LIFE PARTNERS HOLDINGS INC - FORM 10-K - XML - IDEA: XBRL DOCUMENT - May 11, 2012

(14) INCOME TAXES

Total income tax expense was allocated for the fiscal 2012, 2011 and 2010, as follows:

Income tax expense was made up of the following components at February 29, 2012, and February 28, 2011 and 2010:

Income tax expense differed from amounts computed by applying the Federal income tax rate to pre-tax earnings for fiscal 2012, 2011 and 2010, as a result of the following:

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:

In fiscal 2010, we recorded a valuation allowance of $611,298 for capital losses resulting from other-than-temporary impairments. This amount represents capital losses that we were not able to deduct until we had corresponding capital gains to apply the losses against. In fiscal 2011, we had capital gains of $82,031. This reduced the valuation allowance to $582,587 at February 28, 2011. In fiscal 2012, we had capital losses of $173,760 that we were not able to deduct until we had corresponding capital gains, against which to apply the losses. This increased the valuation allowance to $643,403 at February 29, 2012.

With few exceptions, we are no longer subject to Federal, state or local examinations by tax authorities for fiscal years 2007 and prior.

Accounting for Uncertainty in Income Taxes.  In June 2006, the FASB issued guidance contained in ASC 740, Income Taxes (formerly FIN 48). The guidance is intended to clarify the accounting for uncertainty in income taxes recognized in a company’s financial statements and prescribes the recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Under ASC 740, evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

At February 29, 2012, we determined that it is more likely than not that we will be assessed additional Texas Margin Tax for non-deductibility of certain payments in past and current periods included in our calculation of the Texas Margin Tax taxable basis. At February 29, 2012, and February 28, 2011, the amount accrued for this uncertain tax position was $123,374.