INCOME TAXES

There was no income tax provision for the years ended December 31, 2017 and 2016.



	For the year ended December 31,
	2017			2016
Deferred benefit	$	(6,000	)	$	(40,000	)
Change in deferred rate⁽¹⁾	350,000			156,000
Change in valuation allowance	(344,000		)	(116,000		)
Total tax provision	$	—		$	—

The tax provision differs from the expense that would result from applying Federal statutory rates as follows:



	For the year ended December 31,
	2017			2016
Benefit at Federal statutory rate	$	(6,000	)	$	(40,000	)
Change in deferred rate⁽¹⁾	350,000			156,000
Change in valuation allowance	(344,000		)	(116,000		)
Tax provision	$	—		$	—


⁽¹⁾	The deferred tax rate decreased from 40% to 34% during 2016 and decreased from 34% to 21% during 2017.

Deferred tax assets and liabilities consist of the following:



	At December 31,
	2017			2016
Deferred tax assets:
Net operating loss carryforwards	$	571,000		$	915,000
Valuation allowance	(571,000		)	(915,000		)
Net deferred tax assets	$	—		$	—

Realization of deferred tax assets is dependent upon generation of sufficient future taxable income and the effects of other loss utilization provisions. Management has determined that sufficient uncertainty exists regarding the realizability of the net deferred tax assets and has provided a full valuation allowance of $571,000 and $915,000, against the net deferred tax assets of the Company as of December 31, 2017 and 2016, respectively. A valuation allowance is considered to be a significant estimate that may change in the near term.

At December 31, 2017, the Company had net operating loss carryforwards of $2,510,000 available to be carried to future periods. Net operating loss carryforwards of $1,859,000 are available for Pillarstone to use without any limitation or restriction imposed by tax regulations. Changes in the ownership of Pillarstone’s shares that occurred in 2001, 2003 and 2006 have limited the amount of net operating losses to be used to approximately $72,400 per year for another 9 years, or a total of $651,600. Prior net loss carryforwards of approximately $10,642,000 cannot be used due to the limitations imposed by Section 382 of the Code related to the 2001, 2003 and 2006 changes of share ownership.

The loss carryforwards expire as follows:



Year Expiring	Net Operating Loss
2027	$	1,551,000
2028	364,000
2029	248,000
2030	81,000
2031	52,000
2032	39,000
2033	61,000
2034	54,000
2035	57,000
2036	68,000
2037	95,000
2038	(160,000		)
Total loss carryforwards	$	2,510,000