UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

[X]☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year endedDecember 31 2017, 2023

OR

[  ]☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from _______________________ to ___________

Commission file number0-17686

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)

1100 Main1900 W 75^th Street, Suite 1830 100Prairie Village, Kansas City, Missouri 6410566208

(Address of principal executive offices, including zip code)

(816)421-7444

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Interests

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] ☐ No [X] ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [  ] ☐ No [X] ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] ☒ No [  ]☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] ☒ No [  ]☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ] Accelerated filer [  ]

Non-accelerated filer [  ] (Do not check if a smaller reporting company) Smaller reporting company [X] Emerging growth company [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] ☐ No [X] ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

The aggregate market value of the voting securities held by non-affiliates of the Registrant: The aggregate market value of limited partnership interests held by non-affiliates is not determinable since there is no public trading market for the limited partnership interests.

As of March 1, 2024 the registrant had 46,280.3 units of limited partnership interests issued and outstanding.

TABLE OF CONTENTS

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 20172023

PART I

Item 1. Business

Background

The Registrant, DiVall Insured Income Properties 2 Limited Partnership (the “Partnership”), is a limited partnership organized under the Wisconsin Uniform Limited Partnership Act pursuant to a Certificate of Limited Partnership dated as of November 20, 1987, and governed by a Limited Partnership Agreement, as amended from time to time (collectively, the “Partnership Agreement”). The Partnership is managed by its general partner, The Provo Group, Inc. (“TPG” or the “General Partner”). As of December 31, 2017,2023, the Partnership had 1,2961,092 limited partners owning an aggregate of 46,280.3 units of Limited Partnership Interests (the “Interests”).

The Partnership is engaged in the business of owning and operating its investment portfolio of commercial real estate properties (each a “Property” and collectively, the “Properties”). At December 31, 2017,2023, the Partnership owned 11three Properties, all located in a total of four states. 10 of the Properties are leased on a triple net basis primarily to, and operated by, franchisees of national, regional and local fast food, family style, and casual/theme restaurants under long-term leases.South Carolina.

At December 31, 2017, eight2023, all of the 11 Properties were (and continue to be) leased to three Wendy’s franchisees, with fiveone of the Properties being leased to Wendgusta, LLC (“Wendgusta”), twoone of the Properties being leased to Wendcharles I,JAI Hospitality RG, LLC (“Wendcharles I”),JAI Hospitality) and one of the Properties being leased to Wendcharles II,JAI Augusta, LLC (“Wendcharles II”)JAI Augusta). An additional Property was leased to Wendgusta until its lease expired on November 6, 2016; this Property is currently vacant. Operating base rents from these eight leases during the year endedAt December 31, 2017 comprised approximately 77% of the total 2017 operating base rents. During the year ended December 31, 2017, additional percentage rents2023, all three Properties were also generated from these eight Wendy’s propertieslisted and totaled $595,399. Additionally, those eight Properties exceeded 72% of the Partnership’s total Properties, both by historical asset value and number. As a result of the previously reported lease extension notices received by the Partnership in January 2017, all eight of the Properties that are currently leased to Wendy’s franchisees now feature a lease expiration date of November 6, 2026.classified as held for sale.

See Properties under Item 2 below for the table of all Properties and lease expirations and a discussion of Properties with significant developments during the year ended December 31, 2017.2023.

During the process of leasing the Properties, the Partnership may experience competition from owners and managers of other properties. As a result, in connection with negotiating tenant leases, along with recognizing market conditions, the General Partner may offer rental concessions, or other inducements, which may have an adverse impact on the results of the Partnership’s operations. The Partnership is also in competition with sellers of similar properties to locate suitable purchasers for its Properties.

The Partnership Agreement specifiesprovides that the Partnership is scheduled to be dissolved on November 30, 2020,2023, or earlier upon the prior occurrence of any of the following events: (a) the disposition of all its Properties; (b) the written determination by the General Partner, that the Partnership’s assets may constitute “plan assets” for purposes of ERISA; (c) the agreement of limited partners owning a majority of the outstanding Interests to dissolve the Partnership; or (d) the dissolution, bankruptcy, death, withdrawal, or incapacity of the last remaining General Partner, unless an additional General Partner is elected previously by a majority of the limited partners.

On February 15, 2018,As previously disclosed by the Partnership, announcedpursuant to a consent solicitation that concluded on October 15, 2020, the Partnership solicited and obtained the affirmative consent of limited partners holding more than a majority of the Partnership’s outstanding Interests to authorize the General Partner, to sell the Properties prior to November 30, 2023 if the General Partner determined such sale to be in the best interest of the Partnership and, upon the sale of all Properties, to commence an orderly liquidation, wind-up and dissolution of the Partnership. In connection with such consent, the limited partners approved a resolution granting the General Partner the authority to sell all or substantially all of the Partnership’s assets prior to November 30, 2023 and subsequently liquidate and dissolve the Partnership, without further approval from the limited partners.

On August 25, 2023, the General Partner adopted resolutions (a) determining that it is in the best interest of the Partnership to sell all or substantially all of the Partnership’s assets, and (b) providing that the General Partner intendswill, upon the sale of such assets, liquidate and dissolve the Partnership in accordance with applicable law and the terms of the Partnership Agreement. In addition, the stated term of the Partnership ended on November 30, 2023, and, prior to that date the Partnership did not seek affirmativeor obtain the consent fromof the limited partners to sellamend the Partnership Agreement to extend the Partnership’s assets, including allterm. As a result of the authority and authorization provided to the General Partner, and because the Partnership’s intended term lapsed on November 30, 2023, during the fiscal year ended December 31, 2023 the General Partner caused the Partnership to dispose of five of its now former Properties and liquidateexpects to continue to pursue the Partnership. The proposed sale of assets, liquidation and dissolution is expected to be completed by December 31, 2018, and it requires affirmative consents from limited partners owning a majorityorderly disposition of the outstanding Interests. Affirmative consents will be sought by a consent solicitation statement that the Partnership expects to file with the Securities and Exchange Commission by April 2018.Partnership’s remaining Properties.

