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EX-32.1 - EX-32.1 - DEL TACO INCOME PROPERTIES IVa55432exv32w1.htm
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EX-31.2 - EX-31.2 - DEL TACO INCOME PROPERTIES IVa55432exv31w2.htm
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
(Mark One)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2009
 
OR
 
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                   to                  
 
Commission file no. 33-13437
 
DEL TACO INCOME PROPERTIES IV
(A California limited partnership)
(Exact name of registrant as specified in its charter)
 
     
California
(State or other jurisdiction of
incorporation or organization)
  33-0241855
(I.R.S. Employer
Identification Number)
     
25521 Commercentre Drive
Lake Forest, California
(Address of principal executive offices)
  92630
(Zip Code)
 
 
Registrant’s telephone number, including area code: (949) 462-9300
 
Securities registered pursuant to section 12(b) of the Act: None
 
Securities registered pursuant to section 12(g) of the Act: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes        No  X 
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes        No  X 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  X   No    
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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      No    
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
 
DOCUMENTS INCORPORATED BY REFERENCE
 
Portions of the registrant’s Form S-11 Registration Statement filed June 5, 1987 are incorporated by reference into Part IV of this report.
 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, 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. (Check one):
 
Large accelerated filer o Accelerated filer o Non-accelerated filer þ Smaller reporting company o
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes        No  X 
 


TABLE OF CONTENTS

PART I
Item 1. Business
Item 1A. Risk Factors
Item 2. Properties
Item 3. Legal Proceedings
Item 4. [Reserved]
PART II
Item 5. Market for the Partnership’s Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued)
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued)
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
PART I. INFORMATION
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Item 9A(T). Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers, and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
SIGNATURES
EX-31.1
EX-31.2
EX-32.1


Table of Contents

PART I
Item 1.   Business
Del Taco Income Properties IV (the Partnership, us, we or our) is a publicly-held limited partnership organized under the California Uniform Limited Partnership Act. The Partnership’s General Partner is Del Taco LLC, a California limited liability company (Del Taco or the General Partner). The Partnership sold 165,415 units totaling $4.135 million through an offering of limited partnership units from June 1987 through June 1988. The term of the partnership agreement is until December 31, 2027, unless terminated earlier by means provided in the partnership agreement.
The business of the Partnership is ownership and leasing of restaurants in California to Del Taco. The Partnership acquired land and constructed three Mexican-American restaurants for long-term lease to Del Taco. Each property is leased for 32 years on a triple net basis. Rent is equal to twelve percent of gross sales of the restaurants plus supplemental rent as required by the partnership agreement. As of December 31, 2009, the Partnership had a total of three properties leased to Del Taco (Del Taco, in turn, has sub-leased one of the restaurants to a Del Taco franchisee).
The Partnership has no full time employees. The partnership agreement assigns full authority for general management and supervision of the business affairs of the partnership to the General Partner. The General Partner has a one percent interest in the profits or losses and distributions of the Partnership. Limited partners have no right to participate in the day to day management or conduct of the Partnership’s business affairs.
Item 1A.   Risk Factors
None.
Item 2.   Properties
The Partnership acquired three properties with proceeds obtained from the sale of limited partnership units:
                 
                Date of
        Date of   Restaurant   Commencement
Address   City, State   Acquisition   Constructed   of Operation (1)
Orangethorpe
Avenue
  Placentia, CA   August 5, 1988   60 seat with drive through
service window
  March 27, 1989
 
               
Lakeshore
Drive
  Lake Elsinore, CA   February 1, 1989   60 seat with drive through
service window
  April 18, 1990 (2) 
 
               
Highland Avenue
  San Bernardino, CA   December 8, 1989   60 seat with drive through
service window
  July 13, 1990
See also Schedule III – Real Estate and Accumulated Depreciation included in Item 8.
 
(1)   Commencement of operation is the first date Del Taco, as lessee, operated the facility on the site as a Del Taco restaurant.
 
(2)   The restaurant is subleased to a franchisee of Del Taco and the restaurant operates as a Del Taco restaurant.

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Item 3.   Legal Proceedings
The Partnership is not a party to any material pending legal proceedings.
Item 4.   [Reserved]
PART II
Item 5.   Market for the Partnership’s Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities
The Partnership sold 165,415 ($4,135,375) limited partnership units during the public offering period ended June 3, 1988 and currently has 272 limited partners of record. There is no public market for the trading of the units. Distributions made by the Partnership to the limited partners during the past three fiscal years are described in Note 7 to the Notes to the Financial Statements contained under Item 8.
Item 6.   Selected Financial Data
The selected financial data presented as of and for the years ended December 31, 2009, 2008, 2007, 2006, and 2005, has been derived from the audited financial statements and should be read in conjunction with the financial statements and related notes and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
                                         
    Years Ended December 31,
    2009   2008   2007   2006   2005
Rental revenues
  $ 434,004     $ 443,351     $ 435,344     $ 448,520     $ 458,027  
General and administrative expense
    64,794       64,782       66,626       63,845       62,255  
 
                                       
Depreciation expense
    55,268       55,268       55,268       55,268       55,268  
 
