DEFERRED TAX BENEFIT

12 Months Ended

Dec. 31, 2011

DEFERRED TAX BENEFIT

DEFERRED TAX BENEFIT

6.     DEFERRED TAX BENEFIT

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The provision (benefit) for income taxes for the years ended December 31, 2011 and 2010 consist of the following:

	2011		2010
Federal:
Current	$	4,800	$	87,565
Deferred	$	4,100	$	(30,440	)
State
Current	$	2,000	$	25,665
Deferred	$	1,700	$	(8,922	)
	$	12,600	$	73,868	)

Net deferred tax assets consist of the following components as of December 31, 2011 and 2010:

	2011		2010
Deferred Tax Assets:
Depreciation	$	4,100	$	20,011
Related Party Accruals		300	$	3,370
Allowance for Doubtful Accounts		6,500	$	14,430
Allowance for Inventory		-	$	13,109
Unrealized gain/(loss)		1,700	$	2,220
Deferred Tax Liabilities:		-	$	-
Net Deferred Tax Asset:	$	12,600	$	53,140

The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rate of 30.11% to pretax income from continuing operations for the years ended December 31, 2011 and 2010 due to the following:

	2011			2010
Book income	$	56,300		$	103,683
State income taxes		(2,700	)		(9,363	)
Depreciation		(12,000	)		489
M & E		1,700			1,099
Non deductible expenses		1,200			-
Related party accrual		(2,300	)		3,370
Unrealized gain/(loss)		900			(1,008	)
Allowance for doubtful accounts		(4,600	)		1,851
Allowance for Inventory		(10,100	)		13,109
Prior Year Tax Expense Over Estimate		17,000			-
Change in Deferred Tax Asset		40,900			-
Valuation Allowance		-			-
Income tax expense	$	86,300		$	113,230