California
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20-2355224
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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17782
Sky Park Circle
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Irvine,
CA
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92614-6404
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(Address
of principal executive offices)
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(Zip
Code)
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Title
of each class
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Trading
Symbol(s)
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Name of
each exchange on which registered
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No
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PART I.
FINANCIAL INFORMATION
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Item
1.
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Financial
Statements
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Condensed
Balance Sheets
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As of
June 30, 2020 and March 31, 2020
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3
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Condensed
Statements of Operations
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For the
Three Months Ended June 30, 2020 and 2019
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4
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Condensed
Statements of Partners' Equity (Deficit)
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For the
Three Months Ended June 30, 2020 and 2019
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5
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Condensed
Statements of Cash Flows
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For the
Three Months Ended June 30, 2020 and 2019
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6
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Notes
to Condensed Financial Statements
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7
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Item
2.
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Management's
Discussion and Analysis of Financial
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Condition
and Results of Operations
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17
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Item
3.
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Quantitative and Qualitative Disclosures about Market
Risks
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19
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Item
4.
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Controls and Procedures
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19
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PART
II. OTHER INFORMATION
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Item
1.
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Legal
Proceedings
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20
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Item
1A.
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Risk
Factors
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20
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Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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20
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Item
3.
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Defaults
Upon Senior Securities
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20
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Item
4.
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Mine
Safety Disclosures
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20
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Item
5.
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Other
Information
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20
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Item
6.
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Exhibits
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20
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Signatures
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21
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June 30,
2020
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March 31,
2020
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ASSETS
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Cash
and cash equivalents
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$157,225
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$228,845
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Investments
in Local Limited Partnerships, net
(Notes 2 and 3)
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-
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51,621
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Other
assets
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3,800
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-
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Total
Assets
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$161,025
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$280,466
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Liabilities:
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Payables
to Local Limited Partnerships (Note 5)
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$-
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$245,113
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Accrued
fees and expenses due to
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General
Partner and affiliates (Note 3)
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1,471,238
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1,525,166
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Total Liabilities
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1,471,238
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1,770,279
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Partners’
Equity (Deficit):
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General
Partner
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Limited
Partners (25,000 Partnership Units authorized;
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572,021
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571,841
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20,707 Partnership Units issued and
outstanding)
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(1,882,234)
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(2,061,654)
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Total Partners’ Equity (Deficit)
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(1,310,213)
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(1,489,813)
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Total
Liabilities and Partners’ Equity (Deficit)
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$161,025
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$280,466
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2020
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2019
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Three Months
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Three Months
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Operating
income:
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Reporting
fees
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$1,384
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$1,384
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Total
operating income
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1,384
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1,384
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Operating
expenses and loss:
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Asset
management fees (Note 3)
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8,112
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10,394
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Legal
and accounting fees
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22,850
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5,570
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Impairment
loss (Note 2)
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-
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439,109
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Asset
management expenses
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-
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275
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Other
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2,877
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4,149
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Total
operating expenses
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33,839
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459,497
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Loss
from operations
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(32,455)
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(458,113)
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Equity
in losses of Local Limited Partnerships (Note 2)
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-
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(45,434)
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Gain
on sale of Local Limited Partnership
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206,242
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-
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Other
income
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5,543
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-
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Interest
income
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270
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112
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Net
income (loss)
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$179,600
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$(503,435)
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Net
income (loss) allocated to:
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General
Partner
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$180
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$(503)
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Limited
Partners
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$179,420
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$(502,932)
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Net
income (loss) per Partnership Unit
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$9
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$(24)
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Outstanding
weighted Partnership Units
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20,707
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20,727
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2020
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General
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Limited
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Partner
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Partners
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Total
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Partners’
equity (deficit) at March 31, 2020
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$571,841
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$(2,061,654)
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$(1,489,813)
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Net
loss
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180
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179,420
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179,600
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Partners’
equity (deficit) at June 30, 2020
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$572,021
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$(1,882,234)
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$(1,310,213)
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2019
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General
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Limited
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Partner
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Partners
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Total
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Partners’
equity (deficit) at March 31, 2019
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$572,544
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$(1,358,956)
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$(786,412)
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Net
loss
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(503)
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(502,932)
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(503,435)
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Partners’
equity (deficit) at June 30, 2019
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$572,041
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$(1,861,888)
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$(1,289,847)
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2020
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2019
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Cash
flows from operating activities:
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Net
income (loss)
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$179,600
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$(503,435)
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Adjustments
to reconcile net income (loss) to net
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cash
provided by (used in) operating activities:
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Equity
in losses of Local Limited Partnerships
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-
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45,434
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Impairment
loss
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-
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439,109
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Increase
in other assets
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(3,800)
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-
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Gain
on sale of Local Limited Partnerships
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(206,242)
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-
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Increase
(decrease) in accrued fees and expenses due to
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General
Partner and affiliates
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(53,928)
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20,389
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Net
cash provided by (used in) operating activities
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(84,370)
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1,497
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Cash
flows from investing activities:
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Net
proceeds from sale of Local Limited Partnerships
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12,750
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-
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Net
cash provided by investing activities
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12,750
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-
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Net
increase (decrease) in cash and cash equivalents
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(71,620)
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1,497
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Cash
and cash equivalents, beginning of period
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228,845
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224,898
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Cash
and cash equivalents, end of period
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$157,225
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$226,395
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SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
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Taxes
paid
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$-
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$-
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For the Three Months Ended
June 30, 2020
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For the Year
Ended
March 31, 2020
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Investments per
balance sheet, beginning of period
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$51,621
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$666,713
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Equity
in losses of Local Limited Partnerships
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-
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(175,983)
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Sale of Local
Limited Partnerships
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(51,621)
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-
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Impairment
loss
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-
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(439,109)
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Investments
per balance sheet, end of period
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$-
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$51,621
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COMBINED
CONDENSED STATEMENTS OF OPERATIONS
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2020
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2019
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Revenues
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$37,000
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$70,000
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Expenses:
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Interest
expense
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5,000
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8,000
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Depreciation
and amortization
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20,000
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63,000
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Operating
expenses
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30,000
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56,000
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Total
expenses
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55,000
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127,000
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Net
loss
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$(18,000)
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$(57,000)
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Net
loss allocable to the Partnership
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$(18,000)
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$(57,000)
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Net
loss recorded by the Partnership
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$-
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$(45,000)
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June
30,
2020
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March
31,
2020
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Asset management
fee payable
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$1,442,248
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$1,434,136
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Reimbursements for
expenses paid by the General Partner or an affiliate
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28,990
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91,030
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Total
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$1,471,238
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$1,525,166
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Part II.
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Other Information
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Item 1.
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Legal Proceedings
NONE
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Item 1A.
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Risk Factors
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No
material changes in risk factors as previously disclosed in the
Partnership’s Form 10-K.
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Item 2.
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Unregistered Sales of Equity Securities and Use of
Proceeds
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NONE
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Item 3.
