Significant Accounting Policies

12 Months Ended

Dec. 31, 2019

Life Partners IRA Holder Partnership, Llc

Equity Method Accounting

The Partnership accounts for its investment in the PHT using the equity method of its share of earnings or loss less distributions received. The Partnership and the Trust are closely connected, with a common trustee and common management. As a result of this common oversight and control, as well as the Partnership’s position as the majority holder of the Trust’s beneficial interest units, the Partnership is considered to have significant influence under the provisions of ASC 323, resulting in the application by the Partnership of the equity method of accounting.

Earnings (losses) attributable to the Partnership’s interests in the Trust and recognized under the equity method represented approximately $38.4 million at December 31, 2019 and $(48.6) million at December 31, 2018.

On November 13, 2019, the Trust made a distribution to Unit holders for the amount of $20.0 million. The Partnership's portion of the distribution was $12.1 million based on its Pro Rata share of the outstanding Units. Management has determined the distribution to be a return of capital. Subsequently, the Partnership distributed most of the funds received from the Trust to its Unit holders based on their Member Interests.

The following table presents summarized Trust financial data:

Balance Sheet Data:


	December 31 2019		December 31, 2018
Life insurance policies	$	172,242,734	$	186,251,760
All other assets	110,546,743		76,486,910
Total Assets	$	282,789,477	$	262,738,670

Total Liabilities	$	70,054,723	$	93,732,074

Net Assets	$	212,734,754	$	169,006,596

Income Statement Data:


	December 31, 2019		December 31, 2018
Change in the fair value of life insurance policies	$	71,207,859	$	(62,215,770)
Other income	2,773,673		1,358,807
Total income (loss)	$	73,981,532	$	(60,856,963)

Total expenses	$	10,575,682	$	9,673,691

Net increase (decrease) in net assets resulting from operations	$	63,405,850	$	(70,530,654)

Distributions Payable

Distributions payable are distributions declared by the IRA Partnership pending payment.

Due to Life Partners Position Holders Trust

The Partnership does not have its own cash accounts, and its operating expenses and distributions to its Unit holders are paid on behalf of the Partnership by the Trust. The Partnership settles its liabilities to the Trust through reduction of the funds it receives from distributions made by the Trust.

Income Taxes

No provision for state or Federal income taxes has been made as the liability for such taxes is attributable to the members rather than the Partnership. The Partnership is a limited liability company with taxable income or loss passing through to the members. In certain instances, however, the Partnership may be required under applicable state laws to remit directly to state tax authorities amounts otherwise due by members. Such payments on behalf of the members are deemed distributions to them.

The Financial Accounting Standards Board (the “FASB”) has provided guidance for how uncertain tax positions should be recognized, measured, disclosed, and presented in the financial statements. This requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Partnership’s tax returns to determine whether the tax positions are more-likely-than-not of being sustained when challenged or when examined by the applicable taxing authority. The Partnership has no material uncertain income tax positions as of December 31, 2019 or December 31, 2018.

Use of Estimates

The preparation of these financial statements, in conformity with generally accepted accounting principles in the United States of America (“GAAP”), requires the Partnership to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting periods. Actual results could differ from these estimates and such differences could be material.

Risks and Uncertainties

The Partnership, due to the nature of its assets and operations, is subject to significant risks and uncertainties affecting the Trust which encounters economic risk. The two main components of economic risk potentially impacting the Partnership's interest in the Trust are market risk and concentration of credit risk. Market risks include interest rate risk and the risk of declines in valuation of the Trust’s life insurance policies, including declines caused by the selection of increased discount rates associated with the Trust’s fair value model. Concentration of credit risk is the risk that an insurance carrier who has issued life insurance policies held by the Trust, does not remit the amount due under those policies due to the deteriorating financial condition of the carrier or otherwise. It is reasonably possible that future changes to estimates involved in valuing the Trust’s life insurance policies could change and result in material effects on the Partnership’s financial position and results of operation.