                                       
Interest and other income
    990       1,826       2,457       2,873       2,348  
 
                                       
Net income
    314,932       325,127       315,907       332,280       342,852  
Net income per limited partnership unit
    1.89       1.95       1.89       1.99       2.05  
Cash distributions per limited partnership unit
    2.29       2.24       2.27       2.38       2.34  
 
                                       
Total assets
    1,578,174       1,643,562       1,692,501       1,777,129       1,840,586  
 
                                       
Long-term obligations
    137,953       137,953       137,953       137,953       137,953  

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Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s discussion and analysis of financial condition, results of operations, liquidity and capital resources, and off balance sheet arrangements and contractual obligations contained within this report on Form 10-K is more clearly understood when read in conjunction with the notes to the financial statements. The notes to the financial statements elaborate on certain terms that are used throughout this discussion and provide information about the Partnership and the basis of presentation used in this report on Form 10-K.
The three restaurants leased to Del Taco make up all of the income producing assets of the Partnership. Therefore, the business of the Partnership is entirely dependent on the success of Del Taco as the operator of the restaurants located at our properties. The success of the restaurants is dependent on a large variety of factors, including, but not limited to, consumer demand and preference for fast food, in general, and for Mexican-American food in particular.
Liquidity and Capital Resources
Del Taco Income Properties IV (the Partnership or the Company) offered limited partnership units for sale between June 1987 and June 1988. In total, $4.135 million was raised through the sale of limited partnership units and used to acquire sites, build three restaurants, pay commissions to brokers and to reimburse Del Taco LLC (Del Taco or the General Partner) for offering costs incurred. In February of 1992, approximately $442,000 raised during the offering but not required to acquire sites and build restaurants was distributed to the limited partners.
The Partnership’s only source of cash flow is rental income from the properties from the triple net leases. Such operating income has historically been and is expected to continue to be sufficient to fund the Partnership’s operating expenses. Net cash provided by operating activities in excess of the Partnership’s ongoing needs is distributed to the partners.
Off Balance Sheet Arrangements and Contractual Obligations
None.
Results of Operations
The Partnership owns three properties that are under long-term lease to Del Taco for restaurant operations (Del Taco, in turn, has sub-leased one of the restaurants to a Del Taco franchisee).
The following table sets forth rental revenues earned by restaurant by year:
                         
    Years Ended December 31,  
    2009     2008     2007  
Orangethorpe Ave., Placentia, CA
  $ 188,989     $ 190,038     $ 183,608  
Lakeshore Drive, Lake Elsinore, CA
    151,851       154,046       159,535  
Highland Ave., San Bernardino, CA
    93,164       99,267       92,201  
 
                 
Total
  $ 434,004     $ 443,351     $ 435,344  
 
                 

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Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued)
Results of Operations – (continued)
The Partnership earns rental revenues equal to 12 percent of gross sales from the restaurants plus supplemental rent as required by the partnership agreement. The Partnership earned rental revenues of $434,004 during the year ended December 31, 2009, which represents a decrease of $9,347 from 2008. The changes in rental revenues between 2008 and 2009 are directly attributable to decreases in sales levels at the restaurants under lease due to local competitive and industry factors. The Partnership earned rental revenues of $443,351 during the year ended December 31, 2008, which represents an increase of $8,007 from 2007. The changes in rental revenues between 2007 and 2008 are directly attributable to increases in sales levels at the restaurants under lease. There was no supplemental rent for the years ended December 31, 2009, 2008 and 2007. Supplemental rent is calculated on an annual basis and recorded in the fourth quarter since the amount of supplemental rent, if any, is contingent upon the amount of annual gross sales and pretax profits of the restaurants which are not known until the end of the year. The amount of supplemental rent, if any, is the lesser of (a) the supplemental rental rate of 14.6 percent times the aggregate property costs of $3,011,349, less 12 percent of gross sales of the restaurants, or (b) 50 percent of the aggregate pretax profit, less general and administrative expenses (as defined) and 50 percent of the franchise royalties paid (as defined). To the extent 12 percent of gross sales of the restaurants exceeds the supplemental rent rate, the supplemental rent would be zero.
The following table breaks down general and administrative expenses by type of expense:
Percentage of Total General and Administrative Expense
                         
    Years Ended December 31,
    2009   2008   2007
Accounting fees
    65.87 %     71.67 %     68.79 %
Distribution of information to limited partners
    27.90       27.09       30.00  
Other
    6.23       1.24       1.21  
 
                       
 
    100.00 %     100.00 %     100.00 %
 
                       
General and administrative costs increased by $12 from 2008 to 2009. The increase was caused primarily due to increased bank charges, partially offset by reduced accounting and tax preparation costs.
General and administrative costs decreased by $1,844 from 2007 to 2008. The decrease was caused primarily by decreased costs for accounting fees and printing and distribution of information to partners, partially offset by an increase in annual audit fees.
Depreciation expense was the same in 2009, 2008, and 2007.
Net income decreased by $10,195 from 2008 to 2009 due to the decrease in revenues of $9,347, the increase in general and administrative expenses of $12, and the decrease in other income of $836.
Net income increased by $9,220 from 2007 to 2008 due to the increase in revenues of $8,007 and the decrease in general and administrative expenses of $1,844, which was partially offset by the decrease in interest and other income of $631.

