INCOME TAXES

12 Months Ended

Dec. 31, 2014

INCOME TAXES

INCOME TAXES

NOTE 11.    INCOME TAXES

For 2014, 2013 and 2012, TCI had net losses for federal tax purposes.

For tax periods ending before August 31, 2012, TCI was part of the ARL consolidated federal return.  After that date, TCI and the rest of the ARL group joined the MRHI consolidated group for tax purposes.  The income tax expense (benefit) for the first part of the 2012 period 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 MRHI for the remainder of 2012 and subsequent periods.  For 2012 and 2014 MRHI, 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):

	2014			2013			2012
Loss from continuing operations	$	(22,902	)	$	(24,598	)	$	(10,401	)
Income from discontinued operations		22,902			16,835			10,401
Tax benefit	$	-		$	(7,763	)	$	-

Of the total 2013 tax (benefit), ($7,763) comes from MRHI.

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):

	2014			2013			2012
Computed "expected" income tax (benefit) expense	$	14,762		$	26,998		$	(4,211	)
Book to tax differences for partnerships not consolidated for tax purposes		(23,900	)		(33,565	)		(3,831	)
Book to tax differences of depreciation and amortization		1,461			1,222			1,434
Book to tax differences in gains on sale of property		(2,350	)		(20,308	)		(4,835	)
Book provision for loss		-			3,962			1,656
Partial valuation allowance against current net operating loss benefit		7,069			16,835			10,401
Other		2,958			2,139			(614	)
Total	$	-		$	(2,717	)	$	-
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):

	2014			2013			2012
Net operating losses	$	56,897		$	71,071		$	53,857
AMT credits		1,374			1,374			1,374
Basis difference of:
Real estate holdings		876			(3,045	)		(15,159	)
Notes receivable		757			860			860
Investments		(4,693	)		(4,703	)		(4,757	)
Notes payable		6,932			12,496			16,598
Deferred gains		10,146			10,806			11,370
Total	$	72,289		$	88,859		$	64,143
Deferred tax valuation allowance		(72,289	)		(88,859	)		(64,143	)
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 $72.3 million, $88.9 million and $64.1 million as of December 31, 2014, 2013 and 2012, respectively.

TCI has tax net operating loss carryforwards of approximately $146.9 million expiring through the year 2033. The alternative minimum tax credit balance did not change in 2014 and remains at approximately $1.4 million.  The credit has no expiration date.

TCI is subject to routine audits by taxing jurisdictions; however, there are currently no audits in progress for any tax periods.  Management believes TCI is no longer subject to income tax examinations for years prior to 2011.