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Defaults Upon Senior Securities
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NONE
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Item 4.
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Mine Safety Disclosures
NOT
APPLICABLE
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Item 5.
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Other Information
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NONE
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Item 6.
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Exhibits
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Document and Entity Information |
3 Months Ended |
---|---|
Jun. 30, 2020
shares
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Document And Entity Information | |
Entity Registrant Name | WNC Housing Tax Credit Fund VI, L.P., Series 13 |
Entity Central Index Key | 0001321228 |
Document Type | 10-Q |
Document Period End Date | Jun. 30, 2020 |
Amendment Flag | false |
Current Fiscal Year End Date | --03-31 |
Entity's Reporting Status Current | Yes |
Entity Filer Category | Non-accelerated Filer |
Entity Emerging Growth Company | false |
Entity Small Business | true |
Entity Shell Company | false |
Entity Interactive Data Current | Yes |
Entity Incorporation State Country Code | CA |
Entity File Number | 333-124115 |
Entity Common Stock, Shares Outstanding | 0 |
Document Fiscal Period Focus | Q1 |
Document Fiscal Year Focus | 2021 |
Condensed Balance Sheets (Unaudited) - USD ($) |
Jun. 30, 2020 |
Mar. 31, 2020 |
---|---|---|
ASSETS | ||
Cash and cash equivalents | $ 157,225 | $ 228,845 |
Investments in Local Limited Partnerships, net (Notes 2 and 3) | 0 | 51,621 |
Other assets | 3,800 | 0 |
Total assets | 161,025 | 280,466 |
Liabilities: | ||
Payables to Local Limited Partnerships (Note 5) | 0 | 245,113 |
Accrued fees and expenses due to General Partner and affiliates (Note 3) | 1,471,238 | 1,525,166 |
Total liabilities | 1,471,238 | 1,770,279 |
Partners' Equity (Deficit): | ||
General Partner | 572,021 | 571,841 |
Limited Partners (25,000 Partnership units authorized; 20,707 Partnership units issued and outstanding) | (1,882,234) | (2,061,654) |
Total partners' equity (deficit) | (1,310,213) | (1,489,813) |
Total liabilities and partners' equity (deficit) | $ 161,025 | $ 280,466 |
Condensed Balance Sheets (Unaudited) (Parenthetical) - shares |
Jun. 30, 2020 |
Mar. 31, 2020 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Limited Partners, units authorized | 25,000 | 25,000 |
Limited Partners, units issued | 20,707 | 20,707 |
Limited Partners, units outstanding | 20,707 | 20,707 |
Condensed Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Operating Income: | ||
Reporting fees | $ 1,384 | $ 1,384 |
Total operating income | 1,384 | 1,384 |
Operating Expenses and Loss: | ||
Asset management fees (Note 3) | 8,112 | 10,394 |
Legal and accounting fees | 22,850 | 5,570 |
Impairment loss (Note 2) | 0 | 439,109 |
Asset management expenses | 0 | 275 |
Other | 2,877 | 4,149 |
Total operating expenses and loss | 33,839 | 459,497 |
Loss from operations | (32,455) | (458,113) |
Equity in losses of Local Limited Partnerships (Note 2) | 0 | (45,434) |
Gain on sale of Local Limited Partnership | 206,242 | 0 |
Other income | 5,543 | 0 |
Interest income | 270 | 112 |
Net income (loss) | 179,600 | (503,435) |
Net Income (Loss) Allocated to: | ||
General Partner | 180 | (503) |
Limited Partners | $ 179,420 | $ (502,932) |
Net income (loss) per Partnership unit | $ 9 | $ (24) |
Outstanding weighted Partnership units | 20,707 | 20,727 |
Condensed Statements of Partners' Equity (Deficit) (Unaudited) - USD ($) |
General Partner |
Limited Partners |
Total |
---|---|---|---|
Partners' equity (deficit), beginning at Mar. 31, 2019 | $ 572,544 | $ (1,358,956) | $ (786,412) |
Net income (loss) | (503) | (503,435) | (503,435) |
Partners' equity (deficit), ending at Jun. 30, 2019 | 572,041 | (1,861,888) | (1,289,847) |
Partners' equity (deficit), beginning at Mar. 31, 2020 | 571,841 | (2,061,654) | (1,489,813) |
Net income (loss) | 180 | 179,420 | 179,600 |
Partners' equity (deficit), ending at Jun. 30, 2020 | $ 572,021 | $ (1,882,234) | $ (1,310,213) |
1. Summary of Significant Accounting Policies |
3 Months Ended |
---|---|
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | General
The accompanying condensed unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q for quarterly reports under Section 13 or 15(d) of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2021. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-K for the fiscal year ended March 31, 2020.
Organization
WNC Housing Tax Credit Fund VI, L.P., Series 13, a California Limited Partnership (the “Partnership”), was formed on February 7, 2005 under the laws of the State of California, and commenced operations on December 14, 2005. The Partnership was formed to invest primarily in other limited partnerships and limited liability companies (the “Local Limited Partnerships”) which own and operate multi-family housing complexes (the “Housing Complexes”) that are eligible for Low Income Housing Tax Credits. The local general partners (the “Local General Partners”) of each Local Limited Partnership retain responsibility for maintaining, operating and managing the Housing Complex. Each Local Limited Partnership is governed by its agreement of limited partnership (the “Local Limited Partnership Agreement”).
The General Partner of the Partnership is WNC National Partners, LLC (the “General Partner”). The general partner of the General Partner is WNC & Associates, Inc. (“Associates”). The chairman and the president of Associates owns all of the outstanding stock of Associates. The business of the Partnership is conducted primarily through Associates, as the Partnership and General Partner have no employees of their own.
The Partnership shall continue in full force and effect until December 31, 2070, unless terminated prior to that date, pursuant to the partnership agreement or law.
The financial statements include only activity relating to the business of the Partnership and do not give effect to any assets that the partners may have outside of their interests in the Partnership, or to any obligations, including income taxes of the partners.
Pursuant to a registration statement filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 18, 2005, the Partnership commenced a public offering of 25,000 units of limited partnership interest (“Partnership Units”) at a price of $1,000 per Partnership Unit. The required minimum offering amount of $1,400,000 was achieved by December 14, 2005. Total subscriptions for 20,981 Partnership Units had been accepted, representing $20,965,400, which is net of volume discounts of $4,540 and dealer discounts of $11,060. Holders of Partnership Units are referred to herein as “Limited Partners.” As of June 30, 2020 and March 31, 2020, a total of 20,707 Partnership Units remain outstanding, respectively. The General Partner has a 0.1% interest in operating profits and losses, taxable income and losses, cash available for distribution from the Partnership and tax credits. The Limited Partners will be allocated the remaining 99.9% interest in proportion to their respective investments.
The proceeds from the disposition of any of the Housing Complexes will be used first to pay debts and other obligations per the respective Local Limited Partnership Agreement. Any remaining proceeds will then be paid to the partners of the Local Limited Partnership, including the Partnership, in accordance with the terms of the particular Local Limited Partnership Agreement. The sale of a Housing Complex may be subject to other restrictions and obligations.
