CAPITAL REALTY INVESTORS IV LIMITED PARTNERSHIP - FORM 10-Q

Attached files

file	filename
EX-32 - CERTIFICATION REQUIRED UNDER SECTION 906 - CAPITAL REALTY INVESTORS IV LIMITED PARTNERSHIP	exhibit32_093010-cri4.htm
EX-31 - CERTIFICATION REQUIRED UNDER SECTION 302 - CAPITAL REALTY INVESTORS IV LIMITED PARTNERSHIP	exhibit31_093010-cri4.htm

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2010

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 0-13523

CAPITAL REALTY INVESTORS-IV

LIMITED PARTNERSHIP

(Exact Name of Issuer as Specified in its Charter)

Maryland	52-1328767
(State of Incorporation)	(I.R.S. Employer Identification No.)

11200 Rockville Pike
Rockville, MD	20852
(Address of Principal Executive Offices)	(ZIP Code)

(301) 468-9200

(Issuer’s Telephone Number, Including Area Code)

_____________________

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o

Non-accelerated filer (Do not check if a smaller reporting company) o Smaller reporting companyx

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

INDEX TO FORM 10-Q

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010

		Page

Part I	FINANCIAL INFORMATION

Item 1.	Financial Statements
	Consolidated Balance Sheets
	- September 30, 2010 and December 31, 2009	2
	Consolidated Statements of Operations and Accumulated Losses
	- for the three and nine months ended September 30, 2010 and 2009	3
	Consolidated Statements of Cash Flows
	- for the nine months ended September 30, 2010 and 2009	4
	Notes to Financial Statements
	- September 30, 2010 and 2009	5

Item 2.	Management's Discussion and Analysis of Financial Condition
	and Results of Operations	12

Item 4.	Controls and Procedures	14

Part II	OTHER INFORMATION

Item 1.	Legal Proceedings	14

Item 3.	Defaults upon Senior Securities	15

Item 5.	Other Information	15

Item 6.	Exhibits	15

Signature		15

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

ASSETS

	September 30,		December 31,
	2010		2009
	(Unaudited)

Investments in partnerships	$	968,580	$	940,105
Investment in partnerships held for sale or transfer		2,163,836		1,964,803
Cash and cash equivalents		4,538,713		5,660,470
Acquisition fees, principally paid to related parties,
net of accumulated amortization of $20,326 and $48,381, respectively		10,510		29,379
Property purchase costs,
net of accumulated amortization of $59,513 and $72,771, respectively		10,913		20,321

Total assets	$	7,692,552	$	8,615,078

LIABILITIES AND PARTNERS' DEFICIT

Due on investments in partnerships	$	500,000		$	500,000
Due on investments in partnerships of assets held for sale		840,000			2,290,000
Accrued interest payable		3,740,383			3,495,556
Accrued interest payable of assets held for sale		2,904,645			7,729,774
Accounts payable and accrued expenses		52,862			30,153

Total liabilities		8,037,890			14,045,483

Commitments and contingencies

Partners' deficit:

Capital paid in:
General Partners		2,000			2,000
Limited Partners		73,501,500			73,501,500

		73,503,500			73,503,500

Less:
Accumulated distributions to partners		(23,219,810	)		(21,019,700	)
Offering costs		(7,562,894	)		(7,562,894	)
Accumulated losses		(43,066,134	)		(50,351,311	)

Total partners' deficit		(345,338	)		(5,430,405	)

Total liabilities and partners' deficit	$	7,692,552		$	8,615,078

The accompanying notes are an integral part

of these consolidated financial statements.

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS

AND ACCUMULATED LOSSES

(Unaudited)

	For the three months ended						For the nine months ended
	September 30,						September 30,
	2010			2009			2010			2009

Share of income from partnerships	$	99,467		$	210,326		$	236,637		$	675,111

Other revenue and expenses:

Revenue:
Interest		--			1,302			13,653			22,427

Expenses:
General and administrative		57,944			80,652			258,667			558,781
Interest		81,609			75,445			244,828			226,336
Management fee		93,750			93,750			281,250			281,250
Professional fees		12,213			30,863			151,213			100,416
Amortization of deferred costs		628			6,374			2,656			21,516

		246,144			287,084			938,614			1,188,299

Total other revenue and expenses		(246,144	)		(285,782	)		(924,961	)		(1,165,872	)

Loss from continuing operations		(146,677	)		(75,456	)		(688,324	)		(490,761	)

Discontinued operations
Income (loss) from discontinued
operations		23,236			(52,159	)		1,298			(188,734	)
Gain on disposition of investment in
partnerships, net of disposition fee		--			--			1,603,594			--
Gain from extinguishment of debt		6,368,609			--			6,368,609			8,957,777

Income (loss) from discontinued
operations		6,391,845			(52,159	)		7,973,501			8,769,043

Net income (loss)		6,245,168			(127,615	)		7,285,177			8,278,282

Accumulated losses, beginning of period		(49,311,302	)		(49,973,693	)		(50,351,311	)		(58,379,590	)

Accumulated losses, end of period	$	(43,066,134	)	$	(50,101,308	)	$	(43,066,134	)	$	(50,101,308	)

Net income (loss) allocated
to General Partners (1.51%)	$	94,302		$	(1,927	)	$	110,006		$	125,002

Net income (loss) allocated
to Initial and Special
Limited Partners (1.49%)	$	93,053		$	(1,901	)	$	108,549		$	123,346

Net income (loss) allocated
to Additional Limited Partners (97%)	$	6,057,813		$	(123,787	)	$	7,066,622		$	8,029,934

Loss from continuing operations per unit
of Additional Limited Partner Interest,
based on 73,337 units outstanding	$	(1.94	)	$	(1.00	)	$	(9.10	)	$	(6.49	)

Income (loss) from discontinued
operations per unit		84.54			(0.69	)		105.46			115.98

Net income (loss) per unit of
Additional Limited Partner Interest,
based on 73,337 units outstanding	$	82.60		$	(1.69	)	$	96.36		$	109.49

The accompanying notes are an integral part

of these consolidated financial statements.

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the nine months ended
	September 30,
	2010			2009

Cash flows from operating activities:
Net income	$	7,285,177		$	8,278,282

Adjustments to reconcile net income to net cash
used in operating activities:
Share of income from partnerships		(442,937	)		(739,251	)
Gain from extinguishment of debt		(6,368,609	)		(8,957,777	)
Gain on disposition of investment in partnerships,
net of disposition fees		(1,603,594	)		--
Amortization of deferred costs		2,656			21,516

Changes in assets and liabilities:
Decrease in other assets		--			8,313
Increase in accrued interest payable		364,120			479,210
Increase (decrease) in accounts payable and accrued expenses		22,709			(37,923	)

Net cash used in operating activities		(740,478	)		(947,630	)

Cash flows from investing activities:
Receipt of distributions from partnerships		208,163			669,834
Proceeds from disposition of investment in partnerships		1,688,168			--
Disposition fee paid to a related party		(77,500	)		--

Net cash provided by investing activities		1,818,831			669,834

Cash flows from financing activities:
Distribution paid to Limited Partners		(2,200,110	)		(1,268,386	)
Tax distribution on behalf of Limited Partners		--			(590,097	)

Net cash used in financing activities:		(2,200,110	)		(1,858,483	)

Net decrease in cash and cash equivalents		(1,121,757	)		(2,136,279	)

Cash and cash equivalents, beginning of period		5,660,470			7,975,361

Cash and cash equivalents, end of period	$	4,538,713		$	5,839,082

The accompanying notes are an integral part

of these consolidated financial statements.

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010 and 2009

(Unaudited)

1. ORGANIZATION

Capital Realty Investors-IV Limited Partnership (the “Partnership”) is a limited partnership which was formed under the Maryland Revised Uniform Limited Partnership Act on December 7, 1983. The Partnership was formed for the purpose of raising capital by offering and selling limited partnership interests and then investing in limited partnerships ("Local Partnerships"), each of which owns and operates an existing rental housing project which was originally financed and/or operated with one or more forms of rental assistance or financial assistance from the U.S. Department of Housing and Urban Development ("HUD"). The Partnership originally made investments in forty-seven Local Partnerships. As of September 30, 2010, the Partnership retained investments in six Local Partnerships.

The General Partners of the Partnership are C.R.I., Inc. (CRI), which is the Managing General Partner, and current and former shareholders of CRI. Services for the Partnership are performed by CRI, as the Partnership has no employees of its own.

2. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP) and with the instructions to Form 10-Q. Certain information and accounting policies and footnote disclosures normally included in financial statements prepared in conformity with US GAAP have been condensed or omitted pursuant to such instructions. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership's annual report on Form 10-K and the amended annual report on Form 10-K/A at December 31, 2009.