The Permanent Manager Agreement

The Permanent Manager Agreement (“PMA”) was entered into on February 8, 1993, between the Partnership, DiVall 1 (which was dissolved in December 1998), DiVall 3 (which was dissolved in December 2003), the now former general partners, Gary J. DiVall and Paul E. Magnuson, their controlled affiliates, and TPG, naming TPG as the Permanent Manager. The PMA contains provisions allowing TPG to submit to the PMA, election of TPG as General Partner, and the issue of acceptance of the resignations of the former general partners to a vote of the limited partners through a solicitation of written consents.

TPG, as the General Partner, has been operating and managing the affairs of the Partnership in accordance with the provisions of the PMA and the Partnership Agreement since February 8, 1993.

Effective January 1, 2017,2023, the PMA was renewed by the General Partner for a two-year period ending December 31, 2018.2024. The PMA can be terminated earlier (a) by a vote at any time by a majority interest of the limited partners, (b) upon the dissolution and winding up of the Partnership, (c) upon the entry of an order of a court finding that TPG has engaged in fraud or other like misconduct or has shown itself to be incompetent in carrying out its duties under the Partnership Agreement, or (d) upon 60 days’ written notice from TPG to the limited partners of the Partnership.

Advisory Board

The concept of the Advisory Board was first introduced by TPG during the solicitation of written consents seeking to elect TPG as the General Partner. The first Advisory Board was established in October 1993. Among other functions, the three-person Advisory Board has the following rights and duties: to review operational policies and practices; to review extraordinary transactions; to review internal financial controls and practices; and to review the performance of the independent auditors of the Partnership. The Advisory Board’s powers are advisory only and the Advisory Board does not have the authority to direct management decisions or policies of the Partnership or remove the General Partner. The Advisory Board has full and free access to the Partnership’s books and records, and individual Advisory Board members have the right to communicate directly with the limited partners concerning Partnership business. Members of the Advisory Board are compensated $1,500 annually and $500 for each quarterly meeting attended.

The Advisory Board currently consists of a broker dealer representative, William Arnold; and limited partners of the Partnership: Jesse Small and Albert Kramer. For a brief description of each Advisory Board member, refer to Item 10, Directors and Executive Officers of the Registrant.

No Employees; Location of Business Operations

The Partnership has no employees.

All of the Partnership’s business is conducted in the United States.

Available Information

The Partnership is required to file with the SEC annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, along with any related amendments and supplements to these periodic and current reports. The SEC maintains a website containing these reports and other information regarding our electronic filings atwww.sec.gov. These reports may also be read and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Further information about the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

We also make these reports and other information available either on or through our Internet Website atwww.divallproperties.comas soon as reasonably practicable after such reports are available. Please note that any internet addresses provided in this Annual Report on Form 10-K are for information purposes only and are not intended to be hyperlinks. Accordingly, no information found and/or provided at such internet addresses is intended or deemed to be incorporated by reference herein.

Item 1A. Risk Factors

AsThe Partnership’s business, the ownership and lease of the Properties, is subject to a smaller reporting company,variety of risks attendant to the ownership and lease of commercial real property, including risks related to: (i) changes in general economic conditions and macro-economic factors such as effects of interest rate fluctuations, both nationally and in the local markets where the Properties are located, (ii) changes in real estate conditions, including without limitation, decreases in valuations of real properties, increases in property taxes and lack of buyers at times when the Partnership seeks to dispose of a Property, (iiii) ability of tenants to fulfill their obligations to the Partnership under existing leases, (iv) declines in sales for tenants whose leases include a percentage rent component, (v) adverse changes to the restaurant market, including declines in demand, (vi) entrance of competitors to the Partnership’s lessees in markets in which the Properties are located, (vii) the Partnership’s ability to realize value for Limited Partners upon disposition of the Properties, (viii) the fact that real property assets are generally not readily liquid, and the risk that the Partnership may be unable to locate suitable purchasers for the Properties and monetize the Properties at the times and on terms and conditions that are in the Partnership’s and its limited partners’ best interests, and (ix) various other factors.

In addition to the general risks identified above, the Partnership is not requiredalso subject to disclose risk factors in its annual report on Form 10-K.various cyber security risks, including those generally described below.

Item 1B. Unresolved Staff Comments

None.

Item 1C. Cybersecurity

None.The Partnership has not adopted any formal cybersecurity risk management program or formal processes for assessing, identifying, and managing material risks from cybersecurity threats. The General Partner has oversight responsibility for the Partnership’s overall risk management, including cybersecurity risk, and has not delegated oversight authority for cybersecurity risks to any committee. In fiscal year 2023, we did not identify any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition.

Item 2. Properties

10 out of 11All Properties are leased to franchisees of national regional and local fast food, family style and casual/themequick service restaurants. The eleventh Property was leased to a Wendy’s franchisee until its lease expired in November 2016; this Property is currently vacant.

Original lease terms for the leased Properties are generally five to 20 years from their inception. All leases are triple-net, which require the tenant to pay all property operating costs including maintenance, repairs, utilities, property taxes, and insurance. A majorityAll of the leases contain percentage rent provisions, which require the tenant to pay a specified percentage (five percent to eight(seven percent) of gross sales above a threshold amount. None of the Properties are mortgaged. The Partnership owns the buildings and land, and all improvements for all the Properties, except for the Property leased to the franchisee of a Kentucky Fried Chicken restaurant (“KFC”) in Santa Fe, New Mexico. KFC is located on land where the Partnership has entered into a long-term ground lease, as lessee, which is set to expire on June 30, 2018. Although the Partnership has the option to extend the ground lease for two additional ten year periods, the Partnership does not expect to exercise its option to extend this ground lease. The Partnership owns all improvements constructed on the land (including the building and improvements) until the termination of the ground lease, at which time all constructed improvements will become the land owner’s property.

Properties. The Partnership owned the following Properties as of March 23, 2018:1, 2024:

Footnotes:

The following summarizes significant developments during 2022 and 2023, by property,Property, for Properties with such developments.