Accordingly, there can be no assurance that a Local Limited Partnership will be able to sell its Housing Complex. Even if it does so, there can be no assurance that any significant amounts of cash will be distributed to the Partnership. Should such distributions occur, the Limited Partners will be entitled to receive distributions from the proceeds remaining after payment of Partnership obligations and funding reserves, equal to their capital contributions and their return on investment (as defined in the Partnership Agreement). The General Partner would then be entitled to receive proceeds equal to its capital contributions from the remainder. Any additional sale or refinancing proceeds will be distributed 90% to the Limited Partners (in proportion to their respective investments) and 10% to the General Partner.
Risks and Uncertainties
An investment in the Partnership and the Partnership’s investments in Local Limited Partnerships and their Housing Complexes are subject to risks. These risks may impact the tax benefits of an investment in the Partnership, and the amount of proceeds available for distribution to the Limited Partners, if any, on liquidation of the Partnership’s investments. Some of those risks include the following:
The Low Income Housing Tax Credits rules are extremely complicated. Noncompliance with these rules results in the loss of future Low Income Housing Tax Credits and the fractional recapture of Low Income Housing Tax Credits already taken. In most cases the annual amount of Low Income Housing Tax Credits that an individual can use is limited to the tax liability due on the person’s last $25,000 of taxable income. The Local Limited Partnerships may be unable to sell the Housing Complexes at a price which would result in the Partnership realizing cash distributions or proceeds from the transaction. Accordingly, the Partnership may be unable to distribute any cash to its Limited Partners. Low Income Housing Tax Credits may be the only benefit from an investment in the Partnership.
The Partnership has invested in a limited number of Local Limited Partnerships. Such limited diversity means that the results of operation of each single Housing Complex will have a greater impact on the Partnership. With limited diversity, poor performance of one Housing Complex could impair the Partnership’s ability to satisfy its investment objectives. Each Housing Complex is subject to mortgage indebtedness. If a Local Limited Partnership failed to pay its mortgage, it could lose its Housing Complex in foreclosure. If foreclosure were to occur during the first 15 years (the “Compliance Period”), the loss of any remaining future Low Income Housing Tax Credits, a fractional recapture of prior Low Income Housing Tax Credits, and a loss of the Partnership’s investment in the Housing Complex would occur. The Partnership is a limited partner or a non-managing member of each Local Limited Partnership. Accordingly, the Partnership will have very limited rights with respect to management of the Local Limited Partnerships. The Partnership will rely totally on the Local General Partners. Neither the Partnership’s investments in Local Limited Partnerships, nor the Local Limited Partnerships’ investments in Housing Complexes, are readily marketable. To the extent the Housing Complexes receive government financing or operating subsidies, they may be subject to one or more of the following risks: difficulties in obtaining tenants for the Housing Complexes; difficulties in obtaining rent increases; limitations on cash distributions; limitations on sales or refinancing of Housing Complexes; limitations on transfers of interests in Local Limited Partnerships; limitations on removal of Local General Partners; limitations on subsidy programs; and possible changes in applicable regulations. Uninsured casualties could result in loss of property and Low Income Housing Tax Credits and recapture of Low Income Housing Tax Credits previously taken. The value of real estate is subject to risks from fluctuating economic conditions, including employment rates, inflation, tax, environmental, land use and zoning policies, supply and demand of similar Housing Complexes, and neighborhood conditions, among others.
The ability of Limited Partners to claim tax losses from the Partnership is limited. The IRS may audit the Partnership or a Local Limited Partnership and challenge the tax treatment of tax items. The amount of Low Income Housing Tax Credits and tax losses allocable to Limited Partners could be reduced if the IRS were successful in such a challenge. The alternative minimum tax could reduce tax benefits from an investment in the Partnership. Changes in tax laws could also impact the tax benefits from an investment in the Partnership and/or the value of the Housing Complexes.
The Partnership currently has insufficient working capital to fund its operations. Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through August 31, 2021.
Anticipated future and existing cash resources of the Partnership are not sufficient to pay existing liabilities of the Partnership. A portion of the existing liabilities are the payables to Local Limited Partnerships and those payables are the first priority to be paid. If the Partnership does not have enough cash to pay those liabilities the General Partner or an affiliate will fund the necessary cash to pay the liabilities. The remaining portion of the payables are due to the General Partner or an affiliate. Though the amounts payable to the General Partner and/or its affiliates are contractually currently payable, the Partnership anticipates that the General Partner and/or its affiliates will not require the payment of these contractual obligations until capital reserves are in excess of the aggregate of then existing contractual obligations and then anticipated future foreseeable obligations of the Partnership. The Partnership would be adversely affected should the General Partner and/or its affiliates demand current payment of the existing contractual obligations and/or suspend services for this or any other reason.
No trading market for the Partnership Units exists or is expected to develop. Limited Partners may be unable to sell their Partnership Units except at a discount and should consider their Partnership Units to be a long-term investment. Individual Limited Partners will have no recourse if they disagree with actions authorized by a vote of the majority of Limited Partners.
Exit Strategy
The Compliance Period for a Housing Complex is generally 15 years following construction or rehabilitation completion. Associates was one of the first in the industry to offer syndicated investments in Low Income Housing Tax Credits. The initial programs have completed their Compliance Periods.
Upon the sale of a Local Limited Partnership interest or Housing Complex after the end of the Compliance Period, there would be no recapture of Low Income Housing Tax Credits. A sale prior to the end of the Compliance Period must satisfy the reasonable belief test outlined above to avoid recapture. None of the remaining Housing Complexes have completed their 15-year Compliance Period.
With that in mind, the General Partner is continuing its review of the Housing Complexes. The review considers many factors, including extended use requirements (such as those due to mortgage restrictions or state compliance agreements), the condition of the Housing Complexes, and the tax consequences to the Limited Partners from the sale of the Housing Complexes.
Upon identifying those Housing Complexes with the highest potential for a successful sale, refinancing or re-syndication, the Partnership expects to proceed with efforts to liquidate them. The objective is to maximize the Limited Partners’ return wherever possible and, ultimately, to wind down the Partnership as Low Income Housing Tax Credits are no longer available. Local Limited Partnership interests may be disposed of any time by the General Partner in its discretion. While liquidation of the Housing Complexes continues to be evaluated, the dissolution of the Partnership was not imminent as of June 30, 2020.
During the year ended March 31, 2011, the Partnership sold two Local Limited Partnerships, Fernwood Meadows, L.P. (“Fernwood”) and Sierra’s Run, L.P., (“Sierra’s Run”), in order to generate sufficient equity to complete the purchase of additional Low Income Housing Tax Credits for Davenport VII, L.P. (“Davenport”).
