying the statutory federal income tax rate to the net income before income taxes is as follows:

  Years Ended  
   

December 31,

  
   

2021

    

2020

  
             
Income tax - statutory rate     21.00 %     21.0 %
Permanent difference     1.69 %     (5.05 )%
State and other     1.11 %     1.48 %
Valuation allowance on deferred tax assets     — %     18.4 %
  Total     23.80 %     35.83 %

 

While only the tax returns for the three years ended prior to December 31, 2021 are open for examination for taxes payable for those years, tax authorities could challenge returns (only under certain circumstances) for earlier years to the extent that they generated loss carry-forwards that are available for those future years.

The personal holding company (“PHC”) rules under the Internal Revenue Code impose a 20% tax on a PHC’s undistributed personal holding company income (“UPHCI”), which means, in general, taxable income subject to certain adjustments. For a corporation to be classified as a PHC, it must satisfy two tests: (i) that more than 50% in value of its outstanding shares must be owned directly or indirectly by five or fewer individuals at any time during the second half of the year (after applying constructive ownership rules to attribute stock owned by entities to their beneficial owners and among certain family members and other related parties) (the “Ownership Test”) and (ii) at least 60% of its adjusted ordinary gross income for a taxable year consists of dividends, interest, royalties, annuities

and rents (the “Income Test”). During the second half of 2021, based on available information concerning the Company’s shareholder ownership, the Company did not satisfy the Ownership Test and thus the Company was not a PHC for 2021. If the Company were to become a PHC in any future year, we would be subject to an additional 20% tax on our UPHCI. In such event, the Company may issue a special cash dividend, to its shareholders in an amount equal to the UPHCI rather than incur the additional 20% tax.