9. Income Taxes

Net operating losses – U.S.

The Company generated net operating losses (“NOLs”) during periods prior to June 30, 2014. The following table summarizes the activity for NOLs for the six months ended June 30, 2014:


NOL, December 31, 2013	$	(140,959	)
U.S. GAAP pretax income		37,428
Income tax differences:
Temporary		8
Permanent		(18,859	)

NOL, June 30, 2014	$	(122,382	)

Deferred tax asset

During the first quarter of 2014, management determined that although realization is not assured, it believed that it is more likely than not that its gross deferred tax asset would be realized. Therefore, it released the valuation allowance previously recorded resulting in an income tax benefit of $13,725 on the Company’s Consolidated Statement of Operations for the period ended March 31, 2014 and a $13,725 net deferred tax asset on the Company’s Consolidated Balance Sheet at March 31, 2014.

At June 30, 2014 and December 31, 2013, $118,895 and $111,635 of the NOLs were generated from stock-based compensation amounts recognized for tax purposes at the time options are exercised (at the intrinsic value) or restricted stock is vested (at fair value of the share price) in excess of amounts previously expensed at the date of grant for U.S. GAAP purposes. Since these amounts cannot be recognized as a deferred tax asset under U.S. GAAP, a deferred tax asset related to this amount is not recorded. In addition, $3,487 of the NOLs are deemed worthless. Therefore, at June 30, 2014, the Company has no recognized deferred tax assets related to NOLs.

During the three and six months ended June 30, 2014, the Company recognized a tax expense of $9,531 and a tax benefit of $4,194. During the six months ended June 30, 2014, the Company utilized $4,238 of its deferred tax asset and the Company recorded a credit to additional paid-in capital of $5,293 for the amount of NOLs from stock-based compensation utilized to reduce taxes payable during the period.

A summary of the components of the gross and tax affected deferred tax asset as of June 30, 2014 is as follows:


Stock-based compensation	$	15,404
Deferred rent liability		5,369
Other		109

Total gross deferred tax asset		20,882
Income tax rate		45.43	%

Tax affected	$	9,487

Net operating losses – U.K.

During the three months ended June 30, 2014, the U.K. subsidiaries of WisdomTree Investments, Inc. have generated $816 of NOLs. At June 30, 2014 a deferred tax asset related to these NOLs has been fully offset by a valuation allowance of $163.