Note 4 - Notes Payable

6 Months Ended

Jun. 30, 2013

Notes

Note 4 - Notes Payable

NOTE 4 - NOTES PAYABLE

One of the Partnership's two remaining investments involved purchases of partnership interests from partners who subsequently withdrew from the operating partnership. As of June 30, 2013 and December 31, 2012, the Partnership is obligated on non-recourse notes payable of approximately $1,421,000 and $2,341,000, respectively, bearing interest at 9.5 percent annually. The Partnership recognized interest expense of approximately $88,000 and $252,000 for the six months ended June 30, 2013 and 2012, respectively. Accrued interest is approximately $3,410,000 and $5,750,000 as of June 30, 2013 and December 31, 2012, respectively. These notes matured between December 1999 and December 2004. These obligations and related interest are collateralized by the Partnership's investments in the Local Limited Partnerships and are payable only out of cash distributions from the Local Limited Partnerships, as defined in the notes. Unpaid interest was due at maturity of the notes.

The Partnership had entered into an agreement with the holders of the non-recourse notes payable collateralized by the Partnership’s investment in twelve Local Limited Partnerships with notes payable in which the note holder agreed to forebear taking any action under these notes pending the purchase by the note holder the properties owned by twelve of the Local Limited Partnerships. Eleven of these Local Limited Partnerships sold their respective investment properties to the note holders during 2012 and 2013. In connection with these sales, non-recourse notes payable and associated accrued interest totaling approximately $16,950,000 were extinguished.

The Partnership recorded a gain of extinguishment of approximately $3,348,000 during the period January 1, 2013 to June 30, 2013 and $13,602,000 for the year ended December 31, 2012.

There were no principal or interest payments made on these notes during the six months ended June 30, 2013 or 2012. The remaining property associated with the remaining note payable is expected to sell in 2013 to the noteholder.