| INCOME TAXES | 8. INCOME TAXES The income tax provision consisted of the following for the years ended November 30: 2016 2015 Current Provision: Federal $ 22,000 $ 750,000 State 28,000 31,000 50,000 781,000 Deferred federal tax expense (benefit) 60,000 (91,000 ) Total $ 110,000 $ 690,000 The provision for income taxes differs from that computed at the federal statutory corporate tax rate as follows: 2016 2015 Tax at 34% statutory rate $ 117,000 $ 743,000 State income taxes, net of federal benefit 18,000 21,000 Section 199 Adjustment (17,000 ) (85,000 ) Permanent differences and other (8,000 ) 11,000 Income tax provision $ 110,000 $ 690,000 The components of deferred tax assets and liabilities were as follows: 2016 2015 Current Deferred Taxes Inventory $ 586,000 $ 605,000 Deferred revenue, sales returns and warranty 26,000 17,000 Other accrued liabilities 78,000 71,000 Current deferred tax asset 690,000 693,000 Non-current Deferred Taxes Depreciation (417,000 ) (360,000 ) Net deferred taxes $ 273,000 $ 333,000 In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax-planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences. |
