NextTrip, Inc. Income Taxes Disclosure

NOTE 11 – Income Taxes

 

The Company accounts for income taxes in accordance with ASC Topic No. 740. This standard requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting methods and any available net operating loss or tax credit carryforwards. Income tax returns open for examination by the Internal Revenue Service consist of tax years ended February 28, 2021 through 2023.

 

 

The Company had available at February 28, 2025 unused operating loss carryforwards of approximately $54,763,000, which may be applied against future taxable income. Losses incurred between 2010 and 2017, which total $9,820,000, expire in various years through 2038, and the remainder of the losses, which total $44,943,000, can be carried forward indefinitely. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reported purposes are subject to annual limitations. Due to the change in ownership as a result of the reverse acquisition, the Company’s net operating loss carryforwards may be limited as to use in future years, and any such limitation will be determined on a year-to-year basis. The amount and ultimate realization of the benefits from the operating loss carryforwards for income tax purposes is dependent, in part, upon the tax laws in effect, the future earnings of the Company and other future events, the effects of which cannot be determined. Because of the uncertainty surrounding the realization of the loss carryforwards, the Company has established a valuation allowance equal to the tax effect of the loss carryforwards and other temporary differences of approximately $11,816,400 and $11,250,300 at February 28, 2025, and February 29, 2024, respectively, and, therefore, no deferred tax asset has been recognized for the loss carryforwards.

 

Deferred tax assets are comprised of the following:

Schedule of Deferred Tax Assets 

		2025				2024
Deferred tax assets:
NOL carryover		$	11,500,300			$	9,226,100
Related party accruals			12,900				173,900
Payroll accruals			47,800				77,800
Deferred tax liabilities:
Depreciation			255,400				1,772,500
Valuation allowance			(11,816,400	)			(11,250,300	)
Net deferred tax asset (liability)		$	-			$	-

 

The reconciliation of the provision for income taxes computed at the U.S. federal statutory tax rate (21%) to the Company’s effective tax rate for the years ended February 28, 2025, and February 29, 2024 is as follows:

Schedule of Reconciliation of Provision for Income Taxes 

		2025				2024
Book loss		$	(2,141,700	)		$	(1,541,200	)
Depreciation			(197,100	)			270,100
Meals & entertainment			-				300
Preferred dividends			16,506				422,842
Loss on NextPlay note receivable			210,000				-
Stock compensation			14,254				24,468
Loss on asset disposal			229				67,274
Accrued payroll			(29,991	)			51,857
Related party accruals			(161,018	)			114,928
Change in valuation allowance			2,288,820				589,431
Provision for Income Taxes		$	-			$	-