TAXABLE INCOME AND TAX BASIS

12 Months Ended

Dec. 31, 2012

TAXABLE INCOME AND TAX BASIS

TAXABLE INCOME AND TAX BASIS

NOTE 13. TAXABLE INCOME AND TAX BASIS

        Taxable income reportable by the Partnership and includable in its partners' tax returns is different than financial statement income because of tax free exchanges, accelerated depreciation, different tax lives, and timing differences related to prepaid rents, allowances and intangible assets at significant acquisitions. Taxable income was approximately $530,000 greater than statement income for the year ended December 31, 2012. The primary reason for the increase is reduced tax depreciation due to tax free exchanges and accelerated depreciation in prior years. The cumulative tax basis of the Partnership's real estate at December 31, 2012 is approximately $12,000,000, less than the statement basis. The primary reasons for the lower tax basis are tax free exchanges, and accelerated depreciation. The Partnership's tax basis in its joint venture investments is approximately $1,700,000 less than statement basis because of accelerated depreciation.

        Certain entities included in the Partnership's consolidated financial statements are subject to certain state taxes. These taxes are not significant and are recorded as operating expenses in the accompanying consolidates financial statements.

        The following reconciles GAAP net income to taxable income:

	For the year ended December 31,
	2012			2011			2010
	(in thousands)
Financial statement ("book") net income (loss)	$	3,634		$	9,291		$	(1,359	)
Book/Tax differences from depreciation and amortization		51			(1,024	)		(643	)
Book/Tax differences on tax free exchanges		266			(7,707	)		—
Book/Tax differences from Investment Properties		198			(161	)		403
Increase (Decrease) in prepaid rent and allowances		(40	)		29			(204	)
Other		57			7			—
Taxable income (loss)	$	4,166		$	435		$	(1,803	)

        Allowable accelerated depreciation deductions have been reduced for 2013. This may result in higher taxable income in future years. Future tax law changes may significantly affect taxable income.

        The Partnership adopted the amended provisions related to uncertain tax provisions of ASC 740, Income Taxes. As a result of the implementation of the guidance, the Partnership recognized no material adjustments regarding its tax accounting treatment. The Partnership expects to recognize interest and penalties related to uncertain tax positions, if any, as income tax expense, which would be included in general and administrative expense.

        In the normal course of business the Partnership or one of its subsidiaries is subject to examination by federal, state and local jurisdictions in which it operates, where applicable. As of December 31, 2012, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2004 forward.