11. Income Taxes

The components of income tax benefit (provision) for the years ended December 31, 2013, 2012 and 2011 are comprised of the following:



	2013			2012			2011
Current:
Federal	$	231		$	(5,210	)	$	(622	)
State	(264		)	(253		)	(502		)
Foreign	—			(10		)	(41		)
Deferred:
Federal	—			—			(284		)
State	36			(49		)	(2		)
Foreign	—			—			(697		)
	$	3		$	(5,522	)	$	(2,148	)

Deferred income taxes represent the tax effect of the temporary differences between the book and tax basis of assets and liabilities. Deferred tax assets (liabilities) include the following as of December 31, 2013 and 2012:



	2013			2012
Impairment of Real Estate	$	5,185		$	5,519
Foreign Net Operating Loss Carryforward	1,312			854
Valuation Allowance	(5,357		)	(5,244		)
Other	696			617
Total Deferred Tax Assets, Net of Allowance	$	1,836		$	1,746
Straight-line Rent	(76		)	(91		)
Fixed Assets	(1,771		)	(1,666		)
Other	(122		)	(158		)
Total Deferred Tax Liabilities	$	(1,969	)	$	(1,915	)
Total Net Deferred Tax Liabilities	$	(133	)	$	(169	)

A valuation allowance is recorded if we believe it is more likely than not that all or some portion of our deferred tax assets will not be realized. We do not have projections of future taxable income or other sources of taxable income in the taxable REIT subsidiaries significant enough to allow us to believe it is more likely than not that we will realize our deferred tax assets. Therefore, we have recorded a valuation allowance against our deferred tax assets. An increase or decrease in the valuation allowance that results from a change in circumstances, and which causes a change in our judgment about the realizability of the related deferred tax assets, is included in the current tax provision.

The income tax benefit (provision) pertaining to income (loss) from continuing operations and gain on sale of real estate differs from the amounts computed by applying the applicable federal statutory rate as follows:



	2013			2012			2011
Tax Benefit (Provision) at Federal Rate Related to Continuing Operations	$	286		$	557		$	(2,162	)
State Tax Provision, Net of Federal Benefit (Provision)	(236		)	(244		)	(521		)
Non-deductible Permanent Items, Net	21			32			(54		)
IRS Audit Adjustment and Accrued Interest	58			(5,523		)	—
Change in Valuation Allowance	(388		)	(166		)	1,853
Foreign Taxes, Net	—			(10		)	(96		)
Other	262			(168		)	78
Net Income Tax Benefit (Provision)	$	3		$	(5,522	)	$	(902	)

We evaluate tax positions taken in the financial statements on a quarterly basis under the interpretation for accounting for uncertainty in income taxes. As a result of this evaluation, we may recognize a tax benefit from an uncertain tax position only if it is "more-likely-than-not" that the tax position will be sustained on examination by taxing authorities. As of December 31, 2013, we do not have any unrecognized tax benefits.

We file income tax returns in the U.S., and various states and foreign jurisdictions. In general, the statutes of limitations for income tax returns remain open for the years 2010 through 2013.

IRS Tax Refund

On August 24, 2009, we received a private letter ruling from the IRS granting favorable loss treatment under Sections 331 and 336 of the Code on the tax liquidation of one of our former taxable REIT subsidiaries. On November 6, 2009, legislation was signed that allowed businesses with net operating losses for 2008 or 2009 to carry back those losses for up to five years. As a result, we received a refund from the IRS of $40,418 in the fourth quarter of 2009 (the "Refund") in connection with this tax liquidation. The IRS examination team, which is required by statute to review all refund claims in excess of $2,000 on behalf of the Joint Committee on Taxation, indicated to us that it disagreed with certain of the property valuations we obtained from an independent valuation expert in support of our fair value of the liquidated taxable REIT subsidiary and our claim for the Refund. During the year ended December 31, 2012, we reached an agreement with the regional office of the IRS on a proposed adjustment to the Refund. The total agreed-upon adjustment to taxable income was $13,700, which equates to $4,806 of taxes owed. We were also required to pay accrued interest of approximately $500. During the year ended December 31, 2012, the Company recorded a charge for the agreed-upon adjustment and the related estimated accrued interest which was reflected as a component of income tax expense. During the year ended December 31, 2013, the settlement amount was approved by the Joint Committee on Taxation and we paid the agreed upon taxes and related accrued interest.

