Boston Financial Tax Credit Fund Vii 10-Q 2012 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

  EXCHANGE ACT OF 1934

For the quarterly period ended                      December 31, 2011                              

                                                                                                  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 number       0-24584

                                                                                             Boston Financial Tax Credit Fund VII, A Limited Partnership                                   

                                                                                                     (Exact name of registrant as specified in its charter)

                   Massachusetts                                                                                        04-3166203                           

      (State or other jurisdiction of                                                         (I.R.S. Employer Identification No.)

       incorporation or organization)

   101 Arch Street, Boston, Massachusetts                                                            02110-1106                           

  (Address of principal executive offices)                                                           (Zip Code)

Registrant's telephone number, including area code                                         (617) 439-3911                        

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____.

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 (§232.405 of this chapter) 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting 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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes____  No   X   .

BOSTON FINANCIAL TAX CREDIT FUND VII, A LIMITED PARTNERSHIP

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION                                                                                                      Page No.

Item 1.      Financial Statements

Balance Sheets - December 31, 2011 (Unaudited) and

March 31, 2011 (Audited)                                                                                                               1

Statements of Operations (Unaudited) -

For the Three and Nine Months Ended December 31, 2011 and 2010                                     2

Statement of Changes in Partners' Equity

(Unaudited) - For the Nine Months Ended December 31, 2011                                                3

Statements of Cash Flows (Unaudited) -

For the Nine Months Ended December 31, 2011 and 2010                                                        4

Notes to the Financial Statements (Unaudited)                                                                                  5

Item 2.      Management's Discussion and Analysis of

Financial Condition and Results of Operations                                                                         8

Item 3.      Quantitative and Qualitative Disclosures About Market Risk                                                        13

Item 4.      Controls and Procedures                                                                                                                       13

PART II. OTHER INFORMATION

Item 6.      Exhibits                                                                                                                                                     14

SIGNATURE                                                                                                                                                             15

BOSTON FINANCIAL TAX CREDIT FUND VII, A LIMITED PARTNERSHIP

PART I.                      FINANCIAL INFORMATION

Item 1.                         Financial Statements

BALANCE SHEETS

December 31, 2011 (Unaudited) and March 31, 2011 (Audited)

Assets	December 31		March 31
Cash and cash equivalents	$	3,128,418	$	2,479,438
Investments in Local Limited Partnerships (Note 1)		91,602		84,293
Due from affiliate		-		1,454
Other assets		303		660
Total Assets	$	3,220,323	$	2,565,845
Liabilities and Partners' Equity
Due to affiliate	$	98,380	$	-
Accrued expenses		5,710		26,836
Total Liabilities		104,090		26,836
General, Initial and Investor Limited Partners' Equity		3,116,233		2,539,009
Total Liabilities and Partners' Equity	$	3,220,323	$	2,565,845

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

BOSTON FINANCIAL TAX CREDIT FUND VII, A LIMITED PARTNERSHIP

STATEMENTS OF OPERATIONS

For the Three and Nine Months Ended December 31, 2011 and 2010

(Unaudited)

	Three Months Ended						Nine Months Ended
	December 31,			December 31,			December 31,			December 31,
	2011			2010			2011			2010
Revenue
Investment	$	3,163		$	2,769		$	9,149		$	7,935
Cash distribution income		-			30,084			-			30,084
Total Revenue		3,163			32,853			9,149			38,019
Expenses:
Asset Management Fees, affiliate		98,380			96,926			295,141			290,779
Provision for valuation allowance on
advances to Local Limited
Partnerships		2,000			-			2,000			-
Impairment on investments
in Local Limited Partnerships		-			-			-			231,000
General and administrative
(includes reimbursements to an affiliate
in the amounts of $6,222 and $32,125          for the three months and $24,680 and
$126,643 for the nine months ended
December 31, 2011 and 2010,
respectively)		23,390			52,798			67,193			188,124
Amortization		886			886			2,657			2,657
Total Expenses		124,656			150,610			366,991			712,560
Loss before equity in income (losses) of
Local Limited Partnerships		(121,493	)		(117,757	)		(357,842	)		(674,541	)
Equity in income (losses) of Local
Limited Partnerships (Note 1)		6,042			(87,461	)		9,966			(101,423	)
Gain on disposition of investments in
Local Limited Partnerships		-			-			925,100			472,876
Net Income (Loss)	$	(115,451	)	$	(205,218	)	$	577,224		$	(303,088	)
Net Income (Loss) allocated:
General Partners	$	(1,155	)	$	(2,052	)	$	5,772		$	(3,031	)
Limited Partners		(114,296	)		(203,166	)		571,452			(300,057	)
	$	(115,451	)	$	(205,218	)	$	577,224		$	(303,088	)
Net Income (Loss) Per Limited Partner
Unit (50,930 Units)	$	(2.24	)	$	(3.99	)	$	11.22		$	(5.89	)

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

BOSTON FINANCIAL TAX CREDIT FUND VII, A LIMITED PARTNERSHIP

STATEMENT OF CHANGES IN PARTNERS' EQUITY

For the Nine Months Ended December 31, 2011

(Unaudited)

			Initial		Investor
	General		Limited		Limited
	Partners		Partner		Partners		Total
Balance at March 31, 2011	$	25,389	$	5,000	$	2,508,620	$	2,539,009
Net Income		5,772		-		571,452		577,224
Balance at December 31, 2011	$	31,161	$	5,000	$	3,080,072	$	3,116,233

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

BOSTON FINANCIAL TAX CREDIT FUND VII, A LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS

For the Nine Months Ended December 31, 2011 and 2010

(Unaudited)

	2011			2010
Net cash used for operating activities	$	(274,120	)	$	(498,248	)
Net cash provided by investing activities		923,100			568,237
Net increase in cash and cash equivalents		648,980			69,989
Cash and cash equivalents, beginning		2,479,438			2,671,659
Cash and cash equivalents, ending	$	3,128,418		$	2,741,648

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

BOSTON FINANCIAL TAX CREDIT FUND VII, A LIMITED PARTNERSHIP

NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

The unaudited financial statements presented herein have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America. These statements should be read in conjunction with the financial statements and notes thereto included with the Annual Report on Form 10-K of Boston Financial Tax Credit Fund VII, a Limited Partnership (the “Fund”) for the year ended March 31, 2011.  In the opinion of the Managing General Partner, these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Fund's financial position and results of operations.  The results of operations for the period may not be indicative of the results to be expected for the year.

The Managing General Partner has elected to report results of the Local Limited Partnerships on a 90 day lag basis because the Local Limited Partnerships report their results on a calendar year basis.  Accordingly, the financial information about the Local Limited Partnerships that is included in the accompanying financial statements is as of September 30, 2011 and 2010 and for the nine months then ended.

Generally, profits, losses, tax credits and cash flow from operations are allocated 99% to the Limited Partners and 1% to the General Partners.  Net proceeds from a sale or refinancing will be allocated 95% to the Limited Partners and 5% to the General Partners, after certain priority payments.  The General Partners may have an obligation to fund deficits in their capital accounts, subject to limits set forth in the Fund’s Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”).  However, to the extent that the General Partners’ capital accounts are in deficit positions, certain items of net income may be allocated to the General Partners in accordance with the Partnership Agreement.

1.      Investments in Local Limited Partnerships

The Fund currently has a limited partner interest in one Local Limited Partnership which was organized for the purpose of owning and operating a government-assisted, multi-family housing complex. The Fund’s ownership interest in the Local Limited Partnership is 99%.  The Fund may have negotiated or may negotiate options with the Local General Partners to purchase or sell the Fund’s interest in the Local Limited Partnership at the end of the Compliance Period for a nominal price.  In the event that the Property is sold to a third party or upon dissolution of the Local Limited Partnership, proceeds will be distributed according to the terms of the Local Limited Partnership agreement.

