Exhibit 13
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS’ REPORT
AMERICAN AFFORDABLE HOUSING II
LIMITED PARTNERSHIP
MARCH 31, 2009 AND 2008
American Affordable Housing II Limited Partnership
TABLE OF CONTENTS
| PAGE |
| |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | F-3 |
| |
FINANCIAL STATEMENTS | |
| |
BALANCE SHEETS | F-5 |
| |
STATEMENTS OF OPERATIONS | F-6 |
| |
STATEMENTS OF CHANGES IN PARTNERS’ DEFICIT | F-7 |
| |
STATEMENTS OF CASH FLOWS | F-8 |
| |
NOTES TO FINANCIAL STATEMENTS | F-9 |
Schedules not listed are omitted because of the absence of the conditions under which they are required or because the information is included in the financial statements or the notes thereto.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
American Affordable Housing II
Limited Partnership
We have audited the accompanying balance sheets of American Affordable Housing II Limited Partnership as of March 31, 2009 and 2008, and the related statements of operations, changes in partners’ deficit and cash flows for each of the years in the two-year period ended March 31, 2009. These financial statements are the responsibility of the partnership’s management. Our responsibility is to express an opinion on these financial statements 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. The partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the partnership’s internal control over financial reporting. Accordingly, we express no such opinion. 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.
F-3
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Affordable Housing II Limited Partnership as of March 31, 2009 and 2008, and the results of its operations and its cash flows for each of the years in the two-year period ended March 31, 2009, in conformity with accounting principles generally accepted in the United States of America.
/s/ Reznick Group, P.C. | |
REZNICK GROUP, P.C. | |
| |
Bethesda, Maryland | |
June 30, 2009 | |
F-4
American Affordable Housing II Limited Partnership
BALANCE SHEETS
March 31,
| | 2009 | | 2008 | |
| | | | | |
ASSETS | | | | | |
| | | | | |
OTHER ASSETS | | | | | |
Cash and cash equivalents | | $ | 19,850 | | $ | 51,354 | |
| | | | | |
| | $ | 19,850 | | $ | 51,354 | |
| | | | | |
LIABILITIES AND PARTNERS’ DEFICIT | | | | | |
| | | | | |
LIABILITIES | | | | | |
Accounts payable | | $ | — | | $ | 381 | |
Due to affiliates | | 6,822,441 | | 6,730,185 | |
| | | | | |
| | 6,822,441 | | 6,730,566 | |
| | | | | |
PARTNERS’ DEFICIT | | | | | |
Limited partners | | | | | |
Units of limited partnership interest, consisting of 50,000 authorized units, $1,000 stated value per unit; issued and outstanding - 26,501 units | | (6,512,544 | ) | (6,390,398 | ) |
General partner | | (290,047 | ) | (288,814 | ) |
| | | | | |
| | (6,802,591 | ) | (6,679,212 | ) |
| | | | | |
| | $ | 19,850 | | $ | 51,354 | |
See notes to financial statements
F-5
American Affordable Housing II Limited Partnership
STATEMENTS OF OPERATIONS
Years ended March 31,
| | 2009 | | 2008 | |
Income | | | | | |
Interest income | | $ | 435 | | $ | 7,546 | |
Miscellaneous income | | 1,734 | | 150 | |
| | | | | |
| | 2,169 | | 7,696 | |
| | | | | |
Share of income from operating limited partnerships | | 21,167 | | — | |
| | | | | |
Expenses | | | | | |
Professional fees | | 32,065 | | 37,357 | |
General and administrative expense | | 29,232 | | 49,606 | |
Asset management fee | | 85,418 | | 69,592 | |
| | | | | |
| | (146,715 | ) | (156,555 | ) |
| | | | | |
NET LOSS | | $ | (123,379 | ) | $ | (148,859 | ) |
| | | | | |
Net loss allocated to general partner | | $ | (1,234 | ) | $ | (1,489 | ) |
| | | | | |
Net loss allocated to limited partners | | $ | (122,145 | ) | $ | (147,370 | ) |
| | | | | |
Net loss per unit of limited partnership interest | | $ | (4.61 | ) | $ | (5.56 | ) |
See notes to financial statements
F-6
American Affordable Housing II Limited Partnership
STATEMENTS OF CHANGES IN PARTNERS’ DEFICIT
Years ended March 31, 2009 and 2008
| | Limited
partners | | General
