Del Taco Income Properties Iv (DTIPIV) 10-K 2005 FY Annual report

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 ended December 31, 2005

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 no. 33-13437

DEL TACO INCOME PROPERTIES IV

(A California limited partnership)

(Exact name of registrant as specified in its charter)

California (State or other jurisdiction of incorporation or organization)	33-0241855 (I.R.S. Employer Identification Number)
25521 Commercentre Drive Lake Forest, California (Address of principal executive offices)	92630 (Zip Code)

Registrant’s telephone number, including area code:(949) 462-9300

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

Securities registered pursuant to section 12(g) of the Act: None

     Indicate by check mark if 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 Exchange 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 for 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   

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the registrant’s Form S-11 Registration Statement filed June 5, 1987 are incorporated by reference into Part IV of this report.

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

     Large accelerated filer                   Accelerated filer                   Non-accelerated filer  X 

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

TABLE OF CONTENTS

PART I
	Item 1. Business
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submissions of Matters to a Vote of Security Holders
PART II
	Item 5. Market for the Partnership’s Common Equity and Related Security Holder Matters
	Item 6. Selected Financial Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
	Item 8. Financial Statements
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
	Item 9A. Controls and Procedures
PART III
	Item 10. Directors and Executive Officers of the Partnership’s General Partner
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Security            Holder Matters
	Item 13. Certain Relationships and Related Transactions
	Item 14. Principal Accountant Fees and Services
PART IV
	Item 15. Exhibits, Financial Statements Schedules, and Reports on Form 8-K
SIGNATURES
Exhibit Index
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1

PART I

Item 1. Business

Del Taco Income Properties IV, (the Partnership) is a publicly-held limited partnership organized under the California Uniform Limited Partnership Act. The Partnership’s General Partner is Del Taco, Inc., a California corporation (Del Taco or the General Partner). The Partnership sold 165,415 units totaling $4.135 million through an offering of limited partnership units from June 1987 through June 1988. The term of the partnership agreement is until December 31, 2027 unless terminated earlier by means provided in the partnership agreement.

The business of the Partnership is ownership and leasing of restaurants in California to Del Taco. The Partnership acquired land and constructed three Mexican-American restaurants for long-term lease to Del Taco. Each property is leased for 32 years on a triple net basis. Rent is equal to twelve percent of gross sales of the restaurants plus supplemental rent as required by the partnership agreement. As of December 31, 2005, the Partnership had a total of three properties leased to Del Taco (Del Taco, in turn, has sub-leased one of the restaurants to a Del Taco franchisee).

The Partnership has no full time employees. The partnership agreement assigns full authority for general management and supervision of the business affairs of the partnership to the General Partner. The General Partner has a one percent interest in the profits or losses and distributions of the Partnership. Limited partners have no right to participate in the day to day management or conduct of the Partnership’s business affairs.

Item 2. Properties

The Partnership has acquired three properties with proceeds obtained from the sale of limited partnership units:

				Date of Commencement of
Address	City, State	Date of Acquisition	Restaurant Constructed	Operation (1)
Orangethorpe Avenue	Placentia, CA	August 5, 1988	60 seat with drive through service window	March 27, 1989
Lakeshore Drive	Lake Elsinore, CA	February 1, 1989	60 seat with drive through service window	April 18, 1990(2)
Highland Avenue	San Bernardino, CA	December 8, 1989	60 seat with drive through service window	July 13, 1990

(1)	Commencement of operation is the first date Del Taco, as lessee, operated the facility on the site as a Del Taco restaurant.
(2)	The restaurant is subleased to a franchisee of Del Taco and the restaurant operates as a Del Taco restaurant.

See also Schedule III.

2

Item 3. Legal Proceedings

The Partnership is not a party to any material pending legal proceedings.

Item 4. Submissions of Matters to a Vote of Security Holders

None.

PART II

Item 5. Market for the Partnership’s Common Equity and Related Security Holder Matters

The Partnership sold 165,415 ($4,135,375) limited partnership units during the public offering period ended June 3, 1988 and currently has 304 limited partners of record. There is no public market for the trading of the units. Distributions made by the Partnership to the limited partners during the past three fiscal years are described in Note 7 to the Notes to the Financial Statements contained under Item 8.

Item 6. Selected Financial Data

The selected financial data presented as of and for the years ended December 31, 2005, 2004, 2003, 2002, and 2001, has been derived from the audited financial statements and should be read in conjunction with the financial statements and related notes and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

			Years Ended December 31,
	2005		2004		2003		2002		2001
Rental revenues	$	458,027	$	439,657	$	439,657	$	432,629	$	434,848
General and administrative expense		62,255		60,837		62,441		45,707		43,193
Depreciation expense		55,268		55,268		55,268		55,268		55,268
Interest and other income		2,348		1,955		1,858		3,127		4,241
Net income		342,852		325,507		323,806		334,781		340,628
Net income per limited partnership unit		2.05		1.95		1.94		2.00		2.04
Cash distributions per limited partnership unit		2.34		2.52		2.34		2.35		2.32
Total assets		1,840,586		1,892,767		1,975,153		2,039,717		2,101,201
Long-term obligations		137,953		137,953		137,953		137,953		137,953

3

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

Management’s discussion and analysis of financial condition, results of operations, liquidity and capital resources, and off balance sheet arrangements and contractual obligations contained within this report on Form 10-K is more clearly understood when read in conjunction with the notes to the financial statements. The notes to the financial statements elaborate on certain terms that are used throughout this discussion and provide information about the Partnership and the basis of presentation used in this report on Form 10-K.

