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,	2016		2015

Federal
Current tax benefit (expense)	$	79,000	$	(2,842,000)
Deferred tax benefit		3,349,000		496,000
		3,428,000		(2,346,000)

State
Current tax expense		(128,000)		(844,000)
Deferred tax benefit		640,000		443,000
		512,000		(401,000)

	$	3,940,000	$	(2,747,000)

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,	2016		2015

Statutory federal tax rate	$	4,471,000	$	(1,706,000)
State income taxes, net of federal tax benefit		465,000		(459,000)
Dividend received deduction		13,000		263,000
Noncontrolling interest		(117,000)		(73,000)
Valuation allowance		(489,000)		(488,000)
Other		(403,000)		(284,000)
	$	3,940,000	$	(2,747,000)

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

Deferred tax assets:	June 30, 2016		June 30, 2015
Net operating loss carryforwards	$	11,372,000	$	12,112,000
Capital loss carryforwards		1,302,000		624,000
Investment impairment reserve		1,898,000		1,747,000
Accruals and reserves		1,096,000		1,005,000
Depreciation and amortization		609,000		650,000
Equity earnings		758,000		-
Valuation allowance		(2,824,000)		(2,335,000)
		14,211,000		13,803,000
Deferred tax assets (liabilities):
Deferred gains on real estate sale		(8,930,000)		(8,954,000)
Unrealized gains on marketable securities		(335,000)		(2,917,000)
Equity earnings		-		(1,248,000)
State taxes		(961,000)		(687,000)
		(10,226,000)		(13,806,000)
Net deferred tax asset (liability)	$	3,985,000	$	(3,000)

The deferred tax valuation allowance increased by $489,000 and $488,000, respectively, during the years ended June 30, 2016 and 2015.

As of June 30, 2016, the Company had estimated net operating losses (NOLs) of $27,950,000 and $21,986,000 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 2026.

	Federal		State
InterGroup	$	-	$	2,491,000
Santa Fe		8,385,000		3,453,000
Portsmouth		19,565,000		16,042,000
	$	27,950,000	$	21,986,000

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. As of June 30, 2016, 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, 2016, tax years beginning in fiscal 2010 remain open to examination by the major tax jurisdictions, and are subject to the statute of limitations.