INCOME TAXES

12 Months Ended

Sep. 30, 2011

INCOME TAXES

INCOME TAXES

NOTE 11—INCOME TAXES

        The Trust has elected to be taxed as a real estate investment trust ("REIT"), as defined under the Internal Revenue Code of 1986, as amended. As a REIT, the Trust will generally not be subject to Federal income taxes at the corporate level if it distributes 100% of its REIT taxable income, as defined, to its shareholders. To maintain its REIT status, the Trust must distribute at least 90% of its taxable income; however if it does not distribute 100% of its taxable income, it will be taxed on undistributed income. There are a number of organizational and operational requirements the Trust must meet to remain a REIT. If the Trust fails to qualify as a REIT in any taxable year, its taxable income will be subject to Federal income tax at regular corporate tax rates and it may not be able to qualify as a REIT for four subsequent tax years. Even if it is qualified as a REIT, the Trust is subject to certain state and local income taxes and to Federal income and excise taxes on the undistributed taxable income. For income tax purposes the Trust reports on a calendar year.

        During the years ended September 30, 2011, 2010 and 2009, the Trust recorded $20,000, $6,000 and $53,000, respectively, of state franchise tax, net of refunds, relating to the 2011, 2010 and 2009 tax years.

        Earnings and profits, which determine the taxability of dividends to shareholders, differs from net income reported for financial statement purposes due to various items including timing differences related to loan loss provision, impairment charges, depreciation methods and carrying values.

        The financial statement income is expected to be approximately $2,300,000 higher than the income for tax purposes for calendar 2011, primarily due to the reversal of loan loss provision taken for book purposes in the current calendar year that is not reportable for tax purposes in the current tax year.

        At December 31, 2010, the Trust had a tax loss carry forward of $70,510,000. These net operating losses can be used in future years to reduce taxable income when it is generated. These tax loss carry forwards begin to expire in 2028.