XML 39 R22.htm IDEA: XBRL DOCUMENT v3.25.1
Note 14 - Income Tax Provision
 12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

14. INCOME TAX PROVISION

 

The Company accounts for income taxes under the asset and liability method under which it recognizes deferred income taxes, net of valuation allowances, if any, for the estimated future tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities and its tax bases and net operating loss and tax credit carryforwards.  The Company may, from time to time, be assessed interest or penalties by tax jurisdictions, although any such assessments historically have been minimal and immaterial to its financial results.  In the event the Company has such an assessment from a taxing authority, it is its accounting policy to recognize any interest and penalties as a component of income tax.  We, together with one of our entities, have elected to treat certain subsidiaries as a taxable REIT subsidiary (a “TRS”) for federal income tax purposes. Certain activities that we undertake must be conducted by a TRS, such as non-customary services for our tenants, and holding assets that we cannot hold directly. A TRS is subject to federal and state income taxes. The Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. Neither the Company nor its subsidiaries have been assessed any significant interest or penalties for tax positions by any tax jurisdictions.

 

 

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

 

The provision (benefit) for income taxes related to our TRS entities consists of the following for the years ended December 31, 2024 and 2023:

 

  

December 31, 2024

  

December 31, 2023

 

Current income tax expense (benefit)

        

Federal

 $(17,835) $100,036 

State

  30,572   (89,054)

Total current income tax expense (benefit)

  12,737   10,982 
         

Deferred income tax expense (benefit)

        

Federal

  40,279   (289,480)

State

  7,839   (57,282)

Total deferred income tax expense (benefit)

  48,118   (346,762)
         

Change in Valuation Allowance

  —   — 

Total income tax (benefit) expense

 $60,855  $(335,780)

 

Income tax provision differed from the amount computed by applying the U.S. federal income tax rate of 21% to income (loss) before taxes, as follows:

 

  

December 31, 2024

  

December 31, 2023

 
                 

Taxes at federal statutory rate

 $103,369   21% $1,370,497   21%

State Taxes

  48,564   10%  21,821   0%

Deconsolidation adjustment

  —   0%  (1,303,720)  -20%

True Up Adjustment

  (91,078)  -19%  (424,378)  -7%
                 

Total income tax (benefit) expense

 $60,855   12% $(335,780)  -5%

 

The tax effects of temporary differences which give rise to significant portions of deferred tax assets are as follows as of December 31:

 

  

For The Years Ended

 
  

2024

  

2023

 

Deferred Tax Assets

        

Deferred Revenue

 $—  $42,792 

State Taxes

  8   781 

Fixed Asset

  243,662   278,646 

Start up costs

  54,974   24,543 

Total deferred tax asset

  298,644   346,762 
         

Deferred Tax Liabilities

        

Basis difference in investments

  —   — 

Net deferred tax assets

  298,644   346,762 
         

Valuation allowance

  —   — 

Net deferred tax assets (liability)

 $298,644  $346,762 

 

Management assessed the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets.  A significant piece of objective positive evidence evaluated was the history of cumulative income for Model Homes Inc. incurred over the three-year period ended December 31, 2023. Such objective evidence provides support for no valuation allowance to be recorded for the year ended December 31, 2023.

 

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions.  The Company is no longer subject to U.S. federal, state, and local or non-U.S. income tax examinations by tax authorities for years before 2020.

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which improves income tax disclosures through enhanced disaggregation within the rate reconciliation table and disaggregation of income taxes paid by jurisdiction. The amendment is effective for fiscal years beginning after December 15, 2024 and early adoption is permitted. The amendments should be applied on a prospective basis, however, retrospective application is permitted. The adoption of this ASU only impacted disclosures with no impact on the Company’s consolidated financial statements.