Note 6 – Income Taxes

UTG and UG file separate federal income tax returns.

Income tax expense (benefit) consists of the following components:

	2015				2014

Current tax		$	747,714			$	3,233,286
Deferred tax			(1,680,429	)			(2,150,359	)
Income tax expense (benefit)		$	(932,715	)		$	1,082,927

The expense for income differed from the amounts computed by applying the applicable United States statutory rate of 35% before income taxes as a result of the following differences:

	2015			2014

Tax computed at statutory rate	$	95,663		$	3,894,334
Changes in taxes due to:
Non-controlling interest		(101,297	)		(1,073,704	)
Current period loss for which no tax benefit was recognized		17,693			17,401
Small company deduction		(552,694	)		(134,653	)
Dividend received deduction		(100,349	)		(1,414,353	)
Other		(291,731	)		(206,098	)
Income tax expense (benefit)	$	(932,715	)	$	1,082,927

The following table summarizes the major components that comprise the deferred tax liability as reflected in the balance sheets:

	2015			2014

Investments	$	(2,735,072	)	$	2,728,928
Cost of insurance acquired		2,849,133			3,166,794
Management/consulting fees		(55,125	)		(57,454	)
Future policy benefits		1,546,770			1,778,105
Deferred gain on sale of subsidiary		2,312,483			2,312,483
Other liabilities		27,406			(127,461	)
Federal tax DAC		(540,128	)		(387,601	)
Deferred tax liability	$	3,405,467		$	9,413,794

At December 31, 2015 and 2014, the Company had gross deferred tax assets of $4,896,464 and $2,405,249, respectively, and gross deferred tax liabilities of $8,301,931 and $11,819,043, respectively, resulting from temporary differences primarily related to the life insurance subsidiary. A valuation allowance is to be provided when it is more likely than not that deferred tax assets will not be realized by the Company. No valuation allowance has been recorded (except as noted below) relating to the Company's deferred tax assets since, in Management's judgment, the Company will more likely than not have sufficient taxable income in future periods to fully realize its existing deferred tax assets.

As of December 31, 2015 and 2014, the Company had a deferred tax asset of $35,094 and $17,401, respectively, relating to a net operating loss carryforward. The Company established an allowance of $35,094 and $17,401 against this deferred tax asset as of December 31, 2015 and 2014, respectively. The Company also has a deferred tax asset of $118,693 and $0 relating to an AMT tax carryforward as of December 31, 2015 and 2014, respectively. The Company established an allowance of $118,693 against this deferred tax asset as of December 31, 2015. The allowances were established based on Management's assessment of the recoverability of these deferred assets.

The Company's Federal income tax returns are periodically audited by the Internal Revenue Service ("IRS"). In February 2011, the IRS audited UTG's 2009 federal income tax return. The examination was closed with no adjustments to the return. There are currently no examinations in process, nor is Management aware of any pending examination by the IRS. The Company follows the accounting guidance for uncertainty in income taxes using the provisions of Financial Accounting Standards Board ("FASB") ASC 740, Income Taxes. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more-likely-than-not the position will be sustained upon examination by the tax authorities. Such tax positions initially and subsequently need to be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. The Company has evaluated its tax positions, expiring statutes of limitations, changes in tax law and new authoritative rulings and believes that no disclosure relative to a provision of income taxes is necessary, at this time, to cover any uncertain tax positions.

The Company classifies interest and penalties on underpayment of income taxes as income tax expense. No interest or penalties were included in the reported income taxes for the years presented. The Company is not aware of any potential or proposed changes to any of its tax filings.