Income Taxes (Tables)

12 Months Ended

Aug. 31, 2019

Note 4 - Income Taxes

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has net carryforward operating loss of ($240,574) which begins expiring twenty years from when it was incurred. The Company has adopted ASC 740, “Accounting for Income Taxes”, as of its inception. Pursuant to ASC 740 the Company is required to compute tax asset benefits for non-capital losses carried forward. The potential benefit of the net operating loss has not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the loss carried forward in future years.

In December 2017, the Tax Cuts and Jobs Act was enacted, which reduces the U.S. statutory corporate tax rate from a maximum rate of 35% to 21% for tax years beginning after December 31, 2017. The Tax Cuts and Jobs Act resulted in the re-measurement of the federal portion of the Company’s deferred tax assets and valuation allowance as of August 31, 2018 from 35% to the new 21% tax rate.

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years.

Significant components of the Company’s deferred tax assets and liabilities as of August 31, 2019 and 2018 after applying enacted corporate income tax rates, is net operating loss carryforward of $328,510 and $240,574 a valuation allowance of $(68,987) and $(50,521), respectively, which is a total deferred tax asset of $0. The tax filing for the 2018 fiscal year is the only other tax year available for review.

		August 31, 2019	August 31, 2018
Deferred tax asset, generated from net operating loss at statutory rates	$	68,987	$	50,521
Valuation allowance	$	(68,987)		(50,521)
	$	--	$	—

The reconciliation of the effective income tax rate to the federal statutory rate is as follows:

Federal income tax rate	21.0	%
Increase in valuation allowance	(21.0)	%
Effective income tax rate	0.0	%

Luxxo, Inc. 10-K