Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes
12 Months Ended
Dec. 31, 2022
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, 2022 and 2021.

    2022     2021  



State and local   $     $ 144,000  
Federal           2,808,000  
Total Current Tax Expense (Benefit)   $     $ 2,952,000  
State and local        56,000       83,000  
Federal     551,000       1,425,000  
Total Deferred Tax Expense     607,000       1,508,000  
Total Income Taxes   $ 607,000     $ 4,460,000  


Significant components of deferred tax assets (liability) as of December 31, 2022 and 2021 consisted of the following:

    2022     2021  
Deferred tax assets (liability):
         Net operating loss carryforward
  $ 477,000     $
         Capital loss carryforward     331,000        
         Stock options and RSU     30,000        
Valuation allowance (838,000 )
        Deferred Tax Liability(1)     (1,161,000 )     (554,000 )
Total deferred tax liability   $ (1,161,000 )   $ (554,000 )


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


As of December 31, 2022, the Company’s estimated aggregate total net operating loss carryforwards (NOLs) were $2,168,000 for U.S. federal tax purposes with an indefinite life.  At December 31, 2022, the Company had deferred tax assets of $838,000, which were offset by a valuation allowance of $838,000 as it was determined that it is more likely than not that the deferred tax assets would not be realized. At December 31, 2022, the Company had a deferred tax liability position of $1,161,000.

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:

Schedule of reconciliation of income tax  
    Years Ended  

December 31,





Income tax - statutory rate     21.00%       21.00%  
Permanent differences     (8.40)%       1.69%  
Change in valuation allowance     (48.79)%       —%  
State     1.28%       1.11%  
Other     (0.43)%       %  
  Total     (35.34)%       23.80%  



On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of Treasury has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax. The excise tax applies in cases where the total value of the stock repurchased during the taxable year exceeds $1,000,000.

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 2022, 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 2022. However, the Company may subsequently be determined to be a PHC in 2023 or in future years if it satisfies both the Ownership Test and the Income Test. If the Company were to become a PHC in any future year, it would be subject to an additional 20% tax on its 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.