Note 11 – Income Taxes

For the 2015 tax year, the Company is planning to elect and qualify as a REIT under the Internal Revenue Code.  To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that the Company distribute at least 90% of its adjusted taxable income to its stockholders.  It is management’s current intention to adhere to these requirements and be eligible to be a REIT for the year ended December 31, 2015.  As a REIT, the Company generally will not be subject to corporate level federal income tax on taxable income currently distributed to stockholders.  If the Company fails to qualify as a REIT for the 2015 tax year, it will be subject to federal and state income taxes at corporate tax rates.  Even if the Company qualifies to be taxed as a REIT for 2015, it may be subject to federal and state taxes on any undistributed taxable income.  For the 2015 tax year, the Company intends to distribute all of its taxable income; therefore, no provision for federal or state income taxes has been recorded in the financial statements. 

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has incurred a net operating loss of approximately $540,000, as of December 31 2014, which begins expiring in 2028. The Company has adopted ASC Topic 740, “Accounting for Income Taxes,” as of its inception. Pursuant to ASC Topic 740, the Company is required to compute tax asset benefits for non-capital losses carried forward. The potential benefit of the net operating loss has not been recognized in these financial statements because it cannot be assured it is more likely than not it will utilize the loss carried forward in future years.

Significant components of the deferred tax assets and liabilities as of December 31, 2014 and August 31, 2014, after applying enacted corporate income tax rates, are as follows:

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.