| Note 4. |
Income Taxes Deferred income taxes are determined based upon differences between financial reporting and income tax bases of assets and liabilities and are measured using the enacted income tax rates and laws that will be in effect when the differences are expected to reverse. The Company recognizes any interest and penalties to unrecognized tax benefits as a component of income tax expense. No federal current or deferred income taxes were recorded for the years ended December 31, 2017 and 2016, as the Company's income tax benefits were fully offset by a corresponding increase to the valuation allowance against its net deferred income tax assets. The Tax Reform Act of 1986 limits the annual utilization of net operating loss and tax credit carry forwards, following an ownership change of the Company. Note that as a result of the Company's equity financings in recent years, the Company underwent changes in ownership for purposes of the Tax Reform Act. Pursuant to Sections 382 and 383 of the Internal Revenue Code, annual use of any of the Company's net operating loss carry forwards may be limited if cumulative changes in ownership of more than 50% occur during any three year period. | |
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At December 31, 2017 and 2016, the Company had federal and state net current operating loss carry forwards of $582,000 and $530,000, respectively, available to offset future taxable income. The current net operating loss carry forwards for Federal income tax purposes will expire in varying amounts beginning 2023 through 2035. At December 31, 2017 and 2016, the Company had federal capital loss carry forwards of $2,000 available to offset future taxable gains. | |
The components of income tax provision (benefit) are as follows: |
| December 31, | ||||
| 2017 | 2016 | |||
| Current income taxes: | ||||
| Federal | $-- | $-- | ||
| State | -- | -- | ||
| Total current income taxes | -- | -- | ||
| Deferred income taxes | 63,679 | (21,937) | ||
| Change in valuation allowance | (63,679) | 21,937 | ||
| Provision (benefit) for income taxes | $-- | $-- | ||
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Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's net deferred income taxes are as follows: |
| December 31, | ||||
| 2017 | 2016 | |||
| Current deferred income tax assets | $-- | $-- | ||
| Noncurrent deferred income tax assets: | ||||
| Net operating loss carryover difference | 154,892 | 205,368 | ||
| Stock option compensation | 29,121 | 42,338 | ||
| 184,013 | 247,706 | |||
| Valuation allowance | (184,013) | (247,706) | ||
| $-- | $-- | |||
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Due to uncertainty surrounding realization of the deferred income tax assets in future periods, the Company has recorded a 100% valuation allowance against its net deferred tax assets. If it is determined in the future that it is more likely than not that the deferred income tax assets are realizable, the valuation allowance will be reduced. The reconciliation of the provision for income taxes for the years ended December 31, 2017 and 2016, and the amount computed by applying the U. S, Federal statutory income tax rate to net loss is as follows: |
| December 31, | ||||
| 2017 | 2016 | |||
| Tax provision (benefit) at statutory rate | ($17,777) | ($19,280) | ||
| State taxes, net of federal effect | (2,450) | (2,657) | ||
| Change in Federal income tax rates | 83,906 | |||
| Change of valuation allowance | (63,679) | 21,937 | ||
| Effective income provision (benefit) | $-- | $-- | ||