BOSTON FINANCIAL TAX CREDIT FUND VII, A LIMITED PARTNERSHIP

NOTES TO THE FINANCIAL STATEMENTS (continued)

(Unaudited)

1.      Investments in Local Limited Partnerships (continued)

The following is a summary of investments in Local Limited Partnerships at December 31, 2011 and March 31, 2011:

	December 31			March 31
Capital contributions and advances paid to Local Limited Partnerships and     purchase price paid to withdrawing partners of Local Limited
Partnerships	$	1,232,020		$	11,295,923
Cumulative equity in losses of Local Limited Partnerships (excluding
cumulative unrecognized losses of $4,425,279 at March 31, 2011)		(214,119	)		(8,533,553	)
Cumulative cash distributions received from Local Limited Partnerships		(154,303	)		(932,150	)
Investments in Local Limited Partnerships before adjustments		863,598			1,830,220
Excess investment costs over the underlying assets acquired:
Acquisition fees and expenses		123,999			428,112
Cumulative amortization of acquisition fees and expenses		(62,995	)		(147,898	)
Investments in Local Limited Partnerships before valuation allowance
and impairment		924,602			2,110,434
Cumulative valuation allowance on advances to Local Limited Partnerships		-			(13,141	)
Cumulative impairment on investments in Local Limited Partnerships		(833,000	)		(2,013,000	)
Investments in Local Limited Partnerships	$	91,602		$	84,293

During the nine months ended December 31, 2011, the Fund advanced $2,000 to certain Local Limited Partnerships, all of which was reserved.

The Fund has also recorded an impairment for its investments in certain Local Limited Partnerships in order to appropriately reflect the estimated net realizable value of these investments.

The Fund’s share of the net losses of the Local Limited Partnerships for the nine months ended December 31, 2011 and 2010 is $269,072 and $510,724, respectively.  For the nine months ended December 31, 2011 and 2010, the Fund has not recognized $279,038 and $409,301, respectively, of equity in losses relating to certain Local Limited Partnerships in which cumulative equity in losses and distributions exceeded its total investments in these Local Limited Partnerships.

During the nine months ended December 31, 2011, the Fund disposed of its interest in five Local Limited Partnerships.  The Fund received $925,100 from the disposition of these interests.  The Fund’s aggregate investment value at the time of the dispositions was zero resulting in a gain on disposition of investments in Local Limited Partnerships of $925,100 for the nine months ended December 31, 2011

BOSTON FINANCIAL TAX CREDIT FUND VII, A LIMITED PARTNERSHIP

NOTES TO THE FINANCIAL STATEMENTS (continued)

(Unaudited)

2. New Accounting Principles

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other bodies that may have an impact on the Fund’s financial reporting or accounting.  The Fund does not believe that any such recently issued pronouncement has had or will have a material effect on the Fund’s financial statements.

Consolidation of Variable Interest Entities

In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for the consolidation of variable interest entities (“VIEs”).  The amended guidance modifies the consolidation model to one based on control and economics, and replaces the current quantitative primary beneficiary analysis with a qualitative analysis.  The primary beneficiary of a VIE will be the entity that has (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE.  If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the amended guidance requires continual reconsideration of the primary beneficiary of a VIE and adds an additional reconsideration event for determination of whether an entity is a VIE.  Additionally, the amendment requires enhanced and expanded disclosures around VIEs.  This amendment is effective for fiscal years beginning after November 15, 2009.  The adoption of this guidance on April 1, 2010 did not have a material effect on the Fund’s financial statements.

3.      Significant Subsidiaries

The following Local Limited Partnership invested in by the Fund represented more than 20% of the Fund’s total assets or equity as of December 31, 2010 or net losses for the three months then ended.  The Fund disposed of its interest in this Local Limited Partnership prior to the three months ended December 31, 2011.  The following financial information represents the performance of this Local Limited Partnership for the three months ended September 30, 2011 and 2010:

Grand Boulevard	2011		2010
Revenue		N/A	$	92,902
Net Loss		N/A	$	(1,554	)

BOSTON FINANCIAL TAX CREDIT FUND VII, A LIMITED PARTNERSHIP

Item 2.                      Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain matters discussed herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  The use of words like “anticipate,” “estimate,” “intend,” “project,” “plan,” “expect,” “believe,” “could” and similar expressions are intended to identify such forward-looking statements.  The Fund intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements and is including this statement for purposes of complying with these safe harbor provisions.  Although the Fund believes the forward-looking statements are based on reasonable assumptions and current expectations, the Fund can give no assurance that its expectations will be attained.  Actual results and timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including, without limitation: (i) possible reduction in rental income due to an inability to maintain high occupancy levels or adequate rental levels; (ii) possible adverse changes in general economic conditions and adverse local conditions, such as competitive overbuilding, a decrease in employment rates or adverse changes in real estate laws, including building codes; (iii) possible future adoption of rent control legislation which would not permit increased costs to be passed on to the tenants in the form of rent increases or which would suppress the ability of the Local Limited Partnership to generate operating cash flow; and (iv) general economic and real estate conditions and interest rates.

The Fund is a Massachusetts limited partnership organized to invest as a limited partner or member in other limited partnerships or limited liability companies (collectively, "Local Limited Partnerships") which own and operate apartment complexes (each, a “Property”) that are eligible for low income housing tax credits (“Tax Credits”) which may be applied against the federal income tax liability of an investor.  The Fund’s objectives are to: (i) provide investors with annual Tax Credits which they may use to reduce their federal income tax liability; (ii) provide limited cash distributions from the operations of apartment complexes; and (iii) preserve and protect the Fund’s capital.  Arch Street VIII, Inc., a Massachusetts corporation is the Managing General Partner of the Fund.  Arch Street VII Limited Partnership, a Massachusetts limited partnership, whose general partner consists of Arch Street, Inc., is also a General Partner.  Both the Managing General Partner and Arch Street VII, L.P. are affiliates of Boston Financial Investment Management, LP (“Boston Financial”).  The fiscal year of the Fund ends on March 31.

Critical Accounting Policies

The Fund’s accounting policies include those that relate to its recognition of investments in Local Limited Partnerships using the equity method of accounting.  The Fund’s policy is as follows:

The Local Limited Partnerships in which the Fund invests are Variable Interest Entities ("VIEs”). The Fund is involved with the VIEs as a non-controlling limited partner equity holder.  The investments in the Local Limited Partnerships are made primarily to obtain tax credits on behalf of the Fund’s investors.  The Tax Credits generated by Local Limited Partnerships are not reflected on the books of the Fund as such credits are allocated to investors for use in offsetting their federal income tax liability.  The general partners or managing members of the Local Limited Partnerships (the “Local General Partners”), who are considered to be the primary beneficiaries, have the power to direct the activities of the Local Limited Partnerships.  The Local General Partners are also responsible for maintaining compliance with the Tax Credit program and for providing subordinated financial support in the event operations cannot support debt and Property tax payments.  The Fund, through its ownership percentages, may participate in Property disposition proceeds.  The timing and amounts of these proceeds are unknown but can impact the Fund’s financial position, results of operations or cash flows. Because the Fund is not the primary beneficiary of these Local Limited Partnerships, it accounts for its investments in the Local Limited Partnerships using the equity method of accounting.  The Fund's exposure to economic and financial statement losses is limited to its investments in the Local Limited Partnerships and estimated future funding commitments.  To the extent that the Fund does not receive the full amount of tax credits specified in its initial investment contribution agreement, it may be eligible to receive payments from the Local General Partners under the provisions of tax credit guarantees.  The Fund may be subject to additional losses to the extent of any financial support that the Fund voluntarily provides in the future.  The Fund may voluntarily provide advances to the Local Limited Partnerships to finance operations or to make debt service payments.  The Fund assesses the collectability of any advances at the time the advance is made and records a reserve if collectability is not reasonably assured.  The Fund does not guarantee any of the mortgages or other debt of the Local Limited Partnerships.

BOSTON FINANCIAL TAX CREDIT FUND VII, A LIMITED PARTNERSHIP

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Critical Accounting Policies (continued)

Under the equity method, the investment is carried at cost, adjusted for the Fund’s share of net income or loss and for cash distributions from the Local Limited Partnerships; equity in income or loss of the Local Limited Partnerships is included currently in the Fund's operations.  A liability is recorded for delayed equity capital contributions to Local Limited Partnerships.  Under the equity method, a Local Limited Partnership investment will not be carried below zero.  To the extent that equity in losses are incurred when the Fund’s carrying value of the respective Local Limited Partnership has been reduced to zero, these excess losses will be suspended and offset against future income.  Income from a Local Limited Partnership, where cumulative equity in losses plus cumulative distributions  have exceeded the total investment in the Local Limited Partnership, will not be recorded until all of the related unrecorded losses have been offset.  To the extent that a Local Limited Partnership with a carrying value of zero distributes cash to the Fund, that distribution is recorded as income in the Fund’s statement of operations.

