- --------------------------------------------------------------------------------
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 8-K
------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report
May 10, 2001
------------------
CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP
Organized pursuant to the Laws of the State of Maryland
------------------
Commission File Number 0-11973
Internal Revenue Service - Employer Identification Number 52-1321492
11200 Rockville Pike, Rockville, Maryland 20852
(301) 468-9200
------------------
- --------------------------------------------------------------------------------
ITEM 5. OTHER EVENTS
------------
On or about May 10, 2001, Limited Partners in Capital Realty Investors-II
Limited Partnership ("CRI-II") may have received an unregistered "mini-tender"
offer from Peachtree Partners to purchase their units of Limited Partner
interest for the cost of the $100 transfer fee.
C.R.I., Inc. ("CRI"), the Managing General Partner, recommends that Limited
Partners REJECT the Peachtree Partners offer because CRI has concluded that the
tender offer is inadequate and not in the best interests of the Limited
Partners. A Limited Partner who accepts this offer would receive no
consideration personally, yet would incur capital gains tax upon the sale of the
units.
CRI is of the view that the Peachtree Partners offer is misleading. It
suggests that Limited Partners tender their units for no consideration, other
than payment of the transfer fee, to avoid "'phantom' taxable income" of "as
much as $125 per unit." Peachtree Partners fails to mention that acceptance of
its offer would result in a greater tax liability to Limited Partners for 2001
than if the Limited Partner retained its units, because the sale would trigger
the recognition of capital gains based on a Limited Partner's negative basis in
CRI-II. For example, a Limited Partner holding ten units of Limited Partner
interest had a negative capital account of approximately $11,500 as of December
31, 2000. A Limited Partner who accepts the Peachtree Partners tender offer and
sells the units would be liable for capital gains tax on this negative basis.
The federal income tax liability would be approximately $2,875. By contrast, the
passive cancellation of indebtedness income anticipated this year upon the loss
of CRI-II's interest in Frenchman's Wharf II is estimated to be approximately
$3,300 for ten units. This would be taxed at ordinary income rates, resulting in
a federal income tax liability of up to approximately $1,307, depending on tax
bracket. Accordingly, the Limited Partner who accepts the Peachtree Partners
offer would be in a worse tax position this year than if the Limited Partner did
nothing. Both the capital gains and the cancellation of indebtedness income
could be offset by any passive loss carryforwards a Limited Partner may have.
Also, a Limited Partner who retains its units defers the recognition of the
remainder of its negative basis (which would be reduced upon the loss of
Frenchman's Wharf II) and may receive future distributions of cash from its
interest in CRI-II.
If a Limited Partner desires to liquidate his or her investment in the
short term, there is no established market for the purchase and sale of Limited
Partner units in CRI-II. Several secondary market services exist, although
activity has been limited and sporadic. Nevertheless, recent transfers of which
CRI is aware were for prices greater than the Peachtree Partners current
unregistered tender offer of paying only the cost of the transfer fee.
CRI urges Limited Partners to consult their own tax advisors when
considering any sale offer, as each Limited Partner's tax situation is unique.
# # #
-2-
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 hereunto duly authorized.
CAPITAL REALTY INVESTORS-II LIMITED
PARTNERSHIP
----------------------------------------------
(Registrant)
by: C.R.I., Inc.
-----------------------------------------
General Partner
May 24 , 2001 by: /s/ Michael J. Tuszka
- ----------------- ------------------------------------
DATE Michael J. Tuszka
Vice President
and Chief Accounting Officer
(Principal Financial Officer
and Principal Accounting Officer)
-3-