UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A AMENDMENT NO. 1 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the fiscal year ended December 31, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to Commission file number 0-14378 Krupp Institutional Mortgage Fund Limited Partnership (Exact name of registrant as specified in its charter) Massachusetts 04-2860302 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 470 Atlantic Avenue, Boston, Massachusetts 02210 (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (617) 423-2233 The total number of pages in this document is 18. ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Appendix A to this report. SIGNATURE Pursuant to the requirements of Section 13 or 15(d) 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, on the 18th day of September, 1997. KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP By:The Krupp Corporation, a General Partner By:/s/ Wayne H. Zarozny Wayne H. Zarozny Treasurer of The Krupp Corporation APPENDIX A KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP FINANCIAL STATEMENTS ITEM 8 OF FORM 10-K ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION For the Year Ended December 31, 1996 KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP INDEX TO FINANCIAL STATEMENTS Report of Independent Accountants F-3 Balance Sheets at December 31, 1996 and December 31, 1995 F-4 Statements of Operations for the Years Ended December 31, 1996, 1995 and 1994 F-5 Statements of Changes in Partners' Equity for the Years Ended December 31, 1996, 1995 and 1994F-6 Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994 F-7 Notes to Financial Statements F-8 - F-15 All schedules are omitted as they are not applicable or not required, or the information is provided in the financial statements or the notes thereto. REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of Krupp Institutional Mortgage Fund Limited Partnership: We have audited the financial statements of Krupp Institutional Mortgage Fund Limited Partnership (the "Partnership") listed in the index on page F-2 of this Form 10-K. 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 generally accepted auditing standards. 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. As discussed in Note E, the Partnership has recorded a loan loss reserve of $16,524,000 and a reserve for uncollectible interest of $12,225,634, based on management's estimate of the value of the properties which serve as collateral for the mortgage notes receivable. As is the case with all real estate, the ultimate value of such properties can only be determined in a negotiation between buyer and seller. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Krupp Institutional Mortgage Fund Limited Partnership as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. Boston, Massachusetts COOPERS & LYBRAND, L.L.P. March 6, 1997 KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP BALANCE SHEETS December 31, 1996 and 1995 ASSETS 1996 1995 Mortgage notes receivable, net of loan loss reserve of $16,524,000 for 1996 and 1995, (Notes C, D and E) $ 6,973,754 $11,795,943 Cash and cash equivalents (Note F) 1,112,524 1,260,798 Accrued interest receivable - mortgage notes, net of reserve for uncollectible interest of $12,225,634 and $9,755,416, respectively (Notes C, D and E) 115,272 112,304 Due from affiliates (Note H) 16,250 1,575 Other assets 1,672 2,160 Total assets $ 8,219,472 $13,172,780 LIABILITIES AND PARTNERS' EQUITY Liabilities $ 25,274 $ 12,952 Partners' equity (deficit)(Note G): Limited Partners (30,059 Units outstanding)8,411,861 13,327,834 General Partners (217,663) (168,006) Total Partners' equity 8,194,198 13,159,828 Total liabilities and Partners' equity $ 8,219,472 $13,172,780 The accompanying notes are an integral part of the financial statements. KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS For the Years Ended December 31, 1996, 1995 and 1994 1996 1995 1994 Interest income: Mortgage notes receivable (Notes C, D and E) $497,376 $799,092 $ 1,020,409 Cash equivalents (Note F) 79,000 69,528 39,741 Total revenue 576,376 868,620 1,060,150 Expenses: Expense reimbursements (Note H) 33,345 49,689 96,608 General and administrative 60,088 53,806 64,122 Provision for credit losses (Notes C, D and E) - - 4,500,000 Total expenses 93,433 103,495 4,660,730 Net income (loss) (Note I) $482,943 $765,125 $(3,600,580) Allocation of net income (loss)(Note G): Limited Partners (30,059 Units outstanding) $478,114 $757,474 $(3,564,574) Per Unit of Limited Partner Interest $ 15.91 $ 25.20 $ (118.59) General Partners $ 4,829 $ 7,651 $ (36,006) The accompanying notes are an integral part of the financial statements. KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP STATEMENTS OF CHANGES IN PARTNERS' EQUITY For the Years Ended December 31, 1996, 1995 and 1994 Total Limited General Partners' Partners Partners Equity Balance at December 31, 1993 $17,487,588 $(125,987) $17,361,601 Distributions (676,327) (6,832) (683,159) Net loss (3,564,574) (36,006) (3,600,580) Balance at December 31, 1994 13,246,687 (168,825) 13,077,862 Distributions (676,327) (6,832) (683,159) Net income 757,474 7,651 765,125 Balance at December 31, 1995 13,327,834 (168,006) 13,159,828 Distributions (Note G) (5,394,087) (54,486) (5,448,573) Net income (Note G) 478,114 4,829 482,943 Balance at December 31, 1996$ 8,411,861 $(217,663) $ 8,194,198 The per Unit distributions for the years 1994 through 1996 were $22.50, $22.50 and $179.45, respectively. The accompanying notes are an integral part of the financial statements. KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1996, 1995 and 1994 1996 1995 1994 Operating activities: Net income (loss) $ 482,943 $ 765,125 $(3,600,580) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Provision for credit losses - - 4,500,000 Decrease (increase) in accrued interest receivable - mortgage notes (2,968) 118,812 (205,236) Decrease (increase) in due from affiliates (14,675) 9,159 (10,734) Decrease (increase) in other assets 488 (891) 1,344 Increase (decrease) in liabilities 12,322 (1,372) 8,437 Net cash provided by operating activities 478,110 890,833 693,231 Investing activity: Principal collections from mortgage notes receivable 4,822,189 26,460 23,952 Financing activity: Distributions (5,448,573) (683,159) (683,159) Net increase (decrease) in cash and cash equivalents (148,274) 234,134 34,024 Cash and cash equivalents, beginning of year 1,260,798 1,026,664 992,640 Cash and cash equivalents, end of year $1,112,524 $ 1,260,798 $ 1,026,664 The accompanying notes are an integral part of the financial statements. KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS A.Organization Krupp Institutional Mortgage Fund Limited Partnership (the "Partnership") was formed on November 15, 1984 by filing a Certificate of Limited Partnership in The Commonwealth of Massachusetts. The Partnership was formed for the purpose of making participating mortgage loans ("the Participating Notes") to Krupp Equity Limited Partnership ("KELP"), in the amount of up to 95% of the proceeds of the offering of units of limited partner interest (the "Units") (see Note D). The Partnership terminates on December 31, 2013 unless earlier terminated upon the occurrence of certain events as set forth in the Partnership Agreement. The Partnership issued all of the General Partner Interests to The Krupp Corporation ("Krupp Corp.") and The Krupp Company Limited Partnership-III ("Krupp Co.-III"), in exchange for capital contributions aggregating $1,000. The General Partners made additional capital contributions of $4,207,560 which equals fourteen percent of the capital contributions of the Investor Limited Partners. The Partnership used these capital contributions to pay costs incurred in connection with its organization and the public offering of Units. On February 21, 1985, the Partnership commenced the marketing and sale of the Units for $1,000 per Unit. The public offering was closed on December 5, 1985, at which time 30,059 Units had been sold. B.Significant Accounting Policies The Partnership uses the following accounting policies for financial reporting purposes, which may differ in certain respects from those used for federal income tax purposes (see Note I). Risks and Uncertainties The Partnership invests its cash primarily in deposits and money market funds with commercial banks. The Partnership has not experienced any losses to date on its invested cash. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and liabilities and revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents The Partnership includes all short-term investments with maturities of three months or less from the date of acquisition in cash and cash equivalents. Cash equivalents are recorded at cost, which approximates current market value. Continued KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued B.Significant Accounting Policies, Continued Provisions for Credit Losses and Accrued Interest Reserves In accordance with Statement of Financial Accounting Standard No. 114, "Accounting by Creditors for Impairment of a Loan", and Statement of Financial Accounting Standard No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures", the Partnership has implemented polices and practices for assessing impairment of its mortgage loans and the recognition of income on impaired loans. Mortgage notes receivable are recorded at the lower of cost or estimated net realizable value. The estimated net realizable value of the mortgage loans is based on current market estimates of the underlying properties held as collateral considering such factors as tenant turnover, current and prospective occupancy levels, the current market competition and assumptions on potential proceeds that might be received upon sale. Given the uncertainty of real estate valuation in the current market, these market estimates could differ from the ultimate value obtained