Fernwood and Sierra’s Run will complete their Compliance Periods in 2022; therefore there is a risk of tax credit recapture. The maximum exposure of recapture (excluding the interest and penalties related to the recapture) is $177,508 and $170,246, respectively, for Fernwood and Sierra’s Run, which equates to $16.75 per Partnership Unit in the aggregate. Under the circumstances, the General Partner believes there is a reasonable expectation that each Local Limited Partnership will continue to be operated as qualified low income housing for the balance of its Compliance Period, and, accordingly, does not anticipate that there will be any recapture.
As of March 31, 2020, the underlying Housing complexes of Pleasant Village Limited Partnership (“Pleasant Village”) and Grove Village Limited Partnership (“Grove Village”) had been sold, resulting in the termination of the Partnership’s Local Limited Partnership interest. The Partnership had also gifted its Local Limited Partnership interest in 909 4th YMCA Limited Partnership to an unrelated nonprofit corporation. In addition, the Partnership sold its Local Limited Partnership interest in Head Circle, L.P. (“Head Circle”), FDI-Country Square, LTD (“FDI-Country Square”) and FDI-Park Place, LTD (“FDI-Park Place”). The Compliance Period for Head Circle has been completed, therefore, there is no risk of recapture to the investors of the Partnership. The Compliance Periods for FDI-Country Square and FDI-Park Place expire in 2021. A guaranty agreement was executed with the General Partner to guarantee the repayment of any recaptured tax credits and/or interest arising from any non-compliance as provided in Section 42 of the Internal Revenue Code arising after the date of the sale.
During the period ended June 30, 2020, the Partnership entered into a purchase agreement with an unrelated party to sell its Local Limited Partnership interest in Davenport Housing VII, L.P. (“Davenport VII”). Davenport VII was appraised for $125,000 and had a mortgage note balance of $470,274 as of December 31, 2019. The Partnership received $15,000 in cash proceeds, which was placed in the Partnership’s reserves for future operating expenses. The Partnership incurred $2,250 in sales related expenses which were netted against the sale proceeds to calculate the gain on sale. The Partnership had an investment balance of $51,621, and a remaining capital contribution payable to Davenport VII of $245,113; therefore, a gain of $206,242 was recorded during the period. The Compliance Period for Davenport VII expires in 2024. A guaranty agreement was executed with the General Partner to guarantee the repayment of any recaptured tax credits and/or interest arising from any non-compliance as provided in Section 42 of the Internal Revenue Code arising after the date of the sale
The proceeds from the disposition of any of the Housing Complexes will be used first to pay debts and other obligations per the respective Local Limited Partnership Agreement. Any remaining proceeds will then be paid to the partners of the Local Limited Partnership, including the Partnership, in accordance with the terms of the particular Local Limited Partnership Agreement. The sale of a Housing Complex may be subject to other restrictions and obligations. Accordingly, there can be no assurance that a Local Limited Partnership will be able to sell its Housing Complex. Even if it does so, there can be no assurance that any significant amounts of cash will be distributed to the Partnership, as the proceeds first would be used to pay Partnership obligations and funding of reserves.
Method of Accounting for Investments in Local Limited Partnerships
The Partnership accounts for its investments in Local Limited Partnerships using the equity method of accounting, whereby the Partnership adjusts its investment balance for its share of the Local Limited Partnerships’ results of operations and for any contributions made and distributions received. The Partnership reviews the carrying amount of an individual investment in a Local Limited Partnership for possible impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such investment may not be recoverable. Recoverability of such investment is measured by the estimated value derived by management, generally consisting of the sum of the remaining future Low Income Housing Tax Credits estimated to be allocable to the Partnership and the estimated residual value to the Partnership. If an investment is considered to be impaired, the Partnership reduces the carrying value of its investment in any such Local Limited Partnership. The accounting policies of the Local Limited Partnerships, generally, are expected to be consistent with those of the Partnership. Costs incurred by the Partnership in acquiring the investments were capitalized as part of the investment account and were being amortized over 27.5 years (see Note 2 and 3).
“Equity in losses of Local Limited Partnerships” for the periods ended June 30, 2020 and 2019 has been recorded by the Partnership. Management’s estimate for the three-month periods is based on either actual unaudited results reported by the Local Limited Partnerships or historical trends in the operations of the Local Limited Partnerships. Equity in losses of Local Limited Partnerships allocated to the Partnership is not recognized to the extent that the investment balance would be adjusted below zero. If the Local Limited Partnerships report net income in future years, the Partnership will resume applying the equity method only after its share of such net income equals the share of net losses not recognized during the period(s) the equity method was suspended.
In accordance with the accounting guidance for the consolidation of variable interest entities, the Partnership determines when it should include the assets, liabilities, and activities of a variable interest entity (VIE) in its financial statements, and when it should disclose information about its relationship with a VIE. The analysis that must be performed to determine which entity should consolidate a VIE focuses on control and economic factors. A VIE is a legal structure used to conduct activities or hold assets, which must be consolidated by a company if it is the primary beneficiary because it has (1) the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and (2) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the guidance requires continual reconsideration of the primary beneficiary of a VIE.
Based on this guidance, the Local Limited Partnerships in which the Partnership invests meet the definition of a VIE because the owners of the equity at risk in these entities do not have the power to direct their operations. However, management does not consolidate the Partnership's interests in these VIEs, as it is not considered to be the primary beneficiary since it does not have the power to direct the activities that are considered most significant to the economic performance of these entities. The Partnership currently records the amount of its investment in these Local Limited Partnerships as an asset on its balance sheets, recognizes its share of partnership income or losses in the statements of operations, and discloses how it accounts for material types of these investments in its financial statements. The Partnership's balance in investment in Local Limited Partnerships, plus the risk of recapture of tax credits previously recognized on these investments, represents its maximum exposure to loss. The Partnership's exposure to loss on these Local Limited Partnerships is mitigated by the condition and financial performance of the underlying Housing Complexes as well as the strength of the Local General Partners and their guarantee against credit recapture to the investors in the Partnership.
Distributions received by the Partnership are accounted for as a reduction of the investment balance. Distributions received after the investment has reached zero are recognized as income. As of June 30, 2020, the remaining investment balance had reached zero.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. As of June 30, 2020, and March 31, 2020, the Partnership had $157,225 and $228,845 of cash equivalents, respectively.
Reporting Comprehensive Income
The Partnership had no items of other comprehensive income for all periods presented.
Income Taxes
The Partnership has elected to be treated as a pass-through entity for income tax purposes and, as such, is not subject to income taxes. Rather, all items of taxable income, deductions and tax credits are passed through to and are reported by its owners on their respective income tax returns. The Partnership’s federal tax status as a pass-through entity is based on its legal status as a partnership. Accordingly, the Partnership is not required to take any tax positions in order to qualify as a pass-through entity. The Partnership is required to file and does file tax returns with the Internal Revenue Service and other taxing authorities. Accordingly, these financial statements do not reflect a provision for income taxes and the Partnership has no other tax positions which must be considered for disclosure. Income tax returns filed by the Partnership are subject to examination by the Internal Revenue Service for a period of three years. While no income tax returns are currently being examined by the Internal Revenue Service, tax years since 2017 remain open.
