Federal Income Taxes

12 Months Ended

Jan. 31, 2021

Income Tax Disclosure [Abstract]

Federal Income Taxes

18. FEDERAL INCOME TAXES

The Trust and subsidiaries have income tax net operating loss carryforwards of approximately $5.4 million at January 31, 2021. In 2005, the Trust had an ownership change within the meaning of Internal Revenue Code Section 382. However, the Trust determined that such ownership change would not have a material impact on the future use of the net operating losses.

The Trust amended the federal and state income tax returns for tax years 2017 and 2018, resulting in a recalculation of the net operating loss carry-forward. The impact of the amended returns are reflected in the below data.

Total and net deferred income tax assets on January 31,

	2021			2020
Net operating loss carryforwards	$	1,352,000		$	1,075,000
Bad debt allowance		2,000			4,000
Accrued expenses		(2,000	)		(4,000	)
Syndications		2,923,000			2,923,000
Prepaid Insurance		(4,000	)		-
Alternative minimum tax credit		51,000			51,000
Total deferred tax asset		4,322,000			4,049,000
Deferred income tax liability associated with book/tax		(1,502,000	)		(1,551,000	)
Net deferred income tax asset		2,820,000			2,498,000
Valuation allowance		(2,820,000	)		(2,498,000	)
	$	-		$	-

Income taxes for the year ended January 31,

	2021			2020
Current income tax provision (benefit)		(68,661	)		(294,402	)
Deferred income tax provision (benefit)		321,306			384,298
Change in valuation allowance		(321,306	)		(384,298	)
Net income tax expense (benefit)		(68,661	)		(294,402	)

The differences between the statutory and effective tax rates are as follows for the year ended January 31, 2021:

	2021
	Amount			Percent
Federal statutory rates	$	(309,200	)		21	%
State income taxes		(77,000	)		5	%
Change in valuation allowance		321,300			-22	%
True-up to prior year returns		(4,000	)		0	%
Effective rate	$	-			5	%

The differences between the statutory and effective tax rates are as follows for the year ended January 31, 2020:

	2020
	Amount			Percent
Federal statutory rates	$	(477,000	)		21	%
State income taxes		(120,000	)		5	%
Change in valuation allowance		384,300			-17.00	%
Amended to 2017 Amended Tax Returns and Other Adjustments		(81,700	)		4	%
Effective rate	$	-			0	%

The Trust is taxed as a C-Corporation. The Trust’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Trust has received various IRS and state tax jurisdiction notices which the Trust in the process of responding to in which management believes the notices are without merit and expect full remediation of all tax notices. The Trust and subsidiaries have deferred tax assets of $4.3 million which includes cumulative net operating loss carryforwards of $1.3 million and syndications of $2.9 million, and deferred tax liability associated with book/tax differences of $1.5 million as of January 31, 2021. We have evaluated the net deferred tax asset and determined that it is not more likely than not we will receive full benefit from the net operating loss carryforwards. Therefore, we have determined a valuation allowance of approximately $2.8 million.