Notes to the Consolidated Financial Statements Dollar amounts are in thousands of Canadian dollars (except share and per share amounts) 20. Financing Costs 21. Income Taxes The temporary differences associated with investments in subsidiaries for which a deferred tax liability has not been recognized, aggregate  to $Nil (December 31, 2012 ‑ $65,186). The income tax provisions differ from that computed using the statutory rates for the following reasons: 88 Killam ProPerties inc | 2013 Deferred income taxes reflect the net effects of temporary differences between the carrying amount of assets and liabilities for financial  reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred income tax assets  and liabilities are as follows: consolidated statements of  Financial Position consolidated statements of  income 2013 2012 2013 2012 Real estate properties $90,871 $86,980 $3,981 $22,610 loss carryforwards ‑ (3,884) 3,884  (3,884) Convertible debentures 1,324  1,565 (241)  (231) other 1,026  (790) 1,726  739 Net deferred tax expense $9,350 $19,234 Net deferred tax liabilities $93,221 $83,871 Reconciliation of net deferred tax liabilities Balance, beginning of year $83,871 $65,139 recognized in statement of income 9,350  19,234 recognized in equity on issuance of shares ‑ (502) Balance, end of year $93,221 $83,871 For the years ended December 31, 2013 2012 Net income before income taxes $51,733 $73,463 Income tax expense at federal statutory rates 14,977 29.0% 21,069 28.7% Non‑taxable component of fair value gain (4,942)  (9.6)% (3,209) (4.4)% Non‑deductible share compensation 181  0.3% 166 0.2% Impact of change in effective tax rates 1,608  3.1% 578 0.8% other (1,023)  (2.0)% 630 0.9% Tax expense $10,801 20.9% $19,234 26.2% For the years ended December 31, 2013 2012 Mortgage, loan and construction loan interest $30,090 $28,590 Amortization of fair value adjustments on assumed debt (459) (229) Convertible debenture interest 6,687 6,632 subordinated debenture interest 10 703 capitalized interest (1,097) (1,063) $35,231 $34,633