Amazon.com 2006 Annual Report Download - page 80

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AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
U.S. and international components of income before income taxes were as follows:
Year Ended December 31,
2006 2005 2004
(in millions)
U.S. .............................................................. $396 $ 601 $358
International ....................................................... (19) (173) (3)
Income before income taxes ....................................... $377 $ 428 $355
The significant components of deferred income tax expense (benefit) attributable to income from operations
for 2006, 2005, and 2004 were as follows:
Year Ended December 31,
2006 2005 2004
(in millions)
Deferred tax expense exclusive of the effect of the items listed below .......... $ 32 $188 $ 145
Decrease in valuation allowance ........................................ (10) (90) (240)
Tax benefit of net operating and capital loss carryforwards ................... — (28) (162)
Total deferred tax expense (benefit) ................................. $ 22 $ 70 $(257)
Deferred income tax assets and liabilities were as follows:
December 31,
2006 2005
(in millions)
Deferred tax assets:
Net operating losses (1) ................................................... $130 $123
Assets held for investment ................................................. 202 239
Revenue items .......................................................... 20 34
Expense items .......................................................... 121 105
Tax credits ............................................................. 7 24
Total gross deferred tax assets .......................................... 480 525
Less valuation allowance (2) ........................................... (203) (213)
Deferred tax assets, net of valuation allowance ........................ 277 312
Deferred tax liabilities:
Expense items .......................................................... (13) (21)
Deferred tax assets, net of valuation allowance and deferred tax liabilities ....... $264 $291
(1) Presented net of the fully reserved stock-based compensation NOL deferred tax asset of $396 million and
$493 million at December 31, 2006 and 2005. The total deferred tax assets relating to our NOLs at
December 31, 2006 and 2005 were $526 million and $616 million (relating to approximately $1.7 billion
and $1.9 billion of NOLs).
(2) Relates primarily to deferred tax assets that would only be realizable upon the occurrence of future capital
gains.
We have not fully utilized net operating loss carry forwards which were generated in the years 1996 through
2003, so that the statute of limitations for these years remains open for purposes of adjusting the amounts of the
losses carried forward from those years.
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