NOTE 11. INCOME TAXES

For 2011, 2010 and 2009, TCI had net losses for federal tax purposes.

During 2009, TCI acquired stock of Income Opportunity Realty Investors, Inc. (IOT), such that more than 80% of IOT was owned by TCI. As a result, IOT joined the ARL consolidated group and joined a Tax Sharing and Compensating Agreement with TCI and ARL. The income tax expense (benefit) for 2011, 2010 and 2009 in the accompanying financial statement was calculated under the Tax Sharing and Compensating Agreement. For 2011, TCI had net losses while ARL and IOT had net income. For 2010, ARL, TCI and IOT had net losses. For 2009, ARL and TCI had net losses and IOT had net income. For 2011, 2010 and 2009 TCI recorded no federal tax (benefit) or expense. The expense (benefit) in each year was calculated based on the amount of losses absorbed by taxable income multiplied by the maximum statutory tax rate of 35%.

Current income tax expense is attributable to:


	2011			2010			2009
Income from continuing operations	$	(14,460	)	$	(26,645	)	$	(28,614	)
Income from discontinued operations		14,460			26,645			28,614

	$	—		$	—		$	—

There was no deferred tax expense (benefit) recorded for the period as a result of the uncertainty of the future use of the deferred tax asset.

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


	2011			2010			2009
Computed "expected" income tax (benefit) expense	$	(11,870	)	$	(24,627	)	$	(27,315	)
Book to tax differences for partnerships not consolidated for tax purposes		(6,442	)		(3,636	)		9,428
Book to tax differences of depreciation and amortization		1,140			1,544			1,467
Book to tax differences in gains on sale of property		(7,020	)		6,056			(12,216	)
Book to tax differences from insurance proceeds		—			—			—
Use of net operating loss carryforward		—			—			—
Book provision for loss		10,132			8,576			3,990
Partial valuation allowance against current net operating loss benefit		14,460			11,324			24,148
Other		(400	)		763			498

	$	—		$	—		$	—

Alternative Minimum Tax	$	—		$	—		$	—

The tax effect of temporary differences that give rise to the deferred tax asset are as follows:


	2011			2010			2009
Net operating losses	$	42,337		$	55,746		$	46,380
ATM credits		1,374			1,374			1,374
Basis difference of
Real estate holdings		(22,448	)		(38,495	)		(46,124	)
Notes receivable		1,663			6,678			5,899
Investments		(5,346	)		(5,495	)		(5,691	)
Notes payable		22,966			41,565			52,007
Net deferred tax asset from IOT		—			—			—
Deferred gains		15,106			26,025			15,078

Total	$	55,652		$	87,398		$	68,923
Deferred tax valuation allowance		(55,652	)		(87,398	)		(68,923	)

Net deferred tax asset	$	—		$	—		$	—

TCI has tax net operating loss carryforwards of approximately $108.6 million expiring through the year 2031.