partner | | Total | |
| | | | | | | |
Partners’ deficit, March 31, 2007 | | (6,243,028 | ) | (287,325 | ) | (6,530,353 | ) |
| | | | | | | |
Net loss | | (147,370 | ) | (1,489 | ) | (148,859 | ) |
| | | | | | | |
Partners’ deficit, March 31, 2008 | | (6,390,398 | ) | (288,814 | ) | (6,679,212 | ) |
| | | | | | | |
Net loss | | (122,145 | ) | (1,234 | ) | (123,379 | ) |
| | | | | | | |
Partners’ deficit, March 31, 2009 | | $ | (6,512,544 | ) | $ | (290,047 | ) | $ | (6,802,591 | ) |
| | | | | | | | | | |
See notes to financial statements
F-7
American Affordable Housing II Limited Partnership
STATEMENTS OF CASH FLOWS
Years ended March 31,
| | 2009 | | 2008 | |
| | | | | |
Cash flows from operating activities | | | | | |
Net loss | | $ | (123,379 | ) | $ | (148,859 | ) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activites | | | | | |
Share of income from operating limited partnerships | | (21,167 | ) | — | |
Increase/(decrease) in accounts payable | | (381 | ) | (7,119 | ) |
Increase/(decrease) in due to affiliates | | 92,256 | | (260,827 | ) |
| | | | | |
Net cash provided by (used in) operating activities | | (52,671 | ) | (416,805 | ) |
| | | | | |
Cash flows from investing activities | | | | | |
Proceeds from disposition of operating limited partnerships | | 21,167 | | — | |
| | | | | |
Net cash provided by investing activities | | 21,167 | | — | |
| | | | | |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | | (31,504 | ) | (416,805 | ) |
| | | | | |
Cash and cash equivalents, beginning | | 51,354 | | 468,159 | |
| | | | | |
Cash and cash equivalents, end | | $ | 19,850 | | $ | 51,354 | |
See notes to financial statements
F-8
American Affordable Housing II Limited Partnership
NOTES TO FINANCIAL STATEMENTS
March 31, 2009 and 2008
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
American Affordable Housing II Limited Partnership (the “partnership”) was formed under the laws of the Commonwealth of Massachusetts on May 13, 1987, for the purpose of acquiring, holding, and disposing of limited partnership interests in operating limited partnerships which were established to acquire, develop, rehabilitate, operate and own newly constructed, existing or rehabilitated apartment complexes which qualify for the Low-Income Housing Tax Credit established by the Tax Reform Act of 1986. Accordingly, the apartment complexes are restricted as to rent charges and operating methods. Certain of the apartment complexes may also qualify for the Historic Rehabilitation Tax Credit for their rehabilitation of certified historic structures and are subject to the provisions of the Internal Revenue Code relating to the rehabilitation investment credit. The general partner of the partnership is Boston Capital Associates Limited Partnership.
In accordance with the limited partnership agreement, profits, losses and cash flow (subject to certain priority allocations and distributions) and tax credits are allocated 99% to the limited partners and 1% to the general partner.
Pursuant to the Securities Act of 1933, the partnership filed a Form S-11 Registration Statement with the Securities and Exchange Commission, effective September 21, 1987, which covered the offering (the “Public Offering”) of the partnership’s units of limited partnership interest, as well as the units of limited partnership interest offered by American Affordable Housing I, III, IV and V Limited Partnerships. The partnership registered 50,000 units of limited partnership interest at $1,000 each unit for sale to the public. During 1988, the partnership sold 26,501 units of limited partnership interest, representing $26,501,000 of capital contributions.
F-9
American Affordable Housing II Limited Partnership
NOTES TO FINANCIAL STATEMENTS
March 31, 2009 and 2008
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
No provision or benefit for income taxes has been included in these financial statements since taxable income or loss passes through to, and is reportable by, the partners individually.