The three restaurants leased to Del Taco make up all of the income producing assets of the Partnership. Therefore, the business of the Partnership is entirely dependent on the success of Del Taco as the operator of the restaurants located at our properties. The success of the restaurants is dependent on a large variety of factors, including, but not limited to, consumer demand and preference for fast food, in general, and for Mexican-American food in particular.

Liquidity and Capital Resources

The Partnership offered limited partnership units for sale between June 1987 and June 1988. 14.5% of the $4.135 million raised through sale of limited partnership units was used to pay commissions to brokers and to reimburse the General Partner for offering costs incurred. Approximately $3 million of the remaining funds were used to acquire sites and build three restaurants. In February of 1992, approximately $442,000 raised during the offering but not required to acquire sites and build restaurants were distributed to the limited partners.

The Partnership’s only source of cash flow is rental income from the properties from the triple net leases. Such operating income has historically been and is expected to continue to be sufficient to fund the Partnership’s operating expenses. Net cash provided by operating activities in excess of the Partnership’s ongoing needs is distributed to the partners.

Off Balance Sheet Arrangements and Contractual Obligations

None.

Results of Operations

The Partnership owns three properties that are under long-term lease to Del Taco for restaurant operations (Del Taco, in turn, has sub-leased one of the restaurants to a Del Taco franchisee).

The following table sets forth rental revenues earned by restaurant by year:

	Years Ended December 31,
	2005		2004		2003
Orangethorpe Ave., Placentia, CA	$	176,686	$	169,881	$	175,288
Lakeshore Drive, Lake Elsinore, CA		185,435		176,599		174,899
Highland Ave., San Bernardino, CA		95,906		93,177		89,470
Total	$	458,027	$	439,657	$	439,657

4

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued)

Results of Operations (continued)

The Partnership earns rental revenues equal to 12 percent of gross sales from the restaurants plus supplemental rent as required by the partnership agreement. The Partnership earned rental revenues of $458,027 during the year ended December 31, 2005, which represents an increase of $18,370 from 2004. The increase in rental revenues was caused primarily by an increase in sales at the restaurants under lease. The Partnership earned rental revenues of $439,657 during the year ended December 31, 2004, which was the same amount as 2003 due to the supplemental rent rate discussed below. Supplemental rent was $0, $9,679 and $50,599 for the years ended December 31, 2005, 2004 and 2003, respectively. Supplemental rent is calculated on an annual basis and recorded in the fourth quarter since the amount of supplemental rent, if any, is contingent upon the amount of annual gross sales and pretax profits of the restaurants which are not known until the end of the year. The amount of supplemental rent, if any, is the lesser of (a) the supplemental rental rate of 14.6 percent times the aggregate property costs of $3,011,349, less 12 percent of gross sales of the restaurants, or (b) 50 percent of the aggregate pretax profit, less general and administrative expenses (as defined) and 50 percent of the franchise royalties paid (as defined). To the extent 12 percent of gross sales of the restaurants exceeds the supplemental rent rate the supplemental rent would be zero.

The following table breaks down general and administrative expenses by type of expense:

Percentage of Total General and Administrative Expense

	Years Ended December 31,
		2005		2004		2003
Accounting fees		64.47	%	59.98	%	57.29	%
Distribution of information to limited partners		33.94		38.62		41.30
Other		1.59		1.40		1.41
		100.00		100.00		100.00

General and administrative costs increased by $1,418 from 2004 to 2005. The increase was caused primarily by increased costs for annual audit, software licensing and accounting fees, partially offset by decreased costs for printing and mailing.

General and administrative costs decreased by $1,604 from 2003 to 2004. The decrease was caused primarily by decreased costs for income tax preparation and printing and mailing costs, partially offset with increased costs for the annual audit.

Depreciation expense was the same in 2005, 2004, and 2003.

Net income increased by $17,345 from 2004 to 2005 due to the increase in revenues of $18,370 and other income of $393, which was partially offset by the increase in general and administrative expenses of $1,418.

Net income increased by $1,701 from 2003 to 2004 due to the decrease in general and administrative expenses of $1,604 and the increase in other income of $97.

5

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued)

Recent Accounting Pronouncements

None that applies to the Partnership.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations, as well as disclosures included elsewhere in this report on Form 10-K are based upon the Partnership’s financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Partnership believes the critical accounting policies that most impact the financial statements are described below. A summary of the significant accounting policies of the Partnership can be found in Note 1 to the Financial Statements which is included in Item 8 of this Form 10-K.

