TAXABLE INCOME AND TAX BASIS

12 Months Ended

Dec. 31, 2016

TAXABLE INCOME AND TAX BASIS

TAXABLE INCOME AND TAX BASIS

NOTE 13. TAXABLE INCOME AND TAX BASIS

Taxable income reportable by the Partnership and includable in its partners’ tax returns is different than financial statement income because of tax free exchanges, accelerated depreciation, different tax lives, and timing differences related to prepaid rents, allowances and intangible assets at significant acquisitions. Taxable income of approximately $4,893,000 was approximately $57,000 less than statement income for the year ended December 31, 2016. The primary reason for the decrease is due to accelerated depreciation, tax free exchange and other differences in the treatment of certain expenditures. The cumulative tax basis of the Partnership’s real estate at December 31, 2016 is approximately $7,200,000 less than the statement basis. The primary reasons for the lower tax basis are tax free exchanges, and accelerated depreciation. The Partnership’s tax basis in its joint venture investments is approximately $2,100,000 less than statement basis.

Certain entities included in the Partnership’s consolidated financial statements are subject to certain state taxes. These taxes are not significant and are recorded as operating expenses in the accompanying consolidates financial statements.

The following reconciles GAAP net income to taxable income:

	For the year ended
	December 31,
	2016		2015		2014
	(in thousands)
Financial statement (“book”) net income	$	4,951	$	3,773	$	1,025
Book/Tax differences from depreciation and amortization		(1,411)		(2,513)		(2,884)
Book/Tax differences on tax free exchanges		1,257		501		(827)
Book/Tax differences from Investment Properties		(279)		(74)		307
Increase (Decrease) in prepaid rent and allowances		375		413		269
Other		—		6		2
Taxable income (loss)	$	4,893	$	2,106	$	(2,108)

Allowable accelerated depreciation deductions were extended through 2016. Future tax law changes may significantly affect taxable income.

The Partnership adopted the amended provisions related to uncertain tax provisions of ASC 740, Income Taxes. As a result of the implementation of the guidance, the Partnership recognized no material adjustments regarding its tax accounting treatment. The Partnership expects to recognize interest and penalties related to uncertain tax positions, if any, as income tax expense, which would be included in general and administrative expense.

In the normal course of business the Partnership or one of its subsidiaries is subject to examination by federal, state and local jurisdictions in which it operates, where applicable. As of December 31, 2016, the tax years that generally remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2013 forward.