In June 2006, the Financial Accounting Standards Board (`FASB”) issued Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (FIN 48), an interpretation of FASB Statement No. 109. FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the partnership’s tax returns to determine whether the tax positions are more-likely-than-not of being sustained upon examination by the applicable tax authority, based on the technical merits of the tax position, and then recognizing the tax benefit that is more-likely-than-not to be realized. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense in the current reporting period. As required, the partnership adopted FIN 48 effective April 1, 2007 and concluded that the effect is not material to its financial statements. Accordingly, no cumulative effect adjustment related to the adoption of FIN 48 was recorded.
F-10
American Affordable Housing II Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
March 31, 2009 and 2008
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investments in Operating Limited Partnerships
The partnership accounts for its investments in operating limited partnerships using the equity method of accounting. Under the equity method of accounting, the partnership adjusts its investment cost for its share of each operating limited partnership’s results of operations and for any distributions received or accrued. However, the partnership recognizes an individual operating limited partnership’s losses only to the extent that the partnership’s share of losses of the operating limited partnership does not exceed the carrying amount of its investment. Unrecognized losses will be suspended and offset against future individual operating limited partnership income.
A loss in value of an investment in an operating limited partnership other than a temporary decline is recorded as an impairment loss. Impairment is measured by comparing the investment carrying amount to the sum of the total amount of the remaining tax credits allocated to the partnership, the realizable income tax benefit of net operating losses and the estimated residual value of the investment. No impairment loss has been recognized for the years ended March 31, 2009 and 2008.
Capital contributions to operating limited partnerships are adjusted by tax credit adjusters. Tax credit adjusters are defined as adjustments to operating limited partnership capital contributions due to reductions in actual tax credits from those originally projected. The partnership records tax credit adjusters as a reduction in investments in operating limited partnerships and capital contributions payable.
The operating limited partnerships maintain their financial statements based on a calendar year and the partnership utilizes a March 31 year-end. The partnership records losses and income from the operating limited partnerships on a calendar year basis which is not materially different from losses and income generated if the operating limited partnerships utilized a March 31 year-end.
The partnership records capital contributions payable to the operating limited partnerships once there is a binding obligation to fund a specified amount. The operating limited partnerships record capital contributions from the partnership when received.
The partnership records acquisition costs as an increase in its investments in operating limited partnerships. Certain operating limited partnerships have not recorded the acquisition costs as a capital contribution from the partnership. These differences are shown as reconciling items in note C.
F-11
American Affordable Housing II Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
March 31, 2009 and 2008
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
As of March 31, 2004, the partnership adopted FASB Interpretation No. 46 - - Revised (“FIN 46R”), “Consolidation of Variable Interest Entities.” FIN 46R provides guidance on when a company should include the assets, liabilities, and activities of a variable interest entity (“VIE”) in its financial statements and when it should disclose information about its relationship with a VIE. A VIE is a legal structure used to conduct activities or hold assets, which must be consolidated by a company if it is the primary beneficiary because it absorbs the majority of the entity’s expected losses, the majority of the expected residual returns, or both.
Based on the guidance of FIN 46R, the operating limited partnerships in which the partnership invests in meet the definition of a VIE. However, management does not consolidate the partnership’s interests in these VIEs under FIN 46R, as it is not considered to be the primary beneficiary. The partnership currently records the amount of its investment in these partnerships as an asset in the balance sheets, recognizes its share of partnership income or losses in the statements of operations, and discloses how it accounts for material types of these investments in the financial statements.
The partnership’s balance in investment in operating limited partnerships, plus the risk of recapture of tax credits previously recognized on these investments, represents its maximum exposure to loss. The partnership’s exposure to loss on these partnerships is mitigated by the condition and financial performance of the underlying properties as well as the strength of the local general partner and their guarantee against credit recapture.
Fiscal Year
For financial reporting purposes, the partnership uses a March 31 year-end, whereas for income tax reporting purposes, the partnership uses a calendar year. The operating limited partnerships use a calendar year for both financial and income tax reporting.
Cash Equivalents
Cash equivalents include money market accounts having original maturities at their acquisition dates of three months or less.