Property and Equipment: Property and equipment is stated at cost. Depreciation is computed using the straight-line method over estimated useful lives which are 20 years for land improvements, 35 years for buildings and improvements, and 10 years for machinery and equipment.

The Partnership accounts for property and equipment in accordance with Statement of Financial Accounting Standards No. (SFAS) 144, “Accounting for the Impairment or Disposal of Long Lived Assets.” SFAS 144 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. In evaluating long-lived assets held for use, an impairment loss is recognized if the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying value of the asset. Once a determination has been made that an impairment loss should be recognized for long-lived assets, various assumptions and estimates are used to determine fair value including, among others, recent sales of comparable properties and the opinions of fair value prepared by independent real estate appraisers. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

None.

Item 8. Financial Statements

6

PART I. INFORMATION

INDEX	PAGE NUMBER
Report of Independent Registered Public Accounting Firm — Squar, Milner, Reehl & Williamson, LLP		8
Report of Independent Registered Public Accounting Firm — KPMG LLP		9
Balance Sheets at December 31, 2005 and 2004		10
Statements of Income for the years ended December 31, 2005, 2004 and 2003		11
Statements of Partners’ Equity for the years ended December 31, 2005, 2004 and 2003		12
Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003		13
Notes to Financial Statements		14-18
Schedule III — Real Estate and Accumulated Depreciation		24

7

Report of Independent Registered Public Accounting Firm

To the Partners of
Del Taco Income Properties IV:

We have audited the accompanying balance sheet of Del Taco Income Properties IV (a California Limited Partnership) as of December 31, 2005, and the related statements of income, partners’ equity, and cash flows for the year then ended. In connection with our audit of the financial statements, we have also audited the 2005 information in the accompanying financial statement schedule listed in item 15. These financial statements and financial statement schedule are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Del Taco Income Properties IV as of December 31, 2005, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the 2005 information in the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ Squar, Milner, Reehl & Williamson, LLP

Newport Beach, California

February 21, 2006

8

Report of Independent Registered Public Accounting Firm

To the Partners of
Del Taco Income Properties IV:

We have audited the accompanying balance sheet of Del Taco Income Properties IV (a California Limited Partnership) as of December 31, 2004, and the related statements of income, partners’ equity, and cash flows for each of the years in the two-year period then ended. In connection with our audits of the financial statements, we have also audited the 2004 and 2003 information in the accompanying financial statement schedule. These financial statements and financial statement schedule are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Del Taco Income Properties IV as of December 31, 2004, and the results of their operations and their cash flows for each of the years in the two-year period then ended in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the 2004 and 2003 information in the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ KPMG LLP

Costa Mesa, California
March 4, 2005

9

DEL TACO INCOME PROPERTIES IV

BALANCE SHEETS

		December 31,
		2005			2004
ASSETS
CURRENT ASSETS:
Cash		$	150,403		$	140,285
Receivable from Del Taco, Inc.			38,934			45,765
Deposits			400			600
Total current assets			189,737			186,650
PROPERTY AND EQUIPMENT:
Land and improvements			1,236,700			1,236,700
Buildings and improvements			1,289,860			1,289,860
Machinery and equipment			484,789			484,789
			3,011,349			3,011,349
Less—accumulated depreciation			1,360,500			1,305,232
			1,650,849			1,706,117
	��
		$	1,840,586		$	1,892,767
LIABILITIES AND PARTNERS’ EQUITY
CURRENT LIABILITIES:
Payable to limited partners		$	37,993		$	36,913
Accounts payable			5,923			10,567
Total current liabilities			43,916			47,480
OBLIGATION TO GENERAL PARTNER			137,953			137,953
PARTNERS’ EQUITY:
Limited partners; 165,375 units outstanding at December 31, 2005 and December 31, 2004			1,673,263			1,721,394
General partner-Del Taco, Inc.			(14,546	)		(14,060	)
			1,658,717			1,707,334
		$	1,840,586		$	1,892,767

See accompanying notes to financial statements.

10

DEL TACO INCOME PROPERTIES IV

STATEMENTS OF INCOME

	Years Ended December 31,
	2005		2004		2003
RENTAL REVENUES	$	458,027	$	439,657	$	439,657
EXPENSES:
General and administrative		62,255		60,837		62,441
Depreciation		55,268		55,268		55,268
		117,523		116,105		117,709
Operating income		340,504		323,552		321,948
OTHER INCOME:
Interest		1,848		1,380		1,258
Other		500		575		600
Net income	$	342,852	$	325,507	$	323,806
Net income per limited partnership unit (note 2)	$	2.05	$	1.95	$	1.94
Number of limited partnership units used in computing per unit amounts		165,375		165,375		165,375

See accompanying notes to financial statements.