Net Income (Loss) Per Partnership Unit
Net income (loss) per Partnership Unit includes no dilution and is computed by dividing net income (loss) available to Limited Partners by the weighted average number of Partnership Units outstanding during the period. Calculation of diluted net income (loss) per Partnership Unit is not required.
Revenue Recognition
The Partnership is entitled to receive reporting fees from the Local Limited Partnerships. The intent of the reporting fees is to offset (in part) administrative costs incurred by the Partnership in corresponding with the Local Limited Partnerships. The fees are consideration from the Local Limited Partnerships in exchange for a single performance obligation satisfied at a point in time for assistance with preparation of tax returns and annual reports. The amount of fees the Partnership is entitled to collect is based on the Local Limited Partnerships’ cash flow. Accordingly, the variable consideration is constrained until the uncertainty about the amount that will be collected is known. There were no contract assets or contract liabilities at the beginning or the end of the reporting period.
Impairment
The Partnership reviews its investments in Local Limited Partnership for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of such investments may not be recoverable. Recoverability is measured by a comparison of the carrying amount of the investment to the sum of the total amount of the remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investment. For the three months ended June 30, 2020 and 2019, impairment loss related to investments in Local Limited Partnerships was $0 and $439,109, respectively.
Impact of Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), as amended by subsequent Accounting Standards Updates (collectively, “ASC 606”). The Partnership adopted ASC 606 during 2019 and applied the guidance on a retrospective basis. There was no impact as a result of the adoption of ASU 2014-09 to recognize revenue on the financial statements of the Partnership as the reporting fee income is immaterial.
In August 2016, the FASB issued Accounting Standards Update 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. The Partnership adopted the update during the year ended March 31, 2020 on a retrospective basis. The effect of the adoption was the application of an accounting policy election to classify distributions received from investees using the nature of the distribution approach. The Partnership classifies distributions from tax credit investments as returns on investment because the design of the local limited partnership is to generate tax credits and losses rather than income from operations. Application of the accounting policy election had no impact on the presentation in the statements of cash flows in the current or prior reporting periods.
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2. Investments in Local Limited Partnerships |
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Equity Method Investments and Joint Ventures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in Local Limited Partnerships | As of June 30, 2020 and March 31, 2020, the Partnership owned Local Limited Partnership interests in 1 and 2 Local Limited Partnerships, respectively, each of which owns one Housing Complex consisting of an aggregate of 24 and 44 apartment units, respectively. The respective Local General Partners of the Local Limited Partnerships manage the day to day operations of the entities. Significant Local Limited Partnership business decisions require approval from the Partnership. The Partnership, as a limited partner, is generally entitled to 99.98%, as specified in the Local Limited Partnership Agreements, of the operating profits and losses, taxable income and losses, and Low Income Housing Tax Credits of the Local Limited Partnerships.
The following is a summary of the equity method activity of the investments in Local Limited Partnerships for the periods presented below:
Selected financial information for the three months ended June 30, 2020 and 2019 from the unaudited combined condensed financial statements of the Local Limited Partnerships in which the Partnership has invested is as follows:
Certain Local Limited Partnerships have incurred significant operating losses and/or have working capital deficiencies. In the event these Local Limited Partnerships continue to incur significant operating losses, additional capital contributions by the Partnership may be required to sustain operations of such Local Limited Partnerships. If additional capital contributions are not made when they are required, the Partnership's investments in certain of such Local Limited Partnerships could be impaired, and the loss and recapture of the related Low Income Housing Tax Credits could occur.
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3. Related Party Transactions |
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions | Under the terms of the Partnership Agreement, the Partnership has paid or is obligated to the General Partner or its affiliates for the following fees:
The accrued fees and expenses due to the General Partner and affiliates consist of the following at:
The General Partner and/or its affiliates do not anticipate that these accrued fees will be paid until such time as capital reserves are in excess of future foreseeable working capital requirements of the Partnership.
The Partnership currently has insufficient working capital to fund its operations. Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through August 31, 2021.
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4. Due From Affiliates, Net |
3 Months Ended |
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Jun. 30, 2020 | |
Related Party Transactions [Abstract] | |
Due From Affiliates, Net | The Partnership is not obligated to fund advances to the Local Limited Partnerships. Occasionally, when Local Limited Partnerships encounter operational issues the Partnership may decide to advance funds to assist the Local Limited Partnerships.
As of June 30, 2020 and March 31, 2020, the Partnership advanced $0 and $763,336, respectively, to Davenport Housing VII, L.P., in which the Partnership was a limited partner. All advances were reserved in full in the year they were advanced. During the three months ended June 30. 2020, all advances and reserves were written off due to the disposition of the Local Limited Partnership.
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5. Payables to Local Limited Partnerships |
3 Months Ended |
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Jun. 30, 2020 | |
Payables and Accruals [Abstract] | |
Payables to Local Limited Partnerships | Payables to Local Limited Partnerships amounting to $0 and $245,113 at June 30, 2020 and March 31, 2020, respectively, represent amounts which were due at various times based on conditions specified in the Local Limited Partnership agreements. These contributions were payable in installments and were generally due upon the Local Limited Partnerships achieving certain operating and development benchmarks (generally within two years of the Partnership’s initial investment). The outstanding payable amount of $245,113 was written off and included in the gain on sale during the period ended June 30, 2020, as the Partnership sold its interest in the related Local Limited Partnership.
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6. Contingency |
3 Months Ended |
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Jun. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingency | The spread of a novel strain of coronavirus (COVID-19) has caused significant business disruptions in the United States beginning in the first quarter of 2020. The economic impact of the business disruptions caused by COVID-19 is uncertain. The extent of any effects these disruptions may have on the operations and financial performance of the Partnership will depend on future developments, including possible impacts on the operations of the underlying real estate of its investments, which cannot be determined.
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1. Summary of Significant Accounting Policies (Policies) |
3 Months Ended |
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Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
General | The accompanying condensed unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q for quarterly reports under Section 13 or 15(d) of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2021. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-K for the fiscal year ended March 31, 2020.
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Organization | WNC Housing Tax Credit Fund VI, L.P., Series 13, a California Limited Partnership (the “Partnership”), was formed on February 7, 2005 under the laws of the State of California, and commenced operations on December 14, 2005. The Partnership was formed to invest primarily in other limited partnerships and limited liability companies (the “Local Limited Partnerships”) which own and operate multi-family housing complexes (the “Housing Complexes”) that are eligible for Low Income Housing Tax Credits. The local general partners (the “Local General Partners”) of each Local Limited Partnership retain responsibility for maintaining, operating and managing the Housing Complex. Each Local Limited Partnership is governed by its agreement of limited partnership (the “Local Limited Partnership Agreement”).
The General Partner of the Partnership is WNC National Partners, LLC (the “General Partner”). The general partner of the General Partner is WNC & Associates, Inc. (“Associates”). The chairman and the president of Associates owns all of the outstanding stock of Associates. The business of the Partnership is conducted primarily through Associates, as the Partnership and General Partner have no employees of their own.
The Partnership shall continue in full force and effect until December 31, 2070, unless terminated prior to that date, pursuant to the partnership agreement or law.
The financial statements include only activity relating to the business of the Partnership and do not give effect to any assets that the partners may have outside of their interests in the Partnership, or to any obligations, including income taxes of the partners.
Pursuant to a registration statement filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 18, 2005, the Partnership commenced a public offering of 25,000 units of limited partnership interest (“Partnership Units”) at a price of $1,000 per Partnership Unit. The required minimum offering amount of $1,400,000 was achieved by December 14, 2005. Total subscriptions for 20,981 Partnership Units had been accepted, representing $20,965,400, which is net of volume discounts of $4,540 and dealer discounts of $11,060. Holders of Partnership Units are referred to herein as “Limited Partners.” As of June 30, 2020 and March 31, 2020, a total of 20,707 Partnership Units remain outstanding, respectively. The General Partner has a 0.1% interest in operating profits and losses, taxable income and losses, cash available for distribution from the Partnership and tax credits. The Limited Partners will be allocated the remaining 99.9% interest in proportion to their respective investments.
The proceeds from the disposition of any of the Housing Complexes will be used first to pay debts and other obligations per the respective Local Limited Partnership Agreement. Any remaining proceeds will then be paid to the partners of the Local Limited Partnership, including the Partnership, in accordance with the terms of the particular Local Limited Partnership Agreement. The sale of a Housing Complex may be subject to other restrictions and obligations.
Accordingly, there can be no assurance that a Local Limited Partnership will be able to sell its Housing Complex. Even if it does so, there can be no assurance that any significant amounts of cash will be distributed to the Partnership. Should such distributions occur, the Limited Partners will be entitled to receive distributions from the proceeds remaining after payment of Partnership obligations and funding reserves, equal to their capital contributions and their return on investment (as defined in the Partnership Agreement). The General Partner would then be entitled to receive proceeds equal to its capital contributions from the remainder. Any additional sale or refinancing proceeds will be distributed 90% to the Limited Partners (in proportion to their respective investments) and 10% to the General Partner.
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Risks and Uncertainties | An investment in the Partnership and the Partnership’s investments in Local Limited Partnerships and their Housing Complexes are subject to risks. These risks may impact the tax benefits of an investment in the Partnership, and the amount of proceeds available for distribution to the Limited Partners, if any, on liquidation of the Partnership’s investments. Some of those risks include the following:
The Low Income Housing Tax Credits rules are extremely complicated. Noncompliance with these rules results in the loss of future Low Income Housing Tax Credits and the fractional recapture of Low Income Housing Tax Credits already taken. In most cases the annual amount of Low Income Housing Tax Credits that an individual can use is limited to the tax liability due on the person’s last $25,000 of taxable income. The Local Limited Partnerships may be unable to sell the Housing Complexes at a price which would result in the Partnership realizing cash distributions or proceeds from the transaction. Accordingly, the Partnership may be unable to distribute any cash to its Limited Partners. Low Income Housing Tax Credits may be the only benefit from an investment in the Partnership.
The Partnership has invested in a limited number of Local Limited Partnerships. Such limited diversity means that the results of operation of each single Housing Complex will have a greater impact on the Partnership. With limited diversity, poor performance of one Housing Complex could impair the Partnership’s ability to satisfy its investment objectives. Each Housing Complex is subject to mortgage indebtedness. If a Local Limited Partnership failed to pay its mortgage, it could lose its Housing Complex in foreclosure. If foreclosure were to occur during the first 15 years (the “Compliance Period”), the loss of any remaining future Low Income Housing Tax Credits, a fractional recapture of prior Low Income Housing Tax Credits, and a loss of the Partnership’s investment in the Housing Complex would occur. The Partnership is a limited partner or a non-managing member of each Local Limited Partnership. Accordingly, the Partnership will have very limited rights with respect to management of the Local Limited Partnerships. The Partnership will rely totally on the Local General Partners. Neither the Partnership’s investments in Local Limited Partnerships, nor the Local Limited Partnerships’ investments in Housing Complexes, are readily marketable. To the extent the Housing Complexes receive government financing or operating subsidies, they may be subject to one or more of the following risks: difficulties in obtaining tenants for the Housing Complexes; difficulties in obtaining rent increases; limitations on cash distributions; limitations on sales or refinancing of Housing Complexes; limitations on transfers of interests in Local Limited Partnerships; limitations on removal of Local General Partners; limitations on subsidy programs; and possible changes in applicable regulations. Uninsured casualties could result in loss of property and Low Income Housing Tax Credits and recapture of Low Income Housing Tax Credits previously taken. The value of real estate is subject to risks from fluctuating economic conditions, including employment rates, inflation, tax, environmental, land use and zoning policies, supply and demand of similar Housing Complexes, and neighborhood conditions, among others.
The ability of Limited Partners to claim tax losses from the Partnership is limited. The IRS may audit the Partnership or a Local Limited Partnership and challenge the tax treatment of tax items. The amount of Low Income Housing Tax Credits and tax losses allocable to Limited Partners could be reduced if the IRS were successful in such a challenge. The alternative minimum tax could reduce tax benefits from an investment in the Partnership. Changes in tax laws could also impact the tax benefits from an investment in the Partnership and/or the value of the Housing Complexes.
The Partnership currently has insufficient working capital to fund its operations. Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through August 31, 2021.
Anticipated future and existing cash resources of the Partnership are not sufficient to pay existing liabilities of the Partnership. A portion of the existing liabilities are the payables to Local Limited Partnerships and those payables are the first priority to be paid. If the Partnership does not have enough cash to pay those liabilities the General Partner or an affiliate will fund the necessary cash to pay the liabilities. The remaining portion of the payables are due to the General Partner or an affiliate. Though the amounts payable to the General Partner and/or its affiliates are contractually currently payable, the Partnership anticipates that the General Partner and/or its affiliates will not require the payment of these contractual obligations until capital reserves are in excess of the aggregate of then existing contractual obligations and then anticipated future foreseeable obligations of the Partnership. The Partnership would be adversely affected should the General Partner and/or its affiliates demand current payment of the existing contractual obligations and/or suspend services for this or any other reason.
No trading market for the Partnership Units exists or is expected to develop. Limited Partners may be unable to sell their Partnership Units except at a discount and should consider their Partnership Units to be a long-term investment. Individual Limited Partners will have no recourse if they disagree with actions authorized by a vote of the majority of Limited Partners.
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Exit Strategy | The Compliance Period for a Housing Complex is generally 15 years following construction or rehabilitation completion. Associates was one of the first in the industry to offer syndicated investments in Low Income Housing Tax Credits. The initial programs have completed their Compliance Periods.
