Components of the deferred tax asset of Biosante Pharmaceuticals are shown in Exhibit 2.12. 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? What is the dollar amount of the deferred tax asset for the net operating loss carryforwards? Describe how these two amounts are related.
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?