11

DEL TACO INCOME PROPERTIES IV

STATEMENTS OF PARTNERS’ EQUITY

Years Ended December 31, 2005, 2004, and 2003

	Limited Partners					General
	Units		Amount			Partner			Total
Balance, December 31, 2002		165,375	$	1,881,610		$	(12,442	)	$	1,869,168
Net Income		—		320,568			3,238			323,806
Cash Distributions		—		(386,594	)		(3,905	)		(390,499	)
Balance, December 31, 2003		165,375		1,815,584			(13,109	)		1,802,475
Net Income		—		322,252			3,255			325,507
Cash Distributions		—		(416,442	)		(4,206	)		(420,648	)
Balance, December 31, 2004		165,375		1,721,394			(14,060	)		1,707,334
Net Income		—		339,423			3,429			342,852
Cash Distributions		—		(387,554	)		(3,915	)		(391,469	)
Balance, December 31, 2005		165,375	$	1,673,263		$	(14,546	)	$	1,658,717

See accompanying notes to financial statements.

12

DEL TACO INCOME PROPERTIES IV

STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2005			2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	342,852		$	325,507		$	323,806
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		55,268			55,268			55,268
Changes in operating assets and liabilities:
Receivable from Del Taco, Inc.		6,831			40,082			18,750
Deposits		200			(126	)		36
Payable to limited partners		1,080			5,223			2,603
Accounts payable		(4,644	)		7,532			(474	)
Net cash provided by operating activities		401,587			433,486			399,989
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners		(391,469	)		(420,648	)		(390,499	)
Net increase in cash		10,118			12,838			9,490
Beginning cash balance		140,285			127,447			117,957
Ending cash balance	$	150,403		$	140,285		$	127,447

See accompanying notes to financial statements.

13

DEL TACO INCOME PROPERTIES IV

NOTES TO FINANCIAL STATEMENTS

NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Partnership: Del Taco Income Properties IV, a California limited partnership, (the Partnership) was formed on March 23, 1987, for the purpose of acquiring real property in California for construction of three Mexican-American restaurants to be leased under long-term agreements to Del Taco, Inc. (General Partner or Del Taco), for operation under the Del Taco trade name. The term of the partnership agreement is until December 31, 2027 unless terminated earlier by means provided in the partnership agreement.

The Partnership has no full time employees (see Note 5). The partnership agreement assigns full authority for general management and supervision of the business affairs of the partnership to the General Partner. The General Partner has a one percent interest in the profits or losses and distributions of the Partnership. Limited partners have no right to participate in the day to day management or conduct of the Partnership’s business affairs.

Distributions are made to the General and limited partners in accordance with the provisions of the Partnership agreement (see Note 2).

Basis of Accounting: The Partnership utilizes the accrual method of accounting for transactions relating to the business of the Partnership. The summary of significant accounting policies presented below is designed to assist in understanding the Partnership’s financial statements. Such financial statements and accompanying notes are the representations of the Partnership’s management, who is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) in all material respects, and have been consistently applied in preparing the accompanying financial statements.

Property and Equipment: Property and equipment is stated at cost. Depreciation is computed using the straight-line method over estimated useful lives which are 20 years for land improvements, 35 years for buildings and improvements, and 10 years for machinery and equipment.

The Partnership accounts for property and equipment in accordance with Statement of Financial Accounting Standards No. (SFAS) 144, “Accounting for the Impairment or Disposal of Long Lived Assets.” SFAS 144 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. In evaluating long-lived assets held for use, an impairment loss is recognized if the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying value of the asset. Once a determination has been made that an impairment loss should be recognized for long-lived assets, various assumptions and estimates are used to determine fair value including, among others, recent sales of comparable properties and the opinions of fair value prepared by independent real estate appraisers. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

14

DEL TACO INCOME PROPERTIES IV
NOTES TO FINANCIAL STATEMENTS— CONTINUED

NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Continued

Income Taxes: No provision has been made for federal or state income taxes on partnership net income, since the Partnership is not subject to income tax. Partnership income is includable in the taxable income of the individual partners as required under applicable income tax laws. Certain items, primarily related to depreciation methods, are accounted for differently for income tax reporting purposes (see Note 6).

Net Income Per Limited Partnership Unit: Net income per limited partnership unit is based upon the limited partners 99 percent share of net income divided by the weighted average number of units outstanding during the period which amounted to 165,375 units for all years presented.

Use of Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Revenue Recognition: Rental revenue is recognized based on 12 percent of gross sales of the restaurants for the corresponding period, and is earned at the point of sale. Supplemental rent is calculated on an annual basis and recorded in the fourth quarter since the amount of supplemental rent, if any, is contingent upon the amount of annual gross sales and pretax profits of the restaurants which are not known until the end of the year. The amount of supplemental rent, if any, is the lesser of (a) the supplemental rental rate of 14.6 percent times the aggregate property costs of $3,011,349, less 12 percent of gross sales of the restaurants, or (b) 50 percent of the aggregate pretax profit, less general and administrative expenses (as defined) and 50 percent of the franchise royalties paid (as defined). To the extent 12 percent of gross sales of the restaurants exceeds the supplemental rent rate the supplemental rent would be zero.

