Income Taxes

12 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

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,	2020			2019
Federal
Current tax expense	$	(57,000	)	$	(1,387,000	)
Deferred tax benefit		1,828,000			2,563,000
		1,771,000			1,176,000
State
Current tax expense		(64,000	)		(25,000	)
Deferred tax benefit (expense)		1,087,000			(850,000	)
		1,023,000			(875,000	)
Income Tax Benefit	$	2,794,000		$	301,000

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

For the years ended June 30,	2020			2019
Statutory federal tax rate	$	1,593,000		$	(457,000	)
State income taxes, net of federal tax benefit		812,000			(972,000	)
Dividend received deduction		18,000			16,000
Disallowed interest		504,000			-
Valuation allowance		49,000			2,158,000
Basis difference in investments		39,000			815,000
Carryback tax payable		-			(1,140,000	)
Other		(221,000	)		(119,000	)
	$	2,794,000		$	301,000

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

	June 30, 2020			June 30, 2019
Deferred tax assets:
Net operating loss carryforwards	$	8,713,000		$	6,810,000
Capital loss carryforwards		1,074,000			1,283,000
Investment impairment reserve		1,156,000			1,295,000
Accruals and reserves		871,000			1,095,000
Interest expense		1,498,000			162,000
Tax credits		563,000			619,000
Unrealized loss on marketable securities		1,591,000			547,000
Other		221,000			231,000
Valuation allowance		(497,000	)		(524,000	)
		15,190,000			11,518,000
Deferred tax liabilities:
Equity earnings		(4,306,000	)		(3,188,000	)
Deferred gains on real estate sale and depreciation		(6,249,000	)		(6,844,000	)
State taxes		(252,000	)		(18,000	)
		(10,807,000	)		(10,050,000	)
Net deferred tax asset	$	4,383,000		$	1,468,000

Management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of June 30, 2019, because of tax planning to generate taxable income in the future, management has determined that there is sufficient positive evidence to conclude that a significant portion of its deferred tax assets are realizable. As a result, the valuation allowance decreased by $2,086,000 during the fiscal year ended June 30, 2019.

As of June 30, 2020, the Company had estimated net operating losses (NOLs) of $30,486,000 and $26,140,000 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 2038.

	Federal		State
InterGroup	$	-	$	-
Santa Fe		9,781,000		4,761,000
Portsmouth		20,705,000		21,379,000
	$	30,486,000	$	26,140,000

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, 2020, it has been determined there are no uncertain tax positions likely to impact the Company.

The Company 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, where applicable.

As of June 30, 2020, tax years beginning in fiscal years 2015 and 2016 remain open to examination by the major tax jurisdictions, and are subject to the statute of limitations.