Effective September 1, 2017, the tenantlisting agreement with Matthews Real Estate Investment Services, Inc. for the Property operated as an Applebee’s restaurant signed a ten year lease renewal for that Property. The new lease expiration date is August 31, 2027. The lease for that Property now provides for a monthly rent of $11,500 and a percentage rent of 6% over $2,300,000 in annual sales. The lease now also includes a single option to extend the lease for an additional five years. If the extension option is exercised, monthly rent during that period will be $13,915 and the percentage rent breakpoint of 6% will be for over $2,500,000 in annual sales.

Other Property Information

Property taxes, general maintenance, insurance and ground rent on the Properties are the responsibilitysale of the respective tenants. However, when a tenant fails to make the required tax payments or when a property becomes vacant (suchProperty with an asking price of $3.5 million. The Property listing went active on July 12, 2023.

The Property is held for sale as the Martinez, GA property, previously operated as a of December 31, 2023.

Wendy’s restaurant),– Richland Ave, Aiken, SC

On June 6, 2023, the Partnership makesexecuted a listing agreement with Matthews Real Estate Investment Services, Inc. for the appropriate property tax payments to avoid possible foreclosuresale of the property. During a property vacancy,Property with an asking price of $3.4 million. The Property listing went active on July 12, 2023.

The Property is held for sale as of December 31, 2023.

Wendy’s – Sam Rittenberg, Charleston, SC

On June 6, 2023, the Partnership paysexecuted a listing agreement with Matthews Real Estate Investment Services, Inc. for insurance and maintenance related to the vacant property.

Such taxes, insurance and ground rent are accrued in the period in which the liability is incurred. The Partnership owns one restaurant located on a parcel of land where it has entered into a long-term ground lease, as lessee, which is set to expire on June 30, 2018. The Partnership has the option to extend the ground lease for two additional ten year periods. The Partnership owns all improvements constructed on the land (including the building and improvements) until the terminationsale of the ground lease, at which time all constructed improvements will become the land owner’s property.Property with an asking price of $3.9 million. The tenant, KFC,Property listing went active on July 12, 2023.

The Property is responsibleheld for the $3,400 per month ground lease payment per the termssale as of its lease with the Partnership.December 31, 2023.

Item 3. Legal Proceedings

As of the date of this report there are no material pending legal proceedings to which the Partnership is a party.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market Price and Dividends on thefor Registrant’s Common Equity, and Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 6. Selected Financial Data(Reserved)

Not Applicable.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not historical facts but are the intent, belief or current expectations of the Partnership’s management based on its knowledge and understanding of the business and industry. Words such as “may,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “could,” “should” and variations of these words and similar expressions are intended to identify forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

Examples of forward-looking statements include, but are not limited to, statements we make regarding:

Forward-looking statements may ultimately differ materially from the actual results. The Partnership cautions readers not to place undue reliance on forward-looking statements, which reflect management’s view only as of the date of this Form 10-K. All subsequent written and oral forward-looking statements attributable to the Partnership, or persons acting on the Partnership’s behalf, are expressly qualified in their entirety by this cautionary statement. Management undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results. Factors that could cause actual results to differ materially from any forward-looking statements made in this Form 10-K include, without limitation, changes in general economic conditions, changes in real estate conditions, including without limitation, decreases in valuations of real properties, increases in property taxes, and lack of suitable buyers and offers for the Properties and other factors that could result in our inability to realize full value for limited partners upon disposition of the Partnership’s assets, lease-up risks, ability of tenants to fulfill their obligations to the Partnership under existing leases, sales levels of tenants whose leases include a percentage rent component, adverse changes to the restaurant market, entrance of competitors to the Partnership’s lessees in markets in which the Properties are located, inability to obtain new tenants upon the expiration of existing leases, the potential need to fund tenant improvements or other capital expenditures out of operating cash flows, and such other factors and uncertainties described from time to time in our filings with the Securities and Exchange Commission (the “SEC”).

Critical Accounting Policies and Estimates

The following discussion and analysis of financial condition and results of operations is based upon the Partnership’s financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these financial statements requires persons performing the functions of the Partnership’s management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis, we evaluate these estimates, including investment impairment. These estimates are based on the General Partner’s historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

The Partnership believes that its most significant accounting policies pertain to:

Depreciation methods and lives- Depreciation of the properties is provided on a straight-line basis over the estimated useful life of the buildings and improvements. While the Partnership believes these are the appropriate lives and methods, use of different lives and methods could result in different impacts on net income. Additionally, the value of real estate is typically based on market conditions and property performance. As a result, depreciated book value of real estate may not reflect the market value of real estate assets.

Revenue recognition- Rental revenue from investment properties is recognized on the straight-line basis over the life of the respective lease when collectability is reasonably assured. Percentage rents are accrued only when the tenant has reached the sales breakpoint stipulated in the lease.lease and collectability is reasonably assured.

Impairment-The Partnership periodically reviews its long-lived assets, primarily real estate, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Partnership’s review involves comparing current and future operating performance of the assets, the most significant of which is undiscounted operating cash flows, to the carrying value of the assets.assets of the individual properties. Based on this analysis, if deemed necessary, a provision for possible loss is recognized.

Recent Developments

On February 15, 2018, the Partnership announced that the General Partner intends to seek affirmative consent from the limited partners to sell the Partnership’s assets, including all theInvestment Properties and liquidate the Partnership. The proposed sale of assets and liquidation is expected to be completed by December 31, 2018, and it requires affirmative consents from limited partners owning a majority of the outstanding Interests. Affirmative consents will be sought by a consent solicitation statement that the Partnership expects to file with the SEC by April 2018.Properties Held for Sale

Investment Properties

As of December 31, 2017,2023, the Partnership owned 11three Properties, each currently containing a fully constructed fast-food or casual restaurant. One Property is located on a parcelall of land which is subject to a ground lease (see Item 2 above). The currentfeature tenants that are franchisees of casual restaurants and as a result the following are operated at the Properties: eight Wendy’s restaurants, an Applebee’s restaurant, and a KFC restaurant. The Property in Martinez, GA is vacant and, as of December 15, 2016, this Property has been held for sale.franchisees. The Properties are all located in a totalthe state of four states.South Carolina.

Property taxes, general maintenance, insurance and ground rent on the Properties are the responsibility of the respective tenants. A more detailed discussion of tax payments, insurance and ground rent is provided in Item 2, and incorporated herein by this reference.

Net Income

Net income for the fiscal years ended December 31, 20172023 and 2016 were $687,4992022 was $12,283,772 and $751,253,$2,069,792, respectively. Net income per Limited Partner Interest for the fiscal years ended December 31, 20172023 and 2016 were $14.712022 was $262,77 and $16.07,$44.28, respectively.

Results of Operations

Net income for the fiscal years ended December 31, 20172023 and 2016 included the results from both operations2022 was $12,283,772, and discontinued operations. Assets disposed of, or deemed to be classified as held for sale, require the reclassification of current and previous years’ operations to discontinued operations in accordance with GAAP applicable to “Accounting for the Impairment or Disposal of Long Lived Assets”. As such, prior year operating results for those properties considered as held for sale or properties no longer considered for sale have been reclassified to conform to the current year presentation without effecting total net income. When Properties are considered held for sale, depreciation of the properties is discontinued, and the properties are valued at the lower of the depreciated cost or fair value, less costs to dispose.

Results of Operations

Net income from continuing operations for the fiscal years ended December 31, 2017 and 2016 were $703,481 and $688,279,$2,069,792, respectively. See the paragraphs below for further information as to variances in individual operating income and expense items.

The increase in net income from 2022 to 2023 was the gain on the Properties sold during the calendar year.

We are not aware of any material trends or uncertainties, other than national economic conditions and macro-economic factors affecting values of real estate generally that may reasonably be expected to have a material impact, favorable or unfavorable, on Partnership revenues and investment property value.

Fiscal year ended December 31, 20172023 as compared to fiscal year ended December 31, 2016:2022:

Operating Rental Income:Operating rental income for the fiscal years ended December 31, 20172023 and 20162022 was $1.484$1.165 million and $1.461$1.611 million, respectively. The rental income was comprised of monthly lease obligations per the tenant leases and percentage rents obligations related to operating tenants who had reached their sales breakpoint. The slight increasedecrease in 20172023 compared to 2016 is2022 was due to the continued increaselower base rental income and percentage rent due to sales of Properties in reported sales for tenants who had reached their sales breakpoint stipulated in their respective leases.each of 2022 and 2023.

The Partnership has begun the wind-up and liquidation process. Management expects total base operating rental income to be approximately $828,000 forsell the 2018 fiscalthree remaining Properties during calendar year based on operating leases currently in place. Future operating rental income has the potential to either decrease or increase. Future operating rental income may decrease with a tenant default and/or we may reclassify certain additional properties as properties held for sale. Future operating rental income may also increase with additional rents due from tenants, if those tenants experience increased sales levels, which require the payment of additional rent to the Partnership. Operating percentage rents included in operating rental income in the fiscal years ended December 31, 2017 and 2016 were $595,399 and $581,324, respectively. Management expects percentage rents for the fiscal year ending December 31, 2018 to be comparable to those received in 2017 due to the expected continued increase in sales from the tenants operating Wendy’s restaurants.2024.

Partnership Management Fees Expense:Partnership management fees expense for the fiscal years ended December 31, 20172023 and 20162022 were $270,110 and $267,246, respectively.$272,316. The General Partner receives a fee for managing the Partnership, and this fee changes each year based on the Consumer Price Index.Partnership. See Note 5, Transactions with General Partner and Its Affiliates, for further information.

Insurance Expense:Insurance expense for the fiscal years ended December 31, 2017 and 2016 was approximately $6,000. Insurance expense was comprised of general liability insurance. Each tenant is responsible for insurance protection and the Partnership only purchases property insurance for an individual property if the tenant cannot provide proof of insurance protection or due to a property vacancy. For the fiscal year ending December 31, 2018, management expects operating insurance expense to again be approximately $6,000. This amount could increase upon a property insurance default or vacancy by a tenant or an increase in the general liability insurance premium for the 2018/2019 insurance year, which is expected to be paid in the fourth quarter of 2018.

General and Administrative Expense:General and administrative expenses for the fiscal years ended December 31, 20172023 and 20162022 were $61,356$34,558 and $59,631,$39,842, respectively. General and administrative expenses were comprised of management expense, state/city registration and annual report filing fees, office supplies and printing costs, outside storage expenses, copy/fax costs, postage and shipping expenses, long-distance telephone expenses, website fees, and bank fees and state income tax expenses.fees. Total operating general and administrative expenses for the fiscal year ended December 31, 20172022 were higher than in the fiscal year ended December 31, 2016,2023, primarily due to increased income tax expensehigher postage, printing and registration/filing fees. Management expectsfee expenses.

State Income Tax Expense: During the total operating general and administrative expenses for the fiscal year ending December 31, 2018 to be marginally higher than for the fiscal year ended December 31, 20172023, the Partnership began accruing the estimated state tax due to an expected increase in postage and printing costs.for each property sold. Because five Properties were sold during 2023, a total of $204,872 was accrued for payment of state tax that will be paid with the state tax returns filed during Q1 2024.

Professional Services: Professional services expenses for the fiscal years ended December 31, 20172023 and 20162022 were $282,927$130,889 and $285,421,$240,302, respectively. Professional service expenses were primarily comprised of investor relations data processing, investor mailings processing, website design, legal, auditing and tax preparation fees, electronic tax filings, and SEC report conversion and processing fees. The General Partner anticipates that total professional services expensescosts in 2023 decreased due to switching investor relations firms and the related decrease in contract costs for the fiscal year ending December 31, 2018 will be higher than incurred for the fiscal year ended December 31, 2017 as a result of highernew investor relations title search and legal fees that are expected in connection with the proposed sale of assets, liquidation and dissolution of the Partnership.services firm.

Note Receivable Interest Income:Note receivable interest income for the fiscal years ended December 31, 2017 and 2016 was $0 and $2,093, respectively. The interest income was comprised of interest associated with the Buyers Note, which was paid in full as of November 1, 2016. See Note 9 Note Receivable for further information regarding the Buyers Note.

Results of Discontinued Operations

The General Partner anticipates that there will be approximately $15,000 in discontinued operations expenditures in 2018 because the Martinez, GA Property is classified as property held for sale.

Net cash flows provided by continuing operating activities for the fiscal years ended December 31, 20172023 and 20162022 were $727,167$1,038,074 and $794,968,$993,976, respectively. Cash flows from operating activities was lower in 20172023 primarily due to unusually high paymentsthe increase in net income year over year offset by the gain on the sale of leasing commissions, as compared to historic leasing commissions paidthe properties sold and the decrease in previous years, related to the eight lease extensions during the 2017 calendarpercentage rent receivable year over year. Cash (used in) provided from discontinued operations for the fiscal years ended December 31, 2017 and 2016 were ($15,982) and $75,980, respectively

Property impairment write-downs, depreciationDepreciation and amortization are non-cash items and do not affect the current operating cash flow of the Partnership or distributions to the limited partners.

Cash flows (used in) provided from investing activities for the fiscal years ended December 31, 20172023 and 20162022 were ($3,129)$13,409,990 and $55,636,$1,448,425 and $584,379, respectively. The 2016 amounts were2023 amount is largely comprised entirely of note receivable principal payments and earningsproceeds from the indemnification trust account.sales of five Properties during 2023. The 2017 amounts were2022 amount is largely comprised entirely of earningsproceeds from the indemnification trust account.sale of the Walton Way Property.

For the fiscal year ended December 31, 2017,2023, cash flows used in financing activities were $762,751$14,439,555 and consisted of aggregate limited partner distributions of $760,000$14,411,721 and General Partner distributions of $2,751.$27,834. For the fiscal year ended December 31, 2016,2022, cash flows used in financing activities were $973,006$3,237,003 and consisted of aggregate limited partner distributions of $970,000$3,225,000 and General Partner distributions of $3,006.$12,003. Both limited partner and General Partner distributions have been, and will continue to be, made in accordance with the Partnership Agreement. Management anticipates that aggregate limited partner distributions will be approximately $750,000 during 2018, but this will increase to the extent that proceeds are received from the previously announced proposed sale of the Partnership’s assets.

Liquidity and Capital Resources

The Partnership’s cash balance was $145,674$179,745 at December 31, 2017. Cash of $100,000 was used to fund the fourth quarter of 2017 aggregate distribution paid to limited partners in February of 2018.2023. Cash of approximately $30,000$35,514 is anticipated to be used in 20182024 for the payment of quarter-end accrued liabilities which are included in the balance sheets. The remainder represents amounts deemed necessary to allow the Partnership to operate normally.sheet.

The Partnership’s principal demands for funds historically have been, and are expected to continue to be, for the payment of operating expenses and distributions. Management anticipates that cash generated through the operations of the Properties and potential sales of Properties will primarily provide the sources for future fund liquidity and limited partner distributions. During the process of leasing the Properties, the Partnership may experience competition from owners and managers of other similarly situated properties. As a result, in connection with negotiating tenant leases, along with recognizing market conditions, management may offer rental concessions, or other inducements, which may have an adverse impact on the results of the Partnership’s operations. The Partnership is also in competition with sellers of similar properties to locate suitable purchasers for its Properties. The two primary liquidity risks in the absence of mortgage debt are the Partnership’s inability to collect rent receivables and near- term or chronic property vacancies. The amount of cash to be distributed to our limited partners is determined by the General Partner and is dependent on a number of factors, including funds available for payment of distributions, capital expenditures,payment of state income taxes and taxable income recognition matching, which is primarily attributable to percentage rents and property sales.Partnership operating costs.

As of December 31, 20172023 and 2016,2022, the Properties were leased 91%.100% leased. In addition, the Partnership collected 100% of its base rent due from current operating tenants for the fiscal years ended December 31, 20172023 and 2016,2022, which we believe is a good indication of overall tenant quality and stability. The only lease set to expire during 2018 is the ground lease in Palo Alto, NM. The Partnership does not expect to renew this ground lease, and the General Partner is expected to explore strategic options with respect to this Property. In January 2017, the Partnership received lease extension notices relating to seven

All three remaining Properties, plus four out of the eight Properties that are leased to Wendy’s franchisees. Pursuant to such notices, each of Wendgusta, LLC, Wendcharles I, LLC and Wendcharles II, LLC exercised the option in their respective property leases to renew such lease for five years beyond the prior expiration date of November 6, 2021. As a result, all eight of the Properties that are leased to Wendy’s franchisees now feature a lease expiration date of November 6, 2026. See Item 2, Properties for further information regarding Properties with significant developments.

Eight of the 11 Properties properties sold during 2023, were/are operated as Wendy’s fast food restaurants and are franchises of the internationalInternational Wendy’s Company. An additional Property was operated as a Wendy’s restaurant until its lease expired on November 6, 2016. Operating base rents from these eight leases comprised approximately 77%91% of the total 20172023 operating base rents included in operating rental income of the Partnership. During the year ended December 31, 2017,2023, additional percentage rents totaled $595,399,$145,120, all of which were unbilled and were accrued in relation to the Properties operated as Wendy’s restaurants. Therefore, during 2017,2023, the Partnership generated approximately 86%92% of its total operating revenues from those eight Properties.

The Partnership’s return on its investment historically has been, and is expected to continue to be, derived principally from rental payments received from its lessees. Therefore, the Partnership’s return on its investment historically is largely dependent upon the business success of its lessees. The business success of the Partnership’s individual lessees can be adversely affected on at least three general levels. First, the tenants rely heavily on the management contributions of a few key entrepreneurial owners. The business operations of such entrepreneurial tenants can be adversely affected by death, disability or divorce of a key owner, or by such owner’s poor business decisions such as an undercapitalized business expansion. Second, changes in a local market area can adversely affect a lessee’s business operation. A local economy can suffer a downturn with high unemployment. Socioeconomic neighborhood changes can affect retail demand at specific sites and traffic patterns may change, or stronger competitors may enter a market. These and other local market factors can potentially adversely affect the lessees of the Properties. Finally, despite an individual lessee’s solid business plans in a strong local market, the franchise concept itself can suffer reversals or changes in management policy, which in turn can affect the profitability of operations. An overall economic recession is another factor that could affect the relative success of a lessee’s business. Therefore, there can be no assurance that any specific lessee will have the ability to pay its rent over the entire term of its lease with the Partnership.

Since the Properties are leased to restaurant tenants, the restaurant market is the major market segment with a material impact on Partnership operations. TheHistorically, the success of customer marketing and the operating effectiveness of the Partnership’s lessee’s,lessees will impact the Partnership’s future operating success in a very competitive restaurant and food service marketplace. The Partnership is currently liquidating.

There is no way to determine, with any certainty, which, if any, tenants will succeed or fail in their business operations over the term of their respective leases with the Partnership. Economic volatility, either locally or nationally, may affect a lessee’s operational activity and its ability to meet lease obligations. Based on past experience, it can be reasonably anticipated that some lessees will default on future lease payments to the Partnership, which will result in the loss of expected lease income for the Partnership. The General Partner will use its best efforts to vigorously pursue collection of any defaulted amounts and to protect the Partnership’s assets and future rental income potential by trying to re-lease any properties with rental defaults. External events, which could impact the Partnership’s liquidity, include the entrance of other competitors into the market areas of our tenants; liquidity and working capital needs of the lessees; and failure or withdrawal of any of the national franchises operated by the Partnership’s tenants. Each of these events, alone or in combination, would affect the liquidity level of the lessees resulting in possible default by a tenant. Since the information regarding plans for future liquidity and expansion of closely held organizations, which are tenants of the Partnership, tend to be of a private and proprietary nature, anticipation of individual liquidity problems is difficult.

The credit environment has continued to be difficult for certain borrowers. Fortunately, the Partnership has limited exposure to the credit markets, as the Partnership has no mortgage debt. The General Partner believes that the Partnership’s liquid assets have been deposited with creditworthy financial institutions. However, the economic environment at any time and any lack of available credit could delay or inhibit the General Partner’s ability to dispose of any of the Properties, or cause management to feel compelled to dispose of Properties for a lower than anticipated return. As a result, the General Partner continues to maintain an objective to preserve capital and sustain property values while from time to time disposing of certain of the Properties as appropriate.

Off-Balance Sheet Arrangements

The Partnership does not have any off-balance sheet arrangements that are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Disposition Policies

In deciding whether to sell a Property, management considers factors such as potential capital appreciation or depreciation, market and economic conditions and the general strength of the real estate market, cash flow and federal income tax considerations, including possible adverse federal income tax consequences to the limited partners. The General Partner may exercise its discretion as to whether and when to sell a Property, and there is no obligation to sell any of the Properties at any particular time, except upon the winding up and dissolution of the Partnership dissolution currently scheduled for November 30, 2020which is in process as, pursuant to the Partnership Agreement, or if limited partners holding a majoritythe Partnership’s scheduled term ended on November 30, 2023. As such, all three remaining Properties have been, and continue to be listed for sale since July, 2023. Management expects the three Properties to sell by the end of the Interests vote to liquidate and dissolve the Partnershipthird quarter in response to a formal consent solicitation to liquidate the Partnership.2024.

Inflation

To the extent that tenants can pass through commodity inflation in their sales prices, the Partnership will benefit from additional percentage rent from increased sales. The majority of the Partnership’s leases have percentage rental clauses. Revenues from operating percentage rentals represented 40% of operating rental income for the fiscal year ended December 31, 2017,12% and 39%21% of operating rental income for the fiscal years ended December 31, 2016.2023 and 2022. If, however, inflation causes sales to decrease, operating margins to deteriorate for lessees, or if expenses grow faster than revenues, then, inflation may well negatively impact the portfolio through tenant defaults.

Due to the “triple-net” nature of the property leases, asset values generally move inversely with interest rates.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Partnership is not subject to market risk as defined by Item 305 of Regulation S-K.

Item 8. Financial Statements and Supplementary Data

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

(A Wisconsin limited partnership)

INDEX TO FINANCIAL STATEMENTS AND SCHEDULE

Report of Independent Registered Public Accounting Firm

805 Third Avenue 14THFloor New York, NY 10022 212.838.5100 212.838.2676/ Fax www.rbsmllp.com

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Management and the Advisory Board

Partners
of DiVall Insured Income Properties 2 Limited Partnership

Opinion on the Financial Statements

We have audited the accompanying balance sheets of DiVall Insured Income Properties 2 Limited Partnership (the “Company”)Partnership) as of December 31, 20172023 and 2016,2022, and the related statements of income, partners’ capital and cash flows for each of the years in the two-year periodthen ended, December 31, 2017, and the related notes and schedules (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the CompanyPartnership as of December 31, 20172023 and 2016,2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2017,2023, in conformity with accounting principles generally accepted in the United States of America.

Emphasis of Matter

The Partnership is scheduled to be dissolved on November 30, 2020, or earlier upon the prior occurrence of some events, as described in Note 1 to the accompanying financial statement.

Basis for Opinion

These financial statements are the responsibility of the Company’sPartnership’s management. Our responsibility is to express an opinion on the Company’sPartnership’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the CompanyPartnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The CompanyPartnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’sPartnership’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters

/s/ Boulay PLLP

We have served as the Partnership’s auditor since 2019.

Minneapolis, Minnesota

April 1, 2024

MN: Eden Prairie, Mankato, Minneapolis (t) 952.893.9320 FL: Naples (t) 239.325.1100

BoulayGroup.com

	15

New York, New York

March 23, 2018

New York, NY Washington DC Mumbai & Pune, India San Francisco, CA Las Vegas, NV Beijing, China Athens, Greece

Member: ANTEA Alliance with offices in major cities worldwide

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

BALANCE SHEETS

December 31, 2017 and 2016ASSETS

ASSETS

The accompanying notes are an integral part of these financial statements.

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

BALANCE SHEETS

December 31, 2017 and 2016

LIABILITIES AND PARTNERS’ CAPITAL

The accompanying notes are an integral part of these financial statements.

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

STATEMENTS OF INCOME

For the Years Ended December 31, 20172023 and 20162022

The accompanying notes are an integral part of these financial statement

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

STATEMENTS OF PARTNERS’ CAPITAL

For the years ended December 31, 2017 and 2016

The accompanying notes are an integral part of these financial statements.

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWSPARTNERS’ CAPITAL

For the Years Ended December 31, 20172023 and 20162022

The accompanying notes are an integral part of these financial statements.

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2023 and 2022

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 20172023 AND 20162022

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:POLICIES:

DiVall Insured Income Properties 2 Limited Partnership (the “Partnership”) was formed on November 20, 1987, pursuant to the Uniform Limited Partnership Act of the State of Wisconsin. The initial capital, contributed during 1987, consisted of $300,$300, representing aggregate capital contributions of $200$200 by the former general partners and $100 $100 by the initial Limited Partner. A subsequent offering of limited partnership interests (closedclosed on February 22, 1990, with 46,280.3 units of limited partnership interests (“Interests”) having been sold in that offering, resulting in total proceeds to the Partnership, net of underwriting compensation and other offering costs, of $39,358,468.$39,358,468.

The Partnership is currently engagedbeginning its liquidation process per the terms of Partnership Agreement as the Partnership’s term expired November 30, 2023. The Partnership had been in the business of owning and operating its investment portfolio of commercial real estate properties (the “Properties”). since the late 1980’s. The Partnership has sold six Properties in the last two years. The three remaining Properties are leased on a triple net basis primarily to, and operated by, franchisors or franchisees of national, regional, and local retail chainsthe International Wendy’s Company under primarily long-term leases. The lessees are fast food, family style, and casual/theme restaurants.leases with terms through December 31, 2040. As of December 31, 2017,2023, the Partnership owned 11three Properties, which are all located in a totalSouth Carolina.

During the 2020 consent solicitation process, the Limited Partners approved two separate amendments to the Partnership Agreement. The amendments served to: (i) extend the term of four states.

Thethe Partnership is scheduledby three (3) years to be dissolved on November 30, 2020, or earlier upon the prior occurrence of any of the following events: (a) the disposition of all its Properties; (b) the written determination by the General Partner, that the Partnership’s assets may constitute “plan assets” for purposes of ERISA; (c) the agreement of limited partners owning a majority of the outstanding limited partner interests to dissolve the Partnership; or (d) the dissolution, bankruptcy, death, withdrawal, or incapacity of the last remaining General Partner, unless an additional General Partner is elected previously by a majority of the limited partners. During the second2023, and third quarters of the nine odd numbered years from 2001 through 2017, consent solicitations were circulated to the Partnership’s limited partners which, if approved by the limited partners, would have authorized(ii) permit the General Partner to initiate the potential sale of all of the Properties and the dissolutioneffect distributions at times that it deems appropriate, but no less often than semi-annually.

Significant Accounting Policies

Financial Statement Presentation

The accounts of the Partnership (each a “Consent”). Limited partners owning a majority of the outstanding Interests did not vote in favor of any of the Consents. Therefore, the Partnership continues to operate as a going concern.

Significant Accounting Policies

Rental revenue from the Properties is recognizedare maintained on the straight-lineaccrual basis over the term of the respective lease. Percentage rents are only accrued when the tenant has reached the sales breakpoint stipulated in the lease.accounting for financial statement purposes.

Rents and other receivables are comprised of billed but uncollected amounts due for monthly rents and other charges, and amounts due for scheduled rent increases for which rentals have been earned and will be collected in the future under the terms of the leases. Receivables are recorded at management’s estimate of the amounts that will be collected.Accounting Estimates

As of December 31, 2017 and 2016 there were no values for allowance for doubtful accounts based on an analysis of specific accounts and historical experience.

The Partnership considers its operations to be in only one segment, the operation of a portfolio of commercial real estate leased on a triple net basis, and therefore no segment disclosure is made.

Depreciation of the Properties is provided on a straight-line basis over the estimated useful lives of the buildings and improvements.

Deferred charges represent leasing commissions paid when the Properties are leased and upon the negotiated extension of a lease. Leasing commissions are capitalized and amortized over the term of the lease. As of December 31, 2017 and 2016, accumulated amortization amounted to $33,843 and $186,850, respectively. Fully amortized deferred charges of $183,021, including related accumulated amortization, were removed from the balance sheets as of December 31, 2016.

Deferred tenant award proceeds escrow represents the portion of the award proceeds from the sale of the portion of the Mt. Pleasant, South Carolina property that are being paid to the tenant ratably over 99 months beginning August 1, 2013.

The Partnership generally maintains cash in federally insured accounts which, at times, may exceed federally insured limits. The Partnership has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risk.

Financial instruments that potentially subject the Partnership to significant concentrations of credit risk consist primarily of cash investments and leases. As of December 31, 2017, eight of the Partnership’s 11 Properties are leased to three significant tenants, Wendgusta, LLC (“Wendgusta”), Wendcharles I, LLC (“Wendcharles I”) and Wendcharles II, LLC (“Wendcharles II”), all three of whom are Wendy’s restaurant franchisees. The property lease(s) for these three tenants comprised approximately 52%, 17% and 9%, respectively, of the Partnership’s total 2017 operating base rents reflected for the fiscal year ended December 31, 2017.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities (and disclosure of contingent assets and liabilities) at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Assets disposed Significant items, subject to such estimates and assumptions, include the carrying value of or deemed to be classified asreal estate held for sale require the reclassificationinvestment.

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Cash Equivalents

All highly liquid investments with maturities of current and previous years’ operations to discontinued operations in accordance with GAAP applicable to “Accounting for the Impairmentthree months or Disposal of Long Lived Assets”. As such, prior year operating results for those properties considered as held for sale or properties no longer considered for sale have been reclassified to conform to the current year presentation without affecting total income. When properties are considered held for sale, depreciation of the properties is discontinued, and the properties are valued at the lower of the depreciated cost or fair value, less costs to dispose. If circumstances arise that were previously considered unlikely, and, as a result, the property previously classified as held for sale is no longer to be sold, the property is reclassified as held and used. Such property is measured at the lower of its carrying amount (adjusted for any depreciation and amortization expense that would have been recognized had the property been continuously classified as held and used) or fair value at the date of the subsequent decision not to sell.

Assetspurchase are classified as heldcash equivalents.

Cash Concentrations of Credit Risk

The Partnership generally maintains cash in federally insured accounts which, at times, may exceed federally insured limits. The Partnership has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risk.