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Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued)
Recent Accounting Pronouncements
None that applies to the Partnership.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of financial condition and results of operations, as well as disclosures included elsewhere in this report on Form 10-K are based upon the Partnership’s financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Partnership believes the critical accounting policies that most impact the financial statements are described below. A summary of the significant accounting policies of the Partnership can be found in Note 1 to the Financial Statements which is included in Item 8 of this Form 10-K.
Revenue Recognition: Rental revenue is recognized based on 12 percent of gross sales of the restaurants for the corresponding period, and is earned at the point of sale. Supplemental rent is calculated on an annual basis and recorded in the fourth quarter since the amount of supplemental rent, if any, is contingent upon the amount of annual gross sales and pretax profits of the restaurants which are not known until the end of the year. The amount of supplemental rent, if any, is the lesser of (a) the supplemental rental rate of 14.6 percent times the aggregate property costs of $3,011,349, less 12 percent of gross sales of the restaurants, or (b) 50 percent of the aggregate pretax profit, less general and administrative expenses (as defined) and 50 percent of the franchise royalties paid (as defined). To the extent 12 percent of gross sales of the restaurants exceeds the supplemental rent rate the supplemental rent would be zero.
Property and Equipment: Property and equipment is stated at cost. Depreciation is computed using the straight-line method over estimated useful lives which are 20 years for land improvements, 35 years for buildings and improvements, and 10 years for machinery and equipment.
The partnership accounts for property and equipment in accordance with authoritative guidance issued by the Financial Accounting Standards Board that requires long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. In evaluating long-lived assets held for use, an impairment loss is recognized if the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying value of the asset. Once a determination has been made that an impairment loss should be recognized for long-lived assets, various assumptions and estimates are used to determine fair value including, among others, estimated costs of construction and development, recent sales of comparable properties and the opinions of fair value prepared by independent real estate appraisers. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk
None.

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Table of Contents

Report of Independent Registered Public Accounting Firm
To the Partners
Del Taco Income Properties IV:
We have audited the accompanying balance sheets of Del Taco Income Properties IV (a California Limited Partnership) as of December 31, 2009 and 2008 and the related statements of income, partners’ equity, and cash flows for each of the three years in the period ended December 31, 2009. Our audits also included the financial statement schedule of the Partnership listed in Item 15. These financial statements and financial statement schedule are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Del Taco Income Properties IV as of December 31, 2009 and 2008 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We were not engaged to examine management’s assessment of the effectiveness of Del Taco Income Properties IV’s internal control over financial reporting as of December 31, 2009 included in the accompanying Management’s report on internal control over financial reporting under Item 9A(T) and, accordingly, we do not express an opinion thereon.
/s/ Squar, Milner, Peterson, Miranda & Williamson, LLP
Newport Beach, California
March 10, 2010

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DEL TACO INCOME PROPERTIES IV
BALANCE SHEETS
                 
    December 31,  
    2009     2008  
ASSETS
 
               
CURRENT ASSETS:
               
Cash
  $ 112,034     $ 120,448  
Receivable from Del Taco LLC
    35,686       37,461  
Deposits
    677       608  
 
           
Total current assets
    148,397       158,517  
 
           
 
               
PROPERTY AND EQUIPMENT:
               
Land and improvements
    1,236,700       1,236,700  
Buildings and improvements
    1,289,860       1,289,860  
Machinery and equipment
    484,789       484,789  
 
           
 
    3,011,349       3,011,349  
Less—accumulated depreciation
    1,581,572       1,526,304  
 
           
 
    1,429,777       1,485,045  
 
           
 
               
 
  $ 1,578,174     $ 1,643,562  
 
           
 
               
LIABILITIES AND PARTNERS’ EQUITY
 
               
CURRENT LIABILITIES:
               
Payable to limited partners
  $ 15,832     $ 13,898  
Accounts payable
    10,830       10,540  
 
           
Total current liabilities
    26,662       24,438  
 
           
 
               
OBLIGATION TO GENERAL PARTNER
    137,953       137,953  
 
           
 
               
PARTNERS’ EQUITY:
               
Limited partners; 165,375 units outstanding at December 31, 2009 and December 31, 2008
    1,430,557       1,497,493  
General partner-Del Taco LLC
    (16,998 )     (16,322 )
 
           
 
    1,413,559       1,481,171  
 
           
 
               
 
  $ 1,578,174     $ 1,643,562  
 
           
See accompanying notes to financial statements.