from a sale of such properties (see Note E). The Partnership recognizes interest income on its impaired loans based on the expected cash flow payments to be received from KELP. Cash flow payments are determined as all cash flow generated by the properties after operating and administrative expenses and senior mortgage obligations. Unpaid interest and late charges are accrued and reserved against. For financial reporting purposes, the Partnership recognizes sales proceeds received from KELP as repayments of principal on the mortgage notes receivable. Income Taxes The Partnership is not liable for federal or state income taxes as Partnership income or loss is allocated to the Partners for income tax purposes. In the event that the Partnership's tax returns are examined by the Internal Revenue Service or state taxing authority and such examination results in a change in the Partnership's taxable income or loss, such change will be reported to the Partners. C.Mortgage Notes Receivable The Partnership made loans to KELP, an affiliate of the Partnership, as provided under the Master Loan Agreement and Collateral Pledge Agreement (the "Agreements"). Under the terms of the Master Loan Agreement, basic interest accrued at a rate of 7.6% per annum and was payable quarterly, in arrears, on the unpaid principal balance of the Participating Notes which were due on December 31, 1992, however, the Partnership exercised its option to extend the maturity date to December 29, 1995. KELP's properties began experiencing cash flow deficiencies and, beginning with the payment due April 1, 1991, KELP has not been able to fully pay the required quarterly interest payments. The terms of the Master Loan Agreement required KELP to pay the Partnership adjusted basic interest at a rate of 10% per annum, which accrued and was payable quarterly, in arrears, on the unpaid principal balance of the Participating Notes. The Participating Notes matured December 29, 1995. Continued KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued C. Mortgage Notes Receivable, Continued Mortgage Notes Receivable consisted of the following as of December 31, 1996 and 1995: Principal Property 1996 1995 Northeast Plaza Shopping Center $ 6,907,763 $ 6,936,993 North Salado Village Shopping Center I - 1,513,000 North Salado Village Shopping Center II - 6,000,000 Village Green Apartments - 1,902,750 Bell Plaza Shopping Center 5,300,000 5,300,000 Mortgage notes receivable collateralized by properties 12,207,763 21,652,743 Remaining indebtedness from previously owned KELP properties 16,082,950 6,667,200 Mortgage notes receivable before reserve and sales proceeds received from KELP 28,290,713 28,319,943 Less: Sales proceeds received from KELP (4,792,959) - Less: Loan loss reserve (16,524,000) (16,524,000) Total mortgage notes receivable $ 6,973,754 $ 11,795,943 Northeast Plaza Shopping Center ("Northeast Plaza") Northeast Plaza is an 89,224 square foot shopping plaza located in Baton Rouge, Louisiana. On September 12, 1985, the Partnership loaned KELP $6,000,000 collateralized by a second mortgage on the Northeast Plaza and the Collateral Pledge Agreement. The non-recourse first mortgage of $994,873, collateralized by Northeast Plaza, matured in 1993. In 1994, the General Partners used a portion of working capital reserves to purchase the first mortgage note in order to preserve the Partnership's equity in the underlying property and became the first lien holder of the property. As a result, the Partnership earns 10% from its first mortgage interest investment versus 4% to 6% earned on the working capital reserve balance. The maturity date of the note was extended to December 29, 1995 as evidenced by the modification of the promissory note dated August 31, 1993. The note requires monthly payments of $10,135 consisting of principal and interest at the rate of 10% per annum based on a 25-year amortization schedule. The non-recourse first mortgage note had balances of $907,763 and $936,993 at December 31, 1996 and 1995, respectively. Continued KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued C.Mortgage Notes Receivable - Continued Bell Plaza Shopping Center ("Bell") Bell is a 43,842 square foot shopping center located in Oak Lawn, Illinois, a suburb of Chicago. On June 2, 1987, the Partnership loaned KELP $5,300,000 collateralized by a first mortgage evidenced by a deed of trust on Bell and the Collateral Pledge Agreement. The average outstanding balances of the mortgage notes receivable were $25,908,849, $28,333,173 and $28,358,379 at December 31, 1996, 1995 and 1994, respectively. The carrying value of the above mentioned mortgage notes receivable reflected in the accompanying balance sheets at December 31, 1996 and 1995 approximates fair value. During 1996, KELP sold Village Green Apartments and North Salado Village Shopping Center to unaffiliated third parties. The Partnership applied sales proceeds of $4,792,959 received from KELP against the outstanding mortgage notes receivable (see Note D). D.Krupp Equity Limited Partnership KELP was formed on January 3, 1985 by filing a Certificate of Limited Partnership in The Commonwealth of Massachusetts. KELP terminates on December 31, 2005, unless earlier terminated upon the occurrence of certain events as set forth in its Partnership Agreement. KELP issued all of the General Partner Interests to two General Partners, Krupp Corp. and Krupp Co.