NOTE 6. INCOME TAXES

The Company utilizes ASC 740 “Income Taxes”, which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

For the year ended December 31, 2016, the Company had available for U.S federal income tax purposes net operating loss carryovers of approximately $184,239, which will expire on various dates in the next twenty (20) years. The net operating loss carryovers may be subject to limitations under Internal Revenue Code Section 382 due to significant changes in the Company’s ownership. Management has not yet completely reviewed such ownership changes under the Internal Revenue Code Section 382, as of the date of this filing, but recognizes that significant changes have occurred. The Company has provided a full valuation allowance against the full amount of the net operating loss benefit, since, in the opinion of management, based upon the earnings history of the Company it is more likely than not that the benefits will not be realized.

The Company was incorporated based upon a “Plan of Reorganization” in conjunction with a Bankruptcy Filing, Chapter 11 plan of reorganization of Pacific Shores Development, Inc. (“PSD”). In this regard, prior tax attributes and potential tax liabilities attributable to PSD are not attributes or liabilities of the Company, based upon the filing. The provision for income taxes differ from the amount of income tax determined by applying the applicable U.S statutory rate to losses before income tax expense for the years ended December 31, 2016 and 2015 as follows:

Deferred income taxes result from temporary differences in the recognition of income and expenses for financial reporting purposes and for tax purposes. The tax effect of these temporary differences representing deferred tax asset result principally from the following: