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EX-32.1 - WNC HOUSING TAX CREDIT FUND VI LP SERIES 7ex32-1.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

Amendment No. 1

to Form 10-K/A

 

(Mark One)

 

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended March 31, 2012

 

OR

 

[  ]  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: 0-32395

 

WNC HOUSING TAX CREDIT FUND VI, L.P., Series 7

(Exact name of registrant as specified in its charter)

 

California   33-0761517
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
     
17782 Sky Park Circle   92614-6404
Irvine, CA   (Zip Code)
(Address of principal executive offices)    

 

 (714) 662-5565

(Telephone number)

 

Securities registered pursuant to Section 12(b) of the Act:

 

NONE

 

Securities registered pursuant to section 12(g) of the Act:

 

UNITS OF LIMITED PARTNERSHIP INTEREST

(Title of Class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act

Yes [  ]  No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes [  ]  No [X]

 

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 [  ]  No [X]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X]  No [  ]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

 

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 the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer [  ] Accelerated filer [  ] Non-accelerated filer [X] Smaller reporting company [  ]

 

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

Yes [  ]  No [X]

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

 

INAPPLICABLE

 

DOCUMENTS INCORPORATED BY REFERENCE

 

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).

 

 

 

 
 

 

EXPLANATORY NOTE

 

This Amendment No. 1 on Form 10-K/A (this “Amendment”) to the Annual Report on Form 10-K of WNC Housing Tax Credit Fund VI, L.P., Series 7 (the “Partnership”) for the fiscal year ended March 31, 2012, initially filed with the Securities and Exchange Commission (the “SEC”) on November 5, 2012 (the “Original Filing”), is being filed to correct certain administrative errors in the Original Filing. The report of the independent registered public accounting firm in the Original Filing in Item 8 inadvertently referred to the fiscal years ended March 31, 2011 and 2010, which were audited by a predecessor auditor.

 

This Amendment No. 1 is being filed solely to correct the report of the independent registered public accounting firm to only cover the fiscal year ended March 31, 2012 and to include the report of the predecessor independent registered public accounting firm for the fiscal years ended March 31, 2011 and 2010 that was intended to be filed with the Original Filing.

 

In addition, pursuant to the rules of the SEC, “Item 8. Financial Statements and Supplementary Data” is being filed in its entirety in this Amendment, however, the only change in Item 8 from the Original Filing has been to correct the report of the independent registered public accounting firm to cover only the fiscal year ended March 31, 2012 and to include the auditor’s report of the predecessor independent registered public accounting firm for the fiscal years ended March 31, 2011 and 2010. Further, the exhibit list in Item 15 of Part IV of the Original Filing has been amended to contain current dated certifications from the Company’s Chief Executive Officer and Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002. The certifications of the Company’s Chief Executive Officer and Chief Financial Officer are attached as exhibits to this Amendment.

 

Except for the foregoing amended information, this Amendment does not alter or update any other information contained in the Original Filing. Therefore, this Amendment should be read together with other documents the Partnership has filed with the SEC subsequent to the Original Filing. Information in such reports and documents updates and supersedes certain information contained in the Original Filing.

 

2
 

 

 

Report of Independent Registered Public Accounting Firm

 

To the Partners

WNC Housing Tax Credit Fund VI, L.P., Series 7

 

We have audited the accompanying balance sheet of WNC Housing Tax Credit Fund VI, L.P., Series 7 (the Partnership) as of March 31, 2012, and the related statements of operations, partners’ equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of WNC Housing Tax Credit Fund VI, L.P., Series 7 as of March 31, 2012, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

 

Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed under Item 15(a)(2) in the index related to the year ended March 31, 2012 is presented for the purpose of complying with the Securities and Exchange Commission’s rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied to the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial statement data required to be set forth therein in relation to the basic financial statements taken as a whole.

 

/s/ CohnReznick LLP  
Bethesda, Maryland  
November 5, 2012  

 

3
 

 

 

 

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

 

To the Partners

WNC Housing Tax Credit Fund VI, L.P., Series 7

 

We have audited the accompanying balance sheet of WNC Housing Tax Credit Fund VI, L.P., Series 7 (the Partnership) as of March 31, 2011, and the related statements of operations, partners’ equity (deficit) and cash flows for each of the years in the two-year period ended March 31, 2011. The Partnership’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of certain Local Limited Partnerships which investments represent $0 of the total Partnership assets as of March 31, 2011; and $0 and $105,302 of the total Partnership loss for the years ended March 31, 2011 and 2010, respectively. Those statements were audited by other auditors, whose reports have been furnished to us, and our opinion, insofar as it relates to those Local Limited Partnerships, is based solely on the reports of the other auditors.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion.

 

In our opinion, based on our audits and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of WNC Housing Tax Credit Fund, VI, L.P,, Series 7 as of March 31, 2011, and the results of its operations and its cash flows for each of the years in the two-year period ended March 31, 2011, in conformity with accounting principles generally accepted in the United States of America

 

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed under Item 15(a)(2) in the index related to years above are presented for the purpose of complying with the Securities and Exchange Commission’s rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied to the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial statement data required to be set forth therein in relation to the basic financial statements taken as a whole.

 

/s/ ReznickGroup, P.C.  
Bethesda, Maryland  
June 27, 2011  

 

4
 

  

PAILET, MEUNIER and LeBLANC, L.L.P.

Certified Public Accountants

Management Consultants

 

INDEPENDENT AUDITOR’S REPORT

 

To the Partners

UNITED DEVELOPMENT CO., L.P.-2000

 

We have audited the accompanying balance sheet of UNITED DEVELOPMENT CO., L.P.-2000, as of December 31, 2009 and the related statements of operations, changes in partners’ capital and cash flows for the year then ended. These financial statements are the responsibility of the partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with the Standards of the Public Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of UNITED DEVELOPMENT CO., L.P.-2000 as of December 31, 2009 and the results of its operations, changes in partners’ capital and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

 

/s/ PAILET, MEUNIER and LeBLANC, L.L.P.  
Metairie, Louisiana  
September 3, 2010  

 

5
 

  

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7

(A California Limited Partnership)

 

BALANCE SHEETS

 

   March 31, 
         
    2012    2011 
           
ASSETS          
           
Cash  $26,139   $160,878 
Investments in Local Limited Partnerships, net (Notes 2 and 3)   472,226    1,426,216 
Due from affiliates, net (Note 5)   75,394    75,394 
Other assets   -    22,964 
           
Total Assets  $573,759   $1,685,452 
           
LIABILITIES AND PARTNERS’ EQUITY (DEFICIT)          
           
Liabilities:          
Accrued expenses  $-   $2,295 
Accrued fees and expenses due to General Partner and affiliates (Note 3)   379,294    254,330 
           
Total Liabilities   379,294    256,625 
           
Partners’ Equity (Deficit):          
General Partner   (17,807)   (16,573)
Limited Partners (25,000 Partnership Units authorized; 18,850 Partnership Units issued and outstanding)   212,272    1,445,400 
           
Total Partners’ Equity (Deficit)   194,465    1,428,827 
           
Total Liabilities and Partners’ Equity (Deficit)  $573,759   $1,685,452 

 

See accompanying notes to financial statements

 

F-1
 

  

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7

(A California Limited Partnership)

 

STATEMENTS OF OPERATIONS

 

   For the Years Ended March 31, 
             
   2012   2011   2010 
                
Reporting fees  $11,713   $8,520   $20,056 
Distribution income   -    -    1,029 
Other income   -    -    102 
                
Total income   11,713    8,520    21,187 
                
Operating expenses and loss:               
Amortization   33,272    39,236    39,236 
Asset management fees (Note 3)   55,176    58,456    58,456 
Impairment loss (Note 2)   638,150    853,991    863,041 
Legal and accounting   55,894    89,444    7,362 
Write off of other  assets   22,964    -    - 
Write off of advances to Local Limited Partnerships (Note 6)   140,344    75,250    15,000 
Other   36,534    19,587    9,670 
                
 Total operating expenses and loss   982,334    1,135,964    992,765 
                
Loss from operations   (970,621)   (1,127,444)   (971,578)
                
Equity in losses of Local Limited Partnerships (Note 2)   (247,905)   (279,911)   (311,581)
                
Loss on sale of Local Limited Partnership   (25,377)   -    - 
                
Interest income   9,541    165    21,190 
                
Net loss  $(1,234,362)  $(1,407,190)  $(1,261,969)
                
Net loss allocated to:               
General Partner  $(1,234)  $(1,407)  $(1,262)
                
Limited Partners  $(1,233,128)  $(1,405,783)  $(1,260,707)
                
Net loss per Partnership Unit  $(65.42)  $(74.58)  $(66.88)
                
Outstanding weighted Partnership Units   18,850    18,850    18,850 

 

See accompanying notes to financial statements

 

F-2
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7

(A California Limited Partnership)

 

STATEMENTS OF PARTNERS’ EQUITY (DEFICIT)

 

For the Years Ended March 31, 2012, 2011 and 2010

 

  General Partner  Limited Partners Total
Partners’ equity (deficit) at March 31, 2009  $(13,904)  $4,111,890   $4,097,986 
                
Net loss   (1,262)   (1,260,707)   (1,261,969)
                
Partners’ equity (deficit) at March 31, 2010   (15,166)   2,851,183    2,836,017 
                
Net loss   (1,407)   (1,405,783)   (1,407,190)
                
Partners’ equity (deficit) at March 31, 2011   (16,573)   1,445,400    1,428,827 
                
Net loss   (1,234)   (1,233,128)   (1,234,362)
                
Partners’ equity (deficit) at March 31, 2012  $(17,807)  $212,272   $194,465 

 

See accompanying notes to financial statements

 

F-3
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7

(A California Limited Partnership)

 

STATEMENTS OF CASH FLOWS

 

   For the Years Ended March 31, 
             
   2012   2011   2010 
             
Cash flows from operating activities:               
Net loss  $(1,234,362)  $(1,407,190)  $(1,261,969)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:               
Amortization   33,272    39,236    39,236 
Impairment loss   638,150    853,991    863,041 
Equity in losses of Local Limited Partnerships   247,905    279,911    311,581 
(Increase) decrease in other assets   -    (18,164)   (4,800)
Decrease in due from affiliates   -    -    3,413 
Decrease in accrued expenses   (2,295)   -    (3,205)
Increase (decrease) in accrued fees and expenses due to General Partner and affiliates   (9,880)   55,167    55,746 
Write off of other assets   22,964    -    - 
Loss on sale of Local Limited Partnership   25,377    -    - 
                
Net cash provided by (used in) operating activities   (278,869)   (197,049)   3,043 
                
Cash flows from investing activities:               
Distributions from Local Limited Partnerships   34,663    19,397    12,244 
Advances to Local Limited Partnerships   (140,344)   (75,250)   (15,000)
Write off of advances to Local Limited Partnerships   140,344    75,250    15,000 
Net payment made on sale of Local Limited Partnership   (25,377)   -    - 
                
Net cash provided by (used in) investing activities   9,286    19,397    12,244 
                
Cash flows from financing activities:               
Advances received from General Partner and affiliates   134,844    -    - 
                
Net cash provided by financing activities   134,844    -    - 
                
Net increase (decrease) in cash   (134,739)   (177,652)   15,287 
                
Cash, beginning of period   160,878    338,530    323,243 
                
Cash, end of period  $26,139   $160,878   $338,530 
                
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:               
Taxes paid  $800   $800   $800 
                
SIGNIFICANT NONCASH INVESTING AND FINANCING ACTIVITIES:               
The Partnership has decreased its investments in Local Limited Partnerships and decreased its payables to Local Limited Partnerships due to negative tax credit adjuster  $-   $-   $12,081 

 

F-4
 

   

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended March 31, 2012, 2011 and 2010

 

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization

 

WNC Housing Tax Credit Fund VI, L.P., Series 7, a California Limited Partnership (the “Partnership”) was formed on June 16, 1997 under the laws of the State of California, and commenced operations on September 3, 1999.  The Partnership was formed to acquire limited partnership interests in other limited partnerships (“Local Limited Partnerships”) which owns multi-family housing complexes (“Housing Complexes”) that are eligible for Federal low income housing tax credits (“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 Complexes. Each Local Limited Partnership is governed by its agreement of limited partnership (the “Local Limited Partnership Agreement”).

 

WNC & Associates, Inc. is the general partner of the Partnership (the “General Partner” or “Associates”).  The chairman and president owns all of the outstanding stock of Associates.  The business of the Partnership is conducted primarily through Associates, as the Partnership has no employees of its own.

 

The Partnership shall continue to be in full force and effect until December 31, 2060 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.

 

The Partnership Agreement authorized the sale of up to 25,000 units of limited partnership interest (“Partnership Units”) at $1,000 per Partnership Unit.  The offering of Partnership Units has concluded and 18,850 Partnership Units, representing subscriptions in the amount of $18,828,790, net of dealer discounts of $21,210 had been accepted.  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 Low Income Housing Tax Credits of the Partnership.  The investors (the “Limited Partners”) in the Partnership will be allocated the remaining 99.9% of these items in proportion to their respective investments.

 

The proceeds from the disposition of any of the Local Limited Partnership 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 Partnership.  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 equal to their capital contributions and their return on investment (as defined in the Partnership Agreement) and 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:

 

F-5
 

  

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

For the Years Ended March 31, 2012, 2011 and 2010

 

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

The Low Income Housing Tax Credit 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 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 properties, 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 the 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.

 

Substantially all of the Low Income Housing Tax Credits anticipated to be realized from the Local Limited Partnerships have been realized. The Partnership does not anticipate being allocated any Low Income Housing Tax Credits from the Local Limited Partnerships in the future.

 

Anticipated future and existing cash resources of the Partnership are not sufficient to pay existing liabilities of the Partnership.  However, substantially all of the existing liabilities of the Partnership are payable to the General Partner and/or its affiliates.  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.

 

F-6
 

  

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

For the Years Ended March 31, 2012, 2011 and 2010

 

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

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 November 30, 2013.

 

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 are completing 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 could result in recapture if certain conditions are not met.

 

With that in mind, the General Partner is continuing its review of the Housing Complexes, with special emphasis on the more mature Housing Complexes such as any that have satisfied the IRS compliance requirements.  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 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. 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 March 31, 2012.

 

Upon management of the Partnership identifying a Local Limited Partnership for disposition, costs incurred by the Partnership in preparation for the disposition are deferred. Upon the sale of the Local Limited Partnership Interest, the Partnership nets the costs that had been deferred against the proceeds from the sale in determining the gain or loss on the sale of the Local Limited Partnership. Deferred disposition costs are included in other assets on the balance sheets.

 

On April 1, 2011, the Partnership sold its Local Limited Partnership interest in Stroud Housing Associates, L.P. (“Stroud”) to an affiliate of the Local General Partner. Stroud had been experiencing several operational issues including extremely low occupancy. The Local General Partner had overfunded its contractual obligations as General Partner. The Partnership offered to pay $5,000 if the Local General Partner would purchase its Local Limited Partnership Interest. The Local General Partner countered at $25,000 which the Partnership accepted.

 

The Local Limited Partnership will complete its 15-year compliance period in 2015; therefore there is a risk of tax credit recapture.  The last year in which Low Income Housing Tax Credits were generated by this Local Limited Partnership is 2011.  The maximum exposure of recapture along with the interest and penalties related to the recapture is $408,914, which equates to $21.69 per Partnership Unit.  The executed Purchase Agreement states that Stroud must remain in compliance with Section 42 of the IRS code. Until the completion of the Compliance Period, the purchaser must furnish the Partnership with certain reports proving that the Housing Complex is still in compliance with the IRS code.

  

F-7
 

  

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

For the Years Ended March 31, 2012, 2011 and 2010

 

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

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 allocated to the Partnership and any 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 are capitalized as part of the investment and were being amortized over 30 years (See Notes 2 and 3).

 

“Equity in losses of Local Limited Partnerships” for each year ended March 31 has been recorded by the Partnership based on the twelve months of reported results provided by the Local Limited Partnerships for each year ended December 31. 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 reported 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 (see Note 2).

