INCOME TAXES

12 Months Ended

Dec. 31, 2013

INCOME TAXES

INCOME TAXES

NOTE 11.    INCOME TAXES

For 2013, 2012 and 2011, TCI had net losses for federal tax purposes.

For tax periods ending before August 31, 2012, the Company was part of the ARL consolidated federal return.  After that date, the Company and the rest of the ARL group joined the RAMI consolidated group for tax purposes.  The income tax expense (benefit) for the 2011 period in the accompanying financial statement was calculated under a tax sharing and compensating agreement between ARL, TCI and IOT.  That agreement continued until August 31, 2012, at which time a new tax sharing and compensating agreement was entered into by ARL, TCI, IOT and RAMI for the remainder of 2012.  For 2012, RAMI, ARL, TCI and IOT had a combined net taxable loss and TCI recorded no current tax (benefit) or expense.  For 2013, TCI consolidated with IOT had a net taxable loss and the remainder of the group had net taxable income resulting in a tax (benefit) to TCI.  The expense (benefit) in each year was calculated based on the amount of losses absorbed by taxable income multiplied by the maximum statutory rate of 35%.

Current expense (benefit) is attributable to (dollars in thousands):

	2013			2012			2011
Income from continuing operations	$	(24,598	)	$	(10,401	)	$	(14,460	)
Income from discontinued operations		16,835			10,401			14,460
Tax benefit	$	(7,763	)	$	-		$	-

Of the total 2013 tax benefit, $6,802 comes from RAMI and  $961 from ARL.

The Federal income tax expense differs from the amount computed by applying the corporate tax rate of 35% to the income before income taxes as follows (dollars in thousands):

	2013			2012			2011
Computed "expected" income tax (benefit) expense	$	26,998		$	(4,211	)	$	(16,008	)
Book to tax differences for partnerships not consolidated for tax purposes		(33,565	)		(3,831	)		(6,442	)
Book to tax differences of depreciation and amortization		1,222			1,434			1,140
Book to tax differences in gains on sale of property		(20,308	)		(4,835	)		(7,020	)
Book provision for loss		3,962			1,656			10,132
Partial valuation allowance against current net operating loss benefit		16,835			10,401			14,460
Other		4,856			(614	)		3,738
Total	$	-		$	-		$	-
Alternative minimum tax	$	-		$	-		$	-

Deferred income taxes reflect the tax effects of temporary timing differences between carrying amounts of assets and liabilities reflected on the financial statements and the amounts used for income tax purposes.  TCI’s tax basis in its net assets differs from the amount at which its net assets are reported for financial statement purposes, principally due to the accounting for gains and losses on property sales, and depreciation on owned properties.  The tax effects of temporary differences and net operating loss carry forwards that give rise to the deferred tax assets are presented below (dollars in thousands):

	2013			2012			2011
Net operating losses	$	71,071		$	53,857		$	42,337
AMT credits		1,374			1,374			1,374
Basis difference of:
Real estate holdings		(3,045	)		(15,159	)		(13,514	)
Notes receivable		860			860			1,726
Investments		(4,703	)		(4,757	)		(5,346	)
Notes payable		12,496			16,598			22,966
Deferred gains		10,806			11,370			14,985
Total	$	88,859		$	64,143		$	64,528
Deferred tax valuation allowance		(88,859	)		(64,143	)		(64,528	)
Net deferred tax asset	$	-		$	-		$	-

Recognition of the benefits of deferred tax assets will require TCI to generate future taxable income.  There is no assurance that TCI will generate earnings in future years.  Therefore, TCI has established a valuation allowance for deferred tax assets of approximately $88,859,000, $64,143,000 and  $64,528,000 as of December 31, 2013, 2012 and 2011, respectively.

TCI has tax net operating loss carryforwards of approximately $184.2 million expiring through the year 2032. The alternative minimum tax credit balance did not change in 2013 and remains at approximately $1,374,000.  The credit has no expiration date.