Upon the sale of a Local Limited Partnership interest or Housing Complex after the end of the Compliance Period, there would be no recapture of Low Income Housing Tax Credits. A sale prior to the end of the Compliance Period must satisfy the reasonable belief test outlined above to avoid recapture. None of the remaining Housing Complexes have completed their 15-year Compliance Period.
With that in mind, the General Partner is continuing its review of the Housing Complexes. The review considers many factors, including extended use requirements (such as those due to mortgage restrictions or state compliance agreements), the condition of the Housing Complexes, and the tax consequences to the Limited Partners from the sale of the Housing Complexes.
Upon identifying those Housing Complexes with the highest potential for a successful sale, refinancing or re-syndication, the Partnership expects to proceed with efforts to liquidate them. The objective is to maximize the Limited Partners’ return wherever possible and, ultimately, to wind down the Partnership as Low Income Housing Tax Credits are no longer available. Local Limited Partnership interests may be disposed of any time by the General Partner in its discretion. While liquidation of the Housing Complexes continues to be evaluated, the dissolution of the Partnership was not imminent as of June 30, 2020.
During the year ended March 31, 2011, the Partnership sold two Local Limited Partnerships, Fernwood Meadows, L.P. (“Fernwood”) and Sierra’s Run, L.P., (“Sierra’s Run”), in order to generate sufficient equity to complete the purchase of additional Low Income Housing Tax Credits for Davenport VII, L.P. (“Davenport”).
Fernwood and Sierra’s Run will complete their Compliance Periods in 2022; therefore there is a risk of tax credit recapture. The maximum exposure of recapture (excluding the interest and penalties related to the recapture) is $177,508 and $170,246, respectively, for Fernwood and Sierra’s Run, which equates to $16.75 per Partnership Unit in the aggregate. Under the circumstances, the General Partner believes there is a reasonable expectation that each Local Limited Partnership will continue to be operated as qualified low income housing for the balance of its Compliance Period, and, accordingly, does not anticipate that there will be any recapture.
As of March 31, 2020, the underlying Housing complexes of Pleasant Village Limited Partnership (“Pleasant Village”) and Grove Village Limited Partnership (“Grove Village”) had been sold, resulting in the termination of the Partnership’s Local Limited Partnership interest. The Partnership had also gifted its Local Limited Partnership interest in 909 4th YMCA Limited Partnership to an unrelated nonprofit corporation. In addition, the Partnership sold its Local Limited Partnership interest in Head Circle, L.P. (“Head Circle”), FDI-Country Square, LTD (“FDI-Country Square”) and FDI-Park Place, LTD (“FDI-Park Place”). The Compliance Period for Head Circle has been completed, therefore, there is no risk of recapture to the investors of the Partnership. The Compliance Periods for FDI-Country Square and FDI-Park Place expire in 2021. A guaranty agreement was executed with the General Partner to guarantee the repayment of any recaptured tax credits and/or interest arising from any non-compliance as provided in Section 42 of the Internal Revenue Code arising after the date of the sale.
During the period ended June 30, 2020, the Partnership entered into a purchase agreement with an unrelated party to sell its Local Limited Partnership interest in Davenport Housing VII, L.P. (“Davenport VII”). Davenport VII was appraised for $125,000 and had a mortgage note balance of $470,274 as of December 31, 2019. The Partnership received $15,000 in cash proceeds, which was placed in the Partnership’s reserves for future operating expenses. The Partnership incurred $2,250 in sales related expenses which were netted against the sale proceeds to calculate the gain on sale. The Partnership had an investment balance of $51,621, and a remaining capital contribution payable to Davenport VII of $245,113; therefore, a gain of $206,242 was recorded during the period. The Compliance Period for Davenport VII expires in 2024. A guaranty agreement was executed with the General Partner to guarantee the repayment of any recaptured tax credits and/or interest arising from any non-compliance as provided in Section 42 of the Internal Revenue Code arising after the date of the sale
The proceeds from the disposition of any of the Housing Complexes will be used first to pay debts and other obligations per the respective Local Limited Partnership Agreement. Any remaining proceeds will then be paid to the partners of the Local Limited Partnership, including the Partnership, in accordance with the terms of the particular Local Limited Partnership Agreement. The sale of a Housing Complex may be subject to other restrictions and obligations. Accordingly, there can be no assurance that a Local Limited Partnership will be able to sell its Housing Complex. Even if it does so, there can be no assurance that any significant amounts of cash will be distributed to the Partnership, as the proceeds first would be used to pay Partnership obligations and funding of reserves.
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Method of Accounting for Investments in Local Limited Partnerships | The Partnership accounts for its investments in Local Limited Partnerships using the equity method of accounting, whereby the Partnership adjusts its investment balance for its share of the Local Limited Partnerships’ results of operations and for any contributions made and distributions received. The Partnership reviews the carrying amount of an individual investment in a Local Limited Partnership for possible impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such investment may not be recoverable. Recoverability of such investment is measured by the estimated value derived by management, generally consisting of the sum of the remaining future Low Income Housing Tax Credits estimated to be allocable to the Partnership and the estimated residual value to the Partnership. If an investment is considered to be impaired, the Partnership reduces the carrying value of its investment in any such Local Limited Partnership. The accounting policies of the Local Limited Partnerships, generally, are expected to be consistent with those of the Partnership. Costs incurred by the Partnership in acquiring the investments were capitalized as part of the investment account and were being amortized over 27.5 years (see Note 2 and 3).
“Equity in losses of Local Limited Partnerships” for the periods ended June 30, 2020 and 2019 has been recorded by the Partnership. Management’s estimate for the three-month periods is based on either actual unaudited results reported by the Local Limited Partnerships or historical trends in the operations of the Local Limited Partnerships. Equity in losses of Local Limited Partnerships allocated to the Partnership is not recognized to the extent that the investment balance would be adjusted below zero. If the Local Limited Partnerships report net income in future years, the Partnership will resume applying the equity method only after its share of such net income equals the share of net losses not recognized during the period(s) the equity method was suspended.
In accordance with the accounting guidance for the consolidation of variable interest entities, the Partnership determines when it should include the assets, liabilities, and activities of a variable interest entity (VIE) in its financial statements, and when it should disclose information about its relationship with a VIE. The analysis that must be performed to determine which entity should consolidate a VIE focuses on control and economic factors. A VIE is a legal structure used to conduct activities or hold assets, which must be consolidated by a company if it is the primary beneficiary because it has (1) the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and (2) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the guidance requires continual reconsideration of the primary beneficiary of a VIE.