 

Distributions received from the Local Limited Partnerships are accounted for as a reduction of the investment balance.  Distributions received after the investment has reached zero are recognized as distribution income.

 

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. 

 

F-8
 

  

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

For the Years Ended March 31, 2012, 2011 and 2010

 

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

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.

 

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 March 31, 2012 and 2011, the Partnership had no cash equivalents.

 

Concentration of Credit Risk

 

At  March 31, 2012, the Partnership maintained cash balances at a certain financial institution in excess of the federally insured maximum. The Partnership believes it is not exposed to any significant financial risk on cash.

 

Reporting Comprehensive Income

 

The Partnership had no items of other comprehensive income for all periods presented.

 

Net Loss Per Partnership Unit

 

Net loss per Partnership Unit includes no dilution and is computed by dividing loss available to Limited Partners by the weighted average number of Partnership Units outstanding during the period.  Calculation of diluted net loss per Partnership Unit is not required.

 

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, there financial statements do not reflect a provision for income taxes and the Partnership has no other tax positions which must be considered for disclosure.

 

F-9
 

  

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

For the Years Ended March 31, 2012, 2011 and 2010

 

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

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.  Due to the uncertainty of the collection of these fees, the Partnership recognizes reporting fees as collections are made.

 

Amortization

 

Acquisition fees and costs were being amortized over 30 years using the straight-line method. Amortization expense for each of the years ended March 31, 2012, 2011, and 2010 was $33,272, $39,236, and $39,236, respectively. Future estimated annual amortization expense for each of the years through March 31, 2017 is $27,308.

 

Impairment

 

The Partnership reviews its investments in Local Limited Partnerships 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. As of March 31, 2009, all Local Limited Partnerships were not considered to have any residual value in consideration of the current economic circumstances. For the years ended March 31, 2012, 2011 and 2010 impairment loss related to investments in Local Limited Partnerships was $344,426, $853,991, and $863,041, respectively.

 

The Partnership also evaluated its intangibles for impairment in connection with its investments in Local Limited Partnerships. Impairment on the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of remaining Low Income Housing Tax Credits allocated to the Partnership and the estimated residual value of the investment. As of March 31, 2009, all Local Limited Partnerships were not considered to have any residual value in consideration of the current economic circumstances. During the years ended March 31, 2012, 2011 and 2010, impairment loss of $293,724, $0, and $0, was recorded against the related intangibles.

 

Impact of Recent Accounting Pronouncements

 

In September 2006, the FASB issued accounting guidance for Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value measurements. This guidance is effective for financial statements issued for fiscal years beginning after November 15, 2007 and shall be applied prospectively except for very limited transactions.  In February 2008, the FASB delayed for one year implementation of the guidance as it pertains to certain non-financial assets and liabilities. The Partnership adopted GAAP for Fair Value Measurements effective April 1, 2008, except as it applies to those non-financial assets and liabilities, for which the effective date was April 1, 2009. The Partnership has determined that adoption of this guidance has no material impact on the Partnership’s financial statements.

 

In November 2008, the FASB issued accounting guidance on Equity Method Investment Accounting Considerations that addresses how the initial carrying value of an equity method investment should be determined, how an impairment assessment of an underlying indefinite-lived intangible asset of an equity method investment should be performed, how an equity method investee’s issuance of shares should be accounted for, and how to account for a change in an investment from the equity method to the cost method. This guidance is effective in fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. The Partnership adopted the guidance for the interim quarterly period beginning April 1, 2009. The impact of adopting it did not have a material impact on the Partnership’s financial condition or results of operations.

 

F-10
 

  

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

For the Years Ended March 31, 2012, 2011 and 2010

 

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

In April 2009, the FASB issued accounting guidance for Interim Disclosures about Fair Value of Financial Instruments.  This requires disclosure about the method and significant assumptions used to establish the fair value of financial instruments for interim reporting periods as well as annual statements.  It became effective for as of and for the interim period ended June 30, 2009 and had no impact on the Partnership’s financial condition or results of operations.

 

In May 2009, the FASB issued guidance regarding subsequent events, which was subsequently updated in February 2010. This guidance established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this guidance sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This guidance was effective for financial statements issued for fiscal years and interim periods ending after June 15, 2009, and was therefore adopted by the Partnership for the quarter ended June 30, 2009. The adoption did not have a significant impact on the subsequent events that the Partnership reports, either through recognition or disclosure, in the financial statements. In February 2010, the FASB amended its guidance on subsequent events to remove the requirement to disclose the date through which an entity has evaluated subsequent events, alleviating conflicts with current SEC guidance. This amendment was effective immediately and therefore the Partnership did not include the disclosure in this Form 10-K.

 

In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for the consolidation of variable interest entities (VIEs).  The amended guidance modifies the consolidation model to one based on control and economics, and replaced quantitative primary beneficiary analysis with a qualitative analysis. The primary beneficiary of a VIE will be the entity that 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 amended guidance requires continual reconsideration of the primary beneficiary of a VIE and adds an additional reconsideration event for determination of whether an entity is a VIE.  Additionally, the amendment requires enhanced and expanded disclosures around VIEs.  This amendment is effective for fiscal years beginning after November 15, 2009.  The adoption of this guidance on April 1, 2010 did not have a material effect on the Partnership’s financial statements.