Financial instruments that potentially subject the Partnership to significant concentrations of credit risk consist primarily of cash investments and leases. As of December 31, 2023, the Partnership’s three Properties are leased to three significant tenants, Wendgusta, LLC (“Wendgusta”), JAI Augusta, LLC (“JAI Augusta”) and JAI Hospitality RG, LLC (“JAI Hospitality”), all three of whom are Wendy’s restaurant franchisees. The property lease (s) for sale, generally, when all criteria within GAAP applicable to “Accountingthese three tenants comprised approximately 91% of the Partnership’s total 2023 operating base rents reflected for the Impairment or Disposal of Long Lived Assets” have been met.

The Partnership periodically reviews its long-lived assets, primarily real estate, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Partnership’s review involves comparing current and future operating performance of the assets, the most significant of which is undiscounted operating cash flows, to the carrying value of the assets. Based on this analysis, a provision for possible loss is recognized, if any. There were no adjustments to carrying values for the fiscal yearsyear ended December 31, 20172023.

Rent and 2016.Other Receivables

Rents and other receivables are comprised of billed but uncollected amounts due for monthly rents and other charges and amounts due for scheduled rent increases for which rentals have been earned and will be collected in the future under the terms of the leases. Receivables are recorded at management’s estimate of the amounts that will be collected.

As of December 31, 2023 and 2022 there were no values for allowance for credit losses based on an analysis of specific accounts and historical experience.

Revenue Recognition

Rental revenue from investment properties is recognized on the straight-line basis over the life of the respective lease when collectability is reasonably assured. Percentage rents are accrued only when the tenant has reached the sales breakpoint stipulated in the lease and collectability is reasonably assured.

Original lease terms for the majority of the leased Properties were generally five to 20 years from their inception. The leases generally provide for minimum rents and additional rents based upon percentages of gross sales in excess of specified breakpoints. The lessee is responsible for occupancy costs such as maintenance, insurance, real estate taxes, and utilities. Accordingly, these amounts are not reflected in the statements of income except in circumstances where, in the General Partner’s opinion, the Partnership will be required to pay such costs to preserve its assets (i.e., payment of past-due real estate taxes). Management has determined that the leases are properly classified as operating leases; therefore, rental income is reported when earned on a straight-line basis and the cost of the property, excluding the cost of the land, is depreciated over its estimated useful life.

As of December 31, 2023, the aggregate minimum operating lease payments to be received under the current operating leases for the Properties are as follows:

SCHEDULE OF AGGREGATE MINIMUM OPERATING LEASE PAYMENTS

Year ending December 31,

In May 2014, the Financial Accounting Standards Board (“FASB”) guidance on “Fair Value Measurements(FASB) issued Accounting Standards Update (ASU) No. 2014-09 regarding ASC Topic 606, Revenue from Contracts with Customers. This standard was developed to enable financial statement users to better understand the nature, amount, timing and Disclosure”, defines fair value, establishesuncertainty of revenue and cash flows arising from contracts with customers. The update’s core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Entities are to use a framework for measuring fair valuefive-step contract review model to ensure revenue is recognized, measured and enhances disclosures about fair value measures required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. The adoption ofdisclosed in accordance with this principle. Those steps include the provisions of this FASB issuance,following: (i) identify the contract with respect to nonrecurring fair value measurements of nonfinancial assets and liabilities, including (but not limited to) the valuation of reporting units forcustomer, (ii) identify the purpose of assessing goodwill impairment and the valuation of property and equipment when assessing long-lived asset impairment, did not have a material impact on how the Partnership estimated its fair value measurements but did result in increased disclosures about fair value measurementsperformance obligations in the Partnership’s financial statements as ofcontract, (iii) determine the transaction price, (iv) allocate the transaction price to each performance obligation in the contract, and for the years ended December 31, 2017 and 2016. See Note 10 for further disclosure.

GAAP applicable to disclosure about fair value of financial instruments requires entities to disclose the fair value of all financial assets and liabilities for which it is practicable to estimate. Fair value is defined(v) recognize revenue when or as the amount at which the instrument could be exchanged inentity satisfies a current transaction between willing parties, other than in a forced or liquidation sale. The General Partner believes that the carrying value of the Partnership’s assets (exclusive of the Properties) and liabilities approximate fair value due to the relatively short maturity of these instruments.performance obligation.

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Income Taxes

No provision for federal income taxes has been made, as any liability for such taxes would be that of the individual partners rather than the Partnership.

At December 31, 2017,2023, the tax basis of the Partnership’s assets exceeded the amounts reported in the December 31, 20172023 financial statements by approximately $6,696,215.$6,732,699

The following represents an unaudited reconciliation of net income as stated on the Partnership statements of income to net income for tax reporting purposes:

SCHEDULE OF UNAUDITED RECONCILIATION OF NET INCOME FOR TAX REPORTING

The Partnership is not subject to federal income tax because its income and losses are includable in the tax returns of its partners but may be subject to certain state taxes. 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 entity’s tax returns to determine whether the tax positions are more-likely-than-not to be sustained when challenged or when examined by the applicable taxing authority. Management has determined that there were no material uncertain income tax positions. Tax returns filed by the Partnership generally are subject to examination by U.S. and state taxing authorities for the years ended after December 31, 2014.2020.

Ohio-– Commercial ActivatesActivities Tax CAT

The Commercial Activity Tax (CAT) is an annual tax imposed on the privilege of doing business in Ohio, measured by gross receipts from business activities in Ohio. Businesses with Ohio taxable gross receipts of $150,000.00$150,000 or more per calendar year are subject to the CAT tax. Such “taxable gross receipts”, include I)i) gross rents and royalties from real property located in Ohio, and 2)ii) gross receipts from the sale of real property located in Ohio. For calendar years 2006 and thereafter, the first $1$1 million in taxable gross receipts are taxed at $150,$150, thereafter at a rate of 0.2600%0.2600%. For tax years prior to December 31, 2013, there is an annual minimum tax (AMT) of$150.00. Since theof $150.

The Partnership has not had gross receipts in excess of $150,000$150,000 for the periodsperiod ended December 31, 2017and 2016,2023 so, the CAT tax of $150is not applicable to the CompanyPartnership for the periodsperiod indicated.

2. INVESTMENTDIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP