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INCOME TAXES

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

INCOME TAXES

Financial files a consolidated federal income tax return with its subsidiaries.

Income tax (benefit) expense consists of the following:

		Year Ended December 31,
		2016				2015				2014

Federal income tax (benefit) expense:

Current		$	—			$	(228,000	)		$	(22,000	)
Deferred			—				—
			—				(228,000	)			(22,000	)

State and local:

Current			—				(47,000	)			(5,000	)
Deferred			—				—				—
			—				(47,000	)			(5,000	)

Total:
Current			—				(275,000	)			(27,000	)
Deferred			—				—				—
		$	—			$	(275,000	)		$	(27,000	)

Income tax benefit in 2015 and 2014 represent the utilization of the loss from continuing operations against income from discontinued operations, exclusive in 2015 of the capital loss from disposal of the investment in the former affiliate.

Reconciliation between the income tax (benefit) provision and income taxes computed by applying the statutory Federal income tax rate to loss before income taxes is as follows:

		Year Ended December 31,
		2016				2015				2014

Expected income tax (benefit) at statutory Federal tax rate (34%)		$	(1,897,000	)		$	(1,051,000	)		$	(2,251,000	)
State and local taxes, net of Federal tax effect			(400,000	)			(68,000	)			(464,000	)
Increase in valuation allowance			1,704,000	(1)			784,000				2,551,000
Nondeductible transaction costs related to change in control			482,000
Expiration of contribution carryforward			85,000
Permanent difference			19,000				13,000				39,000
Other			7,000				47,000				98,000

Income tax (benefit)		$	—			$	(275,000	)		$	(27,000	)

(1)	Reflects a $264,000 reduction to the valuation allowance and related deferred tax assets as of December 31, 2015.

The principal items giving rise to deferred tax assets (liabilities) are as follows:

		December 31,
		2016				2015
Deferred tax assets:
Net operating loss credit carryforwards		$	10,316,000			$	9,456,000
Capital loss carryforwards							395,000
							—
Employee stock based compensation			237,000				237,000
Retail brokerage accounts (b)			71,000				140,000
Contribution carryover			158,000				178,000
Furniture, equipment and leasehold improvements			312,000				181,000
Accrued settlement liability			340,000				252,000
Investment in former affiliate (a)			—				—
Other			8,000				44,000
Total			11,442,000,				10,883,000

Valuation allowance			(11,442,000	)			(10,002,000	)
Net deferred tax assets			—				881,000

Deferred tax liability:
Receivable from affiliate (a)			—				(881,000	)
			—				—

(a)

Relates to receivable from business sold to affiliate treated as an installment sale for tax purposes.

(b)

Related to acquired retail discount brokerage accounts, which are being amortized over 15 years for tax purposes and have been fully amortized for financial reporting purposes.

Due to cumulative losses incurred by the Company during the current and prior two years, the Company is unable to conclude that it is more likely than not that it will realize its deferred tax asset in excess of the deferred tax liability and, accordingly, has recorded a valuation allowance to fully offset such amount at December 31, 2016 and 2015.

At December 31, 2016, the Company has state net operating loss carryforwards aggregating $17.4 million, which expires from 2029 through 2036. In addition, the Company has federal net operating loss carryforwards of $24.2 million at December 31, 2016, which expires from 2030 through 2036. Utilization of the Company’s net operating loss carryforwards are subject to annual limitations under Internal Revenue Code section 382 due to the change in ownership.

The Company applied the “more-likely-than not” recognition threshold to all tax positions taken or expected to be taken in a tax return which resulted in no unrecognized tax benefits reflected in the financial statements as of December 31, 2016. The Company classifies interest and penalties that would accrue according to the provisions of relevant tax law as income taxes.

Tax years 2013 and thereafter are subject to examination by federal and certain tax authorities. For other states the 2010 through 2013 tax years remain open to examination. The Company is currently under tax examination by New York State for the years 2012 to 2014 and by the state of Illinois for the years 2012 and 2013.