NOTE 14 – INCOME TAXES

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

For the years ended June 30,	2015		2014

Federal
Current tax expense	$	(2,842,000)	$	(51,000)
Deferred tax benefit		496,000		2,748,000
		(2,346,000)		2,697,000

State
Current tax expense		(844,000)		(56,000)
Deferred tax benefit		443,000		926,000
		(401,000)		870,000

	$	(2,747,000)	$	3,567,000

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,	2015		2014

Statutory federal tax rate	$	(1,706,000)	$	3,507,000
State income taxes, net of federal tax benefit		(459,000)		552,000
Dividend received deduction		263,000		245,000
Noncontrolling interest		(73,000)		(351,000)
Valuation allowance		(488,000)		(153,000)
Other		(284,000)		(233,000)
	$	(2,747,000)	$	3,567,000

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

Deferred tax assets:	June 30, 2015		June 30, 2014
Net operating loss carryforwards	$	12,112,000	$	10,110,000
Capital loss carryforwards		624,000		940,000
Investment impairment reserve		1,747,000		1,565,000
Accruals and reserves		1,005,000		968,000
Depreciation and amortization		650,000		571,000
State taxes		-		707,000
Valuation allowance		(2,335,000)		(1,847,000)
		13,803,000		13,014,000
Deferred tax assets (liabilities):
Deferred gains on real estate sale		(8,954,000)		(9,633,000)
Unrealized gains on marketable securities		(2,917,000)		(3,789,000)
Equity earnings		(1,248,000)		(535,000)
State taxes		(687,000)		-
		(13,806,000)		(13,957,000)
Net deferred tax liability	$	(3,000)	$	(943,000)

The deferred tax valuation allowance increased by $488,000 and $152,000, respectively, during the years ended June 30, 2015 and 2014.

As of June 30, 2015, the Company had estimated net operating losses (NOLs) of $29,038,000 and $25,757,000 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 2025.

	Federal		State
InterGroup	$	-	$	1,259,000
Santa Fe		8,558,000		4,903,000
Portsmouth		20,480,000		19,595,000
	$	29,038,000	$	25,757,000

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.

Assets and liabilities are established for uncertain tax positions taken or positions expected to be taken in income tax returns when such positions are judged to not meet the “more-likely-than-not” threshold based on the technical merits of the positions. The Partnership has disputed certain tax assessments arising out of the restructuring of the Company in 2013. See Note 8, Other Assets, Net and Note 17, Commitments and Contingencies – Legal Matters. With the exception of those matters, as of June 30, 2015, it has been determined there are no uncertain tax positions likely to impact the Company.

The Partnership files tax returns as prescribed by the tax laws of the jurisdictions in which it operates and is subject to examination by federal, state and local jurisdictions, were applicable. As of June 30, 2015, tax years beginning in fiscal 2010 remain open to examination by the major tax jurisdictions, and are subject to the statute of limitations.