Concentration of Risk: The three restaurants leased to Del Taco make up all of the income producing assets of the Partnership and contributed all of the Partnership’s rental revenues for the three years ended December 31, 2005. Therefore, the business of the Partnership is entirely dependent on the success of the Del Taco trade name restaurants that lease the properties.

The Partnership maintains substantially all of its cash and cash equivalents at one major commercial bank. The cash balance is in excess of the Federal Depository Insurance Commission’s limits. At December 31, 2005 and 2004 the Partnership had approximately $164,000 and $143,000, respectively, on deposit at one financial institution.

15

DEL TACO INCOME PROPERTIES IV
NOTES TO FINANCIAL STATEMENTS— CONTINUED

NOTE 2 — PARTNERS’ EQUITY

Pursuant to the partnership agreement, annual partnership net income or loss is allocated one percent to the General Partner and 99 percent to the limited partners. Partnership gains from any sale or refinancing are to be allocated one percent to the General Partner and 99 percent to the limited partners until allocated gains and profits equal losses, distributions and syndication costs, and until each class of limited partners receive their priority return (12 percent) as defined in the partnership agreement. Additional gains are to be allocated 12 percent to the General Partner and 88 percent to the limited partners.

NOTE 3 — OBLIGATION TO GENERAL PARTNER

Under terms of the partnership agreement, the General Partner is entitled to receive a fee in an amount equal to five percent of the gross proceeds of the offering. The fee shall be for services rendered in connection with site selection and the design and supervision of construction of improvements to acquired properties. One percent of the gross proceeds of the offering has been paid to the General Partner. The remaining four percent of this fee shall be earned at the time the services are rendered, but shall not be paid and shall be subordinated to the limited partners’ interests until all restaurants have opened and the limited partners have received certain minimum returns on their investment, as required by the partnership agreement. It is the policy of the Partnership to accrue the site selection and development fee as an obligation to the General Partner. No fees were earned for such services during 2005, 2004, and 2003.

NOTE 4 — LEASING ACTIVITIES

The Partnership leases certain properties for operation of restaurants to Del Taco on a triple net basis. The leases are for terms of 32 years commencing with the completion of the restaurant facility located on each property and require monthly rentals equal to 12 percent of the gross sales of the restaurants. Supplemental rent (as defined in the partnership agreement) may be earned if certain criteria are met. Supplemental rent was $0, $9,679, and $50,599 for the years ended December 31, 2005, 2004, and 2003, respectively. There is no minimum rental under any of the leases. The Partnership had a total of three properties leased to Del Taco as of December 31, 2005, 2004, and 2003 (Del Taco, in turn, has subleased one of the restaurants to a Del Taco franchisee for each of the three years ended December 31, 2005).

The two restaurants operated by Del Taco, for which the Partnership is the lessor, had combined, unaudited sales of $2,271,600, $2,143,884, and $1,952,440 and unaudited net income of $211,722, $185,915, and $153,412 for the years ended December 31, 2005, 2004, and 2003, respectively. Net income by restaurant includes charges for general and administrative expenses incurred in connection with supervision of restaurant operations and interest expense. The one restaurant operated by a Del Taco franchisee, for which the Partnership is the lessor, had unaudited sales of $1,545,288, $1,439,262, and $1,289,707 for the years ended December 31, 2005, 2004, and 2003, respectively.

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DEL TACO INCOME PROPERTIES IV
NOTES TO FINANCIAL STATEMENTS— CONTINUED

NOTE 5 — RELATED PARTIES

The receivable from Del Taco consists of rent accrued for the months of December 2005 and 2004. This amount was collected in January 2006 and 2005, respectively.

The General Partner received $3,915, $4,206 and $3,905 in distributions relating to its one percent interest in the Partnership for the years ended December 31, 2005, 2004 and 2003, respectively.

Del Taco serves in the capacity of General Partner in other partnerships which are engaged in the business of operating restaurants, and three other partnerships which were formed for the purpose of acquiring real property in California for construction of Mexican-American restaurants for lease under long-term agreements to Del Taco.

The General Partner provides certain minimal managerial and accounting services to the Partnership at no cost.

NOTE 6 — INCOME TAXES (UNAUDITED)

The Partnership is not subject to income taxes because its income is taxed directly to the General Partner and limited partners. The reconciling items presented in the table below are the only items that create a difference between the tax basis and reported amounts of the Partnership’s assets and liabilities.