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DEL TACO INCOME PROPERTIES IV
STATEMENTS OF INCOME
                         
    Years Ended December 31,  
    2009     2008     2007  
RENTAL REVENUES
  $ 434,004     $ 443,351     $ 435,344  
 
                 
 
                       
EXPENSES:
                       
General and administrative
    64,794       64,782       66,626  
Depreciation
    55,268       55,268       55,268  
 
                 
 
    120,062       120,050       121,894  
 
                 
 
                       
Operating income
    313,942       323,301       313,450  
 
                       
OTHER INCOME:
                       
Interest
    115       576       2,082  
Other
    875       1,250       375  
 
                 
 
                       
Net income
  $ 314,932     $ 325,127     $ 315,907  
 
                 
 
                       
Net income per limited partnership unit (note 2)
  $ 1.89     $ 1.95     $ 1.89  
 
                 
 
                       
Number of limited partnership units used in computing per unit amounts
    165,375       165,375       165,375  
 
                 
See accompanying notes to financial statements.

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DEL TACO INCOME PROPERTIES IV
STATEMENTS OF PARTNERS’ EQUITY

Years Ended December 31, 2009, 2008, and 2007
                                 
    Limited Partners     General        
    Units     Amount     Partner     Total  
Balance, December 31, 2006
    165,375     $ 1,608,916     $ (15,196 )   $ 1,593,720  
 
                               
Net Income
          312,748       3,159       315,907  
 
                               
Cash Distributions
          (374,616 )     (3,784 )     (378,400 )
 
                       
 
                               
Balance, December 31, 2007
    165,375       1,547,048       (15,821 )     1,531,227  
 
                               
Net Income
          321,876       3,251       325,127  
 
                               
Cash Distributions
          (371,431 )     (3,752 )     (375,183 )
 
                       
 
                               
Balance, December 31, 2008
    165,375       1,497,493       (16,322 )     1,481,171  
 
                               
Net Income
          311,783       3,149       314,932  
 
                               
Cash Distributions
          (378,719 )     (3,825 )     (382,544 )
 
                       
 
                               
Balance, December 31, 2009
    165,375     $ 1,430,557     $ (16,998 )   $ 1,413,559  
 
                       
See accompanying notes to financial statements.

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DEL TACO INCOME PROPERTIES IV
STATEMENTS OF CASH FLOWS
                         
    Years Ended December 31,  
    2009     2008     2007  
CASH FLOWS FROM OPERATING ACTIVITIES:
                       
 
                       
Net income
  $ 314,932     $ 325,127     $ 315,907  
Adjustments to reconcile net income to net cash provided by operating activities:
                       
Depreciation
    55,268       55,268       55,268  
Changes in operating assets and liabilities:
                       
Receivable from Del Taco LLC
    1,775       (1,746 )     821  
Deposits
    (69 )     (57 )     64  
Payable to limited partners
    1,934       1,396       (22,383 )
Accounts payable
    290       (279 )     248  
 
                 
 
                       
Net cash provided by operating activities
    374,130       379,709       349,925  
 
                 
 
                       
CASH FLOWS FROM FINANCING ACTIVITIES:
                       
 
                       
Cash distributions to partners
    (382,544 )     (375,183 )     (378,400 )
 
                 
 
                       
Net increase (decrease) in cash
    (8,414 )     4,526       (28,475 )
 
                       
Beginning cash balance
    120,448       115,922       144,397  
 
                 
 
                       
Ending cash balance
  $ 112,034     $ 120,448     $ 115,922  
 
                 
See accompanying notes to financial statements.

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DEL TACO INCOME PROPERTIES IV
NOTES TO FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Partnership: Del Taco Income Properties IV, a California limited partnership, (the Partnership) was formed on March 23, 1987, for the purpose of acquiring real property in California for construction of three Mexican-American restaurants to be leased under long-term agreements to Del Taco LLC (General Partner or Del Taco), for operation under the Del Taco trade name. The term of the partnership agreement is until December 31, 2027 unless terminated earlier by means provided in the partnership agreement.
The Partnership has no full time employees (see Note 5). The partnership agreement assigns full authority for general management and supervision of the business affairs of the partnership to the General Partner. The General Partner has a one percent interest in the profits or losses and distributions of the Partnership. Limited partners have no right to participate in the day to day management or conduct of the Partnership’s business affairs.
Distributions are made to the General and limited partners in accordance with the provisions of the Partnership agreement (see Note 2).
Basis of Accounting: The Partnership utilizes the accrual method of accounting for transactions relating to the business of the Partnership. The summary of significant accounting policies presented below is designed to assist in understanding the Partnership’s financial statements. Such financial statements and accompanying notes are the representations of the Partnership’s management, who is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America (GAAP) in all material respects, and have been consistently applied in preparing the accompanying financial statements.
Property and Equipment: Property and equipment is stated at cost. Depreciation is computed using the straight-line method over estimated useful lives which are 20 years for land improvements, 35 years for buildings and improvements, and 10 years for machinery and equipment.
The partnership accounts for property and equipment in accordance with authoritative guidance issued by the Financial Accounting Standards Board that requires long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. In evaluating long-lived assets held for use, an impairment loss is recognized if the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying value of the asset. Once a determination has been made that an impairment loss should be recognized for long-lived assets, various assumptions and estimates are used to determine fair value including, among others, estimated costs of construction and development, recent sales of comparable properties and the opinions of fair value prepared by independent real estate appraisers. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