 

In June 2009, the FASB issued the Accounting Standards Codification (Codification).  Effective July 1, 2009, the Codification is the single source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with GAAP.  The Codification is intended to reorganize, rather than change, existing GAAP.  Accordingly, all references to currently existing GAAP have been removed and have been replaced with plain English explanations of the Partnership’s accounting policies.  The adoption of the Codification did not have a material impact on the Partnership’s financial position or results of operations.

  

F-11
 

  

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

For the Years Ended March 31, 2012, 2011 and 2010

 

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS

 

As of March 31, 2012 and 2011, the Partnership owns Local Limited Partnership interests in 12 and 13 Local Limited Partnerships, respectively, each of which owns one Housing Complex consisting of an aggregate 440 and 476 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 Partnership’s investments in Local Limited Partnerships as shown in the balance sheets at March 31, 2012 and 2011 are approximately $3,715,000 and $2,007,000 respectively, less than the Partnership’s equity at the preceding December 31 as shown in the Local Limited Partnerships’ combined condensed financial statements presented below.  This difference is primarily due to unrecorded losses as discussed below, and acquisition, selection and other costs related to the acquisition of the investments which have been capitalized in the Partnership’s investment account along with impairment losses recorded in the Partnership’s investment account.

 

The Partnership reviews its investments in Local Limited Partnerships 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. As of March 31, 2009, all Local Limited Partnerships were not considered to have any residual value in consideration of the current economic circumstances. For the years ended March 31, 2012, 2011 and 2010 impairment loss related to investments in Local Limited Partnerships was $344,426, $853,991, and $863,041, respectively.

 

The Partnership also evaluated its intangibles for impairment in connection with its investments in Local Limited Partnerships. Impairment on the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of remaining Low Income Housing Tax Credits allocated to the Partnership and the estimated residual value of the investment. As of March 31, 2009, all Local Limited Partnerships were not considered to have any residual value in consideration of the current economic circumstances. During the years ended March 31, 2012, 2011 and 2010, impairment loss of $293,724, $0, and $0 were recorded on the related intangibles.

 

At March 31, 2012 and 2011, the investment accounts for ten and seven of the Local Limited Partnerships, respectively, have reached a zero balance. Consequently, a portion of the Partnership’s estimate of its share of (income) losses for the years ended March 31, 2012, 2011 and 2010, amounting to $(1,075,180), $347,628, and $271,477, respectively, have not been recognized.  As of March 31, 2012, the aggregate share of net losses not recognized by the Partnership amounted to approximately $915,000. 

 

F-12
 

  

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

For the Years Ended March 31, 2012, 2011 and 2010

 

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

 

The following is a summary of the equity method activity of the investments in Local Limited Partnerships for periods presented:

 

   For the Years
Ended March 31,
 
             
   2012   2011   2010 
             
Investments per balance sheet, beginning of period  $1,426,216   $2,618,751   $3,856,934 
Tax credit adjustment   -    -    (12,081)
Impairment loss   (638,150)   (853,991)   (863,041)
Distributions received from Local Limited Partnerships   (34,663)   (19,397)   (12,244)
Equity in losses of Local Limited Partnerships   (247,905)   (279,911)   (311,581)
Amortization of paid acquisition fees and costs   (33,272)   (39,236)   (39,236)
                
Investments per balance sheet, end of period  $472,226   $1,426,216   $2,618,751 

 

   For the Years
Ended March 31,
 
             
   2012   2011   2010 
             
Investments in Local Limited Partnerships, net  $43,346   $670,340   $1,823,639 
Acquisition fees and costs, net of accumulated amortization of $23,463, $940,624, and $901,388   428,880    755,876    795,112 
Investments per balance sheet, end of period  $472,226   $1,426,216   $2,618,751 

 

F-13
 

  

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

For the Years Ended March 31, 2012, 2011 and 2010

 

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

 

The financial information from the individual financial statements of the Local Limited Partnerships includes rental and interest subsidies. Rental subsidies are included in total revenues and interest subsidies are generally netted against interest expense. Approximate combined condensed financial information from the individual financial statements of the Local Limited Partnerships as of December 31 and for the years then ended is as follows:

 

COMBINED CONDENSED BALANCE SHEETS

 

   2011   2010 
ASSETS          
           
Buildings and improvements (net of accumulated depreciation as of December 31, 2011, and 2010 of $9,805,000, and $9,451,000, respectively)  $18,781,000   $20,817,000 
Land   1,031,000    995,000 
Other assets   2,635,000    2,291,000 
           
Total assets  $22,447,000   $24,103,000 
           
LIABILITIES          
           
Mortgage loans payable  $14,254,000   $16,017,000 
Due to related parties   1,240,000    1,718,000 
Other liabilities   564,000    1,294,000 
           
Total liabilities   16,058,000    19,029,000 
           
PARTNERS’ EQUITY          
           
WNC Housing Tax Credit Fund VI, L.P., Series 7   4,187,000    3,433,000 
Other partners   2,202,000    1,641,000 
           
Total partners’ equity   6,389,000    5,074,000 
           
Total liabilities and partners’ equity  $22,447,000   $24,103,000 

  

F-14
 

  

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

For the Years Ended March 31, 2012, 2011 and 2010

 

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

 

COMBINED CONDENSED STATEMENTS OF OPERATIONS

 

   2011   2010   2009 
             
Revenues  $5,006,000   $3,003,000   $2,954,000 
                
Expenses:               
Operating expenses   2,449,000    2,145,000    1,881,000 
Interest expense   777,000    685,000    764,000 
Depreciation and amortization   953,000    801,000    935,000 
                
Total expenses   4,179,000    3,631,000    3,580,000 
                
Net operating  income (loss)  $827,000   $(628,000)  $(626,000)
                
Net income (loss) allocable to the Partnership  $827,000   $(628,000)  $(585,000)
                
Net loss recorded by the Partnership  $(248,000)  $(280,000)  $(312,000)

 

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 and/or the Local General Partners 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 investment 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.

 

NOTE 3 - 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 items:

 

 Acquisition fees equal to 7% of the gross proceeds from the sale of Partnership Units as compensation for services rendered in connection with the acquisition of Local Limited Partnerships.  At the end of all periods presented, the Partnership incurred acquisition fees of $1,319,500.  Accumulated amortization of these capitalized costs was $23,463, and $563,624, as of March 31, 2012 and 2011, respectively. Impairment of the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of the remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investments. If an impairment loss related to the acquisition fees is recorded, the accumulated amortization is reduced to zero at that time.

 

 Reimbursement of costs incurred by the General Partner or an affiliate in connection with the acquisition of the Local Limited Partnerships.  These reimbursements have not exceeded 2% of the gross proceeds. As of the end of all periods presented, the Partnership had incurred acquisition costs of $377,000 which have been included in investments in Local Limited Partnerships.  The acquisition costs were fully amortized for all periods presented.

 

F-15
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

For the Years Ended March 31, 2012, 2011 and 2010

 

NOTE 3 - RELATED PARTY TRANSACTIONS, continued

 

An annual asset management fee equal to 0.2% of the Invested Assets of the Partnership, as defined.  “Invested Assets” means the sum of the Partnership’s investment in Local Limited Partnership interests and the Partnership’s allocable share of mortgage loans on and other debts related to the Housing Complexes owned by such Local Limited Partnerships. Asset management fees of $55,176, $58,456 and $58,456 were incurred during the years ended March 31, 2012, 2011 and 2010, respectively, of which $45,000, $45,000 and $22,500 was paid during the years ended March 31, 2012, 2011 and 2010, respectively.

 

The Partnership reimbursed the General Partner or its affiliates for operating expenses incurred by the Partnership and paid for by the General Partner or its affiliates on behalf of the Partnership.  Operating expense reimbursements were $113,998, $85,484, and $5,081 during the years ended March 31, 2012, 2011 and 2010, respectively.

 

 A subordinated disposition fee in an amount equal to 1% of the sales price of real estate sold.  Payment of this fee is subordinated to the limited partners receiving a return on investment (as defined in the Partnership Agreement) and is payable only if the General Partner or its affiliates render services in the sales effort. No such fee was incurred for all the periods presented.

 

During the year ended March 31, 2012, 2011, and 2010, the Partnership had received cash advances from the General Partner or affiliates totaling $134,845, $0, and $0 which were in turn advanced to Lake Village Apartments to aid the property with its operational issues.  

 

The accrued fees and expenses due to the General Partner and affiliates consist of the following at:

 

   March 31, 
         
   2012   2011 
Expenses paid by the General Partner or an affiliate on behalf of the Partnership  $42,286   $62,343 
Asset management fee payable   202,164    191,987 
Payable to General Partner or an affiliate   134,844    - 
           
Total  $379,294   $254,330 

 

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 the 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 October 31, 2013.

 

F-16
 

  

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

For the Years Ended March 31, 2012, 2011 and 2010

 

NOTE 4 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

 

The following is a summary of the quarterly operations for the years ended March 31 (rounded):

 

   June 30   September 30   December 31   March 31 
                 
2012                
                 
Income  $-   $5,000   $2,000   $5,000 
                     
Operating expenses   (735,000)   (37,000)   (27,000)   (184,000)
                     
Loss from operations   (735,000)   (32,000)   (25,000)   (179,000)
                     
Equity in losses of Local Limited Partnerships   (50,000)   (31,000)   (31,000)   (136,000)
                     
Loss on sale of Local Limited Partnerships   (25,000)   -    -    - 
                     
Interest income   -    -    -    10,000 
                     
Net loss   (810,000)   (63,000)   (56,000)   (305,000)
                     
Net loss available to Limited Partners   (809,000)   (63,000)   (56,000)   (305,000)
                     
Net loss per Partnership Unit   (43)   (3)   (3)   (16)

 

   June 30   September 30   December 31   March 31 
                 
2011                
                 
Income  $-   $1,000   $-   $8,000 
                     
Operating expenses   (893,000)   (97,000)   (99,000)   (47,000)
                     
Loss from operations   (893,000)   (96,000)   (99,000)   (39,000)
                     
Equity in losses of Local Limited Partnerships   (75,000)   (64,000)   (57,000)   (84,000)
                     
Net loss   (968,000)   (160,000)   (156,000)   (123,000)
                     
Net loss available to Limited Partners   (967,000)   (160,000)   (156,000)   (123,000)
                     
Net loss per Partnership Unit   (51)   (9)   (8)   (7)

 

F-17
 

  

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

For the Years Ended March 31, 2012, 2011 and 2010

 

NOTE 4 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED), continued

 

   June 30   September 30   December 31   March 31 
                 
2010                
                 
Income  $4,000   $16,000   $-   $1,000 
                     
Operating expenses   (889,000)   (33,000)   (43,000)   (28,000)
                     
Loss from operations   (885,000)   (17,000)   (43,000)   (27,000)
                     
Equity in losses of Local Limited Partnerships   (97,000)   (91,000)   (89,000)   (34,000)
                     
Interest income   -    -    -    21,000 
                     
Net loss   (982,000)   (108,000)   (132,000)   (40,000)
                     
Net loss available to Limited Partners   (981,000)   (108,000)   (132,000)   (40,000)
                     
Net loss per Partnership Unit   (52)   (6)   (7)   (2)

 

NOTE 5 - DUE FROM AFFILIATES, NET

 

At March 31, 2012 and 2011, loans receivable of $75,394 were due from one Local Limited Partnership, ACN Southern Hills II, L.P. (“Southern Hills”) in which the Partnership owns a 99.98% interest. The loan receivable is in the form of a 20 year promissory note, is subordinate to the first mortgage on the respective property, due in full on August 30, 2022 and earns interest at a rate of 8% per annum.  Southern Hills had a construction loan payable aggregating approximately $1,100,000 as of December 31, 2001, which was due in March 2002 and was not repaid at that time. In September 2002 the $1.1 million loan was refinanced. The General Partner paid off $557,000 of the loan with investment money received from the Partnership. The remaining balance was converted to a $463,000 first mortgage with a bank and an $80,000 promissory note due in 20 years to the Partnership. The payments are to be made monthly and at the end of the year from available cash flow. The Partnership expects this loan to be collectible in full.  The mortgage note has covenants requiring the DCR to be maintained at 1.20 or greater.  In such cases where the DCR would fall below 1.20, no payments on the note would be made.  The most recent payments of $9,516 and $20,002 were received on March 16, 2012 and 2010, respectively.

 

At March 31, 2012 and 2001, advances due from one Local Limited Partnership were $431,098 and $290,754 due from Lake Village Apartments in which the Partnership owns a 99.98% interest. In April 2006, Lake Village Apartments, did not make its regularly scheduled principal and interest payment to the mortgage holder, Illinois Development Housing Authority (IHDA) and began negotiations with IHDA to restructure the debt. IHDA filed a summons and complaint for foreclosure in the 14th Judicial Circuit, Cambridge, Henry County, Illinois against Lake Village Apartments. Lake Village Apartments through counsel, filed an answer to the complaint denying the material allegations contained in the complaint. No further action by IHDA had been taken in the lawsuit. Notwithstanding, IHDA continued to negotiate with Lake Village Apartments regarding some type of partnership and debt restructuring. Through the bankruptcy court, the Local General Partner and IHDA agreed on a debt pay-off amount of $600,000. The General Partner or an affiliate thereof has paid the $600,000 to IHDA. The Local Limited Partnership is working towards a refinance which will most likely occur in 2013 at which time the affiliate of the General Partner will be repaid. All advances made to Lake Village Apartments were reserved for in full in the year they were advanced.

 

F-18
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

For the Years Ended March 31, 2012, 2011 and 2010

 

NOTE 6 – COMMITMENTS AND CONTINGENCIES

  

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 Partnership with its operational issues. During the year ended March 31, 2002, Associates was advised that Lake Village Apartments, a Local Limited Partnership, was in default of certain covenants relating to certain loans advanced for the construction of the apartments. The defaults were primarily caused by the general contractor failing to complete the construction of the development according to the terms of the Lake Village Apartment’s loans. As a result of the foregoing, on June 30, 2002, the Local General Partner of Lake Village Apartments was replaced by an entity wholly owned by two minority shareholders and officers of Associates and a workout agreement was executed with the lender (the “Agreement”), whereby the Local General Partner of Lake Village Apartments was replaced by the aforementioned entity. Pursuant to the terms of the Agreement, the new Local General Partner would contribute additional equity to the Local Limited Partnership if necessary, a new general contractor would complete the construction of the development, and the lender, upon satisfaction of certain conditions of the Agreement as defined, would continue to fund the completion of the construction and other costs. In addition, pursuant to the Agreement, the Partnership Agreement was amended, and the Partnership committed and paid additional capital contributions of $855,628 as a result of obtaining additional Low Income Housing Tax Credits. Construction of the development was completed as of June 2002, at which time all construction loans converted to permanent financing.

 

Beginning in November 2005, the Lake Village Apartments are being managed by the Henry County Housing Development Group, Inc. (HCHD). HCHD is the local housing authority serving Kewanee, Illinois. HCHD currently manages numerous apartment units in Kewanee and brings substantial knowledge of property management and knowledge of the local community. HCHD also administers the tenant housing choice voucher program and may be able to provide Lake Village Apartments occupants with rental assistance payments to help defer the cost of their rent thereby making it more attractive for a prospective tenant to remain at Lake Village Apartments. As of the report date, the Partnership has advanced Lake Village Apartments approximately $431,098 all of which has been reserved for and written off as bad debt as management has deemed the collectability to be questionable. These advances were used to fund certain recurring and nonrecurring operating expenses consisting primarily of property taxes and insurance.

 

Beginning in April 2006, Lake Village Apartments did not make its regularly schedule principal and interest payment to the mortgage holder, Illinois Development Housing Authority (IHDA) and began negotiations with IHDA at that time to restructure the debt. In April 2011, IHDA filed a summons and complaint for foreclosure in the 14th Judicial Circuit, Cambridge, Henry County, Illinois against Lake Village Apartments. Lake Village Apartments through counsel, filed an answer to the complaint denying the material allegations contained in the complaint. No further action by IHDA has been taken in the lawsuit. Notwithstanding, IHDA continues to negotiate with Lake Village Apartments regarding some type of partnership and debt restructuring.

 

An appraisal received in April 2008 indicated a current market value of $480,000. The Partnership has not had another appraisal prepared since that date. As of December 31, 2010, the current mortgage balance to be paid for Lake Village Apartments was $2,009,895. Through the bankruptcy court, the Local General Partner and IHDA agreed on a debt pay-off amount of $600,000. The General Partner or an affiliate thereof has paid the $600,000 to IHDA. This will prevent the property from foreclosure and possible recapture events.

 

On April 9, 2010, Stroud was inspected by the Oklahoma Housing Finance Agency (“OHFA”) and it was concluded that Stroud had fallen below the minimum set-aside requirements due to the number of down units, vacancies and the overall condition of the property. The set-aside requirement for this property is that 40 percent or more of the building’s aggregate units be occupied by individuals with incomes of 60 percent or less of the area median gross income. The OHFA requested that all corrections to be made no later than June 7, 2010. The Local General Partner engaged legal counsel to help rectify this situation. Stroud’s legal counsel asked for an extension to get all the corrections made. OHFA granted an extension and is currently receiving bi-weekly progress reports on the issues and the corrections being made. On December 14, 2010 the Local General Partner received a letter from OHFA stating that all corrections had been made and the final close out letter included copies of the corrected forms from the Internal Revenue Service.

 

F-19
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

For the Years Ended March 31, 2012, 2011 and 2010

 

NOTE 6 – COMMITMENTS AND CONTINGENCIES, continued

 

On April 1, 2011, the Partnership sold its Local Limited Partnership Interest in Stroud to an affiliate of the Local General Partner. The Local General Partner had overfunded its contractual obligations as General Partner. The Partnership offered to pay $5,000 if the Local General Partner would purchase its Local Limited Partnership interest. The Local General Partner countered at $25,000 which the Partnership accepted.

 

The Local Limited Partnership will complete its 15-year Compliance Period in 2015; therefore there is a risk of tax credit recapture. The last year in which Low Income Housing Tax Credits will be generated by this Local Limited Partnership is 2011. The maximum exposure of recapture along with the interest and penalties related to the recapture is $408,914, which equates to $21.69 per Partnership Unit. The executed Purchase Agreement states that Stroud must remain in compliance with Section 42 of the IRS code. Until the completion of the Compliance Period, the purchaser must furnish the Partnership with certain reports proving that the Housing Complex is still in compliance with the IRS code.

 

F-20
 

  

Item 15.  Exhibits and Financial Statement Schedules

 

(a)(1)    List of financial statements included in Part II hereof:
     
   

Balance Sheets, March 31, 2012 and 2011

Statements of Operations for the years ended March 31, 2012, 2011 and 2010

Statements of Partners’ Equity (Deficit) for the years ended March 31, 2012, 2011 and 2010

Statements of Cash Flows for the years ended March 31, 2012, 2011 and 2010

Notes to Financial Statements

     
(a)(2)   List of financial statement schedules included in Part IV hereof:
     
    Schedule III - Real Estate Owned by Local Limited Partnerships
     
(a)(3)    Exhibits
     
3.1   Articles of incorporation and by-laws:  The registrant is not incorporated.  The Partnership Agreement dated May 10, 1991 filed as Exhibit 28.1 to Form 10 K for the year ended December 31, 1996 is hereby incorporated by reference as Exhibit 3.1.
     
31.1   Certification of the Chief Executive Officer pursuant to Rule 13a-14 and 15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)
     
31.2   Certification of the Chief Financial Officer pursuant to Rule 13a-14 and 15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)
     
32.1   Section 1350 Certification of the Chief Executive Officer.  (filed herewith)
     
32.2    Section 1350 Certification of the Chief Financial Officer.  (filed herewith)
     
101.   Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Balance Sheets at March 31, 2012 and 2011, (ii) the Statements of Operations for the years ended March 31, 2012, 2011 and 2010, (iii) the Statements of Cash Flows for the years ended March 31, 2012, 2011 and 2010 and (iv) the Notes to Financial Statements

 

Exhibits 32.1, 32.2 and 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibits shall not be deemed incorporated by reference into any filing under the Securities Act of 1933 or Securities Exchange Act of 1934.

 

6
 

  

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 7

 

By:  

WNC & Associates, Inc.,

General Partner

 

 

  By:   /s/ Wilfred N. Cooper, Jr.  
      Wilfred N. Cooper, Jr.,  
      President of WNC & Associates, Inc.  
         
Date:       March 1, 2013  

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:         /s/ Wilfred N. Cooper, Jr.  
    Wilfred N. Cooper, Jr.,  
    Chief Executive Officer, President and Director of WNC & Associates, Inc. (principal executive officer)
       
Date:        March 1, 2013  
       
By:   /s/ Melanie R. Wenk  
    Melanie R. Wenk,  
    Vice-President - Chief Financial Officer of WNC & Associates, Inc. (principal financial officer and principal accounting officer)
       
Date:        March 1, 2013  
       
By:    /s/ Wilfred N. Cooper, Sr.  
    Wilfred N. Cooper, Sr.,  
    Chairman of the Board of WNC & Associates, Inc.  
       
Date:   March 1, 2013  
       
By:   /s/ Kay L. Cooper  
    Kay L. Cooper  
    Director of WNC & Associates, Inc.  
       
Date:   March 1, 2013  

 

7