Certain reclassifications have been made to the prior year consolidated balance sheets and consolidated statements of operations to conform to the September 30, 2010 presentation of the components of assets and liabilities held for sale and the results from continuing and discontinued operations for the three and nine month periods ended September 30, 2010.

In the opinion of C.R.I., Inc., the Managing General Partner, the accompanying unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position of Capital Realty Investors-IV Limited Partnership (the Partnership) as of September 30, 2010, and the results of its operations and its cash flows for the three and nine month periods ended September 30, 2010 and 2009. The results of operations for the interim period ended September 30, 2010, are not necessarily indicative of the results to be expected for the full year.

3. INVESTMENTS IN PARTNERSHIPS

At September 30, 2010 and 2009, the Partnership had limited partnership equity interests in six and eight Local Partnerships respectively, each of which owned an apartment complex.

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010 and 2009

(Unaudited)

3. INVESTMENTS IN PARTNERSHIPS - Continued

A schedule of the apartment communities owned by the Local Partnerships in which the Partnership is invested is provided below:

PROPERTY	CITY	STATE	UNITS
Fairways	Naperville	IL	210
Madison Square	Grand Rapids	MI	133
Mary Allen Tower West	Galesburg	IL	154
Northridge Park	Salinas	CA	104
Tradewinds	Traverse City	MI	122
Westport Village	Freeport	IL	121

Under the terms of the Partnership's investment in each Local Partnership, the Partnership was required to make capital contributions to the Local Partnerships. These contributions were payable in installments upon each Local Partnership achieving specified levels of construction and/or operations. At September 30, 2010 and 2009, all such capital contributions had been paid to the Local Partnerships.

a. Summarized financial information

Combined statements of operations for the six and eight Local Partnerships in which the Partnership was invested as of September 30, 2010 and 2009, respectively, follow. The combined statements have been compiled from information supplied by the management agents of the properties and are unaudited. The information for each of the periods is presented separately for those Local Partnerships which have investment basis (equity method), and for those Local Partnerships which have cumulative losses in excess of the amount of the Partnership’s investments in those Local Partnerships (equity method suspended). Appended after the combined statements is information concerning the Partnership’s share of income from partnerships related to cash distributions recorded as income, and related to the Partnership’s share of income from Local Partnerships.

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010 and 2009

(Unaudited)

3. INVESTMENTS IN PARTNERSHIPS - Continued

COMBINED STATEMENTS OF OPERATIONS

(Unaudited)

	For the three months ended
	September 30,
	2010						2009
	Equity						Equity
	Method			Suspended			Method Suspended

Number of Local Partnerships		2	(a)		4	(b)		2	(a)		6	(c)

Revenue:
Rental	$	411,155		$	1,309,694		$	434,245		$	1,799,944
Other		21,024			18,189			(76,077	)		82,808

Total revenue		432,179			1,327,883			358,168			1,882,752

Expenses:
Operating		270,154			949,740			260,750			1,143,425
Interest		592			323,608			10,343			422,322
Depreciation and amortization		79,331			259,078			77,232			355,101

Total expenses		350,077			1,532,426			348,325			1,920,848

Net income (loss)	$	82,102		$	(204,543	)	$	9,843		$	(38,096	)

Cash distribution	$	--		$	--		$	--		$	--

Cash distribution recorded
as income		--			79,231			--			232,330

Partnership's share of Local
Partnership net income		80,663			--			9,743			--

Share of income from partnerships		$99,467						$210,326

Share of income from partnerships
classifed as discontinued
operations		$60,427						$31,747

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010 and 2009

(Unaudited)

3. INVESTMENTS IN PARTNERSHIPS - Continued

COMBINED STATEMENTS OF OPERATIONS

(Unaudited)

	For the nine months ended
	September 30,
	2010						2009
	Equity						Equity
	Method			Suspended			Method			Suspended

Number of Local Partnerships		2	(a)		4	(b)		2	(a)		6	(c)

Revenue:
Rental	$	1,244,912		$	3,596,528		$	1,129,282		$	5,399,831
Other		59,031			121,039			27,209			248,423

Total revenue		1,303,943			3,717,567			1,156,491			5,648,254

Expenses:
Operating		822,015			2,422,670			823,640			3,430,274
Interest		1,775			970,823			31,028			1,266,967
Depreciation and amortization		237,993			777,235			231,696			1,065,303

