6. Income Taxes

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements

6. Income Taxes

6.             INCOME TAXES

For income tax purposes the Company has net operating loss carry forwards of $24,073,000 as of December 31, 2011 that may be used to offset future taxable income.  In the instance of future corporate acquisitions, the net operating losses may be used to offset the future taxable income of a qualifying subsidiary corporation which meets IRS regulations governing such situations.  The losses have accumulated since 1998 and they will start to expire in 2018.

The components of the net deferred tax asset as of December 31, 2011 are as follows:

The components of the net deferred tax asset as of December 31, 2011 are as follows:
Effect of net operating loss carry forward	$	10,111,000
Less evaluation allowance		(10,111,000	)
Net deferred tax asset	$	-

The components of income tax expense (benefit) are as follows:

	Period ended
	December 31,			December 31,
	2011			2010
Net loss per financial statements which approximates
net loss per income tax returns	$	(1,761,019	)	$	(555,145	)
Income tax expense (benefit) applying prevailing
Federal and state income tax rates		(739,628	)		(233,161	)
Less valuation allowance		739,628			233,161
Net income tax expense (benefit)	$	-		$	-

Net income tax benefit is not recognized at this time because there is no reasonable expectation that the benefit will be realized in the future.

The Company has adopted accounting rules that prescribe when to recognize and how to measure the financial statement effects, if any, of income tax positions taken or expected on its income tax returns. These new rules require management to evaluate the likelihood that, upon examination by relevant taxing jurisdictions, those income tax positions would be sustained.

Based on that evaluation, if it were more than fifty percent (50%) probable that a material amount of income tax would be imposed at the entity level upon examination by the relevant taxing authorities, a liability would be recognized in the accompanying balance sheet along with any interest and penalties that would result from that assessment.  Should any such penalties and interest be incurred, the Company’s policy would be to recognize them as operating expenses.

Due to continuous losses from operations the company has assigned a full valuation allowance against its deferred assets.