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DEL TACO INCOME PROPERTIES IV
NOTES TO FINANCIAL STATEMENTS — CONTINUED
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Continued
Income Taxes: No provision has been made for federal or state income taxes on partnership net income, since the Partnership is not subject to income tax. Partnership income is includable in the taxable income of the individual partners as required under applicable income tax laws. Certain items, primarily related to depreciation methods, are accounted for differently for income tax reporting purposes (see Note 6).
Net Income Per Limited Partnership Unit: Net income per limited partnership unit is based on net income attributable to the limited partners (after 1% allocation to the general partner) using the weighted average number of units outstanding during the periods presented which amounted to 165,375 units for all years presented.
Use of Estimates: The preparation of the financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Revenue Recognition: Rental revenue is recognized based on 12 percent of gross sales of the restaurants for the corresponding period, and is earned at the point of sale. Supplemental rent is calculated on an annual basis and recorded in the fourth quarter since the amount of supplemental rent, if any, is contingent upon the amount of annual gross sales and pretax profits of the restaurants which are not known until the end of the year. The amount of supplemental rent, if any, is the lesser of (a) the supplemental rental rate of 14.6 percent times the aggregate property costs of $3,011,349, less 12 percent of gross sales of the restaurants, or (b) 50 percent of the aggregate pretax profit, less general and administrative expenses (as defined) and 50 percent of the franchise royalties paid (as defined). To the extent 12 percent of gross sales of the restaurants exceeds the supplemental rent rate the supplemental rent would be zero.
Concentration of Risk: The three restaurants leased to Del Taco make up all of the income producing assets of the Partnership and contributed all of the Partnership’s rental revenues for the three years ended December 31, 2009. Therefore, the business of the Partnership is entirely dependent on the success of the Del Taco trade name restaurants that lease the properties.
The Partnership maintains substantially all of its cash and cash equivalents at one major commercial bank. The Federal Depository Insurance Commission’s limits were $250,000 at December 31, 2009 and 2008. At December 31, 2009 and 2008, the Partnership had approximately $118,000 and $127,000, respectively, on deposit at one financial institution.
Fair Value of Financial Instruments: The fair values of cash, accounts receivables, deposits, accounts payable and payables to limited partners approximate the carrying amounts due to their short maturities.

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DEL TACO INCOME PROPERTIES IV
NOTES TO FINANCIAL STATEMENTS — CONTINUED
NOTE 2 — PARTNERS’ EQUITY
Pursuant to the partnership agreement, annual partnership income or loss is allocated one percent to Del Taco and 99 percent to the limited partners. Partnership gains from any sale or refinancing will be allocated one percent to the General Partner and 99 percent to the limited partners until allocated gains and profits equal losses, distributions and syndication costs, and until each class of limited partners receive their priority return as defined in the partnership agreement. Additional gains will be allocated 12 percent to the General Partner and 88 percent to the limited partners.
NOTE 3 — OBLIGATION TO GENERAL PARTNER
Under terms of the partnership agreement, the General Partner is entitled to receive a fee in an amount equal to five percent of the gross proceeds of the offering. The fee shall be for services rendered in connection with site selection and the design and supervision of construction of improvements to acquired properties. One percent of the gross proceeds of the offering has been paid to the General Partner. The remaining four percent of this fee shall be earned at the time the services are rendered, but shall not be paid and shall be subordinated to the limited partners’ interests until all restaurants have opened and the limited partners have received certain minimum returns on their investment, as required by the partnership agreement. It is the policy of the Partnership to accrue the site selection and development fee as an obligation to the General Partner. No fees were earned for such services during 2009, 2008, and 2007.
NOTE 4 — LEASING ACTIVITIES
The Partnership leases certain properties for operation of restaurants to Del Taco on a triple net basis. The leases are for terms of 32 years commencing with the completion of the restaurant facility located on each property and require monthly rentals equal to 12 percent of the gross sales of the restaurants. Supplemental rent (as defined in the partnership agreement) may be earned if certain criteria are met. No supplemental rent was earned for the years ended December 31, 2009, 2008, and 2007, respectively. The leases terminate in the years 2023 to 2024. There is no minimum rental under any of the leases. The Partnership had a total of three properties leased to Del Taco as of December 31, 2009, 2008, and 2007 (Del Taco, in turn, has subleased one of the restaurants to a Del Taco franchisee for each of the three years ended December 31, 2009).
The two restaurants operated by Del Taco, for which the Partnership is the lessor, had combined, unaudited sales of $2,351,274, $2,410,870, and $2,298,410 and unaudited net income of $40,157, $45,809, and $64,591 for the years ended December 31, 2009, 2008, and 2007, respectively. Del Taco net income by restaurant includes charges for general and administrative expenses incurred in connection with supervision of restaurant operations and interest expense and the decrease in net income from the corresponding period of the prior year primarily relates to additional interest expense and reduced restaurant revenues. The one restaurant operated by a Del Taco franchisee, for which the Partnership is the lessor, had unaudited sales of $1,265,429, $1,283,717, and $1,329,458 for the years ended December 31, 2009, 2008, and 2007, respectively.