Total expenses		1,061,783			4,170,728			1,086,364			5,762,544

Net income (loss)	$	242,160		$	(453,161	)	$	70,127		$	(114,290	)

Cash distribution	$			$	38,892		$	--		$	669,833

Cash distribution recorded as income		--			203,833			--			669,833

Partnership’s share of Local
Partnership net income		239,104			--			69,418			--

Share of income from partnerships		$236,637						$675,111

Share of income from partnerships
classified as discontinued
operations		$206,300						$64,140

(a) Mary Allen Tower West; Tradewinds

(b) Fairway Park; Madison Square; Northridge; Westport Village

Hale Ohana

Cash distributions received from Local Partnerships which have investment basis (equity method) are recorded as a reduction of investments in partnerships and as cash receipts on the respective consolidated balance sheets. Cash distributions received from Local Partnerships which have cumulative losses in excess of the amount of the Partnership’s investments in those Local Partnerships (equity method suspended) are recorded as share of income from partnerships on the respective consolidated statements of operations and as cash receipts on the respective consolidated balance sheets. As of September 30, 2010 and 2009, the Partnership's share of cumulative losses to date for four of the six and for six of the eight Local Partnerships, respectively, exceeded the amount of the Partnership's investments in those Local Partnerships by $7,047,450 and $6,925,552, respectively. As the Partnership has no further obligation to advance funds or provide financing to these Local Partnerships, the excess losses have not been reflected in the accompanying consolidated financial statements.

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010 and 2009

(Unaudited)

3. INVESTMENTS IN PARTNERSHIPS - Continued

a. Due on investments in partnerships and accrued interest payable

Purchase money notes

The Partnership executed certain purchase money notes payable as part of the acquisition of its equity interests in certain Local Partnerships. The notes are nonrecourse notes secured by a security interest in the Partnership’s interests in the respective Local Partnership. The Partnership's obligations with respect to its investments in Local Partnerships, in the form of nonrecourse purchase money notes having an aggregate principal balance of $1,340,000 plus aggregate accrued interest of $6,645,028 as of September 30, 2010, are payable in full upon the earliest of: (i) sale or refinancing of the respective Local Partnership's rental property; (ii) payment in full of the respective Local Partnership's permanent loan; or (iii) maturity.

Effective January 1, 2009, the Partnership’s interest in Cedar Point and Thornwood House were transferred to the purchase money noteholders and or their affiliates or assignees. Effective July 15, 2010, the Partnership’s interest in Pilgrim Tower East was transferred to the purchase money noteholder and or its affiliates or assignees.

Property	Principal	Date	Disposition
Cedar Point	$1,320,000	January 2009	Transfer
Thornwood House	$1,775,000	January 2009	Transfer
Pilgrim Tower East	$1,450,000 (1)	July 2010	Transfer

(1) Remaining principal, after a partial payment.

The purchase money note related to the following property matured and has not been paid or extended as of December 13, 2010.

		Accrued Interest
		as of
Property	Principal	September 30, 2010	Maturity
Westport Village (1)	$840,000	$2,904,645	09/01/99

(1) In receivership.

The remaining purchase money note related to Northridge Park matures in 2025. As of September 30, 2010, principal and accrued interest balances were $500,000 and $3,740,383, respectively.

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010 and 2009

(Unaudited)

3. INVESTMENTS IN PARTNERSHIPS - Continued

The purchase money notes, which are nonrecourse to the Partnership, are generally secured by the Partnership's interest in the respective Local Partnerships. There is no assurance that the underlying properties will have sufficient appreciation and equity to enable the Partnership to pay the purchase money notes' principal and accrued interest when due. If a purchase money note is not paid in accordance with its terms, the Partnership will either have to renegotiate the terms of repayment or risk losing its partnership interest in the respective Local Partnership. In the event that a purchase money note remains unpaid upon maturity, the noteholder may have the right to foreclose on the Partnership’s interest in the related Local Partnership.

The Partnership's inability to pay certain of the purchase money notes principal and accrued interest balances when due, and the resulting uncertainty regarding the Partnership's continued ownership interest in the related Local Partnerships, does not adversely impact the Partnership's financial condition because the purchase money notes are nonrecourse and secured solely by the Partnership's interest in the related Local Partnerships. Therefore, should the investment in any of the Local Partnerships with matured or maturing purchase money notes not produce sufficient value to satisfy the related purchase money notes, the Partnership's exposure to loss is limited because the amount of the nonrecourse indebtedness of each of the matured or maturing purchase money notes exceeds the carrying amount of the investment in each of the related Local Partnerships. Thus, even a complete loss of the Partnership's interest in these Local Partnerships would not have a material adverse impact on the financial condition of the Partnership.

Interest expense on the Partnership's purchase money notes for the three and nine month periods ended September 30, 2010, was $81,609 and $244,828, respectively, and $75,445 and $226,336 for the three and nine month periods ended September 30, 2009, respectively. The accrued interest payable on these purchase money notes of $3,740,383 and $3,495,556 as of September 30, 2010 and December 31, 2009, respectively, is due upon the earliest of: (i) sale or refinancing of the respective Local Partnership’s rental property; (ii) payment in full of the respective Local Partnership’s permanent loan; or (iii) maturity. Interest expense included in discontinued operations for the three and nine month periods ended September 30, 2010, was $37,191 and $205,002, respectively, and $83,906 and $252,874 for the three and nine month periods ended September 30, 2009, respectively.

b. Assets held for sale or transfer

Westport Village

The purchase money note secured by the Partnership’s interest in Westport Associates (Westport Village) matured on September 1, 1999 and was not paid. The Partnership’s non-recourse purchase money note obligation and accrued interest thereon was $840,000 and $2,904,645, respectively, at September 30, 2010. This purchase money note and the accrued interest thereon is classified as held for sale in the accompanying consolidated balance sheets.

The mortgage loan encumbering the property associated with the Partnership’s investment in Westport Village is in default. As of September 30, 2010, Westport Village was in receivership pending a foreclosure sale of the property. Accordingly, the Partnership’s basis in the Local Partnership, which totaled $0 at both September 30, 2010 and December 31, 2009, has been reclassified to investment in partnerships held for sale or transfer in the accompanying consolidated balance sheets. There can be no assurance as to the ultimate timing of the foreclosure sale and/or transfer of ownership of the property.

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010 and 2009

(Unaudited)

3. INVESTMENTS IN PARTNERSHIPS – Continued

Madison Square

The mortgage loan encumbering the property associated with the Partnership’s investment in Madison Square is in default. As of September 30, 2010, the Local Partnership had received notice from the lender of its intent to foreclose on the property. Accordingly, the Partnership’s basis, which totaled $0 at both September 30, 2010 and December 31, 2009, has been reclassified to investment in partnerships held for sale or transfer in the accompanying consolidated balance sheets. There can be no assurance as to the ultimate timing of the foreclosure sale and/or transfer of ownership of the property.

Mary Allen Tower West

On May 12, 2010, a contract for the sale of the Mary Allen Tower West property was executed. Due to the possible sale of the property related to Mary Allen Tower West, the Partnership’s basis in the Local Partnership was $2,138,022, which includes net unamortized acquisition fees and purchase property costs, which totaled $10,896 as of September 30, 2010, and $11,089 as of December 31, 2009, have been reclassified to investment in partnerships held for sale or transfer in the accompanying balance sheet. There is no assurance that the sale of the property will occur.

c. Completed sales

Hale Ohana

On March 15, 2008 the Local Partnership entered into a contract with a third party to sell its property for approximately $3,875,000. The sale was completed on March 15, 2010. The sale resulted in gain on disposition of investment in partnerships for financial statement purposes of $1,603,593 in 2010 and in gain of approximately $2,086,000 for federal tax purposes. As of September 30, 2010, the Partnership’s share of cash proceeds from sale has been received. In accordance with the terms of the Partnership Agreement, in March 2010, the Managing General Partner was paid a disposition fee or $77,500 related to the sale. The fee was netted against the related gain on disposition of investment in partnerships.

Pilgrim Tower East

Effective July 15, 2010, the Partnership’s interest in Pilgrim Tower East was transferred to the purchase money noteholder as satisfaction of the note. As of July 15, 2010, the principal and accrued interest balances were $1,450,000 and $4,944,423, respectively. The sale resulted in gain from extinguishment of debt for financial statement purposes of $6,368,609 in 2010 and in gain of approximately $7.5 million for federal tax purposes.

