Income Taxes

12 Months Ended

Dec. 31, 2015

11. Income Taxes

The Company accounts for income taxes in accordance with ASC 740. Due to continued losses from operations, since the inception of the Company, no provision for income taxes has been made in these consolidated financial statements. The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes consists of the following:


	Year Ended December 31,
	2015		2014
Federal statutory rate	34.00%		34.00%
Effect of:
Valuation allowance	(34.00%	)	(34.00%	)
Effective income tax rate	—%		—%

The Company is in the process of completing its federal income tax return and does not expense to have an income tax liability due to continued losses from operations. The Company’s estimated income tax provision is summarized below:


	Year Ended December 31,
	2015			2014
Income tax expense (benefit):
Federal - current	$	(29,744	)	$	(686,784	)
Federal - deferred		33,382			349,653
Total		3,638			(337,131	)
Less: valuation allowance		(3,638	)		337,131
Total	$	—		$	—

We will recognize future accrued interest and penalties related to unrecognized tax benefits in income tax expense if incurred. At December 31, 2015 we had no unrecognized tax benefits in income tax expense, and do not expect any for the year ended December 31, 2016. Our income tax returns are no longer subject to Federal tax examinations by tax authorities for years before April 30, 2013.

The estimated components of the deferred tax asset are as follows:


	Year Ended December 31,
	2015			2014
Deferred tax assets:
Net operating loss carryforwards	$	2,175,071		$	2,145,327
Depreciation and amortization		458,137			741,298
Stock compensation expense		1,956,714			1,956,714
Other deferred tax assets		133,513			155,735
Other deferred tax liabilities		(12,345	)		(10,645	)
Total deferred tax assets		4,711,090			4,988,429
Valuation allowance		(4,711,090	)		(4,988,429	)
Net deferred tax assets	$	—		$	—

For the years ended December 31, 2015 and 2014 and the eight-month period ended December 31, 2013 the cumulative deferred tax assets of $4,711,090, $4,988,429 and $3,980,080, respectively, are offset by a valuation allowance due to the uncertainty of the realization of the net operating loss carryforwards. The cumulative income tax loss carryforward, of $6,397,267, if not used, will expire in various years through 2035, and is severely restricted as per the Internal Revenue Code if there is a change in ownership.

Cornerworld Corp 10-K