| INCOME TAXES |
INCOME TAXES
CCA and its subsidiaries file a consolidated federal income tax return.
The Company previously adopted the provisions of ASC Subtopic 740-10-25, “Uncertain Tax Positions”. Management believes that there were no unrecognized tax benefits, or tax positions that would result in uncertainty regarding the deductions taken, as of February 29, 2016 and February 28, 2015. ASC Subtopic 740-10-25 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
The charitable contributions portion of the deferred tax asset and the loss carry forward has $178,920 and $9,071,853, respectively, that has been reclassified as a long-term asset, based on an estimate of the amount that will be realizable in periods greater than twelve months from February 29, 2016.
At February 29, 2016 and November 30, 2015, respectively, the Company had temporary differences arising from the following:
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February 29, 2016 |
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Classified As |
Type |
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Amount |
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Deferred Tax |
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Short-Term
Asset |
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Long-Term
Asset (Liability) |
Depreciation |
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$ |
(254,298 |
) |
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$ |
(93,845 |
) |
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$ |
— |
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$ |
(93,845 |
) |
Reserve for bad debts |
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4,102 |
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1,514 |
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|
1,514 |
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— |
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Reserve for returns |
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843,885 |
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311,425 |
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311,425 |
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— |
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Accrued returns |
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315,841 |
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116,557 |
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116,557 |
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— |
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Reserve for obsolete inventory |
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604,176 |
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222,963 |
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222,963 |
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— |
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Vacation accrual |
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54,218 |
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20,009 |
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20,009 |
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— |
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Bonus obligation unpaid |
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24,000 |
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8,857 |
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8,857 |
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— |
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Restructuring costs |
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1,332,508 |
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491,744 |
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491,744 |
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— |
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Charitable contributions |
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724,997 |
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267,550 |
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88,630 |
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178,920 |
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Section 263A costs |
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64,129 |
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23,666 |
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23,666 |
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— |
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Loss carry forward |
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26,984,182 |
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9,958,152 |
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886,299 |
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9,071,853 |
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Net deferred tax asset |
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$ |
11,328,592 |
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$ |
2,171,664 |
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$ |
9,156,928 |
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November 30, 2015 |
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Classified As |
Type |
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Amount |
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Deferred Tax |
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Short-Term
Asset |
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Long-Term
Asset (Liability) |
Depreciation |
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$ |
(250,811 |
) |
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$ |
(92,558 |
) |
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$ |
— |
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$ |
(92,558 |
) |
Reserve for bad debts |
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4,911 |
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1,812 |
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1,812 |
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— |
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Reserve for returns |
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907,777 |
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335,003 |
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335,003 |
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— |
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Accrued Returns |
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407,992 |
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150,564 |
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150,564 |
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— |
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Reserve for obsolete inventory |
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821,259 |
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303,075 |
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303,075 |
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— |
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Vacation accrual |
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35,955 |
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13,269 |
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13,269 |
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— |
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Bonus obligation unpaid |
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24,000 |
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8,857 |
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8,857 |
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— |
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Restructuring costs |
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1,264,218 |
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466,544 |
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466,544 |
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— |
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Charitable contributions |
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734,643 |
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271,109 |
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86,402 |
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184,707 |
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Section 263A costs |
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67,129 |
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24,773 |
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24,773 |
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— |
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Loss carry forward |
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27,022,986 |
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9,972,473 |
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864,023 |
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9,108,450 |
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Net deferred tax asset |
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$ |
11,454,921 |
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$ |
2,254,322 |
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$ |
9,200,599 |
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Income tax expense (benefit) is made up of the following components:
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Three Months Ended |
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February 29, 2016 |
February 28, 2015 |
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Continuing Operations |
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Current tax - Federal |
$ |
— |
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$ |
— |
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Current tax - State & Local |
2,367 |
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2,000 |
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Deferred tax |
129,855 |
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38,988 |
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Tax - Continuing Operations |
$ |
132,222 |
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$ |
40,988 |
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Discontinued Operations |
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Current tax - Federal |
— |
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— |
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Current tax - State & Local |
— |
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— |
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Deferred tax |
(3,525 |
) |
— |
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Tax - Discontinued Operations |
$ |
(3,525 |
) |
$ |
— |
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Prepaid and refundable income taxes are made up of the following components:
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Prepaid and refundable income taxes |
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Federal |
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State &
Local |
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Total |
February 29, 2016 |
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$ |
— |
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$ |
73,834 |
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$ |
73,834 |
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November 30, 2015 |
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$ |
— |
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$ |
70,056 |
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$ |
70,056 |
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A reconciliation of the provision for income taxes computed at the statutory rate to the effective rate for the three months ended February 29, 2016, and February 28, 2015 is as follows:
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Three Months Ended |
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Three Months Ended |
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February 29, 2016 |
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February 28, 2015 |
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Amount |
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Percent of Pretax Income |
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Amount |
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Percent of Pretax Income |
Continuing Operations |
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Provision for income taxes at federal statutory rate |
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$ |
115,995 |
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34.00 |
% |
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$ |
33,523 |
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34.00 |
% |
Changes in provision for income taxes resulting from: |
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State income taxes, net of federal income tax benefit |
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9,894 |
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2.90 |
% |
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2,859 |
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2.90 |
% |
Non-deductible expenses and other adjustments |
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6,333 |
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1.86 |
% |
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4,606 |
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4.67 |
% |
Provision for income taxes at effective rate |
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132,222 |
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38.76 |
% |
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40,988 |
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41.57 |
% |
Discontinued Operations |
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Benefit from income taxes at federal statutory rate |
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$ |
(3,093 |
) |
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34.00 |
% |
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$ |
— |
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— |
% |
Changes in benefit from income taxes resulting from: |
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State income taxes, net of federal income tax benefit |
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(264 |
) |
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2.90 |
% |
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— |
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— |
% |
Non-deductible expenses and other adjustments |
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(168 |
) |
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1.85 |
% |
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— |
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— |
% |
Benefit from income taxes at effective rate for Discontinued Operations |
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$ |
(3,525 |
) |
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38.75 |
% |
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$ |
— |
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— |
% |
Total benefit from income taxes at effective rate |
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$ |
128,697 |
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38.76 |
% |
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$ |
40,988 |
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41.57 |
% |
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