-III, and issued all of the Limited Partner Interests to Krupp Co.- III. KELP received capital contributions from the two General Partners, Krupp Corp. and Krupp Co-III, totalling $480,000 which consisted of $204,000 in cash and $276,000 in promissory notes. KELP also received $6,984,086 of Limited Partner capital contributions from Krupp Co.-III consisting of cash, the assumption of a note payable to an affiliate in the amount of $1,550,013, and promissory notes in the amount of $2,514,388. These promissory notes, totalling $2,790,388, are pledged as additional collateral for the Participating Notes under the Master Loan Agreement and the Collateral Pledge Agreement. The purpose of KELP is to acquire, manage, operate and sell real estate and personal property; and to borrow funds from the Partnership and other sources to finance the acquisition, management and operation of real estate and personal property related thereto. Condensed financial statements of KELP are as follows: Continued KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued D. Krupp Equity Limited Partnership - Continued KRUPP EQUITY LIMITED PARTNERSHIP CONDENSED BALANCE SHEETS December 31, 1996 and 1995 ASSETS 1996 1995 Property, at cost (1) $ 12,716,122 $ 30,960,353 Property valuation provision (2) (5,000,000) (5,986,000) Accumulated depreciation (3,795,870) (10,206,689) Total real estate assets 3,920,252 14,767,664 Other assets 305,538 1,012,929 Total assets $ 4,225,790 $ 15,780,593 LIABILITIES AND PARTNERS' DEFICIT Mortgage notes payable to the Partnership(1)$ 28,290,713$28,319,943 Mortgage notes payable (1) - 7,599,279 Notes payable to an affiliate 300,000 300,000 Accrued interest payable to an affiliate (1)7,880,286 10,171,783 Due to affiliates 666,702 767,737 Other liabilities 386,780 560,388 Total liabilities 37,524,481 47,719,130 Partners' deficit (33,298,691) (31,938,537) Total liabilities and Partners' deficit $ 4,225,790 $ 15,780,593 (1)On March 5, 1996, Village Green was sold to an unaffiliated party for $5,200,000. The sale agreement required the buyer to assume the first mortgage note payable on the property of $4,633,989 and as a result, no prepayment penalty was assessed by the holder of the note. The sale resulted in a gain to KELP of $1,457,889, for financial reporting purposes. On May 16, 1996, North Salado was sold to an unaffiliated third party for $7,350,000. The first mortgage note payable of $2,920,405 was paid at the closing and no prepayment penalty was assessed, under the terms of the mortgage note. The sale of the property resulted in a gain of $121,515 to KELP, for financial reporting purposes. The properties were released as collateral by the Partnership for KELP's secondary mortgage obligations. For KELP's financial reporting purposes, sales proceeds paid to KIMF of $4,792,959 were applied against accrued interest in 1996. (2)During the fourth quarter of 1995, the General Partners of KELP determined that the carrying value of its retail properties exceeded its net realizable value which resulted in an additional valuation adjustment of $586,000 which was charged against earnings. In 1996, no additional adjustment to KELP's remaining real estate investments was required, and to date the General Partners have recorded a cumulative property valuation provision of $5,000,000. Continued KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued D. Krupp Equity Limited Partnership - Continued KRUPP EQUITY LIMITED PARTNERSHIP CONDENSED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 1996 1995 1994 Revenue $ 1,737,771 $ 3,479,262 $ 4,320,747 Property operating expenses (726,856) (1,535,994) (2,074,159) Operating income 1,010,915 1,943,268 2,246,588 Depreciation and amortization (784,010) (844,628) (1,218,383) Interest (3,166,463) (3,692,639) (4,038,180) Loss before gain on sale of properties and property valuation provision (2,939,559) (2,593,999) (3,009,975) Gain on sale of properties 1,579,404 - (3,592,179) Property valuation provision - (586,000) (5,400,000) Loss before extraordinary gain (1,360,155) (3,179,999) (12,002,154) Extraordinary gain - debt forgiveness - - 1,176,738 Net loss $(1,360,154) $(3,179,999)$(10,825,416) It is expected that KELP will continue to be unable to pay its stated debt service obligation to the Partnership. The General Partners of KELP have attempted to mitigate the cash flow issues in the following ways: 1) the General Partners or the Limited Partner of KELP have funded certain prior deficits through capital contributions; 2) the