F-12
American Affordable Housing II Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
March 31, 2009 and 2008
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Net Loss per Unit of Limited Partnership Interest
Net loss per unit of limited partnership interest is calculated based upon the number of units outstanding. For each of the two years in the period ended March 31, 2009, 26,501 units were outstanding.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.
Plan of Liquidation and Dissolution
On April 1, 2008, Unit Holders approved a Plan of Liquidation and Dissolution for the Partnership, (the “Plan”). Pursuant to the Plan, the general partner may, without further action by the Unit Holders, sell the remaining assets held by the partnership. It is anticipated that sale of all the apartment complexes will be completed sometime in 2011. However, because of numerous uncertainties, the liquidation may take longer or shorter than expected, and the final liquidating distribution may occur months after all of the apartment complexes have been sold. Because the liquidation of the partnership was not imminent, as of March 31, 2009, the financial statements are presented assuming the partnership will continue as a going concern.
F-13
American Affordable Housing II Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
March 31, 2009 and 2008
NOTE B - RELATED PARTY TRANSACTIONS
During the years ended March 31, 2009 and 2008, the partnership entered into several transactions with various affiliates of the general partner, including Boston Capital Partners, Inc., Boston Capital Holdings Limited Partnership and Boston Capital Asset Management Limited Partnership, as follows:
Advances to operating limited partnerships to pay third-party expenses and accruals of related party general and administrative expenses in the amounts of $1,658, and $1,448, incurred by Boston Capital Asset Management Limited Partnership, Boston Capital Holdings Limited Partnership, and Boston Capital Partners, Inc., were charged to operations during the years ended March 31, 2009 and 2008, respectively. At March 31, 2009 and 2008, the unpaid advances and general and administrative expenses totaled $313,910 and $312,252, respectively.
An annual asset management fee based on 0.5% of the aggregate cost of all apartment complexes acquired by the operating limited partnerships has been accrued as payable to Boston Capital Asset Management Limited Partnership. The aggregate cost is comprised of the capital contributions made by the partnership to the operating limited partnership and 99% of the permanent financing at the operating limited partnership level. At March 31, 2009 and 2008, the unpaid asset management fees totaled $6,508,531 and $6,417,933, respectively. The fee is payable without interest until sufficient funds become available from sales or refinancing proceeds from operating limited partnerships. The asset management fees accrued during the years ended March 31, 2009 and 2008 were $90,598 and $98,818, respectively. The asset management fees paid during the years ended March 31, 2009 and 2008 were $0 and $361,093, respectively. These amounts are presented in the statements of operations net of reporting fees paid by the operating limited partnerships during the years ended March 31, 2009 and 2008, of $5,180, and $29,226, respectively.
F-14
American Affordable Housing II Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
March 31, 2009 and 2008
NOTE C - INVESTMENTS IN OPERATING LIMITED PARTNERSHIPS
At March 31, 2009 and 2008, the partnership has limited partnership equity interests in 13 and 15 operating limited partnerships, respectively, which own apartment complexes. During the fiscal years ended March 31, 2009 and 2008, 2 and 0, respectively, of the operating limited partnerships were sold.
The operating limited partnership interests disposed of during the fiscal year ended March 31, 2009 were the result of a transfer of the partnership’s limited partner interest in two of the operating limited partnerships. The disposition resulted in cash proceeds to the partnership of $21,167, all of which had been received at March 31, 2009, and a gain on the disposal of the assets of $21,167 for the year ended March 31, 2009.
Under the terms of the partnership’s investment in each operating limited partnership, the partnership was required to make capital contributions to the operating limited partnerships. These contributions were payable in installments over several years based upon each operating limited partnership achieving specified levels of construction and/or operations. All contributions have been made to the operating limited partnerships as of March 31, 2009 and 2008. The partnership has no further obligation to make any additional contributions.