A reconciliation of financial statement net income to taxable income for each of the periods is as follows:

	2005		2004		2003
Net income per financial statements	$	342,852	$	325,507	$	323,806
Excess book depreciation		14,915		14,915		14,915
Taxable income	$	357,767	$	340,422	$	338,721

A reconciliation of partnership equity per the financial statements to partners’ equity for tax purposes as of December 31, 2005, is as follows (unaudited):

Partners’ equity per financial statements	$	1,658,717
Issue costs of limited partnership units capitalized for tax purposes		579,259
Difference in book vs. tax depreciation		229,837
Partners’ equity for tax purposes	$	2,467,813

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DEL TACO INCOME PROPERTIES IV
NOTES TO FINANCIAL STATEMENTS— CONTINUED

NOTE 7 — CASH DISTRIBUTIONS TO LIMITED PARTNERS

Cash distributions paid to limited partners for the three years ended December 31, 2005 were as follows:

	Cash		Weighted		Number of Units
	Distribution per		Average Number		Outstanding at
	Limited Partnership		of Units		the End of
Quarter Ended	Unit		Outstanding		Quarter
December 31, 2002	$	0.50		165,375		165,375
March 31, 2003		0.82		165,375		165,375
June 30, 2003		0.48		165,375		165,375
September 30, 2003		0.54		165,375		165,375
Total paid in 2003	$	2.34
December 31, 2003	$	0.54		165,375		165,375
March 31, 2004		0.75		165,375		165,375
June 30, 2005		0.56		165,375		165,375
September 30, 2004		0.67		165,375		165,375
Total paid in 2004	$	2.52
December 31, 2004	$	0.59		165,375		165,375
March 31, 2005		0.63		165,375		165,375
June 30, 2005		0.49		165,375		165,375
September 30, 2005		0.63		165,375		165,375
Total paid in 2005	$	2.34

Cash distributions per limited partnership unit were calculated based upon the weighted average number of units outstanding for each quarter and were paid from operations. Distributions declared in the quarter ended December 31, 2005 amounted to $.64 per limited partnership unit and were paid in January 2006.

NOTE 8 — RESULTS BY QUARTER (UNAUDITED)

	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Year ended December 31, 2005
Rental revenues	$	107,923	$	116,001	$	117,490	$	116,613
Net income		60,089		93,728		94,353		94,682
Net income per limited partnership unit		0.36		0.56		0.56		0.57
Year ended December 31, 2004
Rental revenues	$	101,710	$	109,478	$	112,574	$	115,895
Net income		55,569		86,709		89,735		93,494
Net income per limited partnership unit		0.33		0.52		0.54		0.56

NOTE 9 — SUBSEQUENT EVENT

On January 30, 2006, the parent company of the General Partner entered into an agreement to sell all of its issued and outstanding common stock to Sagittarius Acquisitions II, Inc. The consummation of the transaction is subject to customary conditions, including the receipt of financing, and is not expected to have any impact on the Partnership.

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Refer to Form 8-K filed on October 28, 2005.

Item 9A. Controls and Procedures

     (a)   Evaluation of disclosure controls and procedures:

As of the end of the period covered by this annual report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective in timely alerting them to material information relating to the Partnership (including its subsidiaries) required to be included in our periodic Securities and Exchange Commission filings.

     (b)   Changes in internal controls:

There were no significant changes in the Partnership’s internal controls over financial reporting that occurred during our most recent fiscal quarter that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

     (c)   Asset-Backed issuers:

Not applicable.

PART III

Item 10. Directors and Executive Officers of the Partnership’s General Partner

(a) & (b) The executive officers and directors of the General Partner and their ages are set forth below:

Name	Title	Age
Kevin K. Moriarty	Director, Chairman and Chief Executive Officer		59
C. Ronald Petty	President		61
Robert J. Terrano	Executive Vice President and Chief Financial Officer		50
James D. Stoops	Executive Vice President, Operations		53
Janet D. Erickson	Executive Vice President, Purchasing		49
Shirlene Lopez	Executive Vice President, Operations Services		41
Michael L. Annis	Senior Vice President, Secretary and General Counsel		59

The above referenced executive officers and directors of the General Partner will hold office until the annual meeting of its shareholders and directors, which is scheduled for the later part of 2006.

(c) None

(d) No family relationship exists between any such director or executive officer of the General Partner.

(e) The following is an account of the business experience during the past five years of each such director and executive officer:

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Kevin K. Moriarty, Director, Chairman and Chief Executive Officer of Del Taco, Inc. Mr. Moriarty began his career with Burger King Corporation in 1974 in Operations Unit Management. In 1983, he was promoted to Area Manager in New York, and was subsequently promoted to the Regional Vice President, Chicago Region in 1985. In 1988, he became Executive Vice President and General Manager of the North Central Division. Mr. Moriarty served in that position until 1990 when he joined Del Taco, Inc. as President and Chief Executive Officer on July 31, 1990. Mr. Moriarty has served as a Director of the General Partner since 1990.

C. Ronald Petty, President of Del Taco, Inc. Mr. Petty began his career in the restaurant business in 1973 with McDonald’s Corporation. He was employed by McDonald’s in a real estate capacity until 1978. For the next 12 years, Mr. Petty was in various officer positions with Burger King. These positions included Vice President of Real Estate, Sr. Vice President of Development, Region Vice President, Sr. Vice President European Operations, President of International and President of U.S. Mr. Petty served as President of Miami Subs from 1990-1992; President and CEO of Denny’s 1993-1996; President and CEO of Peter Piper Pizza 1996-1998; President of Del Taco December 1998-present.

Robert J. Terrano, Executive Vice President and Chief Financial Officer of Del Taco, Inc. From May 1994 to April 1995, Mr. Terrano served as Chief Financial Officer for Denny’s, Inc. in Spartanburg, S.C. From August 1983 to May 1994, he served with Burger King Corporation, Miami Florida, in a variety of positions, most recently as Division Controller. Mr. Terrano joined Del Taco, Inc. in April 1995.

James D. Stoops, Executive Vice President, Operations of Del Taco, Inc. From 1968 to 1991, Mr. Stoops served in a wide variety of Operations positions with Burger King Corporation with increasing levels of responsibility. In 1985, Mr. Stoops was appointed Region Vice President/General Manager for the New York region and served in that position until October of 1990. In January of 1991, he joined Del Taco, Inc. in his current post.

Janet D. Erickson, Executive Vice President, Purchasing of Del Taco, Inc. From 1979 to 1986, Ms. Erickson was with Denny’s Inc. She served in the Research and Development department in a variety of positions until 1982 when she was promoted to the position of Purchasing Agent. Ms. Erickson was hired in 1986 as Manager of Contract Purchasing with Carl Karcher Enterprises, a post she held until March 1990 when she became Vice President, Purchasing for Del Taco, Inc. Ms. Erickson has a Bachelor of Science degree in Foods and Nutrition from Cal State Polytechnic University in Pomona, California.

Shirlene Lopez, Executive Vice President, Operations Services of Del Taco, Inc. Ms. Lopez began her career with Del Taco in 1978 as an hourly employee and advanced through the ranks to General Manager in 1984. Ms. Lopez was promoted to the corporate office in 1989 as Human Resource Manager. In 1994, she was promoted to Executive Project Manager reporting to the CEO and in 1996, to Director of Corporate Development in charge of all interior image and design and in 1997, to Vice President, Corporate Development & Design. Ms. Lopez has held her current position since February 2002.

20

Michael L. Annis, Senior Vice President, Secretary and General Counsel of Del Taco, Inc. From 1981 to 1986 Mr. Annis served as Regional Real Estate Manager and Director of Real Estate Services with Taco Bell, Inc. In 1986 he served as Regional General Manager with Quaker State Minit Lube. In January of 1987 Mr. Annis joined Red Robin International, Inc. as General Counsel and was subsequently promoted to Vice President/Secretary and later Vice President Real Estate Development/Secretary and General Counsel, the position he held until joining Del Taco, Inc. in December of 1993. Mr. Annis received his J.D. Degree from Whittier College.

Item 11. Executive Compensation

The Partnership has no executive officers or directors and pays no direct remuneration to any executive officer or director of its General Partner. The Partnership has not issued any options or stock appreciation rights to any executive officer or director of its General Partner, nor does the Partnership propose to pay any annuity, pension or retirement benefits to any executive officer or director of its General Partner. The Partnership has no plan, nor does the Partnership presently propose a plan, which will result in any remuneration being paid to any executive officer or director of the General Partner upon termination of employment.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Security Holder Matters

(a)	No person of record currently owns more than five percent of limited partnership units of the Partnership, nor was any person known of by the Partnership to own of record and beneficially, or beneficially only, more than five percent of such securities.
(b)	Neither Del Taco, Inc., nor any executive officer or director of Del Taco, Inc. owns any limited partnership units of the Partnership.
(c)	The Partnership knows of no contractual arrangements, the operation or the terms of which may at a subsequent date result in a change in control of the Partnership, except for provisions in the partnership agreement providing for removal of the General Partner by holders of a majority of the limited partnership units and if a material event of default occurs under the financing agreements of the General Partner.

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Item 13. Certain Relationships and Related Transactions

(a) No transactions have occurred between the Partnership and any executive officer or director of its General Partner.

During 2005, the following transactions occurred between the Partnership and the General Partner pursuant to the terms of the partnership agreement.

(1)	The General Partner earned $3,429 as its one percent share of the net income of the Partnership.
(2)	The General Partner received $3,915 in distributions relating to its one percent interest in the Partnership.

(b)	During 2005, the Partnership had no business relationships with any entity of a type required to be reported under this item.
(c)	Neither the General Partner, any director or officer of the General Partner or any associate of any such person, was indebted to the Partnership at any time during 2005 for any amount.
(d)	Not applicable.

Item 14. Principal Accountant Fees and Services

The following table presents fees for professional services rendered by Squar, Milner, Reehl & Williamson, LLP (Squar), principal auditor since the quarter ended September 30, 2005, and KPMG LLP who was the principal auditor for 2004 and through the quarter ended June 30, 2005.

