INNSUITES HOSPITALITY TRUST Income Taxes Disclosure

18. FEDERAL INCOME TAXES

 

The Trust and subsidiaries have income tax net operating loss carryforward of approximately $7M at January 31, 2025. In 2005, the Trust had an ownership change within the meaning of the Internal Revenue Code Section 382. However, the Trust determined that such ownership change would not have a material impact on the future use of the net operating losses.

 

The Trust amended the Federal and State Tax Returns for tax years 2017 and 2018, resulting in a recalculation of the net operating loss carry-forward. The impact of the amended returns are reflected in the below data.

 

Total and net deferred income tax assets at January 31,

 

SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

		2025				2024
Net operating loss carryforwards		$	3,053,465			$	2,113,926
Bad debt allowance			-				-
Accrued expenses			(2,622	)			(2,622	)
Syndications			2,923,000				2,923,000
Prepaid insurance			95,532				64,963
Alternative minimum tax credit			51,000				51,000
Total deferred tax asset			6,120,375				5,150,267
Deferred income tax liability associated with book/tax			(1,785,672	)			(1,848,478	)
Net deferred income tax asset			4,334,703				3,301,790
Valuation Allowance			(4,334,703	)			(3,301,790	)
Net deferred income tax			-				-

 

Income taxes for the year ended January 31,

 

SCHEDULE OF INCOME TAX PROVISION

		2025				2024
Current income tax provision (benefit)			355				(100	)
Deferred income tax benefit			(392,348	)			(213,744	)
Change in valuation allowance			392,348				213,744
Net income tax expense (benefit)			355				(100	)

 

The differences between the statutory and effective tax rates are as follows for the year ended January 31,

 

SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION

		Amount				Percent
		2025
		Amount				Percent
Federal statutory rates		$	(248,329	)			21	%
State income taxes			(61,670	)			5	%
Change in valuation allowance			(428,200	)			36	%
True-up in prior year returns			-				0	%
Effective Rate			-				62	%

 

The differences between the statutory and effective tax rates are as follows for the year ended January 31,

 

		Amount				Percent
		2024
		Amount				Percent
Federal statutory rates		$	(236,478	)			21	%
State income taxes			(58,727	)			5	%
Change in valuation allowance			(213,700	)			19	%
True-up in prior year returns			-				0	%
Effective Rate			-				45	%

 

The Trust is taxed as a C-Corporation. The Trust’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Trust has received various IRS and state tax jurisdiction notices which the Trust in the process of responding to in which management believes the notices are without merit and expect full remediation of all tax notices. The Trust and subsidiaries have deferred tax assets of $6.1 million which includes cumulative net operating loss carryforwards of $3.1 million and syndications of $2.9 million, and deferred tax liability associated with book/tax differences of $1.8 million as of January 31, 2025. We have evaluated the net deferred tax asset and determined that it is not more likely than not we will receive full benefit from the net operating loss carryforwards. Therefore, we have determined a valuation allowance of approximately $4.3 million.