F-15
American Affordable Housing II Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
March 31, 2009 and 2008
NOTE C - INVESTMENTS IN OPERATING LIMITED PARTNERSHIPS (Continued)
The partnership’s investments in operating limited partnerships at March 31, 2009 and 2008 are summarized as follows:
| | 2009 | | 2008 | |
| | | | | |
Capital contributions paid to operating limited partnerships, net of tax credit adjusters of $22,529 | | $ | 3,139,706 | | $ | 3,972,706 | |
Acquisition costs of operating limited partnerships | | 430,375 | | 593,865 | |
Cumulative losses from operating limited partnerships | | (3,561,022 | ) | (4,557,512 | ) |
Cumulative distributions from operating limited partnerships | | (9,059 | ) | (9,059 | ) |
| | | | | |
Investment per balance sheet | | — | | — | |
| | | | | |
Acquisition costs not included in net assets of operating limited partnerships (see note A) | | 5,688 | | 7,303 | |
Tax credit adjusters not accounted for in net assets of operating limited partnerships (see note A) | | 22,529 | | 22,529 | |
Loss of operating limited partnerships not recognized under the equity method of accounting (see note A) | | (6,302,309 | ) | (6,604,183 | ) |
Other adjustments | | 264,164 | | 142,138 | |
| | | | | |
Capital (deficit) per operating limited partnerships’ combined financial statements | | $ | (6,009,928 | ) | $ | (6,432,213 | ) |
F-16
American Affordable Housing II Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
March 31, 2009 and 2008
NOTE C - INVESTMENTS IN OPERATING LIMITED PARTNERSHIPS (Continued)
The combined summarized balance sheets of the operating limited partnerships at December 31, 2008 and 2007 are as follows:
COMBINED SUMMARIZED BALANCE SHEETS
| | 2008 | | 2007 | |
ASSETS | | | | | |
| | | | | |
Buildings and improvements, net of accumulated depreciation of $12,343,488 and $13,506,720 | | $ | 7,059,205 | | $ | 8,634,618 | |
Land | | 1,017,229 | | 1,036,130 | |
Other assets | | 1,358,061 | | 1,739,755 | |
| | | | | |
| | $ | 9,434,495 | | $ | 11,410,503 | |
| | | | | |
LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT) | | | | | |
| | | | | |
Mortgages payable | | $ | 14,247,209 | | $ | 15,825,306 | |
Accounts payable and accrued expenses | | 305,986 | | 1,178,881 | |
Other liabilities | | 555,474 | | 559,450 | |
| | | | | |
| | 15,108,669 | | 17,563,637 | |
| | | | | |
PARTNERS’ CAPITAL (DEFICIT) | | | | | |
American Affordable Housing II Limited Partnership | | (6,009,928 | ) | (6,432,213 | ) |
Other partners | | 335,754 | | 279,079 | |
| | | | | |
| | (5,674,174 | ) | (6,153,134 | ) |
| | | | | |
| | $ | 9,434,495 | | $ | 11,410,503 | |
F-17
American Affordable Housing II Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
March 31, 2009 and 2008
NOTE C - INVESTMENTS IN OPERATING LIMITED PARTNERSHIPS (Continued)
The combined summarized statements of operations of the operating limited partnerships for the years ended December 31, 2008 and 2007 are as follows:
COMBINED SUMMARIZED STATEMENTS OF OPERATIONS
| | 2008 | | 2007 | |
Revenue | | | | | |
Rental | | $ | 2,503,059 | | $ | 2,816,477 | |
Interest and other | | 74,391 | | 100,932 | |
| | | | | |
| | 2,577,450 | | 2,917,409 | |
| | | | | |
Expenses | | | | | |
Interest | | 370,300 | | 453,820 | |
Depreciation and amortization | | 637,083 | | 735,361 | |
Taxes and insurance | | 391,074 | | 477,147 | |
Repairs and maintenance | | 598,952 | | 551,515 | |
Operating expenses | | 999,275 | | 1,047,807 | |
| | | | | |
| | 2,996,684 | | 3,265,650 | |
| | | | | |
NET INCOME (LOSS) | | $ | (419,234 | ) | $ | (348,241 | ) |
| | | | | |
Net income(loss) allocated to American Affordable | | | | | |
Housing II Limited Partnership * | | $ | (418,540 | ) | $ | (388,401 | ) |
| | | | | |
Net income(loss) allocated to other partners | | $ | (694 | ) | $ | 40,160 | |
* Amount includes $418,540, and $388,401, for the years ended December 31, 2008 and 2007, respectively, of loss not recognized under the equity method of accounting as described in note A.
