Income Taxes

12 Months Ended

Sep. 30, 2011

Income Taxes

Income Tax Disclosure [Text Block]

NOTE 12 – INCOME TAXES:

Significant components of income tax benefit for the years ended September 30, 2011 and 2010 are as follows:

		2011		2010
Current:
Federal	$	-	$	-
State		-		-
Discontinued operations		-		-
Total current income tax benefit		-		-
Deferred:
Federal		852,122		408,031
Foreign		-		-
Total deferred income tax benefit		852,122		408,031
Total income tax benefit	$	852,122	$	408,031

The components of the Company’s deferred taxes are as follows:

		2011		2010
Net deferred tax asset:
Exploration costs	$	1,098,000	$	860,000
Property, mineral rights and equipment		(348,000)		(275,000)
Intangible expenses		(262,000)		(167,000)
Foreign intangible expenses		(371,000)		(230,000)
Share based compensation		2,136,000		1,787,000
Foreign income tax credit carryforwards		443,000		443,000
Federal net operating losses		8,175,000		8,920,000
Foreign net operating losses		2,019,000		1,878,000
Total net deferred tax asset		12,890,000		13,216,000
Valuation allowance		(12,890,000)		(13,216,000)
Deferred tax asset	$	-	$	-
BH Minerals USA, Inc.
Net deferred tax asset (liability):
Property, mineral rights and equipment	$	(3,755,000)	$	(3,684,122)
Exploration costs		1,844,000		396,000
Federal net operating losses		2,377,000		2,436,000
Total deferred tax asset (liability)		466,000		(852,122)
Valuation allowance		(466,000)		-
Deferred tax asset (liability)	$	-	$	(852,122)

The federal income taxes of the Company’s wholly owned subsidiary, BH Minerals USA, Inc., are not consolidated with those of the rest of the Company since BH Minerals USA, Inc. is wholly owned by the Company’s Canadian subsidiary, Staccato Gold Resources Ltd.

As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to 100% of the net deferred tax asset has been recorded at September 30, 2011 and 2010.

Net loss before income taxes for the years ended September 30, 2011 and 2010 are as follows:

		2011		2010
Continuing operations	$	(7,687,988)	$	(6,251,145)
Discontinued operations		4,506,356		92,286
	$	(3,181,632)	$	(6,158,859)

		2011		2010
Statutory Federal income tax rate		34%		34%
Expected income tax benefit based on statutory rate	$	(1,082,000)	$	(2,094,000)
Permanent differences		40,878		(116,031)
Effect of state taxes		49,000		(342,000)
Non-recognition due to increase (decrease) in valuation allowance		140,000		2,144,000
Total income tax benefit	$	(852,122)	$	(408,031)

The Company has concluded that the guidance regarding accounting for uncertainty in income taxes had no significant impact on our results of operations or financial position as of September 30, 2011 or 2010. Therefore, we do not have an accrual for uncertain tax positions as of September 30, 2011 or 2010.  As a result, tabular reconciliation of beginning and ending balances would not be meaningful.  If interest and penalties were to be assessed, we would charge interest to interest expense, and penalties to other operating expense.  It is not anticipated that unrecognized tax benefits would significantly increase or decrease within 12 months of the reporting date.  Fiscal years 2008 through 2011 remain subject to examination by state and federal tax authorities.

At September 30, 2011, the Company has federal net operating loss carryforwards of approximately $26,300,000 which will expire in fiscal years ending September 30, 2017 through September 30, 2031. Approximately $19,940,000 of state net operating loss carryforwards will expire in fiscal years ending September 30, 2012 through September 30, 2031. 

At September 30, 2011 the Company had $443,000 of foreign tax credit carryforwards which expire in 2012 and 2013.  The Company also has approximately $6,500,000 in net operating loss carryforwards in Canada which will expire in fiscal years ending September 30, 2026 through September 30, 2031. 

For the year ended September 30, 2010, the acquisition of Staccato Gold Resources Ltd. had a significant impact on our deferred tax position.  The acquisition added a net deferred tax liability of $852,122 related to the purchase accounting.  The entire balance of the deferred tax liability has been eliminated in the year ended September 30, 2011 as a result of ongoing exploration expenditures and net operating losses incurred.

The Tax Reform Act of 1986 substantially changed the rules relative to the use of net operating loss and general business credit carryforwards in the event of an “ownership change” of a corporation.  Due to the change in ownership in 2004, the Company is restricted in the future use of net operating losses generated before the ownership change.  As of September 30, 2010, this limitation is applicable to accumulated federal net operating losses of approximately $2,040,000.

Certain estimates for income tax for the year ended September 30, 2010 used in calculating income tax for the year ended September 30, 2011 have been revised to reflect the actual amounts per the tax returns filed with federal and state tax authorities.  These revisions had no effect on the current or prior year income tax provision (benefit), or deferred tax assets or liabilities.