Federal Income Taxes

12 Months Ended

Dec. 31, 2014

Federal Income Taxes [Abstract]

FEDERAL INCOME TAXES

NOTE 11 – FEDERAL INCOME TAXES

Reconciliation Between U.S. GAAP Net Income and Taxable Income

The following table reconciles U.S. GAAP net income to taxable income for the years ended December 31, 2014, 2013, and 2012:

		2014 Estimate (unaudited)		2013 Actual		2012 Actual
U.S. GAAP net income	$	4,237,803	$	5,836,823	$	6,474,057
Add:  U.S. GAAP net loss of taxable REIT subsidiary included above		3,946,571		2,746,526		3,081,837
U.S. GAAP net income from REIT operations		8,184,374		8,583,349		9,555,894
Stock compensation expense		922,944		850,349		573,244
Acquisition costs and other book / tax differences, net		(1,238,794)		351,413		(344,027)
Taxable income before adjustments		7,868,524		9,785,111		9,785,111
Less:  Capital gains		(1,514,518)		(3,630,548)		(4,146,773)
Adjusted taxable income subject to 90% dividend requirement	$	6,354,006	$	6,154,563	$	5,638,338

Reconciliation Between Cash Dividends Paid and Dividends Paid Deduction

The following table reconciles cash dividends paid with the dividends paid deduction for the years ended December 31, 2014, 2013, and 2012:

		2014 Estimate (unaudited)		2013 Actual		2012 Actual
Cash dividends paid	$	23,842,416	$	21,120,059	$	16,798,495
Less:  Portion designated as capital gains distributions		(1,514,518)		(3,630,548)		(4,146,773)
Less: Return of capital		(15,973,892)		(11,334,948)		(7,013,384)
Dividends paid deduction	$	6,354,006	$	6,154,563	$	5,638,338

Characterization of Distributions

The following table characterizes the distributions paid per common share for the years ended December 31, 2014, 2013, and 2012:

			2014				2013				2012
		Amount		Percent		Amount		Percent		Amount		Percent
Ordinary income	$	0.01114		1.55%	$	0.12844		17.84%	$	0.07892		10.96%
Capital gains		0.00265		.37%		0.05835		8.10%		0.08391		11.65%
Return of capital		0.70621		98.08%		0.53321		74.06%		0.55717		77.39%
	$	0.72		100%	$	0.72		100%	$	0.72		100%

For the year ended December 31, 2014, total distributions paid by the Company for preferred stock, amounted to $7,556,588 or $2.0625 per share ($1.66551 taxed as ordinary income and $0.39699 taxed as capital gains). For the year ended December 31, 2013, total distributions paid by the Company for preferred stock, amounted to $7,556,588 or $2.0625 per share ($1.41816 taxed as ordinary income and $.64434 taxed as capital gains). For the year ended December 31, 2012, total distributions paid by the Company for preferred stock before accrued dividends, amounted to $5,068,697 or $2.0625 per share ($0.99966 taxed as ordinary income and $1.06284 taxed as capital gains).

In addition to the above, taxable income from non-REIT activities conducted by S&F, a TRS, is subject to federal, state and local income taxes. Deferred income taxes pertaining to S&F are accounted for using the asset and liability method. Under this method, deferred income taxes are recognized for temporary differences between the financial reporting bases of assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards based on enacted tax rates expected to be in effect when such amounts are realized or settled. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of available evidence, including tax planning strategies and other factors. For the years ended December 31, 2014, 2013 and 2012, S&F had operating losses for financial reporting purposes of $3,946,571, $2,746,526 and $3,081,837, respectively. Therefore, a valuation allowance has been established against any deferred tax assets relating to S&F. For the years ended December 31, 2014, 2013 and 2012, S&F recorded $15,000, $5,000 and $5,000, respectively, in federal, state and franchise taxes.