INCOME TAXES

12 Months Ended

Sep. 30, 2013

The Company has net operating loss carryforwards totaling approximately $17,895,000 at September 30, 2013, expiring through 2033. Utilization of these net operating losses may be limited due to potential ownership changes under the Internal Revenue Code.

Significant deferred tax assets at September 30, 2013 and 2012 are approximately as follows:

	September 30, 2013			September 30, 2012
Gross deferred tax assets:
Net operating loss carryforward	$	(7,873,800	)	$	(20,000	)
Total deferred tax assets		7,873,800			20,000
Less: Valuation allowance		(7,873,800	)		(20,000	)
Net deferred tax assets recorded	$	-		$	-

The valuation allowance at September 30, 2012 was $20,000. The increase in valuation allowance during the period ended September 30, 2013 was approximately $7,853,800. 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 income tax assets will not be realized. The ultimate realization of deferred income 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 income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance as of September 30, 2013.

The Company has not filed its Federal or State income tax returns for the years ended September 30, 2013 and 2012. Management plans to file all delinquent tax returns as soon as possible.

Taxpayers who don’t file past due returns may be subject to the following:

Assessment of penalties and interest,

A substitute return may be filed by tax agency based on information the tax agency has from other sources. It will not include any additional exemptions or expenses and may overstate the Company’s tax liability,

Levy on bank account,

Federal and/or state tax lien

Loss of net operating loss carryback; and

Revocation of corporate charter

The income tax returns filed for the tax years from inception would be subject to examination by the relevant taxing authorities.

There was no income tax expense for the years ended September 30, 2013 and 2012 due to the Company’s net losses.

The actual tax benefit differs from the expected tax benefit for the years ended September 30, 2013 and 2012, respectively, (computed by applying the U.S. Federal Corporate tax rate of 34% to income before taxes and a state rate of 10%, for a blended rate of 40.6%) as follows:

	September 30, 2013			September 30, 2012
Expected tax benefit - Federal	$	(6,064,300	)	$	(14,000	)
Expected tax benefit - State		(1,789,500	)		(5,000	)
Change in valuation allowance		7,853,800			19,000
Actual tax expense (benefit)	$	-		$	-

- 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

OLIE INC 10-K