4. RELATED PARTY TRANSACTIONS

In accordance with the terms of the Partnership Agreement, the Partnership is obligated to reimburse the Managing General Partner or its affiliates for direct expenses in connection with managing the Partnership. For the three and nine month periods ended September 30, 2010 the Partnership paid $76,535 and $210,091, respectively, and $59,869 and $248,865 for the three and nine month periods ended September 30, 2009, respectively. Such expenses are included in general and administrative expenses in the accompanying consolidated statements of operations.

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010 and 2009

(Unaudited)

4. RELATED PARTY TRANSACTIONS – Continued

In accordance with the terms of the Partnership Agreement, the Partnership is obligated to pay the Managing General Partner an annual incentive management fee (Management Fee) after all other expenses of the Partnership are paid. The Partnership paid the Managing General Partner a Management Fee of $93,750 for each of the three month periods ended September 30, 2010 and 2009 and $281,250 for each of the nine month periods ended September 30, 2010 and 2009.

In accordance with the terms of the Partnership Agreement, in March 2010, the Managing General Partner was paid a disposition fee of $77,500 related to the sale of Hale Ohana, which was netted against the related gain on disposition of investment in partnerships.

5. CASH DISTRIBUTIONS

On May 17, 2009, the Partnership declared a cash distribution of $1,857,597 ($25 per Unit) to the Limited Partners who were holders of record as of May 17, 2009, of which, in June 2009, $1,268,386 was paid to the Limited Partners. From the distribution amount, in April 2009, $590,097 was paid to the State of New Jersey for non-resident withholding tax.

On July 30, 2010, the Partnership paid a cash distribution of $2,200,110 ($30 per Unit) to the Limited Partners who were holders of record as of July 1, 2010.

6. CASH CONCENTRATION RISK

Financial instruments that potentially subject the Partnership to concentrations of risk consist primarily of cash. The Partnership maintains two cash accounts with SunTrust Bank. As of September 30, 2010, the uninsured portion of the cash balances was $0.

Part I. FINANCIAL INFORMATION

Item 2. Management's Discussion and Analysis

of Financial Condition and Results of Operations

The Management's Discussion and Analysis of Financial Condition and Results of Operations section is based on the consolidated financial statements, and contains information that may be considered forward looking, including statements regarding the effect of governmental regulations. Actual results may differ materially from those described in the forward looking statements and will be affected by a variety of factors including national and local economic conditions, the general level of interest rates, governmental regulations affecting the Partnership and interpretations of those regulations, the competitive environment in which the Partnership operates, and the availability of working capital.

The financial results for the three and nine month periods ended September 30, 2010 and 2009 included the impact of treating the results of operations related to the sale of the Partnership’s interest in Local Partnerships during the reporting periods. The Partnership has presented the results of operations from these sold Local Partnerships as discontinued operations in the accompanying consolidated financial statements for all periods presented.

Part I. FINANCIAL INFORMATION

Item 2. Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

Critical Accounting Policies

The Partnership has disclosed its selection and application of significant accounting policies in Note 1 of the notes to consolidated financial statements included in the Partnership’s annual report on Form 10-K at December 31, 2009. The Partnership accounts for its investments in partnerships (Local Partnerships) by the equity method because the Partnership is a limited partner in the Local Partnerships. As such the Partnership has no control over the selection and application of accounting policies, or the use of estimates, by the Local Partnerships. Environmental and operational trends, events and uncertainties that might affect the properties owned by the Local Partnerships would not necessarily have a significant impact on the Partnership’s application of the equity method of accounting, since the equity method has been suspended for four Local Partnerships which have cumulative losses in excess of the amount of the Partnership’s investments in those Local Partnerships.

Financial Condition/Liquidity

The Partnership's liquidity, with unrestricted cash resources of $4,538,713, along with anticipated future cash distributions from Local Partnerships, is expected to be adequate to meet its current and anticipated operating cash needs. As of December 13, 2010, there were no material commitments for capital expenditures.

The Partnership closely monitors its cash flow and liquidity position in an effort to ensure that sufficient cash is available for operating requirements. For the nine month period ended September 30, 2010, existing cash resources, receipt of distributions from local partnerships and sale proceeds received were adequate to support operating cash requirements. Cash and cash equivalents decreased $1,121,757 during the nine month period ended September 30, 2010, primarily due to the distribution paid to limited partners which was partially offset by sale proceeds received.