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DEL TACO INCOME PROPERTIES IV
NOTES TO FINANCIAL STATEMENTS — CONTINUED
NOTE 5 — RELATED PARTIES
The receivable from Del Taco consists of rent accrued for the months of December 2009 and 2008. This amount was collected in January 2010 and 2009, respectively.
The General Partner received $3,825, $3,752 and $3,784 in distributions relating to its one percent interest in the Partnership for the years ended December 31, 2009, 2008 and 2007, respectively.
Del Taco serves in the capacity of General Partner in other partnerships which are engaged in the business of operating restaurants, and three other partnerships which were formed for the purpose of acquiring real property in California for construction of Mexican-American restaurants for lease under long-term agreements to Del Taco.
The General Partner provides certain minimal managerial and accounting services to the Partnership at no cost.
NOTE 6 — INCOME TAXES (UNAUDITED)
The Partnership is not subject to income taxes because its income is taxed directly to the General Partner and limited partners. The reconciling items presented in the table below are the only items that create a difference between the tax basis and reported amounts of the Partnership’s assets and liabilities.
A reconciliation of financial statement net income to taxable income for each of the periods is as follows:
                         
    2009     2008     2007  
Net income per financial statements
  $ 314,932     $ 325,127     $ 315,907  
 
Excess book depreciation
    14,915       14,915       14,915  
 
                 
 
                       
Taxable income
  $ 329,847     $ 340,042     $ 330,822  
 
                 
A reconciliation of partnership equity per the financial statements to partners’ equity for tax purposes as of December 31, 2009, is as follows (unaudited):
         
Partners’ equity per financial statements
  $ 1,413,559  
 
       
Issue costs of limited partnership units capitalized for tax purposes
    579,259  
 
       
Difference in book vs. tax depreciation
    289,497  
 
     
 
       
Partners’ equity for tax purposes
  $ 2,282,315  
 
     

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DEL TACO INCOME PROPERTIES IV
NOTES TO FINANCIAL STATEMENTS — CONTINUED
NOTE 7 — CASH DISTRIBUTIONS TO LIMITED PARTNERS
Cash distributions paid to limited partners for the three years ended December 31, 2009 were as follows:
                         
    Cash     Weighted     Number of Units  
    Distribution per     Average Number     Outstanding at  
    Limited Partnership     of Units     the End of  
Quarter Ended   Unit     Outstanding     Quarter  
December 31, 2006
  $ 0.63       165,375       165,375  
March 31, 2007
    0.53       165,375       165,375  
June 30, 2007
    0.46       165,375       165,375  
September 30, 2007
    0.65       165,375       165,375  
 
                     
Total paid in 2007
  $ 2.27                  
 
                     
 
                       
December 31, 2007
  $ 0.59       165,375       165,375  
March 31, 2008
    0.45       165,375       165,375  
June 30, 2008
    0.60       165,375       165,375  
September 30, 2008
    0.60       165,375       165,375  
 
                     
Total paid in 2008
  $ 2.24                  
 
                     
 
                       
December 31, 2008
  $ 0.61       165,375       165,375  
March 31, 2009
    0.54       165,375       165,375  
June 30, 2009
    0.50       165,375       165,375  
September 30, 2009
    0.64       165,375       165,375  
 
                     
Total paid in 2009
  $ 2.29                  
 
                     
Cash distributions per limited partnership unit were calculated based upon the weighted average number of units outstanding for each quarter and were paid from operations. Distributions declared in January 2010 for the quarter ended December 31, 2009 amounted to $0.55 per limited partnership unit and were paid in February 2010.
NOTE 8 — RESULTS BY QUARTER (UNAUDITED)
                                     
    First   Second   Third   Fourth
    Quarter   Quarter   Quarter   Quarter
Year ended December 31, 2009
                               
Rental revenues
  $ 106,120     $ 111,467     $ 109,092     $ 107,325  
Net income
    58,147       88,797       82,693       85,295  
Net income per limited partnership unit
    0.35       0.53       0.50       0.51  
 
                               
Year ended December 31, 2008
                               
Rental revenues
  $ 105,815     $ 111,894     $ 113,926     $ 111,716  
Net income
    54,702       89,995       91,835       88,595  
Net income per limited partnership unit
    0.33       0.54       0.55       0.53  

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DEL TACO INCOME PROPERTIES IV
NOTES TO FINANCIAL STATEMENTS — CONTINUED
NOTE 9 — PAYABLE TO LIMITED PARTNERS
Payable to limited partners represents a reclassification from cash for distribution checks made to limited partners that have remained outstanding for six months or longer.

