INCOME TAXES

9 Months Ended

Sep. 30, 2018

INCOME TAXES

The

Company as a qualifying real estate investment trust (“REIT”) 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.

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

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.

In March 2018, the Company paid a cash dividend of approximately $2.5 million (or $2.50 per share) to shareholders of record as of March 21, 2018. The dividend was a capital gain distribution to shareholders. No dividends were declared for the year ended December 31, 2017.

In January 2017, the Company paid a cash dividend of approximately $501,000 (or $.50 per share) to shareholders of record as of December 29, 2016. The dividend was a return of capital to shareholders. No dividends were declared for the year ended December 31, 2017.

The 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 basis 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 of September 30, 2018, and December 31, 2017, the Company has recorded a net deferred tax liability of approximately $144,000 and $84,000, respectively, primarily as a result of timing differences associated with the carrying value of the investment in affiliate (TGIF) and other investments. CII’s NOL carryover to 2018 is approximately $1.1 million, the estimated tax benefits of which have been fully reserved due to CII historically having tax losses.

The provision for income taxes in the consolidated statements of comprehensive income consists approximately of the following:

Nine months ended September 30,	2018		2017
Current:
Federal	$	-	$	-
State		-		-
		-		-
Deferred:
Federal	$	43,000	$	34,000
State		10,000		4,000
		53,000		38,000
Increased (decreased) valuation allowance		7,000		(38,000	)
Total	$	60,000	$	-