NOTE 14 – INCOME TAXES

The provision for the Company’s income tax benefit (expense) is comprised of the following:

For the years ended June 30,	2014		2013

Federal
Current tax expense	$	(51,000)	$	(62,000)
Deferred tax benefit		2,748,000		183,000
		2,697,000		121,000

State
Current tax expense		(56,000)		(54,000)
Deferred tax benefit		926,000		180,000
		870,000		126,000

	$	3,567,000	$	247,000

The provision for income taxes differs from the amount of income tax computed by applying the federal statutory income tax rate to loss before taxes as a result of the following differences:

For the years ended June 30,	2014		2013

Statutory federal tax rate	$	3,507,000	$	(129,000)
State income taxes, net of federal tax benefit		552,000		69,000
Dividend received deduction		245,000		255,000
Noncontrolling interest		(351,000)		450,000
Valuation allowance		(153,000)		(397,000)
Other		(233,000)		(1,000)
	$	3,567,000	$	247,000

The components of the deferred tax asset and liabilities are as follows:

Deferred tax assets:	June 30, 2014		June 30, 2013
Net operating loss carryforwards	$	10,110,000	$	8,625,000
Capital loss carryforwards		940,000		896,000
Investment impairment reserve		1,565,000		1,541,000
Accruals and reserves		968,000		886,000
Depreciation and amortization		571,000		528,000
State taxes		707,000		-
Valuation allowance		(1,847,000)		(1,695,000)
		13,014,000		10,781,000
Deferred tax assets (liabilities):
Deferred gains on real estate sale		(9,633,000)		(9,612,000)
Unrealized gains on marketable securities		(3,789,000)		(3,804,000)
Equity earnings		(535,000)		(1,816,000)
State taxes		-		(166,000)
		(13,957,000)		(15,398,000)
Net deferred tax liability	$	(943,000)	$	(4,617,000)

The deferred tax valuation allowance increased by $152,000 and $397,000, respectively, during the years ended June 30, 2014 and 2013.

As of June 30, 2014, the Company had estimated net operating losses (NOLs) of $25,165,000 and $18,086,000 for federal and state purposes, respectively. Below is the break-down of the NOLs for Intergroup, Santa Fe and Portsmouth. The carryforward expires in varying amounts through the year 2024.

	Federal		State
InterGroup	$	3,922,000	$	1,502,000
Santa Fe		6,879,000		3,304,000
Portsmouth		14,364,000		13,280,000
	$	25,165,000	$	18,086,000

The Company is subject to U.S. federal income tax as well as to income tax in multiple state jurisdictions. Federal income tax returns of the Company are subject to IRS examination for the 2010 through 2013 tax years. State income tax returns are subject to examination for the 2009 through 2013 tax years.

Utilization of the net operating loss carryover may be subject a substantial annual limitation if it should be determined that there has been a change in the ownership of more than 50 percent of the value of the Company's stock, pursuant to Section 382 of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating loss carryovers before utilization.

As of June 30, 2014, there were no uncertain tax positions. Management does not anticipate any future adjustments in the next twelve months which would result in a material change to its tax position. For the years ended June 30, 2014 and 2013, the Company did not have any interest and penalties.