Entity information:

8. INCOME TAXES:

 

The income tax provision consisted of the following for the years ended November 30: 

 

   2017  2016
Current Provision:          
Federal  $171,000   $22,000 
State   30,000    28,000 
    201,000    50,000 
           
Deferred federal tax expense   70,000    60,000 
           
Total  $271,000   $110,000 

  

The provision for income taxes differs from that computed at the federal statutory corporate tax rate as follows:

 

   2017  2016
Tax at 34% statutory rate  $570,000   $117,000 
State income taxes, net of federal benefit   20,000    18,000 
Section 199 Adjustment   (45,000)   (17,000)
Research and Development Tax Credit   (279,000)   —   
Permanent differences and other   5,000    (8,000 
           
Income tax provision  $271,000   $110,000 

 

The components of deferred tax assets and liabilities were as follows:

 

   2017  2016
Deferred tax assets (liabilities)          
          Inventory  $432,000   $586,000 
Deferred revenue, sales returns and warranty   55,000    26,000 
Other accrued liabilities   83,000    78,000 
Depreciation   (367,000)   (417,000)
Net deferred assets  $203,000   $273,000 

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax-planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences