NOTE E. INCOME TAXES

The Company follows the provisions of FASB ASC 740-10, Accounting for Uncertainty in Income Taxes. The Company is not aware of any material unrecognized tax uncertainties as a result of tax positions previously taken.

The Company recognizes interest and penalties as interest expense when they are accrued or assessed.

The federal income tax returns of the Company for 2015, 2014, and 2013 are subject to examination by the IRS, generally for three years after they are filed.

The actual provision for income tax for the nine months ended November 30, 2016 and 2015 differ from the amounts computed by applying the U.S. federal income tax rate of 34% to the pretax loss as a result of the following:

	Three Months Ended November 30,
	2016			2015

Expected income tax benefit	$	(130,267	)	$	(156,465	)
Effect of expenses deducted directly by Dr. Burzynski	130,267			156,465
Nondeductible expenses and other adjustments	(2,694		)	(1,178		)
Change in valuation allowance	2,694			1,178
State tax	—			—


Income tax expense	$	—		$	—

	Nine Months Ended November 30,
	2016			2015

Expected income tax benefit	$	(392,668	)	$	(542,306	)
Effect of expenses deducted directly by Dr. Burzynski	392,668			542,306
Nondeductible expenses and other adjustments	175			(4,043		)
Change in valuation allowance	(175		)	4,043
State tax	—			—


Income tax expense	$	—		$	—

At November 30, 2016, the Company had a net deferred tax asset of $0, which includes a valuation allowance of $265,505. The Company’s ability to utilize net operating loss carryforwards and alternative minimum tax credit carryforwards will depend on its ability to generate adequate future taxable income. The Company has no historical earnings on which to base an expectation of future taxable income. Accordingly, a full valuation allowance for deferred tax assets has been provided. At November 30, 2016 the Company had net operating loss carryforwards available to offset future taxable income in the amount of $655,757 which may be carried forward and will expire if not used between 2020 and 2034.