NOTE 14 - INCOME TAXES

The Company and Portsmouth file separate tax returns for both federal and state purposes. The provision for income tax expense consists of the following:

For the years ended June 30,	2014		2013
Federal
Current tax expense	$	(39,000)	$	(62,000)
Deferred tax benefit (expense)		3,061,000		(116,000)
		3,022,000		(178,000)
State
Current tax expense		(14,000)		(25,000)
Deferred tax benefit		992,000		73,000
		978,000		48,000

Total income tax benefit (expense)	$	4,000,000	$	(130,000)

A reconciliation of the statutory federal income tax rate to the effective tax rate is as follows:

For the years ended June 30,	2014		2013

Statutory federal tax rate	34.0	%	34.0	%
State income taxes, net of federal tax benefit	6.0	%	-5.5	%
Noncontrolling interest	-3.2	%	-34.7	%
Valuation allowance	-1.4	%	30.6	%
Other	1.0	%	-14.2	%
	36.4	%	10.2	%

The components of the Company’s deferred tax assets and (liabilities) as of June 30, 2014 and 2013 are as follows:

Deferred tax assets	2014		2013
Net operating loss carryforward	$	8,689,000	$	6,897,000
Investment reserve		1,565,000		1,541,000
Basis difference in Justice		1,621,000		(1,037,000)
Capital loss carryforward		624,000		624,000
Depreciation and amortization		206,000		202,000
Wash sales		297,000		168,000
Constructive sales		18,000		64,000
Accrued vacation		19,000		21,000
Valuation allowance		(1,847,000)		(1,695,000)
		11,192,000		6,785,000
Deferred tax liabilities
Unrealized gains on marketable securities		(2,421,000)		(2,408,000)
Deferred gains on real estate sale		(913,000)		(913,000)
State taxes		(612,000)		(271,000)
		(3,946,000)		(3,592,000)
Net deferred tax assets	$	7,246,000	$	3,193,000

The deferred tax valuation allowance increased by $152,000 and $397,000, respectively, during the years ended June 30, 2014 and 2013.

As of June 30, 2014, the Company had federal and state operating loss carryforwards of $21,243,000 and $16,584,000, respectively. These carryforwards expire in varying amounts through 2031.

The Company is subject to U.S. federal income tax as well as to income tax in multiple state jurisdictions. Federal income tax returns of the Company are subject to IRS examination for the 2010 through 2013 tax years. State income tax returns are subject to examination for the 2009 through 2013 tax years.

Utilization of the net operating loss carryover may be subject a substantial annual limitation if it should be determined that there has been a change in the ownership of more than 50 percent of the value of the Company's stock, pursuant to Section 382 of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating loss carryovers before utilization.

As of June 30, 2014, there were no uncertain tax positions. Management does not anticipate any future adjustments in the next twelve months which would result in a material change to its tax position. For the years ended June 30, 2014 and 2013, the Company did not have any interest and penalties.