Equity Method Investment

9 Months Ended

Sep. 30, 2016

Equity Method Investments, Policy [Policy Text Block]

(4) Equity Method Investment –

On January 22, 2015, to facilitate the sale of its 47% interest in the Tractor Supply Company store in Starkville, Mississippi, the Partnership contributed the property via a limited liability company to AEI Net Lease Portfolio II DST (“ANLP II”), a Delaware statutory trust (“DST”), in exchange for 9.03% of the Class B ownership interests in ANLP II. The remaining interest in the property, owned by an affiliated entity, along with three other properties owned by two other affiliated entities, were also contributed to ANLP II in exchange for 90.97% of the Class B ownership interests in ANLP II. In addition, cash was contributed for working capital. A DST is a recognized mechanism for selling property to investors who are looking for replacement real estate to complete like-kind exchanges under Section 1031 of the Internal Revenue Code. As investors purchased Class A ownership interests in ANLP II, the proceeds received were used to redeem, on a one-for-one basis, the Class B ownership interests of the Partnership and affiliated entities. From January 28, 2015 to July 15, 2015, ANLP II sold 100% of its Class A ownership interests to investors and redeemed 100% of the Class B ownership interests from the Partnership and affiliated entities. As of December 31, 2015, the Partnership had no ongoing interest in ANLP II.

The investment in ANLP II was recorded using the equity method of accounting in the accompanying financial statements. Under the equity method, the investment in ANLP II was stated at cost and adjusted for the Partnership’s share of net income or losses and reduced by proceeds received from the sale of the Class B ownership interests of ANLP II as well as distributions from net rental income. During 2015, the investment balance consists of the following:


Activity from January 28, 2015 to September 30, 2015:
Real Estate Contributed (at carrying value)	$	1,231,125
Cash Contributed		13,585
Net Income – Rental Activity		25,654
Net Income – Gain on Sale of Real Estate		415,469
Distributions from Net Rental Income		(25,654)
Proceeds from Sale of Class B Interests		(1,653,926)
Equity Method Investment at September 30, 2015	$	6,253

Activity After September 30, 2015:
Net Income – Rental Activity	$	5
Net Income – Gain on Sale of Real Estate		(103)
Distributions from Net Rental Income		(5)
Proceeds from Sale of Class B Interests		(6,150)
Equity Method Investment at December 31, 2015	$	0

- Definition

Disclosure of accounting policy for the equity method of accounting for investments in common stock or other interests including unconsolidated subsidiaries, corporate joint ventures, noncontrolling interests in real estate ventures, limited partnerships, and limited liability companies. The accounting policy may include information such as: (1) initially recording an investment in the stock of an investee at cost; (2) adjusting the carrying amount of the investment to recognize the investor's share of the earnings or losses of the investee after the date of acquisition; and (3) adjustments to reflect the investor's share of changes in the investee's capital (dividends). This disclosure may also include a detailed description of the policy for determining the amount of equity method losses recognized after an investment has been reduced to zero as a result of previous losses, reasons for not using the equity method when the investor company owns 20 percent or more of the voting stock of the investee's company (including identification of the significant investee), reasons for using the equity method when the ownership percentage is less than 20 percent, and discussion of recognition of equity method losses when an investor's total investment in an investee includes, in addition to an investment in common stock, other investments such as preferred stock and loans to the investee. An entity also may describe how such investments are assessed for impairment.

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