INCOME TAXES

12 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 13 – INCOME TAXES

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

For the years ended June 30,	2022			2021
Federal
Current tax expense	$	(113,000	)	$	(755,000	)
Deferred tax (expense) benefit		884,000			(1,848,000	)
		771,000			(2,603,000	)
State
Current tax expense		(330,000	)		(605,000	)
Deferred tax benefit		589,000			(395,000	)
		259,000			(1,000,000	)
Income Tax Benefit	$	1,030,000		$	(3,603,000	)

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,	2022			2021
Statutory federal tax rate	$	2,446,000		$	(3,169,000	)
State income taxes, net of federal tax benefit		204,000			(834,000	)
Dividend received deduction		103,000			51,000
PPP Loan forgiveness		1,391,000			-
Provision to return adjustment		634,000			-
Deferral true up – Justice difference in basis of fixed assets		11,621,000			-
Disallowed interest					214,000
Net operating loss		32,000			105,000
Valuation allowance		(15,201,000	)		(319,000
Basis difference in investments		-			-
Carryback claim refundable		-			304,000
Payable true up		(311,000	)		-
Other		111,000			45,000
	$	1,030,000		$	(3,603,000	)

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

	June 30, 2022			June 30, 2021
Deferred tax assets:
Net operating loss carryforwards	$	11,075,000		$	9,801,000
Deferred gains on real estate sale and depreciation		10,418,000			-
Capital loss carryforwards		1,322,000			614,000
Investment impairment reserve		-			671,000
Accruals and reserves		831,000			893,000
Interest expense		2,231,000			2,684,000
Tax credits		566,000			554,000
Other		247,000			225,000
Deferred Tax Asset before Valuation Allowance		26,690,000			15,442,000
Valuation Allowance		(22,775,000	)		(951,000	)
Deferred Tax Asset after Valuation Allowance		3,915,000			14,491,00
Deferred tax liabilities:
Equity earnings		-			(5,626,000	)
Deferred gains on real estate sale and depreciation					(5,027,000	)
Unrealized gain on marketable securities		(9,000	)		(1,531,000	)
State taxes		(294,000	)		(167,000	)
Deferred Tax Liability		(303,000	)		(12,351,000	)
Net deferred tax asset	$	3,612,000		$	2,140,000

Management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets to determine if it is more likely than not that the deferred tax asset will be realized. As of June 30, 2022, it has been determined that it more likely than not that the deferred tax asset will not be recognized with the exception of forecasted five-year projected income. Thus, there was a valuation allowance of $22,775,000 as of June 30, 2022. This was an increase of $21,824,000 from June 30, 2021.

As of June 30, 2022, the Company had net operating loss (“NOL”) carryforwards of approximately $35,483,000 and $41,238,000 for federal and state purposes, respectively. Of the $35,483,000 federal NOL’s carryforwards, $14,697,000 expire in varying amount through 2037 and $20,786,000 of post 2017 NOL’s can be carried forward indefinitely. Note that the post 2017 NOL’s may only offset 80% of future taxable income.

	Federal		State
InterGroup	$	472,000	$	832,000
Portsmouth		35,011,000		40,416,000
	$	35,483,000	$	41,248,000

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, 2022, 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, 2022, tax years beginning in fiscal years 2018 and 2017 remain open to examination by the federal and state tax jurisdictions, respectively, and are subject to the statute of limitations.

The Company’s income tax expense for the fiscal year ended June 30, 2021 includes $3,382,000 of Santa Fe’s tax expense up to its liquidation on February 19, 2021.