General Partners of KELP have arranged for borrowings to cover certain prior deficits; 3) KELP has remitted to the Partnership all available cash flow from the properties; and 4) the management agent for the properties (an affiliate of the General Partners of KELP) has continued to serve even though it is not receiving payment of property management fees. KELP will continue to monitor expenses and implement rental increases as market conditions permit in order to increase cash flow from the properties. E.Provision for Credit Losses and Accrued Interest Reserves The General Partners of the Partnership have recorded a cumulative provision for credit losses of $16,524,000 on its mortgage notes receivable. Additionally, the Partnership has recorded cumulative provisions for uncollectible interest of $12,225,634 and $9,755,416 as of December 31, 1996 and 1995, respectively. These cumulative provisions are recorded against the carrying value of the assets in order to reflect management's current estimates of the underlying property values which, given the inherent uncertainty of real estate valuation in the current market, could differ from the ultimate value obtained upon sale of such properties. Continued KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued F. Cash and Cash Equivalents Cash and cash equivalents at December 31, 1996 and 1995 consist of the following: 1996 1995 Cash and money market accounts$ 316,317 $ 465,788 Commercial paper 796,207 795,010 $1,112,524 $1,260,798 Commercial paper at December 31, 1996 represents corporate issues complying with Section 3.04 of the Partnership Agreement maturing in the first quarter of 1997. G.Partners' Equity Net profits and losses from Partnership operations, excluding Additional Interest on the Participating Notes, shall be determined as of the end of each fiscal year, and are allocated ninety-nine percent (99%) to the class of Limited Partners and one percent (1%) to the class of General Partners. Net profits and losses and Distributable Cash from Operations, as defined by Section 5.01 of the Partnership Agreement, allocated to the Limited Partners have been apportioned in the ratio of the number of Units owned per Limited Partner to the total number of Units outstanding. The General Partners portion of net profits and losses, distributions of Distributable Cash from Operations and Surplus Funds, as defined, has been allocated proportionately among the General Partners according to their respective invested capital. Distributable Cash from Operations shall be distributed ninety-nine percent (99%) to the class of Limited Partners and one percent (1%) to the class of General Partners. Surplus Funds received by the Partnership, as defined in the Partnership Agreement, are to be allocated differently than that described above. As of December 31, 1996, the following cumulative Partner contributions and allocations were made since inception of the Partnership: Total Limited General Partners' Partners Partners Equity Capital contributions $ 30,059,000 $ 4,208,560 $ 34,267,560 Syndication costs - (4,157,560) (4,157,560) Distributions (20,310,311) (205,157) (20,515,468) Net loss (1,336,828) (63,506) (1,400,334) Balance at December 31, 1996 $ 8,411,861 $ (217,663)$ 8,194,198 Continued KRUPP INSTITUTIONAL MORTGAGE FUND LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued H.Related Party Transactions The Partnership reimburses affiliates of the General Partners for certain expenses incurred in connection with the activities of the Partnership, including communications, bookkeeping and clerical work necessary in maintaining relations with Limited Partners, and accounting, tax and computer services necessary for the maintenance of the books and records of the Partnership. Due from affiliates consists of the following as of December 31, 1996 and 1995: 1996 1995 Expense reimbursements $16,250 $ 1,575 I. Federal Income Taxes The reconciliations of the net income (loss) reported in the accompanying Statement of Operations with the net income (loss) reported in the Partnership's federal income tax return for the years ended December 31, 1996, 1995 and 1994 are as follows: 1996 1995 1994 Net income (loss) per Statement of Operations $ 482,943 $765,125 $(3,600,580) Book to tax difference due to provision for credit loss - - 4,500,000 Income (expense) recognized for tax not book 1,496,640 (3,998) 3,998 Net income for federal income tax purposes $1,979,583 $ 761,127 $ 903,418 The allocation of net income for federal income tax purposes for 1996 is as follows: Portfolio Portfolio Income Expense Total Limited Partners $2,052,286 (92,499) $1,959,787 General Partners 20,730 (934) 19,796 $2,073,016 $ (93,433) $1,979,583 The basis of the Partnership's assets for tax purposes exceeds its assets for financial reporting purposes by approximately $25,000,000 and $24,000,000 at December 31, 1996 and 1995, respectively. The tax and book basis of the Partnership's liabilities are equal.