Note 5 - Income Taxes

12 Months Ended

Dec. 31, 2012

Notes

Note 5 - Income Taxes

Note 5 - Income Taxes

The Partnership is not taxed on its income. The partners are taxed in their individual capacities based upon their distributive share of the Partnership's taxable income or loss and are allowed the benefits to be derived from off-setting their distributive share of the tax losses against taxable income from other sources subject to passive loss limitations. The taxable income or loss differs from amounts included in the statements of operations because different methods are used in determining the losses of the Local Partnerships as discussed below. The taxable income or loss is allocated to the partner groups in accordance with Section 704(b) of the Internal Revenue Code and therefore is not necessarily proportionate to the interest percentage owned.

A reconciliation between the Partnership’s reported net income and the net income (loss) per tax return follows (in thousands, except per limited partnership interest):
	Years Ended December 31,
	2012	2011
Net income per financial statements	$ 3,300	$   536
Sale of partnership interest	(3,612)	5,513
Other	(177)	(90)
Investment in Local Partnerships	(289)	(496)
Net income (loss) per tax return	$  (778)	$ 5,463
Net income (loss) per limited partnership interest	$ (53.36)	$343.46

The following is a reconciliation between the Partnership’s reported amounts and the Federal tax basis of net assets at December 31, 2012 and 2011 (in thousands):
	2012	2011
Net assets as reported	$  8,891	$  5,591
Add (deduct):
Deferred offering costs	9,367	9,367
Investment in Local Partnerships	(13,392)	(9,319)
Other	3,673	3,708
Net assets – Federal tax basis	$  8,539	$  9,347

The Partnership is subject to a New Jersey tax based upon the number of resident and non-resident limited partners and apportionment of income related to the Partnership’s investment in certain Local Partnerships.  For the years ended December 31, 2012 and 2011, the expense related to this tax is reflected in tax expense in the accompanying statements of operations.  At December 31, 2011, the Partnership’s estimate of the balance of the tax due for 2011 to the state of New Jersey was approximately $44,000 and this amount was included in accounts payable and accrued expenses on the accompanying balance sheet as of December 31, 2011. The actual balance of the tax due for 2011 was approximately $87,000 and was paid during the year ended December 31, 2012. The additional tax of approximately $43,000 owed for 2011 taxes is attributable to the sale of interest in Countryside and is included as a reduction of gain on sale during the year ended December 31, 2012. In addition, during the year ended December 31, 2012, the Partnership paid approximately $66,000 as a required deposit for estimated 2012 New Jersey taxes, which is based on half of the previous year’s taxes. However, the Partnership’s estimate of the actual tax due for 2012 is approximately $12,000 which has been recognized as expense during the year ended December 31, 2012. The remaining balance paid of approximately $54,000 is reflected as an other asset on the accompanying balance sheet at December 31, 2012.