F-18
American Affordable Housing II Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
March 31, 2009 and 2008
NOTE D - RECONCILIATION OF FINANCIAL STATEMENT NET INCOME (LOSS) TO TAX RETURN
For income tax purposes, the partnership reports using a December 31 year-end. The partnership’s net income (loss) for financial reporting and tax return purposes for the years ended March 31 is reconciled as follows:
| | 2009 | | 2008 | |
| | | | | |
Net loss for financial reporting purposes | | $ | (123,379 | ) | $ | (148,859 | ) |
| | | | | |
Operating limited partnership rents received in advance | | 6,304 | | 5,916 | |
| | | | | |
Related party expenditures | | (1,550 | ) | — | |
| | | | | |
Accrued asset management fee not deductible (deductible) for tax purposes until paid | | 90,598 | | (262,274 | ) |
| | | | | |
Excess of tax depreciation over book depreciation on operating limited partnership assets | | (129,103 | ) | (42,794 | ) |
| | | | | |
Difference due to fiscal year for book purposes and calendar year for tax purposes | | (86,751 | ) | 79,511 | |
| | | | | |
Operating limited partnership net loss not allowed for financial reporting under equity method | | (418,540 | ) | (388,401 | ) |
| | | | | |
Other | | 676,744 | | 133,349 | |
| | | | | |
Net loss for income tax purposes | | $ | (14,323 | ) | $ | (623,552 | ) |
F-19
American Affordable Housing II Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
March 31, 2009 and 2008
NOTE D - RECONCILIATION OF FINANCIAL STATEMENT NET LOSS TO TAX RETURN (Continued)
The differences between the investments in operating limited partnerships for tax purposes and financial statement purposes are primarily due to the differences in the losses not recognized under the equity method of accounting, the three month period due to fiscal year reporting and the historic tax credits taken for income tax purposes. At March 31, 2009 and 2008, the differences are as follows:
| | 2009 | | 2008 | |
| | | | | |
Investments in operating limited partnerships - tax basis | | $ | (7,876,031 | ) | $ | (8,006,566 | ) |
| | | | | |
Add back operating limited partnership losses not recognized for financial reporting purposes under the equity method | | 6,302,309 | | 6,604,183 | |
| | | | | |
Historic tax credits | | 516,169 | | 516,169 | |
| | | | | |
Other | | 1,057,553 | | 886,214 | |
| | | | | |
Investments in operating limited partnerships - as reported | | $ | — | | $ | — | |
NOTE E - SUBSEQUENT EVENT
The partnership has entered into agreements to sell interests in five operating limited partnerships. The estimated sales price and other terms for the dispositions of the operating limited partnerships have been determined. The estimated proceeds to be received for the operating limited partnerships is $656,118. The estimated gain on sale of the operating limited partnerships is $522,346, which is expected to be recognized in the first, second, and third quarters of fiscal year 2010.
F-20
American Affordable Housing II Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
March 31, 2009 and 2008
NOTE F - CONCENTRATION OF CREDIT RISK
The partnership maintains its cash and cash equivalent balances in several accounts in various financial institutions. The balances are generally insured by the Federal Deposit Insurance Corporation (FDIC) up to specified limits by each institution. At times, the balances may exceed these insurance limits; however, the partnership has not experienced any losses with respect to its balances in excess of FDIC insurance. Management believes that no significant concentration of credit risk with respect to these cash and cash equivalent balances exists as of March 31, 2009.
NOTE G - FAIR VALUE OF FINANCIAL INSTRUMENTS
The partnership is subject to the disclosure provisions of FASB Statement No. 107, “Disclosures about Fair Value of Financial Instruments,” (FAS 107), which requires disclosure of the fair value of the partnership’s financial instruments. As of March 31, 2009, the partnership’s financial instruments relate to accounts payable - affiliates. Management has not disclosed the fair value of the financial instruments because determination of such fair value is deemed to be impractical. The accounts payable - affiliates are owed to affiliates of the partnership. The unique nature of these financial instruments makes determination of any fair value impractical. See note B for disclosure of the carrying amount and terms of these financial instruments.
F-21