The Fund has implemented policies and practices for assessing other-than-temporary declines in the values of its investments in Local Limited Partnerships.  Periodically, the carrying values of the investments are tested for other-than-temporary impairment. If an other-than-temporary decline in carrying value exists, a provision is recorded to reduce the investment to the sum of the estimated remaining benefits. The estimated remaining benefits for each Local Limited Partnership consists of the estimated future benefit from tax losses and tax credits over the estimated life of the investment and estimated residual proceeds at disposition. Estimated residual proceeds are calculated by capitalizing the estimated net operating income and subtracting the estimated terminal debt balance of each Local Limited Partnership.  Generally, the carrying values of most Local Limited Partnerships will decline through losses and distributions.  However, the Fund may record impairment losses if the expiration of tax credits outpaces losses and distributions from any of the Local Limited Partnerships.

Liquidity and Capital Resources

At December 31, 2011, the Fund had cash and cash equivalents of $3,128,418 as compared with $2,479,438 at March 31, 2011.  This increase is primarily attributable to proceeds from the disposition of the Fund’s interests in five Local Limited Partnerships.

The Managing General Partner initially designated 5% of the Gross Proceeds as Reserves, as defined in the Partnership Agreement.  The Reserves were established to be used for working capital of the Fund and contingencies related to the ownership of Local Limited Partnership interests.  The Managing General Partner may increase or decrease such Reserves from time to time, as it deems appropriate.  At December 31, 2011 and March 31, 2011, approximately $3,123,000 and $2,453,000, respectively, has been designated as Reserves.

To date, professional fees relating to various Property issues totaling approximately $128,000 have been paid from Reserves.  In the event a Local Limited Partnership encounters operating difficulties requiring additional funds, the Fund’s management might deem it in its best interest to voluntarily provide such funds in order to protect its investment.  As of December 31, 2011, the Fund has advanced approximately $1,527,000 to Local Limited Partnerships to fund operating deficits.

The Managing General Partner believes that the investment income earned on the Reserves, along with cash distributions received from Local Limited Partnerships, to the extent available, will be sufficient to fund the Fund's ongoing operations.  Reserves may be used to fund operating deficits, if the Managing General Partner deems funding appropriate.  To date, the Fund has used approximately $2,232,000 of Reserves to fund operations.  If Reserves are not adequate to cover the Fund’s operations, the Fund will seek other financing sources including, but not limited to, the deferral of asset management fees paid to an affiliate of the Managing General Partner or working with Local Limited Partnerships to increase cash distributions.

Since the Fund invests as a limited partner, the Fund has no contractual duty to provide additional funds to Local Limited Partnerships beyond its specified investment.  Thus, as of December 31, 2011, the Fund had no contractual or other obligation to any Local Limited Partnership which had not been paid or provided for except as disclosed above.

BOSTON FINANCIAL TAX CREDIT FUND VII, A LIMITED PARTNERSHIP

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Cash Distributions

No cash distributions were made to Limited Partners during the nine months ended December 31, 2011 and 2010.

Results of Operations

Three Month Period

The Fund’s results of operations for the three months ended December 31, 2011 resulted in net loss of $115,451 as compared to a net loss of $205,218 for the same period in 2010.  The decrease in net loss is primarily attributable to a decrease in equity in losses of Local Limited Partnerships and a decrease in general and administrative expenses, partially offset by a decrease in cash distribution income.  The decrease in equity in losses of Local Limited Partnerships is due to a reduction in the number of Properties held and the related equity in losses from these Properties.  General and administrative expenses decreased due to a decrease in charges for operations and administrative expenses necessary for the operations of the Fund.  The decrease in cash distribution income is primarily due to the Fund not receiving any distributions from Local Limited Partnerships.

