Income Tax

7 Months Ended

Dec. 31, 2020

NOTE 10. INCOME TAX

The Company’s net deferred tax assets is as follows:

	December 31, 2020
Deferred tax assets
Net operating loss carryforward	$	81,219
Total deferred tax assets		81,219
Valuation Allowance		(81,219	)
Deferred tax assets, net of allowance	$	—

The income tax provision consists of the following:

	December 31, 2020
Federal
Current	$	—
Deferred		(81,219	)
State and Local
Current		—
Deferred		—
Change in valuation allowance		81,219
Income tax provision	$	—

As of December 31, 2020, the Company had $386,757 of U.S. federal net operating loss carryovers available to offset future taxable income.

In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of 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 temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the period from June 16, 2020 (inception) through December 31, 2020, the change in the valuation allowance was $81,219.

A reconciliation of the federal income tax rate to the Company’s effective tax rate is as follows:

	December 31, 2020
Statutory federal income tax rate		21.0	%
Meals and entertainment		(0.1	)%
Change in fair value of warrant liability		(10.9	)%
Transaction costs – warrants		(2.9	)%
Fair value in excess of warrant purchase consideration		(5.3	)%
Valuation allowance		(1.8	)%
Income tax provision		0.0	%

The Company files income tax returns in the U.S. federal jurisdiction. The Company’s tax returns for the year ended December 31, 2020 remain open and subject to examination.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details

Software Acquisition Group Inc. II 10-K/A