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7. Income Taxes

12 Months Ended

Dec. 31, 2018

Income Taxes

The Company files a United States federal income tax return and a Canadian branch return on a calendar year basis. The Company and its wholly-owned subsidiaries, Sunshine Biopharma Canada Inc. and Atlas Pharma Inc., have not generated taxable income since inception.

Deferred income taxes arise from the temporary differences between financial statement and income tax recognition of net operating losses. These loss carryovers are limited under the Internal Revenue Code should a significant change in ownership occur. The Company accounts for income taxes pursuant to ASC 740.

Deferred income taxes arise from the temporary differences between financial statement and income tax recognition of net operating losses and other items. Loss carryovers are limited under the Internal Revenue Code should a significant change in ownership occur.

The Company follows FASB Statement Accounting Standards Codification No. 740, “Accounting for Income Taxes”, which requires, among other things, an asset and liability approach to calculating deferred income taxes. The components of the deferred income tax assets and liabilities arising under ASC No. 740 were as follows:

The types of temporary differences between the tax basis of assets and their financial reporting amounts that give rise to a significant portion of the deferred assets and liabilities are as follows:

		December 31, 2018								December 31, 2017
		Temporary Difference				Tax Effect				Temporary Difference				Tax Effect
Deferred tax assets:
Net operating loss US		$	12,156,020			$	2,997,675			$	10,611,921			$	3,932,778
Net operating loss Canada			298,661				80,041				266,498				71,421
Total			12,454,681				3,077,716				10,878,419				4,004,199
Valuation allowance			(12,454,681	)			(3,077,716	)			(10,878,419	)			( 4,004,199	)
Total deferred tax asset			-0-				-0-				-0-				-0-
Net deferred tax asset			-0-				-0-				-				-

Deferred income taxes arise from the temporary differences between financial statement and income tax recognition of net operating losses. These loss carryovers are limited under the Internal Revenue Code should a significant change in ownership occur.

At December 31, 2018 and December 31, 2017, the Company had approximately $12,454,681 and $10,878,419 respectively, in unused federal net operating loss carryforwards, which begin to expire principally in the year 2029. A deferred tax asset at each date of approximately $3,077,716 and $4,004,199 resulting from the loss carryforwards has been offset by a 100% valuation allowance. The change in the valuation allowance for the period ended December 31, 2018 and December 31, 2017 was approximately $926,483 and $342,693, respectively.

A reconciliation of the U.S. statutory federal income tax rate to the effective tax rate is as follows:

		December 31,
		2018				2017
U.S. Federal statutory graduated rate			21.00	%			34.00	%
State income tax rate, net of federal benefit			4.12	%			3.06	%
Net rate			25.12	%			37.06	%
Net operating loss used			0.00	%			0.00	%
Net operating loss for which no tax benefit is currently available			-25.12	%			-37.06	%
			0.00	%			0.00	%

Canada Federal statutory rate			15.00	%			15.00	%
Canada Provincial rate			11.80	%			11.80	%
Net Canada rate			26.80	%			26.80	%
Net operating loss used			0.00	%			0.00	%
Net operating loss for which no tax benefit is currently available (Canada)			-26.80	%			-26.80	%
			0.00	%			0.00	%

The Company’s income tax filings are subject to audit by various taxation authorities. The Company’s open audit periods are 2015, 2016, and 2017, although, the statute of limitations for the 2015 tax year will expire effective March 15, 2019. In evaluating the Company’s provisions and accruals, future taxable income, and reversal of temporary differences, interpretations and tax planning strategies are considered. The Company believes its estimates are appropriate based on current facts and circumstances.