Nine Month Period

The Fund’s results of operations for the nine months ended December 31, 2011 resulted in a net income of $577,224 as compared to a net loss of $303,088 for the same period in 2010.  The decrease in net loss is primarily attributable to an increase in gain on disposition of investments in Local Limited Partnerships, a decrease in impairment on investments in Local Limited Partnerships, a decrease in general and administrative expenses and a decrease in equity in losses of Local Limited Partnerships, partially offset by a decrease in cash distribution income.  The increase in gain on disposition of investments in Local Limited Partnerships is due to the disposition of five Local Limited Partnerships during the current year.  The decrease in impairment on investments in Local Limited Partnerships is due to no impairment losses on the Fund’s investments in Local Limited Partnerships in the current year.  General and administrative expenses decreased due to a decrease in charges for operations and administrative expenses necessary for the operations of the Fund.  The decrease in equity in losses of Local Limited Partnerships is due to a reduction in the number of Properties held and the related equity in losses from these Properties.  The decrease in cash distribution income is due to the Fund not receiving any distributions from Local Limited Partnerships during the current year.

Portfolio Update

As of December 31, 2011, the Fund’s investment portfolio consisted of a limited partner interest in one Local Limited Partnership, which owns and operates a multi-family apartment complex that had generated, but no longer generates, Tax Credits.  Since inception, the Fund generated Tax Credits, net of recapture, of approximately $1,485 per Limited Partner Unit.  The aggregate amount of Tax Credits generated by the Fund is consistent with the objective specified in the Fund’s prospectus.

Properties that receive low income housing Tax Credits must remain in compliance with rent restriction and set aside requirements for at least 15 calendar years from the date the Property is placed in service (the “Compliance Period”).  Failure to do so would result in the recapture of a portion of the Property’s Tax Credits.  The Compliance Period for the remaining Property in which the Fund has an interest expired on December 31, 2008.  The Fund is in negotiations to dispose of its interest in the final Local Limited Partnership in early 2012.

The Managing General Partner will continue to closely monitor the operations of the Property and continues to explore a disposition strategy with respect to the Fund’s remaining Local Limited Partnership interest.  The Fund shall dissolve and its affairs shall be wound up upon the disposition of the final Local Limited Partnership interest and other assets of the Fund.  Investors will continue to be Limited Partners, receiving K-1s and quarterly and annual reports, until the Fund is dissolved.

The Fund is not a party to any pending legal or administrative proceeding, and to the best of its knowledge, no legal or administrative proceeding is threatened or contemplated against it.

BOSTON FINANCIAL TAX CREDIT FUND VII, A LIMITED PARTNERSHIP

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Property Discussions

The remaining Property in which the Fund has an interest had stabilized operations and operated above breakeven as of September 30, 2011.  The Managing General Partner, in the normal course of the Fund’s business, is arranging for the future disposition of its interest in the last remaining Local Limited Partnership.

As previously reported, Guardian Place, located in Richmond, Virginia, refinanced its existing debt, on July 29, 2005.  In addition to an annual debt service reduction of approximately $49,000, additional loan proceeds were utilized to retire a second mortgage and provide for a distribution of refinancing proceeds of $212,461 to the Fund on August 1, 2005.  The Managing General Partner, in accordance with and as permitted by the Partnership Agreement, retained the entire amount of refinancing proceeds in Reserves.  As part of this transaction, the Managing General Partner and the Local General Partner entered into an agreement that would allow for a sale at the end of the Compliance Period on December 31, 2009.  As previously anticipated, an August 30, 2010 sale of the Fund’s interest in the Local Limited Partnership occurred.  The sale resulted in $472,876, or $9.28 per Unit, in sales proceeds.  This transaction resulted in 2010 taxable gain of $1,391,909, or about $27.33 per Unit. The Fund no longer has an interest in this Local Limited Partnership.