Results of Operations

The Partnership’s recognized net income for the three month period ended September 30, 2010, compared to net loss in 2009, primarily due to the gain on extinguishment of debt related to the transfer of the Partnership's interests in Pilgrim Tower East, which offset the decrease in share of income from partnerships. The loss from continuing operations increased primarily due to the decrease in share of income from partnerships despite the reduced operating expenses. The increase in income from discontinued operations was primarily attributable to the gain on extinguishment of debt related to the transfer of the Partnership's interests in Pilgrim Tower East.

The Partnership’s net income for the nine month period ended September 30, 2010 decreased compared to 2009, primarily due to the lower gain on extinguishment of debt and a decrease in share of income from partnerships but the decline was partially offset by the disposition of an investment in a Local Partnership. The gain in the prior year was related to the transfer of the Partnership’s interest in two Local Partnerships. The loss from continuing operations increased primarily due to the decrease in share of income from partnerships despite the reduced operating expenses. The decrease in share of income from partnerships is the result of significant reductions in the distributions from Local Partnerships in 2010. General and administrative expenses decreased primarily due to nonrecurring state tax filing fees and lower reimbursed expenses in connection with managing the Partnership. Professional fees increased due to higher audit costs. The decrease in income from discontinued operations was primarily due to the lower gain on extinguishment of debt.

Part I. FINANCIAL INFORMATION

Item 2. Management's Discussion and Analysis

of Financial Condition and Results of Operations - Continued

For financial reporting purposes, the Partnership, as a limited partner in the Local Partnerships, does not record losses from the Local Partnerships in excess of its investment to the extent that the Partnership has no further obligation to advance funds or provide financing to the Local Partnerships. As a result, the Partnership's share of income from partnerships for the three and nine month periods ended September 30, 2010 did not include losses of $266,800 and $640,306, respectively, compared to excluded losses of $139,339 and $418,021 for the three and nine month periods ended September 30, 2009, respectively.

Certain taxing authorities may assert claims against the Partnership for failure to withhold and remit income tax on operating profit or where the sale(s) of property in which the Partnership was invested failed to produce sufficient cash proceeds with which to pay the state tax and/or to pay statutory partnership filing fees. The Partnership is unable to quantify the amount of such potential claims at this time. The Partnership has consistently advised its Partners that they should consult with their tax advisors as to the necessity of filing non-resident returns in such states with respect to their proportional taxes due.

The Partnership successfully contested a claim from the Internal Revenue Service which related to a penalty from an alleged late filing of the 2002 federal tax return. The Internal Revenue Service waived the claim in October 2010.

No other significant changes in the Partnership's operations have taken place during the three month period ended September 30, 2010.

Item 4. Controls and Procedures

a) Disclosure Controls and Procedures.

The Partnership’s management, with the participation of the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. A control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the control system are met. Based on such evaluation, the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective at a reasonable assurance level.

b) Changes in Internal Control over Financial Reporting.

There has been no change in the Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

The Partnership is unaware of any pending or outstanding litigation involving it or the underlying investment property of the Local Partnerships in which the Partnership invests that are not of a routine nature arising in the ordinary course of business or that would have a material adverse effect on the business.

Part II. OTHER INFORMATION - Continued

Item 3. Defaults upon Senior Securities

See Note 2.a. of the notes to consolidated financial statements contained in Part I, Item 1, hereof, for information concerning the Partnership's defaults on certain purchase money notes.

Item 5. Other Information

There has not been any information required to be disclosed in a report on Form 8-K during the quarter ended September 30, 2010, but not reported, whether or not otherwise required by this Form 10-Q at September 30, 2010.

There is no established market for the purchase and sale of units of additional limited partner interest (Units) in the Partnership, although various informal secondary market services may exist. Due to the limited markets, however, investors may be unable to sell or otherwise dispose of their Units.

Item 6. Exhibits

Exhibit No.

Description

31.1	Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32	Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

All other Items are not applicable.

SIGNATURE

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		CAPITAL REALTY INVESTORS-IV LIMITED
		PARTNERSHIP
		(Registrant)

		by: C.R.I., Inc.
		Managing General Partner



December 13, 2010		by: /s/ H. William Willoughby
DATE		H. William Willoughby
		Director, President, Secretary,
		Principal Financial Officer and
		Principal Account Officer

Attached files

CAPITAL REALTY INVESTORS IV LIMITED PARTNERSHIP Reports

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