Goldfield (GV)

Note 7 – Income Taxes

As of March 31, 2009, the Company had alternative minimum tax (“AMT”) credit carryforwards of approximately $775,000, which are available to reduce future federal income taxes over an indefinite period and inventory basis differences of $1.5 million, which will be recognized mainly as condominium units are sold. In addition, the Company had net operating loss carryforwards from Florida of $2.4 million available to offset future taxable income from Florida, which if unused will expire in 2027 and 2028.

SFAS No. 109, “Accounting for Income Taxes,” requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance, if based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on the SFAS No. 109 more-likely-than-not realization threshold criterion. In the assessment for a valuation allowance, appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with loss carryforwards not expiring unused and tax planning alternatives.

Based upon an evaluation of all available evidence, we established a valuation allowance against our deferred tax assets totaling $1.9 million during the fourth quarter of 2008. Our cumulative loss position over the evaluation period and the current uncertain and volatile market conditions were significant negative evidence in assessing the need for a valuation allowance. In future periods, the allowance could be reduced based on sufficient evidence indicating that it is more likely than not that a portion of our deferred tax assets will be realized. The net deferred tax asset valuation allowance was $2.0 million as of March 31, 2009, compared to $1.9 million as of December 31, 2008.

The following table presents our provision for income tax expense (benefit) and effective income tax rate (benefit) from continuing operations for the three months ended March 31 as indicated:

The Company’s expected tax rate for the year ending December 31, 2009, which was calculated based on our estimated annual operating results for the year, is 0%. The expected tax rate of 0% differs from the federal statutory rate of 34% due to an anticipated loss for the year and pursuant to the requirements of SFAS No. 109, tax benefits are not recognized on anticipated losses. The effective tax rate for the three months ended March 31, 2009 of 2.3% differs from the expected tax rate of 0% due to state income taxes.

In compliance with FIN No. 48 “Accounting for Uncertainty in Income Taxes – an Interpretation of SFAS No. 109,” the Company had gross unrecognized tax benefits of $44,000 as of both March 31, 2009 and December 31, 2008. The Company’s federal statute of limitation has expired for years prior to 2005 and relevant state statutes vary. The Company believes that it is reasonably possible that the liability for unrecognized tax benefits related to certain state income tax matters may be settled within the next twelve months. The Company is currently not under any tax audits or examinations and does not expect the assessment of any significant additional tax in excess of amounts reserved.

The Company accrues interest and penalties related to unrecognized tax benefits as interest expense and other general and administrative expense, respectively, and not as a component of income taxes.

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Income Taxes

The following table presents our provision for income tax expense (benefit) and effective income tax rate (benefit) from continuing operations for the three months ended March 31 as indicated:

Our expected tax rate for the year ending December 31, 2009, which was calculated based on our estimated annual operating results for the year, is 0%. The expected tax rate of 0% differs from the federal statutory rate of 34% due to an anticipated loss for the year and pursuant to the requirements of SFAS No. 109, tax benefits are not recognized on anticipated losses. The effective tax rate for the three months ended March 31, 2009 of 2.3% differs from the expected tax rate of 0% due to state income taxes.

Income Taxes

The following table presents our provision for income tax and effective income tax rate from continuing operations for the years ended December 31 as indicated:

Our effective tax rate for the year ended December 31, 2008 of (0.4)% differs from the statutory rate of 34.0% primarily due to the valuation allowance. Our effective tax rate for the year ended December 31, 2007 was (34.2)%, which was essentially the same as the statutory rate. The small difference is mainly due to the effect of state income taxes being offset by non-deductible expenses.

Discontinued Operations

Through certain of our subsidiaries and predecessor companies, we were previously engaged in mining activities, and all such activities were discontinued or disposed of prior to 2003. In September 2003, we were notified by the EPA that we are a PRP with respect to possible investigation and removal activities at a mine formerly owned by us. Please see note 6 to the consolidated financial statements for a discussion on this matter and the related gain (loss) recognized in the years ended December 31, 2008 and 2007.

