8. Income Taxes

12 Months Ended

Oct. 31, 2021

Notes

8. Income Taxes

8. Income Taxes

The Company’s provision for income taxes in each fiscal year consists of current federal, state, and local minimum taxes.

The income tax expense for fiscal years ended October 31, 2021 and 2020 consisted of the following:

	2021	2020
Current:
Federal	$ -	$ -
State	3,000	5,000
Foreign	-	32,000
Income tax provision - current	$ 3,000	$ 37,000
Deferred:
Federal	-	-
State	-	-
Total income tax provision	$ 3,000	$ 37,000

The difference between income taxes expected at the U.S federal statutory income tax rate and the reported income tax expense are summarized as follows:

	2021		2020
	Amount	Percent	Amount	Percent
U.S. statutory tax	$ 21,000	21.0%	$ (2,576,000)	21.0%
Stock compensation	31,000	31.2%	84,000	-0.7%
Meals and entertainment	1,000	1.0%	3,000	0.0%
State tax, net of federal benefit	127,000	127.8%	(636,000)	5.2%
Other adjustments - accruals	15,000	15.1%	(14,000)	0.1%
Change in valuation allowance	(192,000)	-193.1%	3,176,000	-25.9%
Total income tax provision	$ 3,000	3.0%	$ 37,000	-0.3%

PASSUR Aerospace, Inc. and Subsidiary

Notes to Consolidated Financial Statements (continued)

8. Income Taxes (continued)

The tax effect of temporary differences that give rise to deferred tax assets and liabilities as of October 31, 2021 and 2020 is as follows:

	2021	2020
Deferred tax assets:
Net operating loss carryforward	$ 6,387,000	$ 6,356,000
Deferred revenue	35,000	72,000
Allowance for doubtful accounts receivable	47,000	251,000
Stock compensation - nonqualified	242,000	228,000
Accruals	70,000	53,000
ROU lease liabilities	107,000	116,000
Foreign tax credit	32,000	32,000
Depreciation	28,000	7,000
Total gross deferred tax asset	$ 6,948,000	$ 7,115,000
Less: Valuation allowance	(6,862,000)	(7,054,000)
Total net deferred tax asset	$ 86,000	$ 61,000
Deferred tax liabilities:
ROU lease assets	(86,000)	(61,000)
Total deferred tax liability	(86,000)	(61,000)
Deferred tax assets and liabilities	$ -	$ -

The ultimate realization of deferred tax assets is dependent on the generation of future taxable income in those periods in which temporary differences become deductible and/or net operating losses can be utilized. We assess all positive and negative evidence when determining the amount of the net deferred tax assets that are more likely than not to be realized. After weighing all available positive and negative evidence including cumulative losses in recent years, the Company continues to conclude that the more likely than not threshold for the realization of deferred tax assets has not been met.

At October 31, 2021, the Company had available a federal net operating loss carryforward of $26,239,000, of which $13,459,000 are indefinite lived, but only available to offset 80% of future taxable income, and $12,780,000, which will expire in various tax years from fiscal year 2022 through fiscal year 2039.

At October 31, 2021 and 2020, the Company did not have any uncertain tax positions. As permitted by ASC 740-10, the Company’s accounting policy is to prospectively classify accrued interest and penalties related to any unrecognized tax benefits in its income tax provision. The Company’s tax return years that are subject to examination by taxing authorities are fiscal years 2017 through 2021.