16 Deferred Tax Assets Components of the deferred tax asset of Biosante Pharmaceuticals, Inc., are shown in Exhibit 2.10. The company had no deferred tax liabilities. REQUIRED a. At the end of 2008, the largest deferred tax asset is for net operating loss carryforwards. (Net operating loss carryforwards, also referred to as tax loss carryforwards, are amounts reported as taxable losses on tax filings. Because the tax authorities generally do not "pay" corporations for incurring losses, companies are allowed to *carry forward"taxable losses to future years to offset taxable income. These future tax benefits give rise to deferred tax assets.) As of the end of 2008, what is the dollar amount of the company's net operating loss carryforwards? $62,542,000 What is the dollar amount of the deferred tax asset for the net operating loss carryforwards? b. Biosante has gross deferred tax assets of $28,946,363. However, the net deferred tax assets balance is zero Explain C. The valuation allowance for the deferred tax asset increased from $21,818,084 to $28,946,363 between 2007 and 2008. How did this change affect the company's net income? (Propiem 2.10) 2008 2007 + Net operating loss carryforwards Tax basis in intangible assets Research and development credits Stock option expense Other Gross Deferred Tax Asset Valuation allowance Net Deferred Tax Asset $ 23,609,594 403,498 3,415,143 1,462,065 56,063 $ 28,946,363 (28,946,363) $ 17,588,392 538,819 2,569,848 1,017,790 103,235 $ 21,818,084 (21,818,084) 0 0 Source: Biosante Pharmaceuticals, Inc., Form 10-K, for the fiscal year ended December 31, 2008. December 31, 2008, the company had approximately $62,542,000 of net operating loss carryforwards available to luce future taxable income for a period of up to 20 years. The net operating loss carryforwards expire in 2018- 28. The net operating loss carryforwards as well as amortization of various intangibles, principally acquired rocess research and development, generate deferred tax benefits that have been recorded as deferred tax assets are entirely offset by a tax valuation allowance. The valuation allowance has been provided at 100% to reduce the erred tax assets to zero, the amount management believes is more likely than not to be realized. In addition, the mpany has provided a full valuation allowance against $3,415,143 of research and development credits, which are ilable to reduce future income taxes, if any, through 2028. 16 Deferred Tax Assets Components of the deferred tax asset of Biosante Pharmaceuticals, Inc., are shown in Exhibit 2.10. The company had no deferred tax liabilities. REQUIRED a. At the end of 2008, the largest deferred tax asset is for net operating loss carryforwards. (Net operating loss carryforwards, also referred to as tax loss carryforwards, are amounts reported as taxable losses on tax filings. Because the tax authorities generally do not "pay" corporations for incurring losses, companies are allowed to *carry forward"taxable losses to future years to offset taxable income. These future tax benefits give rise to deferred tax assets.) As of the end of 2008, what is the dollar amount of the company's net operating loss carryforwards? $62,542,000 What is the dollar amount of the deferred tax asset for the net operating loss carryforwards? b. Biosante has gross deferred tax assets of $28,946,363. However, the net deferred tax assets balance is zero Explain C. The valuation allowance for the deferred tax asset increased from $21,818,084 to $28,946,363 between 2007 and 2008. How did this change affect the company's net income? (Propiem 2.10) 2008 2007 + Net operating loss carryforwards Tax basis in intangible assets Research and development credits Stock option expense Other Gross Deferred Tax Asset Valuation allowance Net Deferred Tax Asset $ 23,609,594 403,498 3,415,143 1,462,065 56,063 $ 28,946,363 (28,946,363) $ 17,588,392 538,819 2,569,848 1,017,790 103,235 $ 21,818,084 (21,818,084) 0 0 Source: Biosante Pharmaceuticals, Inc., Form 10-K, for the fiscal year ended December 31, 2008. December 31, 2008, the company had approximately $62,542,000 of net operating loss carryforwards available to luce future taxable income for a period of up to 20 years. The net operating loss carryforwards expire in 2018- 28. The net operating loss carryforwards as well as amortization of various intangibles, principally acquired rocess research and development, generate deferred tax benefits that have been recorded as deferred tax assets are entirely offset by a tax valuation allowance. The valuation allowance has been provided at 100% to reduce the erred tax assets to zero, the amount management believes is more likely than not to be realized. In addition, the mpany has provided a full valuation allowance against $3,415,143 of research and development credits, which are ilable to reduce future income taxes, if any, through 2028