Significant Accounting Policies

3 Months Ended

Mar. 31, 2020

Life Partners IRA Holder Partnership, Llc

Equity Method Accounting

The Partnership accounts for its investment in the Trust using the equity method of accounting in accordance with Accounting Standards Codification (ASC) 323, Investments – Equity Method and Joint Ventures. 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.

The following table presents summary financial information for the Trust:

Balance Sheet Data


	March 31, 2020		December 31, 2019
	(Unaudited)		(Audited)
Investment in life insurance policies	$	178,822,344	$	172,242,734
All other assets	111,203,883		110,546,743
Total assets	$	290,026,227	$	282,789,477
Total liabilities	$	67,289,911	$	70,054,723
Net assets	$	222,736,316	$	212,734,754

Income Statement Data


	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
	(Unaudited)		(Unaudited)
Change in fair value of life insurance policies	$	12,626,320	$	15,761,303
Other income	$	259,123	$	196,835
Total income (loss)	$	12,885,443	$	15,958,138
Total expenses	$	2,883,881	$	3,217,334
Net increase in net assets resulting from operations	$	10,001,562	$	12,740,804

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. In certain instances, however, the Partnership may be required under applicable state laws to remit directly to state tax authorities amounts otherwise due to members prior to any distributions. Such payments on behalf of the members are deemed distributions to them. The Partnership currently includes franchise taxes as part of the state and local tax expense.

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 March 31, 2020 nor December 31, 2019.

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. The 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 and changes in other assumptions to 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 life insurance policies could result in material effects to the Partnership’s financial position and results of operations.