As previously reported, occupancy at Grand Boulevard Renaissance, located in Chicago, Illinois continued to be in the mid­-90 percentile throughout 2010.  However, debt service coverage was not at an acceptable level and the Property was operating below breakeven.  The operating deficit for the first nine months of 2010 was approximately $11,000.  A representative of the Managing General Partner conducted a physical inspection as part of a June 2009 site visit.  Despite improvements since an October 2008 visit, the Property was still assigned an unfavorable rating due to significant deferred maintenance and unaddressed issues.  The Managing General Partner’s representative also considered property management to be weak and limited in capacity to address the physical needs of the Property.  Advances from the Local General Partner and working capital enabled the Property to remain current on its loan obligations.  In response to prior deficits, during 2001 the Local General Partner negotiated with the first mortgage lender to reduce the interest rate on the current first mortgage.  In addition, in an effort to further reduce the Property’s debt service burden, in July 2003 the Local Limited Partnership and the Illinois Housing Development Authority closed on a mortgage restructuring of the second mortgage that reduced monthly debt service payments until June 1, 2005.  As part of the transaction, the management agent agreed to subordinate a percentage of its management fee to payment of the second mortgage debt service.  The Tax Credit Compliance Period expired December 31, 2009.  The Fund’s interest in the Property was transferred on December 31, 2010 for $47,548, which was due to the Fund for outstanding cumulative priority distributions.  This transaction resulted in 2010 taxable gain of $3,404, or about $0.07 per Unit.  The Fund no longer has an interest in this Local Limited Partnership.

As previously reported, the Managing General Partner anticipated the Fund’s interest in the Local Limited Partnership that owns SpringWood Apartments, located in Tallahassee, Florida, would be terminated upon the sale of the Property in the third quarter of 2008, a transaction that could have resulted in net sales proceeds to the Fund of approximately $200,000, or $3.93 per Unit.  In July 2008, the potential buyer withdrew its interest to purchase this Property.  Subsequently, the Managing General Partner explored an alternative exit strategy for this Local Limited Partnership interest.  The Managing General Partner previously anticipated the Fund’s interest in the Local Limited Partnership would generally terminate no earlier than 90 days upon the sale of the Property in June 2011 for a nominal sum.  However, the transfer of the Fund’s interest in the Local Limited Partnership occurred on May 31, 2011 for no consideration.  The Managing General Partner estimates that this transaction will result in 2011 taxable income of $50,000, or $0.98 per Unit.  As previously reported, the debt matured on March 1, 2011; however, it was extended for three years.  The Tax Credit Compliance Period ended on December 31, 2009.  The Fund no longer has an interest in this Local Limited Partnership.

BOSTON FINANCIAL TAX CREDIT FUND VII, A LIMITED PARTNERSHIP

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Property Discussions (continued)

As previously reported, in an effort to reduce the Fund’s risk to chronic operating difficulties at Wynmor, also known as Eden Park, located in Brooklyn Park, Minnesota, the Managing General Partner and Local General Partner, on October 1, 2003, entered into an agreement to transfer a portion of the Fund’s interest in the Property’s future Tax Credits (approximately $11 per Unit) and tax losses to the Local General Partner.  In return, the Local General Partner agreed to deposit $500,000 into an escrow to be used to fund current and future operating deficits and to fund as much as an additional $500,000 to cover future operating deficits.  The Managing General Partner and Local General Partner also had an agreement that allowed for the Managing General Partner to put the Fund’s interest to the Local General Partner for $100 any time after October 1, 2003 and that the Local General Partner could call the Fund’s interest for fair market value any time after January 2, 2009.  The Managing General Partner previously expected the put to be exercised in December 2010; however, it did not occur until June 1, 2011.  The Managing General Partner estimates that this transaction will result in 2011 taxable loss projected to be approximately $550,000, or about $10.80 per Unit.  The Compliance Period for the Property expired on December 31, 2008.  The Fund no longer has an interest in this Local Limited Partnership.

As previously reported, the Managing General Partner negotiated an exit strategy with the Local General Partner of Andrew’s Pointe, located in Burnsville, Minnesota.  The Compliance Period expired December 31, 2008.  The Local General Partner and Managing General Partner agreed on a price for the Local General Partner to purchase the Fund’s interest in the Property, which occurred on June 7, 2011.  The transaction resulted in net sales proceeds of $925,000, or $18.16 per Unit and the Managing General Partner estimates 2011 taxable income of $1,250,000, or $24.54 per Unit.  The Fund no longer has an interest in the Local Limited Partnership.