Based on this guidance, the Local Limited Partnerships in which the Partnership invests meet the definition of a VIE because the owners of the equity at risk in these entities do not have the power to direct their operations. However, management does not consolidate the Partnership's interests in these VIEs, as it is not considered to be the primary beneficiary since it does not have the power to direct the activities that are considered most significant to the economic performance of these entities. The Partnership currently records the amount of its investment in these Local Limited Partnerships as an asset on its balance sheets, recognizes its share of partnership income or losses in the statements of operations, and discloses how it accounts for material types of these investments in its financial statements. The Partnership's balance in investment in Local Limited Partnerships, plus the risk of recapture of tax credits previously recognized on these investments, represents its maximum exposure to loss. The Partnership's exposure to loss on these Local Limited Partnerships is mitigated by the condition and financial performance of the underlying Housing Complexes as well as the strength of the Local General Partners and their guarantee against credit recapture to the investors in the Partnership.
Distributions received by the Partnership are accounted for as a reduction of the investment balance. Distributions received after the investment has reached zero are recognized as income. As of June 30, 2020, the remaining investment balance had reached zero.
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Use of Estimates | The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.
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Cash and Cash Equivalents | The Partnership considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. As of June 30, 2020, and March 31, 2020, the Partnership had $157,225 and $228,845 of cash equivalents, respectively.
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Reporting Comprehensive Income | The Partnership had no items of other comprehensive income for all periods presented.
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Income Taxes | The Partnership has elected to be treated as a pass-through entity for income tax purposes and, as such, is not subject to income taxes. Rather, all items of taxable income, deductions and tax credits are passed through to and are reported by its owners on their respective income tax returns. The Partnership’s federal tax status as a pass-through entity is based on its legal status as a partnership. Accordingly, the Partnership is not required to take any tax positions in order to qualify as a pass-through entity. The Partnership is required to file and does file tax returns with the Internal Revenue Service and other taxing authorities. Accordingly, these financial statements do not reflect a provision for income taxes and the Partnership has no other tax positions which must be considered for disclosure. Income tax returns filed by the Partnership are subject to examination by the Internal Revenue Service for a period of three years. While no income tax returns are currently being examined by the Internal Revenue Service, tax years since 2017 remain open.
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Net Income (Loss) Per Partnership Unit | Net income (loss) per Partnership Unit includes no dilution and is computed by dividing net income (loss) available to Limited Partners by the weighted average number of Partnership Units outstanding during the period. Calculation of diluted net income (loss) per Partnership Unit is not required.
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Revenue Recognition | The Partnership is entitled to receive reporting fees from the Local Limited Partnerships. The intent of the reporting fees is to offset (in part) administrative costs incurred by the Partnership in corresponding with the Local Limited Partnerships. The fees are consideration from the Local Limited Partnerships in exchange for a single performance obligation satisfied at a point in time for assistance with preparation of tax returns and annual reports. The amount of fees the Partnership is entitled to collect is based on the Local Limited Partnerships’ cash flow. Accordingly, the variable consideration is constrained until the uncertainty about the amount that will be collected is known. There were no contract assets or contract liabilities at the beginning or the end of the reporting period.
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Impairment | The Partnership reviews its investments in Local Limited Partnership for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of such investments may not be recoverable. Recoverability is measured by a comparison of the carrying amount of the investment to the sum of the total amount of the remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investment. For the three months ended June 30, 2020 and 2019, impairment loss related to investments in Local Limited Partnerships was $0 and $439,109, respectively.
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Impact of Recent Accounting Pronouncements | In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), as amended by subsequent Accounting Standards Updates (collectively, “ASC 606”). The Partnership adopted ASC 606 during 2019 and applied the guidance on a retrospective basis. There was no impact as a result of the adoption of ASU 2014-09 to recognize revenue on the financial statements of the Partnership as the reporting fee income is immaterial.
In August 2016, the FASB issued Accounting Standards Update 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. The Partnership adopted the update during the year ended March 31, 2020 on a retrospective basis. The effect of the adoption was the application of an accounting policy election to classify distributions received from investees using the nature of the distribution approach. The Partnership classifies distributions from tax credit investments as returns on investment because the design of the local limited partnership is to generate tax credits and losses rather than income from operations. Application of the accounting policy election had no impact on the presentation in the statements of cash flows in the current or prior reporting periods.
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2. Investments in Local Limited Partnerships (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments and Joint Ventures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of equity method investments in local limited partnerships |
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Schedule of combined condensed statements of operations |
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3. Related Party Transactions (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||
Schedule of accrued fees and expenses due to general partner and affiliates |
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1. Summary of Significant Accounting Policies (Details Narrative) - USD ($) |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Mar. 31, 2020 |
Mar. 31, 2019 |
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Accounting Policies [Abstract] | ||||
Number of Partnership units remain outstanding | 20,707 | 20,707 | ||
Cash and cash equivalents | $ 157,225 | $ 226,395 | $ 228,845 | $ 224,898 |
Impairment loss related to investments in Local Limited Partnerships | $ 0 | $ 439,109 | $ 439,109 |
2. Investments In Local Limited Partnerships (Details) - USD ($) |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Mar. 31, 2020 |
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Equity Method Investments and Joint Ventures [Abstract] | |||
Investments per balance sheet, beginning | $ 51,621 | $ 666,713 | $ 666,713 |
Equity in losses of local limited partnerships | 0 | (45,434) | (175,983) |
Sale of Local Limited Partnerships | (51,621) | 0 | |
Impairment loss | 0 | $ (439,109) | (439,109) |
Investments per balance sheet, ending | $ 0 | $ 51,621 |
2. Investments In Local Limited Partnerships (Details 1) - Local Limited Partnerships - USD ($) |
3 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
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Revenues | $ 37,000 | $ 70,000 |
Expenses: | ||
Interest expense | 5,000 | 8,000 |
Depreciation and amortization | 20,000 | 63,000 |
Operating expenses | 30,000 | 56,000 |
Total expenses | 55,000 | 127,000 |
Net loss | (18,000) | (57,000) |
Net loss allocable to the Partnership | (18,000) | (57,000) |
Net loss recorded by the Partnership | $ 0 | $ (45,000) |
3. Related Party Transactions (Details) - USD ($) |
Jun. 30, 2020 |
Mar. 31, 2020 |
---|---|---|
Related Party Transactions [Abstract] | ||
Asset management fee payable | $ 1,442,248 | $ 1,434,136 |
Reimbursements for expenses paid by the General Partner or an affiliate | 28,990 | 91,030 |
Total | $ 1,471,238 | $ 1,525,166 |
3. Related Party Transactions (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
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Related Party Transactions [Abstract] | ||
Asset management fees | $ 8,112 | $ 10,394 |
Operating expense reimbursements | $ 93,790 | $ 0 |
4. Due From Affiliates, Net (Details Narrative) - USD ($) |
Jun. 30, 2020 |
Mar. 31, 2020 |
---|---|---|
Davenport Housing VII | ||
Advances to local limited partnerships during period | $ 0 | $ 763,336 |
5. Payables to Local Limited Partnerships (Details Narrative) - USD ($) |
Jun. 30, 2020 |
Mar. 31, 2020 |
---|---|---|
Due to related parties | $ 0 | $ 245,113 |
Local Limited Partnerships | ||
Due to related parties | $ 0 | $ 245,113 |
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