6. Deferred Tax Benefit

12 Months Ended

Dec. 31, 2012

Notes

6. 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, 2012 and 2011 consist of the following:

	2012	2011
Federal:
Current	$            -	$       4,500
Deferred	54,255	18,400
State:
Current	800	9,200
Deferred	22,600	54,100
	$      77,655	$     86,300

The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rate of 39% to pretax income from continuing operations for the years ended December 31, 2012 and 2011 due to the following:

	2012	2011
Book income	$      62,300	$      56,300
State income taxes	(300)	(2,700)
Depreciation	(79,000)	(12,000)
M & E	1,700	1,700
Non deductible expenses	-	1,200
Related party accrual	-	(2,300)
Allowance for doubtful accounts	(5,400)	(4,600)
Unrealized loss	700	900
Prior year tax expense over estimate	7,755	17,000
Change in deferred tax asset	69,900	40,900
Allowance for Inventory	-	(10,100)
NOL Benefit	20,000	-
Valuation Allowance		-
Income tax expense	77,655	$      86,300

Net deferred tax assets consist of the following components as of December 31, 2012 and 2011:

	2012	2011
Deferred Tax Assets:
NOL Carryover	$     20,000	$              -
Depreciation	-	4,100
Related Party Accruals	400	300
Allowance for Doubtful Accounts	3,100	6,500
Unrealized loss	-	1,700
Deferred Tax Liabilities:
Depreciation	(80,100)	-
Unrealized Gain	(700)	-
Net Deferred Tax Asset/Liability	$    (57,300)	$     12,600

At December 31, 2012, the Company had net operating loss carryforwards of approximately $51,000 that may be offset against future taxable income from the year 2013 through 2032.  Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations.  Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years.