Income Taxes

12 Months Ended

Dec. 31, 2011

Income Tax Contingency [Line Items]

Income Tax Disclosure [Text Block]

INCOME TAXES

The components of income (loss) from continuing operations before the provision for income taxes consisted of the following:

	Year ended December 31,
	2011			2010		2009
Domestic	$	(14,880,000	)	$	10,212,000	$	(13,618,000	)
Foreign	20,001,000			—		—
Total	$	5,121,000		$	10,212,000	$	(13,618,000	)

The (benefit from) provision for income taxes consisted of the following:

	Year ended December 31,
	2011			2010			2009
Federal
Current	$	—		$	(2,450,000	)	$	(9,461,000	)
Deferred	(4,523,000		)	5,583,000			5,987,000
	(4,523,000		)	3,133,000			(3,474,000		)
State
Current	59,000			18,000			228,000
Deferred	(149,000		)	576,000			(715,000		)
	(90,000		)	594,000			(487,000		)
Foreign
Current	2,599,000			—			—
Deferred	—			—			—
	2,599,000			—			—
Total	$	(2,014,000	)	$	3,727,000		$	(3,961,000	)

A reconciliation of the statutory federal income tax rate of 34% with Kennedy-Wilson’s effective income tax rate is as follows:

	Year ended December 31,
	2011			2010			2009
Tax computed at the statutory rate	$	1,741,000		$	3,472,000		$	(4,630,000	)
State income taxes, net of federal benefit	(59,000		)	393,000			(681,000		)
Non-vested stock expense	(54,000		)	—			525,000
Taxing authority settlement	809,000			—			—
Foreign rate differential	(4,246,000		)	—			—
Capitalized transaction costs	—			—			528,000
Adjustment to investment basis	—			—			954,000
Extinguishment of debt	—			818,000			—
Noncontrolling interest and other	(385,000		)	(956,000		)	(657,000		)
Other	180,000			—			—
(Benefit from) provision for income taxes	$	(2,014,000	)	$	3,727,000		$	(3,961,000	)

Cumulative tax effects of temporary differences are shown below at December 31, 2011 and 2010:

	Year ended December 31,
	2011		2010
Deferred tax assets:
Accrued reserves	$	210,000	$	196,000
Stock option expense	1,833,000		1,714,000
Net operating loss carryforward and credits	20,935,000		9,145,000
Marketable securities	2,564,000		1,032,000
Hedging transactions	2,426,000		289,000
Total deferred tax assets	27,968,000		12,376,000
Deferred tax liabilities:
Depreciation and amortization	7,447,000		6,644,000
Prepaid expenses and other	581,000		814,000
Investment basis and reserve differences	28,355,000		21,701,000
Foreign currency translation	7,667,000		6,773,000
Capitalized interest	2,355,000		2,315,000
Total deferred tax liabilities	46,405,000		38,247,000
Net deferred tax liability	$	18,437,000	$	25,871,000

Based upon the level of historical taxable income and projections for future taxable income over the periods which Kennedy-Wilson’s gross deferred tax assets are deductible, management believes it is more likely than not Kennedy-Wilson will realize the benefits of these deductible differences as of December 31, 2011.

As of December 31, 2011 Kennedy-Wilson had federal net operating losses of $54.8 million. These net operating losses begin to expire in the year 2030. As of December 31, 2011 there were also state net operating loss carryforwards of approximately $48.1 million. The state net operating losses begin to expire after the year 2030.    

Presently a deferred tax liability for undistributed earnings of subsidiaries located outside the U.S. has not been recorded. These earnings may become taxable upon a payment of a dividend or as a result of a sale or liquidation of the subsidiaries. At this time we don't have plans to repatriate income from our foreign subsidiaries, however to the extent that are able to repatriate such earnings in a tax free manner, or in the event of a change in our capital situation or investment strategy, it is possible that the foreign subsidiaries may pay a dividend which would impact our effective tax rate. Unremitted earnings of foreign subsidiaries, which have been, or are intended to be permanently invested, aggregated approximately $17.5 million as of December 31, 2011. The determination of the tax liability upon repatriation is not practicable.

There were no gross unrecognized tax benefits at December 31, 2011 and December 31, 2010. Management has considered the likelihood and significance of possible penalties associated with Kennedy-Wilson's current and intended filing positions and has determined, based on its assessment, that such penalties, if any, would not expected to be significant.