As a result of the Joint Committee on Taxation's approval during 2013, we entered into closing agreements with the IRS that determined the timing of the settlement on the tax characterization of the limited partners of the Operating Partnership and the stockholders of the Company. Pursuant to these closing agreements, $8,238 of the preferred stock distributions for the year ended December 31, 2012 are taxable as capital gain. As revised, for income tax purposes, 35.42% of our 2012 preferred stock distributions are classified as long term capital gains and 64.58% are classified as return of capital.

Federal Income Tax Treatment of Share Distributions

For income tax purposes, distributions paid to common shareholders are classified as ordinary income, capital gain, return of capital or qualified dividends. We did not pay common share distributions for the years ended December 31, 2012 and 2011. For the year ended December 31, 2013, the distributions per common share were classified as follows:



Common Stock	2013		As a Percentage of Distributions
Ordinary Income	$	0.3088	100.00	%
Long-term Capital Gains	—		0.00	%
Unrecaptured Section 1250 Gain	—		0.00	%
Return of Capital	—		0.00	%
Qualified Dividends	—		0.00	%
	$	0.3088	100.00	%

For income tax purposes, distributions paid to preferred shareholders are classified as ordinary income, capital gain, return of capital or qualified dividends. For the years ended December 31, 2013, 2012 and 2011, the preferred distributions per depositary share were classified as follows:



Series J Preferred Stock	2013 (1)		As a Percentage of Distributions (1)		2012		As a Percentage of Distributions		2011		As a Percentage of Distributions
Ordinary Income	$	0.5085	100.00	%	$	—	0.00	%	$	0.3130	23.02	%
Long-term Capital Gains	—		0.00	%	0.8025		35.42	%	—		0.00	%
Unrecaptured Section 1250 Gain	—		0.00	%	—		0.00	%	—		0.00	%
Return of Capital	—		0.00	%	1.4632		64.58	%	1.0402		76.52	%
Qualified Dividends	—		0.00	%	—		0.00	%	0.0062		0.46	%
	$	0.5085	100.00	%	$	2.2657	100.00	%	$	1.3594	100.00	%

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(1)	The remaining 4,000,000 Depositary Shares of the Series J Preferred Stock were redeemed on April 11, 2013. The 2013 redemption had no impact on the 2012 or 2011 allocations included in the table above.



Series J Preferred Stock – Depositary Shares Redeemed (2)	2012		As a Percentage of Distributions
Ordinary Income	$	—	0.00	%
Long-term Capital Gains	0.7864		35.42	%
Unrecaptured Section 1250 Gain	—		0.00	%
Return of Capital	1.4339		64.58	%
Qualified Dividends	—		0.00	%
	$	2.2203	100.00	%

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(2)	Schedule relates to the 2,000,000 Depositary Shares of the Series J Preferred Stock that were redeemed on December 21, 2012. The 2012 redemption had no impact on the 2011 allocation.



Series K Preferred Stock	2013 (3)		As a Percentage of Distributions (3)		2012		As a Percentage of Distributions		2011		As a Percentage of Distributions
Ordinary Income	$	0.9969	100.00	%	$	—	0.00	%	$	0.3130	23.02	%
Long-term Capital Gains	—		0.00	%	0.8025		35.42	%	—		0.00	%
Unrecaptured Section 1250 Gain	—		0.00	%	—		0.00	%	—		0.00	%
Return of Capital	—		0.00	%	1.4632		64.58	%	1.0402		76.52	%
Qualified Dividends	—		0.00	%	—		0.00	%	0.0062		0.46	%
	$	0.9969	100.00	%	$	2.2657	100.00	%	$	1.3594	100.00	%

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(3)	Schedule relates to the 2,000,000 Depositary Shares of the Series K Preferred Stock that were redeemed on July 18, 2013. The 2013 redemption had no impact on the 2012 or 2011 allocations included in the table above.