Note 5 - Income Taxes

12 Months Ended

Dec. 31, 2012

Notes

Note 5 - Income Taxes

NOTE 5 - INCOME TAXES

The Partnership is not taxed on its income. The partners are taxed in their individual capacities based upon their distributive share of the Partnership's taxable income or loss and are allowed the benefits to be derived from off-setting their distributive share of the tax losses against taxable income from other sources subject to passive loss limitations. The taxable income or loss differs from amounts included in the statements of operations because different methods are used in determining the losses of the Local Limited Partnerships. The tax loss is allocated to the partner groups in accordance with Section 704(b) of the Internal Revenue Code and therefore is not necessarily proportionate to the interest percentage owned.

A reconciliation follows:
	Years Ended December 31,
	2012	2011
	(in thousands)
Net income per financial statements	$ 2,295		$   295
Accrued interest	--		49
Gain on sale and extinguishment of debt	(2,476)		3,670
Other	(40)		17
Partnership’s share of Local Limited Partnership	(379)		1,257
Net income (loss) per tax return	$  (600)		$  5,288
Taxable income (loss) per limited partnership interest	$   (70.69)		$ 588.86

The following is a reconciliation between the Partnership’s reported amounts and the Federal tax basis of net assets (in thousands):
	December 31,
	2012	2011
Net assets as reported	$  2,456	$    161
Add (deduct):
Deferred offering costs	4,976	4,976
Investment in Local Limited Partnerships	(6,262)	(3,820)
Accrued interest	--	1,198
Other	291	(454)
Net equity – Federal tax basis	$  1,461	$  2,061

The Partnership incurs expense for a New Jersey tax based upon the number of resident and non-resident limited partners and apportionment of income related to the Partnership’s investment in certain Local Limited Partnerships.  For the years ended December 31, 2012 and 2011 the expense of approximately $165,000 and $120,000, respectively, related to this tax is reflected in tax expense in the accompanying consolidated statements of operations.