5. INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2012

The tax effect of significant temporary differences representing the net deferred tax liability at December 31, 2012 and 2011 were as follows:

	2012			2011
Net operating loss carry forward	$	2,469,932		$	2,781,864
Well Costs		(6,075	)		(6,075	)
Partnership differences		(160,330	)		(101,289	)
Valuation allowance		(2,303,527	)		(2,674,500	)

Net deferred tax liability	$	–		$	–

U.S. statutory corporate federal income tax rate to pre-tax income

The income tax expense is different from the amount computed by applying the U.S. statutory corporate federal income tax rate to pre-tax income as follows:

	2012					2011
Income tax expense computed at the statutory rate	$	288,756		34.0%		$	87,419		34.0%
Increase (reduction) in tax benefit resulting from:
State and local income taxes, net of federal tax effect							10,285		4.0%
Adjustment for book to tax changes		115,089		6.0%			–		(0.0%	)
Permanent items		–		(0.0%	)		10,317		(0.0%	)
Valuation allowance decrease		(370,973	)	(38.0%	)		(87,387	)	(38.0%	)
Income tax expense	$	32,872		–		$	–		–

- Definition

Tabular disclosure of the information required in the supplementary schedule applicable to management investment companies identifying the tax basis of investments.

+ References+ Details

BAYOU CITY EXPLORATION, INC. 10-K