14. INCOME TAXES

12 Months Ended

Dec. 31, 2011

Income Tax Disclosure [Text Block]

14. INCOME TAXES

The Company (excluding CII) qualifies as a real estate investment trust and distributes its taxable ordinary income to stockholders in conformity with requirements of the Internal Revenue Code and is not required to report deferred items due to its ability to distribute all taxable income. In addition, net operating losses can be carried forward to reduce future taxable income but cannot be carried back. Distributed capital gains on sales of real estate as they relate to REIT activities are not subject to taxes; however, undistributed capital gains may be subject to corporate tax.

The Company’s 95%-owned subsidiary, CII, files a separate income tax return and its operations are not included in the REIT’s income tax return.

The Company accounts for income taxes in accordance with ASC Topic 740, “Accounting for Income Taxes”. ASC Topic 740 requires a Company to use the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred taxes only pertain to CII. As a result of timing differences associated with the carrying value of other investments and depreciable assets and the future benefit of a net operating loss, the Company has recorded a net deferred tax asset as of December 31, 2011 and 2010 of $632,000 and $480,000, respectively. A valuation allowance against deferred tax asset has not been established as it is more likely than not, based on the Company’s previous history, that these assets will be realized.

As of December 31, 2011 the Company (excluding CII) has an estimated net operating loss carryover of approximately $4.9 million of which expires as follows:
 

NOL		Expiration Year
$	571,000		2025
	786,000		2026
	500,000		2027
	422,000		2028
	754,000		2029
	576,000		2030
	1,307,000		2031
$	4,918,000		Total

As of December 31, 2011 CII has an estimated net operating loss carryover (NOL) of approximately $1.1 million which expires as follows:

NOL		Expiration Year
$	44,000		2018
	386,000		2022
	14,000		2024
	13,000		2026
	81,000		2028
	141,000		2029
	356,000		2030
	76,000		2031
$	1,111,000		Total

The components of income before income taxes and the effect of adjustments to tax computed at the federal statutory rate for the years ended December 31, 2011 and 2010 were as follows:

	2011			2010
Loss before income taxes	$	(1,093,000	)	$	(1,357,000	)
Computed tax at federal statutory rate of 34%	$	(372,000	)	$	(461,000	)
State taxes at 5.5%		(60,000	)		(75,000	)
REIT related adjustments		401,000			574,000
Unrealized gain from marketable securities for book not tax		52,000			20,000
Net gains from other investments for book in excess of tax		—			(63,000	)
Other items, net		(173,000	)		(17,000	)
Benefit from income taxes	$	(152,000	)	$	(22,000	)

The REIT related adjustments represent the difference between estimated taxes on undistributed income and/or capital gains and book taxes computed on the REIT’s income before income taxes.

In 2011 CII underestimated its NOL carry forward by approximately $347,000 the tax effect is approximately $128,000 which is included in other items, net for 2011.

The benefit from income taxes in the consolidated statements of comprehensive income consists of the following:

Year ended December 31,	2011			2010
Current:
Federal		—			—
State		—			—
		—			—
Deferred:
Federal	$	(137,000	)	$	(20,000	)
State		(15,000	)		(2,000	)
		(152,000	)		(22,000	)
Total	$	(152,000	)	$	(22,000	)

As of December 31, 2011 and 2010, the components of the deferred tax assets and liabilities are as follows:

	As of December 31, 2011				As of December 31, 2010
	Deferred tax				Deferred tax
	Assets		Liabilities		Assets		Liabilities
Net operating loss carry forward	$	411,000			$	241,000
Excess of book basis of 49% owned corporation over tax basis			$	470,000			$	489,000
Excess of tax basis over book basis of investment property		278,000				275,000
Unrealized gain on marketable securities				1,000				50,000
Excess of tax basis over book basis of other investments		484,000		70,000		555,000		52,000
Totals	$	1,173,000	$	541,000	$	1,071,000	$	591,000