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Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
  None
Item 9A(T).   Controls and Procedures
  Disclosure controls and procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Treasurer, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognized that any system of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost—benefit relationship of possible controls and procedures.
In connection with the preparation of this Annual Report on Form 10-K, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Treasurer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Treasurer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K to ensure that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Treasurer, as appropriate, to allow timely decisions regarding required disclosures.
  Internal control over financial reporting
  (a)   Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control system is designed to provide reasonable assurance to our management regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2009. In making its assessment of internal control over financial reporting, management used the criteria set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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Management has concluded that, as of December 31, 2009, our internal control over financial reporting was effective based on these criteria.
This annual report does not include an attestation report of the Partnership’s registered public accounting firm regarding the effectiveness of internal control over financial reporting. Pursuant to temporary rules of the Securities and Exchange Commission, such attestation report is not required to be included in this filing; the Partnership is only required to provide management’s report in this annual report.
  (b)   Changes in internal controls:
There were no significant changes in the Partnership’s internal controls over financial reporting that occurred during our most recent fiscal quarter that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.   Other Information
  None.
PART III
Item 10.   Directors, Executive Officers, and Corporate Governance
(a) & (b) Del Taco serves as the Partnership’s sole general partner. Individuals who perform the functions of directors and officers of the Partnership consist of the following officers of Del Taco:
             
Name   Title   Age
Paul J.B. Murphy, III
  Chief Executive Officer     55  
James W. Lyons
  Chief Development Officer     54  
James D. Stoops
  Executive Vice President, Operations     57  
Janet D. Erickson
  Executive Vice President, Purchasing     53  
Steven L. Brake
  Treasurer     37  
Del Taco’s term as general partner will continue indefinitely, subject to the right of a majority in interest of the limited partners to remove and replace it. The above referenced officers of the General Partner will hold office until their resignation or the election or appointment of their successor.
(c)   None
 
(d)   No family relationship exists between any such officer of the General Partner.
 
(e)   The following is an account of the business experience during the past five years of each such officer:

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Paul J. B. Murphy, III, Chief Executive Officer of Del Taco LLC. Mr. Murphy has served as Chief Executive Officer since February of 2009. He previously served as President and Chief Executive Officer of Einstein Noah Restaurant Group, Inc. (formerly, New World Restaurant Group, Inc.) from October of 2003 to December of 2008.
James W. Lyons, Chief Development Officer of Del Taco LLC. Mr. Lyons has served as Chief Development Officer since September of 2008. He previously served as Chief Operating Officer of Popeyes Chicken and Biscuits (a division of AFC Enterprises, Inc.), from March of 2007 to December of 2007, and as Chief Development Officer of Popeyes Chicken and Biscuits from July of 2004 to March of 2007. Prior to that, he served as Vice President of Development for Domino’s Pizza from 2002 to July of 2004.
James D. Stoops, Executive Vice President, Operations of Del Taco LLC. From 1968 to 1991, Mr. Stoops served in a wide variety of operations positions with Burger King Corporation with increasing levels of responsibility. In 1985, Mr. Stoops was appointed Region Vice President/General Manager for the New York region and served in that position until October of 1990. In January of 1991, he joined Del Taco LLC in his current post.
Janet D. Erickson, Executive Vice President, Purchasing of Del Taco LLC. From 1979 to 1986, Ms. Erickson was with Denny’s Inc. She served in the Research and Development department in a variety of positions until 1982 when she was promoted to the position of Purchasing Agent. Ms. Erickson was hired in 1986 as Manager of Contract Purchasing with Carl Karcher Enterprises, a post she held until March 1990 when she became Vice President, Purchasing for Del Taco LLC. Ms. Erickson has a Bachelor of Science degree in Foods and Nutrition from Cal State Polytechnic University in Pomona, California.
Steven L. Brake, Vice President, Treasurer and Controller of Del Taco LLC. Mr. Brake has been Treasurer since March 2006 and previously served as the Corporate Controller of Del Taco LLC from September 2003 to March of 2006. From December 1995 until September 2003 Mr. Brake spent seven years with Arthur Andersen and one year with KPMG LLP in their respective audit departments. Mr. Brake is a licensed certified public accountant and holds a Bachelor of Arts degree in Economics from the University of California, Irvine and an MBA from the Paul Merage School of Business at the University of California, Irvine.
Code of Ethics
The Partnership has no executive officers or any fulltime employees and, accordingly, has not adopted a code of ethics.
Item 11.   Executive Compensation
The Partnership has no executive officers or directors and pays no direct remuneration to any executive officer or director of its General Partner. The Partnership has not issued any options or stock appreciation rights to any executive officer or director of its General Partner, nor does the Partnership propose to pay any annuity, pension or retirement benefits to any executive officer or director of its General Partner. The Partnership has no plan, nor does the Partnership presently propose a plan, which will result in any remuneration being paid to any executive officer or director of the General Partner upon termination of employment.

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Item 12.   Security Ownership of Certain Beneficial Owners and Management
(a)   No person of record currently owns more than five percent of limited partnership units of the Partnership, nor was any person known of by the Partnership to own of record and beneficially, or beneficially only, more than five percent of such securities.
 
(b)   Neither Del Taco LLC, nor any executive officer or director of Del Taco LLC, owns any limited partnership units of the Partnership.
 
(c)   The Partnership knows of no contractual arrangements, the operation or the terms of which may at a subsequent date result in a change in control of the Partnership, except for provisions in the partnership agreement providing for removal of the General Partner by holders of a majority of the limited partnership units and if a material event of default occurs under the financing agreements of the General Partner.