	Squar		KPMG LLP
	2005		2005		2004
Audit Fees	$	1,080	$	12,131	$	10,800
Audit-Related Fees		0		0		0
Tax Fees		0		11,250		11,187
All Other Fees		0		0		0
Total	$	1,080	$	23,381	$	21,987

The General Partner approves all the audit and non-audit services, and related fees, provided to the Partnership by the independent auditors prior to the services being rendered.

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PART IV

Item 15. Exhibits, Financial Statements Schedules, and Reports on Form 8-K

(a)(1)	Financial Statements
	Included in Part II of this report:
	Report of Independent Registered Public Accounting Firm — Squar, Milner, Reehl & Williamson, LLP
	Report of Independent Registered Public Accounting Firm — KPMG LLP
	Balance Sheets
	Statements of Income
	Statements of Partners’ Equity
	Statements of Cash Flows
	Notes to Financial Statements
(a)(2)	Financial Statement Schedules
	Schedule III — Real Estate and Accumulated Depreciation
	Financial statement schedules other than those referred to above have been omitted because they are not applicable or not required.
(b)	Reports on Form 8-K
	During the three months ended December 31, 2005, the following report on Form 8-K was filed:
	On October 28, 2005, Form 8-K was filed regarding the dismissal of KPMG LLP as the Partnership’s independent registered public accounting firm and the selection of Squar, Milner, Reehl & Williamson, LLP as the Partnership’s new independent registered public accountants.
(c)	Exhibits required by Item 601 of Regulation S-K:

1.	Incorporated herein by reference, Restated Agreement of Limited Partnership of
	Del Taco Income Properties IV filed as Exhibit 3.01 to Partnership’s Registration
	Statement on Form S-11 as filed with the Securities and Exchange Commission on June 5,
	1987.
2.	Incorporated herein by reference, Amendment to Restated Agreement of Limited
	Partnership of Del Taco Income Properties IV.
3.	Incorporated herein by reference, Form of Standard Lease to be entered into by
	Partnership and Del Taco, Inc., as lessee, filed as Exhibit 10.02 to Partnership’s
	Registration Statement on Form S-11 as filed with the Securities and Exchange Commission
	on June 5, 1987.
31.1	Kevin K. Moriarty’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Robert J. Terrano’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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DEL TACO INCOME PROPERTIES IV — SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2005

							Cost capitalized		Gross amount at
			Initial cost to company				subsequent to acquisition		which carried at close of period								Life on which
			Land		Buildings &				Land, buildings &								depreciation in latest
Description			& land		Improve-		Carrying		improvements		Accumulated		Date of		Date		income statement
(All Restaurants)	Encumbrances		improvements		ments		costs		Total		depreciation		construction		acquired		is computed
Placentia, CA	$	—	$	465,933	$	485,961	$	—	$	951,894	$	329,921		1988		1988	20 (LI), 35 (BI)
Lake Elsinore, CA		—		449,058		468,361		—		917,419		317,974		1989		1989	20 (LI), 35 (BI)
San Bernardino, CA		—		321,709		335,538		—		657,247		227,786		1989		1989	20 (LI), 35 (BI)
	$	—	$	1,236,700	$	1,289,860	$	—	$	2,526,560	$	875,681

			Accumulated
	Restaurants		Depreciation
Balances at December 31, 2002:	$	2,526,560	$	709,877
Additions		—		55,268
Retirements		—		—
Balances at December 31, 2003:		2,526,560		765,145
Additions		—		55,268
Retirements		—		—
Balances at December 31, 2004:		2,526,560		820,413
Additions		—		55,268
Retirements		—		—
Balances at December 31, 2005:	$	2,526,560	$	875,681

The aggregate cost basis of Del Taco Income Properties IV real estate assets for Federal income tax purposes was $1,961,422 at December 31, 2005.

See accompanying report of independent registered public accounting firm.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	DEL TACO INCOME PROPERTIES IV a California limited partnership
	Del Taco, Inc. General Partner
Date March 17, 2006	Kevin K. Moriarty
	Kevin K. Moriarty
	Director, Chairman and Chief
	Executive Officer
Date March 17, 2006	Michael L. Annis
	Michael L. Annis
	Senior Vice President, Secretary and
	General Counsel
Date March 17, 2006	Robert J. Terrano
	Robert J. Terrano
	Executive Vice President and
	Chief Financial Officer

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Exhibit Index

Exhibit	Description
1.	Incorporated herein by reference, Restated Agreement of Limited Partnership of Del Taco Income Properties IV filed as Exhibit 3.01 to Partnership’s Registration Statement on Form S-11 as filed with the Securities and Exchange Commission on June 5, 1987.
2.	Incorporated herein by reference, Amendment to Restated Agreement of Limited Partnership of Del Taco Income Properties IV.
3.	Incorporated herein by reference, Form of Standard Lease to be entered into by Partnership and Del Taco, Inc., as lessee, filed as Exhibit 10.02 to Partnership’s Registration Statement on Form S-11 as filed with the Securities and Exchange Commission on June 5, 1987.
31.1	Kevin K. Moriarty’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Robert J. Terrano’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

26