Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

(2)   Summary of Significant Accounting Policies

(a)   Basis of Accounting and Consolidation

The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America and include the accounts of the Partnership and its two subsidiaries that are wholly-owned:

i.   Realmark Camelot, LLC, a dormant company.

ii.   Realmark Commercial, LLC that owns an approximately 35,000 square foot building in Commercial Park West located in Durham, North Carolina.

Beginning on December 31, 2014 the Partnership changed its basis of accounting from accrual basis to the liquidation basis.  Under the liquidation basis of accounting, assets are stated at their net realizable values and liabilities are stated at their estimated settlement amounts.

The Partnership's decision to adopt the liquidation basis of accounting on December 31, 2014 is the result of the Partnership beginning to actively market their property in the fourth quarter of calendar year 2014.  The liquidation of the Commercial Park West property will allow the Partnership to complete the process of winding up of the Partnership and cancel the Partnership.  The Partnership expects to complete its cancellation of the Partnership during 2017.  The property was sold by the Partnership on September 22, 2016 for $3,690,126, net of commissions of $158,500, title charges and transfer taxes $7,800, legal costs of $15,778 and prorated rent, taxes and security deposits of $27,796.  The proceeds are not expected to be adequate to satisfy all obligations of the Partnership.

The only asset that was remeasured for liquidation purposes is property and equipment.  Management has estimated that the fair value of all other assets held in liquidation, approximates the carrying value at the date of adoption.

Upon adoption of the liquidation basis and at December 31, 2014, the costs accrued in the statement of deficiency in net assets in liquidation in order to complete liquidation of the Partnership were $477,420.  These costs were estimated based on the operating losses incurred from January 1, 2015, through the December 31, 2015 as well as administrative costs expected to be incurred through the formal cancellation of the Partnership, offset by rental income.  As these costs are incurred and gains are realized they decrease and decrease the liability, respectively.  The estimate of costs to liquidate are evaluated at each reporting period and changes will be reflected in the statement of changes in deficiency in net assets in liquidation.    The estimate of costs to liquidate at December 31, 2015 amount to $166,661 and the change in estimated costs accrued in the statement of net assets in liquidation at December 31, 2015 is $36,974 reflecting  changes in amounts estimated to be needed in order to complete liquidation of the Partnership through cancellation expected in 2017 after reflecting the activity for 2015.

In consolidation, all intercompany accounts and transactions have been eliminated.

(b)   Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

(c)   Receivables and Bad Debt

The Partnership uses the allowance method for uncollectible accounts. Charges to this account are made on a case-by-case basis. Increases or decreases to the allowance are charged to bad debt expense. At December 31, 2015 and 2014, the bad debt expense is $36,972 and $1,174, respectively.   The allowance for doubtful accounts amounted to $37,846 and $874 at December 31, 2015 and 2014, respectively.

  (d)   Property and Equipment

Through December 31, 2014, property and equipment was recorded at cost. During the period of operations, depreciation was provided using the straight-line method over the estimated useful lives of the assets, from 5 to 25 years. Significant improvements were capitalized, while expenditures for maintenance, repairs and replacements were charged to expense as incurred. Upon disposal of depreciable property, the appropriate property accounts are reduced by the related costs and accumulated depreciation and gains and losses are reflected in the consolidated statements of operations.

The Partnership reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. In determining whether there is an impairment of long-lived assets, the Partnership compares the sum of the expected future net cash flows (undiscounted and without interest charges) to the carrying amount of the assets at December 31, 2015 and 2014, no impairment in value has been recognized.

Upon adoption of the liquidation basis, depreciation is no longer recorded.  Beginning December 31, 2014, in accordance with the liquidation basis of accounting, property and equipment were adjusted to their realizable value.  Any changes in the estimate of net realizable value will be reflected in the statement of changes in deficiency in net assets in liquidation.  The value used to estimate the fair value of the building at December 31, 2014 is based on market analysis and consultation with real estate experts in the area.  At December 31, 2015 the value was adjusted to reflect the final sales price less closing expenses related to the sale of the building.

(e)   Concentrations of Credit Risk

Financial instruments that potentially subject the Partnership to concentrations of credit risk consist principally of cash and cash equivalent accounts in financial institutions. Although the accounts exceed the federally insured deposit amount, management does not anticipate nonperformance by the financial institution.

(f)   Rental Income

Rental income is recognized as earned according to the terms of the leases. Commercial leases are generally for periods of one to five years.

(g)   Per Unit Data

Per limited partnership unit is based on the weighted average number of limited partnership units outstanding for the year.  There are no potentially dilutive instruments outstanding.

(h)   Fair Value of Financial Instruments

Due to the short-term nature and interest rates that approximate market rates, the fair value of the Partnership's financial instruments approximated their carrying values at December 31, 2015 and 2014.

(i)   Income Allocation and Distributable Cash Flow

The partnership agreement provides that income not arising from sale and refinancing activities and all partnership losses are to be allocated 97% to the limited partners and 3% to the general sale or refinancing activities is allocated in the same proportion as distributions of distributable cash from sale proceeds. In the event there is no distributable cash from sale proceeds, taxable income will be allocated 87% to the limited partners and 13% to the general partners. The above is subject to tax laws that were applicable at the time of the formation of the Partnership and may be adjusted due to subsequent changes in the Internal Revenue Code.

The Partnership Agreement also provides for the distribution to the partners of net cash flow from operations. In connection with the pending sale of the Partnership's properties (note 3) (which closed in September 2016), it is anticipated that there will be no future distributions of net cash flow from operations. Sale or refinancing proceeds are distributed to the extent available, 100% to the limited partners until there has been a return of the limited partner's capital contribution plus an amount sufficient to provide a 7%, not compounded, return on their adjusted capital contributions for all years following the termination of the offering of the units. After payment of outstanding obligations, it is anticipated that there will not be sufficient cash from the sale of the Partnership's remaining property to provide this return to the limited partners. As noted in the Current Report on Form 8-K filed on December 20, 2016, given current aggregate outstanding liabilities of the Partnership at the time of the filing of the Current Report on Form 8-K, the Partnership does not expect to make any liquidating distribution to the holders of the limited partnership units in the Partnership in connection with the dissolution.

(j)   Income Taxes

As a limited partnership, the Company's taxable income or loss is allocated to members in accordance with their respective percentage ownership. Therefore, no provision or liability for income taxes has been included in the financial statements.

Accounting principles generally accepted in the United States of America require management to evaluate tax positions taken by the Company and recognize a tax liability if the Company has taken an uncertain position that more likely than not would not be sustained upon examination by taxing authorities. Management evaluated the Company's tax positions and concluded that the Company had taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance. With few exceptions, the Company is no longer

subject to income tax examinations by the U.S. federal, state, or local tax authorities for years before 2011.

(k)   Segment Information

The Partnership's operating segments all involve the ownership and operation of income-producing real property and are aggregated into one reporting segment.

(l)   Reclassifications

None

(2) Summary of Significant Accounting Policies

(a) Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. The balance sheet at December 31, 2014 has been derived from the audited consolidated financial statements at that date. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation, have been included.

The Partnership's decision to adopt the liquidation basis of accounting on December 31, 2014 is the result of the Partnership beginning to actively market their property in the fourth quarter of calendar year 2014.  The liquidation of the Commercial Park West property will allow the Partnership to complete the process of winding up of its affairs as part of the dissolution of the Partnership and to cancel the Partnership.  The Partnership expects to complete its cancellation during 2017.  The property was sold on September 22, 2016 for $3,900,000 less commissions and other costs.  As a result the estimate of fair value was updated in the first quarter of 2015 to reflect the proceeds received from this sale resulting in an increase in value of $514,529.  The Partnership also updated its estimate of costs to liquidate in the first quarter reflecting actual costs incurred prior to the release of these financial statements, as we as expected costs to liquidate.  This resulted in an increase in the liability amounting to $36,974

The Partnership's significant accounting policies are set forth in its December 31, 2014 Annual Report on Form 10-K. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements included therein. The interim results should not be considered indicative of the annual results.

(b) Fair Value of Financial Instruments

Due to their short-term nature and interest rates that approximate market rates, the fair value of the Partnership's financial instruments approximated their carrying values at March 31, June 30, and September 30, 2015 and 2014.