XML 31 R20.htm IDEA: XBRL DOCUMENT v3.8.0.1
Income Taxes
9 Months Ended
Aug. 31, 2017
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The Company's effective income tax rate was approximately 94.3 percent and 42.4 percent for the three and nine months ended August 31, 2017, respectively, and approximately 38.4 percent and 38.9 percent for the three and nine months ended August 31, 2016, respectively.
The increase in the effective income tax rate for three and nine months ended August 31, 2017, as compared to the same periods in the prior year, are substantially due to the Company impairing a deferred tax asset of approximately $2.1 million, resulting in a charge to income tax expense. To a lesser extent, changes in certain state tax rates also increased the effective income tax rate for the three and nine months ended August 31, 2017, as compared to the same periods in the prior year.
During the third fiscal quarter of 2017, the Company determined its stock investment in Motorsports Authentics, Inc. (“MA”) had become worthless under the U.S. federal income tax rules relating to worthless securities. Although the Company had previously reduced its carrying value of the investment to $0 in fiscal 2009, operations continued through the third fiscal quarter of 2017. On August 31, 2017, management and the board of MA decided to cease operations and liquidate MA. In the third quarter of fiscal 2017, the Company recorded a deferred tax asset of $48.3 million representing the tax basis in the shares of MA that was not previously required to be recorded in the deferred assets, as it represents the outside basis difference in the shares of a subsidiary not previously held for sale. The Company has no prior capital gains against which a capital loss could be applied and does not anticipate recording any future capital gains. As a result, the Company recorded a full valuation allowance offsetting the $48.3 million deferred tax asset. The Company has not, however, completed its analysis to determine whether the loss qualifies as a loss from a non-capital asset for federal income tax purposes.
The Company expects to complete its analysis of whether the loss is a loss from a non-capital asset, or a capital loss, for federal income tax purposes during its fourth fiscal quarter of 2017, which could result in the recognition of the full tax benefit if it is determined the loss is from a non-capital asset.