Income Taxes

10 Months Ended

Dec. 31, 2021

Income Taxes

Income Taxes

8. Income Taxes

The Company’s taxable income primarily consists of interest income on the Trust Account, less any franchise taxes. The Company’s formation costs are generally considered start-up costs and are not currently deductible.

The income tax provision (benefit) consists of the following:

Current
Federal	$	—
State		—
Deferred
Federal		(270,918)
State		—
Valuation allowance		270,918
Income tax provision	$	—

The Company’s net deferred tax assets are as follows:

Deferred tax assets
Organization Costs	$	237,766
Net operating loss carryforward		33,152
Total deferred tax assets		270,918
Valuation allowance		(270,918)
Deferred tax assets, net of allowance	$	—

As of December 31, 2021, the Company had $157,867 of U.S. federal net operating loss carryovers available to offset future taxable income. The federal net operating losses can be carried forward indefinitely.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax assets, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance.   For the year ended December 31, 2021, the change in the valuation allowance was $270,918.

A reconciliation of the statutory federal income tax rate (benefit) to the Company’s effective tax rate for the period from January 15, 2021 (inception) to December 31, 2021 is as follows:

Statutory Federal income tax rate	21.0	%
Share Based Compensation	(2.65)	%
Change in Valuation Allowance	(18.35)	%
Effective Tax Rate	0.0	%

The Company’s effective tax rates for the periods presented differ from the expected (statutory) rates due to the recording of full valuation allowances on deferred tax assets.