As previously reported, the Managing General Partner was negotiating an exit strategy with the Local General Partner of Harford Commons, located in Baltimore, Maryland.  The Local General Partner and Managing General Partner agreed upon on a nominal price for the Local General Partner to purchase the Fund’s interest in the Property, which occurred March 31, 2011, with an effective date of March 1, 2011.  The effective date is the date at which benefits stopped flowing to the Fund.  The Managing General Partner estimates that this transaction will result in 2011 taxable income estimated to be $930,000, or $18.26 per Unit.  The Compliance Period expired December 31, 2010.

As previously reported, the Local General Partner of Twin Oaks Meadows, located in Lansing, Michigan, with the Fund’s consent, obtained soft loan financing in May 2004 to undertake much needed security improvements to the Property, reduce payables and fund operating deficits.  In return for its consent, the Fund received a Put option that allows the Fund to transfer its interest in the Local Limited Partnership for a nominal price to the Local General Partner at any time subsequent to the end of the Property’s Compliance Period on December 31, 2009.  The Managing General Partner disposed of the Fund’s interest in the Property on December 1, 2011.  The Fund received no sales proceeds for this transaction.  The Managing General Partner estimates that this transaction will result in 2011 taxable gain projected to be approximately $580,000, or about $11.39 per Unit.  The Fund no longer has an interest in the Local Limited Partnership.

As previously reported, the Local General Partner of Fairhaven Manor, located in Burlington, Washington, was working on a permanent loan extension.  The loan matured on June 1, 2009, at which time a balloon payment was due; however, the note was extended for 60 months (5 years).  The Compliance Period ended December 31, 2008; therefore, there is no recapture risk at the Property.  The Managing General Partner is currently negotiating an exit strategy with the Local General Partner.  The likely end result is that the Local General Partner and Managing General Partner will agree on a price for the Local General Partner to purchase the Fund’s interest in the Property, which is currently estimated for March 2012.  Sales proceeds are currently being negotiated.  The Managing General Partner estimates that the disposition will result in a 2012 tax loss projected to be approximately $140,000, or about $2.75 per Unit.

BOSTON FINANCIAL TAX CREDIT FUND VII, A LIMITED PARTNERSHIP

Item 3.                      Quantitative and Qualitative Disclosures About Market Risk

Not Applicable

Item 4.                      Controls and Procedures

Disclosure Controls and Procedures

The Fund maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (“Exchange Act”) is recorded, processed, summarized and reported within the specified time periods.  The Chief Executive Officer and Chief Financial Officer of the Managing General Partner (collectively, the “Certifying Officers”) are responsible for maintaining disclosure controls for the Fund.  The controls and procedures established by the Fund are designed to provide reasonable assurance that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

As of the end of the period covered by this report, the Certifying Officers evaluated the effectiveness of the Fund’s disclosure controls and procedures.  Based on the evaluation, the Certifying Officers concluded that as of December 31, 2011, the Fund’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

The Certifying Officers have also concluded that there was no change in the Fund’s internal controls over financial reporting identified in connection with the evaluation of the Fund's controls that occurred during the Fund’s third fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.

BOSTON FINANCIAL TAX CREDIT FUND VII, A LIMITED PARTNERSHIP

PART II.                  OTHER INFORMATION

Item 6.                      Exhibits

31.1         Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2          Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1          Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2  Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS	XBRL Instance Document*
101.SCH	XBRL Taxonomy Extension Schema Document*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB	XBRL Taxonomy Extension Label Linkbase Document*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document*

*Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise not subject to liability under those sections. This exhibit shall not be deemed to be incorporated by reference into any filing, except to the extent that the Registrant specifically incorporates this exhibit by reference.

BOSTON FINANCIAL TAX CREDIT FUND VII, A LIMITED PARTNERSHIP

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:  February 14, 2012                                                                         BOSTON FINANCIAL TAX CREDIT FUND VII,

          A LIMITED PARTNERSHIP

By:      Arch Street VIII, Inc.,

             its Managing General Partner

/s/Kenneth J. Cutillo                     

Kenneth J. Cutillo

President

Arch Street VIII , Inc.

(Chief Executive Officer)