Management has considered the likelihood and significance of possible penalties associated with Kennedy-Wilson's current and intended filing positions and has determined, based on its assessment, that such penalties, if any, would not expected to be significant.

Kennedy-Wilson's federal income tax returns remain open to examination for the years 2007 through 2011. Kennedy-Wilson is currently under examination for 2008, 2009 and 2010.

KW Residential [Member]

Income Tax Contingency [Line Items]

Income Tax Disclosure [Text Block]

8-INCOME TAXES

Provision (benefit) for income taxes for the years ended December 31, 2011, 2010 and 2009 consists of the following:

		Year ended December 31,
		2011			2010			2009
		(Unaudited)
Current - Foreign		$	491,988		$	387,830		$	107,474
Deferred - Foreign		33,122			269,657			(144,168		)
Total		$	525,110		$	657,487		$	(36,694	)

Other than the income tax obligations in Japan as explained below, the Company has no other foreign tax obligations. For U.S. federal tax purposes, KW Residential, LLC is considered to be a pass-through entity and all applicable U.S. taxes are the responsibility of the members. In addition, most of KIWI Entities are exempt from Japanese income taxes based on a permitted structure under Japanese tax legislation. Accordingly, the taxes recorded in these financial statements relate to the income taxes of certain Japanese subsidiaries applicable in Japan.

The significant components of deferred tax assets and liabilities as of December 31 are as follows:

	December 31,
	2011				2010
	(Unaudited)
Deferred tax assets:
Tax loss carryforwards	$	1,749,403			$	1,845,522
Accrued enterprise taxes	19,281				26,848
Accrued expenses	31,914				30,559
Depreciation	194,979				211,642
Allowance for paid vacation	32,349				30,624
Other	4,887				6,418
Gross deferred tax assets	2,032,813				2,151,613
Less: Valuation allowance	(1,749,403		)		(1,845,522		)
Total deferred tax assets	283,410				306,091
Deferred tax liabilities:
Total deferred liabilities	(659		)		(3,900		)
Net deferred tax assets	$	282,751			$	302,191

Management has provided a valuation allowance against deferred tax assets of tax loss carryforwards that are resulted from certain loss making companies in order to reduce tax assets to management's estimate of the amount more likely than not to be realized due to the uncertainty of the timing of realization. The total valuation allowance for the year ended December 31, 2011 decreased by $96,119 (unaudited), and the year ended December 31, 2010 decreased by $11,731,191, respectively.

Income taxes in Japan applicable to the Company are imposed by the national, prefectural and municipal governments, and in the aggregate resulted in a normal effective statutory rate of 40.69% for the years ended December 31, 2011, 2010 and 2009 (unaudited).

In Japan, new laws related to corporate taxes were promulgated on December 2, 2011. In the aggregate, the effective statutory rate will be 38.01% for the fiscal years beginning on or after April 1, 2012. From the years beginning on or after April 1, 2015, the effective statutory rate will be further reduced to 35.64% (unaudited).

As a result of the change in enacted tax rates, the net deferred tax assets decreased by $27,523 (unaudited) and the provision for income tax expense increased by $26,793 (unaudited) for the year ended December 31, 2011.

A reconciliation of the effective income tax rate reflected in the accompanying consolidated statements of operations to the combined normal effective statutory tax rate for the years ended December 31, 2011, 2010 and 2009 is as follows:

	Year ended December 31,
	2011			2010		2009
	(Unaudited)
Effective statutory tax (benefit) rate	(40.69	)%		(40.69	)%	40.69	%
Nondeductible expenses	13.77			3.04		0.03
Gains and losses on tax exempted entities	139.11			62.07		—
Change in valuation allowances	(30.75	)		(10.83	)	(42.98	)
Per capita tax	19.24			0.24		0.39
Effect of tax rate change	5.48			—		—
Others, net	1.16			0.55		1.65
Effective income tax (benefit) rate	107.32	%		14.38	%	(0.22	)%

As of December 31, 2011, the Company had tax loss carryforwards of $ 4,908,537 (unaudited). Such carryforwards, if not utilized, are scheduled to expire as follows:

2017 (unaudited)	$	1,321,482
2018 (unaudited)	2,346,529
2019 (unaudited)	1,086,341
2020 (unaudited)	154,185
Total	$	4,908,537