The following table sets forth summary operating results of discontinued operations for the years ended December 31 as indicated:

The following table presents our provision for income tax and effective income tax rate from discontinued operations for the years ended December 31 as indicated:

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Our effective tax rate related to discontinued operations for the year ended December 31, 2008 of (1.6)% differs from the statutory rate of 34% primarily due to the valuation allowance. Our effective tax rate related to discontinued operations for the year ended December 31, 2007 of (37.6)%. The effective tax rate differs from the federal statutory rate primarily due to state income taxes.

Income Taxes

The following
table presents our provision for income tax and effective income tax rate from continuing operations for the years ended December 31 as indicated:

Our effective tax rate for the year ended December 31, 2008 of (0.4)% differs from the statutory rate of
34.0% primarily due to the valuation allowance. Our effective tax rate for the year ended December 31, 2007 was (34.2)%, which was essentially the same as the statutory rate. The small difference is mainly due to the effect of state income
taxes being offset by non-deductible expenses.

Discontinued Operations

FACE="Times New Roman" SIZE="2">Through certain of our subsidiaries and predecessor companies, we were previously engaged in mining activities, and all such activities were discontinued or disposed of prior to 2003. In September 2003, we were
notified by the EPA that we are a PRP with respect to possible investigation and removal activities at a mine formerly owned by us. Please see note 6 to the consolidated financial statements for a discussion on this matter and the related gain
(loss) recognized in the years ended December 31, 2008 and 2007.

The following table sets forth summary operating results of discontinued operations
for the years ended December 31 as indicated:

The following table presents our provision for income tax and effective income tax rate from discontinued
operations for the years ended December 31 as indicated:

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Our effective tax rate related to discontinued operations for the year ended December 31, 2008 of (1.6)% differs
from the statutory rate of 34% primarily due to the valuation allowance. Our effective tax rate related to discontinued operations for the year ended December 31, 2007 of (37.6)%. The effective tax rate differs from the federal statutory rate
primarily due to state income taxes.

Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

On January 1, 2007, the Company adopted FIN No. 48 “Accounting for Uncertainty in Income Taxes – an Interpretation of SFAS No. 109,” which clarifies the accounting and reporting for uncertainties in income tax law. This Interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. FIN No. 48 prescribes a more-likely-than-not threshold of a tax position taken or expected to be taken in a tax return being sustained on audit based on the technical merits for financial statement recognition and measurement.

Income Taxes

SIZE="2">The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Income Taxes

The following table presents our provision for income tax and effective income tax rate from continuing operations for the three months ended September 30 as indicated:

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Our expected tax rate for the year ending December 31, 2008, which was calculated based on the estimated annual operating results for the year, is (36.0)%. The effective tax rate differs from the federal statutory rate of (34)% for the three months ended September 30, 2008 primarily due to state income taxes.

Discontinued Operations

Effective November 30, 2002, we completed the sale of the capital stock of our mining subsidiaries. Following the sale, in September 2003, we were notified by the EPA that we are a PRP with respect to possible investigation and removal activities at a mine we previously owned, as described in note 5 to the consolidated financial statements contained herein. During the three months ended September 30, 2008 a net increase of $149,000 was recorded to the provision for remediation, mainly due to a decrease in the expected reimbursable amount from the insurers. In addition, during the three months ended September 30, 2007, a reduction of $20,000 was recorded in the amount expected to be reimbursed by one of our former general liability insurance carriers.

Income Taxes

The following table presents our provision for income tax and effective income tax rate from continuing operations for the three months ended June 30 as indicated:

The effective tax rate differs from the federal statutory rate of (34%) for the three months ended June 30, 2008 primarily due to state income taxes.

Income Taxes

The following table presents our provision for income tax and effective income tax rate from continuing operations for the three months ended March 31 as indicated:

Our expected tax rate for the year ending December 31, 2008, which was calculated based on the estimated annual operating results for the year, is (34.3)%, which is essentially the same as the statutory rate (benefit) of (34.0)%.

Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Income Taxes

Income Taxes

The following table presents our provision (benefit) for income taxes and effective income tax rate (benefit) from continuing operations for the years ended December 31 as indicated:

The Company’s effective tax rate for the year ended December 31, 2005 was 39.9%, differing from the federal statutory rate of 34.0% by 5.9%. Of the 5.9% difference, 1.2% is due to the impact of non-deductible expenses on annual income, 1.9% is due to state income taxes, and 2.8% is due to the reconciliation of actual amounts reported on the previous year’s tax return. The Company’s effective tax rate (benefit) for the year ended December 31, 2004 was (21.7%), differing from the federal statutory rate (benefit) of (34.0%) by 12.3%. Of the 12.3% difference, 14.8% is due to the impact of non-deductible expenses in proportion to the annual income (loss), 1.3% is due to state income taxes and (3.8%) is due to the reconciliation of actual amounts reported on the previous year’s tax return.

Discontinued Operations 

On December 4, 2002, effective November 30, 2002, the Company completed the sale of the capital stock of its mining subsidiaries.

Following the sale, in September 2003, the Company was notified by the EPA that it is a PRP with respect to possible investigation and removal activities at a mine formerly owned by the Company. Please see note 6 of the notes to the consolidated financial statements for a discussion on this matter.

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Income Taxes

The following table presents our provision for income tax and effective income tax rate from continuing operations for the three months ended June 30 as indicated:

The Company’s effective tax rate for the three months ended June 30, 2006 was 38.5%. This is the Company’s expected tax rate for the year ending December 31, 2006, which was calculated based on the estimated annual operating results for the year. The effective tax rate differs from the federal statutory rate of 34% for the three months ended June 30, 2006 largely due to state income taxes. The Company’s effective tax rate for the three months ended June 30, 2005 was 39.5%. The effective tax rate differs from the federal statutory rate for the three months ended June 30, 2005 largely due to state income taxes.

Discontinued Operations 

On December 4, 2002, effective November 30, 2002, the Company completed the sale of the capital stock of its mining subsidiaries.

Following the sale, in September 2003, the Company was notified by the EPA that it is a PRP with respect to possible investigation and removal activities at a mine previously owned by the Company, as described in note 5 of the notes to the consolidated financial statements contained herein.

     Income Taxes

The following table presents our provision for income tax and effective income tax rate from continuing operations for the three months ended March 31 as indicated:

The Company’s effective tax rate for the three months ended March 31, 2006 was 38.5%. This is the Company’s expected tax rate for the year ending December 31, 2006, which was calculated based on the estimated annual operating results for the year. The effective tax rate differs from the federal statutory rate of 34% for the three months ended March 31, 2006, largely due to state income taxes. The Company’s effective tax rate for the three months ended March 31, 2005 was 38.0%. The effective tax rate differs from the federal statutory rate for the three months ended March 31, 2005, largely due to state income taxes.

     Discontinued Operations 

On December 4, 2002, effective November 30, 2002, the Company completed the sale of the capital stock of its mining subsidiaries.

Following the sale, in September 2003, the Company was notified by the EPA that it is a PRP with respect to possible investigation and removal activities at a mine previously owned by the Company, as described in note 5 of the notes to the consolidated financial statements contained herein.

     Income Taxes

The following table presents our provision (benefit) for income taxes and effective income tax rate (benefit) for the years ended December 31 as indicated:

The Company’s effective tax rate (benefit) for the year ended December 31, 2004 was (21.7%) differing from the statutory rate (benefit) of (34.0%) by 12.3%. Of the 12.3% difference, 14.8% is due to the impact of non-deductible expenses in proportion to the annual income (loss), 1.3% is due to state income taxes, and (3.8%) is due to the reconciliation of actual amounts reported on the previous year’s tax return. The Company’s effective tax rate for the year ended December 31, 2003 was 43.1% differing from the statutory rate of 34.0% by 9.1%. Of the 9.1% difference, 6.6% is due to the impact of non-deductible expenses on annual income, 3.0% is due to state income taxes, and (0.5%) is due to the reconciliation of actual amounts reported on the previous year’s tax return.

Discontinued Operations 

On December 4, 2002, effective November 30, 2002, the Company completed the sale of the capital stock of its mining subsidiaries.

Following the sale, in September 2003, the Company was notified by the EPA that it is a PRP with respect to possible investigation and removal activities at a mine formerly owned by the Company. Please see note 5 of notes to the consolidated financial statements for a discussion on this matter and the related provision recognized in the year ended December 31, 2004.

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