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Item 13.   Certain Relationships and Related Transactions, and Director Independence
(a)   No transactions have occurred between the Partnership and any executive officer or director of its General Partner.
 
    During 2009, the following transactions occurred between the Partnership and the General Partner pursuant to the terms of the partnership agreement.
  (1)   The General Partner earned $3,149 as its one percent share of the net income of the Partnership.
 
  (2)   The General Partner received $3,825 in distributions relating to its one percent interest in the Partnership.
(b)   During 2009, the Partnership had no business relationships with any entity of a type required to be reported under this item.
 
(c)   Neither the General Partner, any director or officer of the General Partner, or any associate of any such person, was indebted to the Partnership at any time during 2009 for any amount.
 
(d)   Not applicable.
Item 14.   Principal Accountant Fees and Services
The following table presents fees for professional services rendered by Squar, Milner, Peterson, Miranda & Williamson, LLP (Squar Milner).
                 
    2009     2008  
Audit Fees
  $ 17,547     $ 17,779  
Audit-Related Fees
    0       0  
Tax Fees
    0       0  
All Other Fees
    0       0  
 
           
 
               
Total
  $ 17,547     $ 17,779  
 
           
The General Partner approves all the audit and non-audit services, and related fees, provided to the Partnership by the independent auditors prior to the services being rendered.

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PART IV
Item 15.   Exhibits and Financial Statement Schedules
(a)(1)   Financial Statements
 
    Included in Part II of this report:
 
    Report of Independent Registered Public Accounting Firm – Squar, Milner, Peterson, Miranda & Williamson, LLP
    Balance Sheets
    Statements of Income
    Statements of Partners’ Equity
    Statements of Cash Flows
    Notes to Financial Statements
 
(a)(2)   Financial Statement Schedule
 
    Schedule III — Real Estate and Accumulated Depreciation
 
    Financial statement schedules other than those referred to above have been omitted because they are not applicable or not required.
 
(b)   Reports on Form 8-K
 
    No reports on Form 8-K were filed during 2009.
 
(c)   Exhibits required by Item 601 of Regulation S-K:
  1.   Incorporated herein by reference, Restated Agreement of Limited Partnership of Del Taco Income Properties IV filed as Exhibit 3.01 to Partnership’s Registration Statement on Form S-11 as filed with the Securities and Exchange Commission on June 5, 1987.
 
  2.   Incorporated herein by reference, Amendment to Restated Agreement of Limited Partnership of Del Taco Income Properties IV.
 
  3.   Incorporated herein by reference, Form of Standard Lease to be entered into by Partnership and Del Taco, Inc., as lessee, filed as Exhibit 10.02 to Partnership’s Registration Statement on Form S-11 as filed with the Securities and Exchange Commission on June 5, 1987.
 
  31.1   Paul J.B. Murphy, III’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
  31.2   Steven L. Brake’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
  32.1   Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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DEL TACO INCOME PROPERTIES IV
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2009
                                                                         
                            Cost capitalized   Gross amount at                            
            Initial cost   subsequent to   which carried at                            
            to company   acquisition   close of period                           Life on which
            Land   Buildings &       Land, buildings &                           depreciation in latest
Description           & land   Improve-   Carrying   improvements   Accumulated   Date of   Date   income statement
(All Restaurants)   Encumbrances   improvements   ments   costs   Total   depreciation   construction   acquired   is computed
 
Placentia, CA
      $   465,933     $ 485,961         $    951,894     $ 413,213       1988       1988     20 (LI), 35 (BI)
Lake Elsinore, CA
          449,058       468,361             917,419       398,250       1989       1989     20 (LI), 35 (BI)
San Bernardino, CA
          321,709       335,538             657,247       285,290       1989       1989     20 (LI), 35 (BI)
                             
 
                                                                       
 
                                                                       
 
      $   1,236,700     $ 1,289,860         $    2,526,560     $ 1,096,753                          
                             
                 
            Accumulated
    Restaurants   Depreciation
Balances at December 31, 2006:
  $ 2,526,560     $ 930,949  
Additions
          55,268  
Retirements
           
     
Balances at December 31, 2007:
    2,526,560       986,217  
Additions
          55,268  
Retirements
           
     
Balances at December 31, 2008:
    2,526,560       1,041,485  
Additions
          55,268  
Retirements
           
     
Balances at December 31, 2009:
  $ 2,526,560     $ 1,096,753  
     
The aggregate cost basis of Del Taco Income Properties IV real estate assets for Federal income tax purposes was $1,961,422 at December 31, 2009.
See accompanying report of independent registered public accounting firm.

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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
         
  DEL TACO INCOME PROPERTIES IV
a California limited partnership

Del Taco LLC
General Partner
 
 
Date March 12, 2010  Paul J. B. Murphy, III    
  Paul J. B. Murphy, III   
  Chief Executive Officer   
 
     
Date March 12, 2010  James W. Lyons    
  James W. Lyons   
  Chief Development Officer   
 
     
Date March 12, 2010  Steven L. Brake    
  Steven L. Brake   
  Treasurer   

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

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