DEL TACO INCOME PROPERTIES IV - FORM 10-K

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EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECURITIES - DEL TACO INCOME PROPERTIES IV	d286472dex311.htm
EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 - DEL TACO INCOME PROPERTIES IV	d286472dex321.htm
EXCEL - IDEA: XBRL DOCUMENT - DEL TACO INCOME PROPERTIES IV	Financial_Report.xls
EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECURITIES - DEL TACO INCOME PROPERTIES IV	d286472dex312.htm

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 (FEE REQUIRED)

For the fiscal year ended December 31, 2011

¨	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 no. 33-13437

DEL TACO INCOME PROPERTIES IV

(A California limited partnership)

(Exact name of registrant as specified in its charter)


California		33-0241855
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
25521 Commercentre Drive Lake Forest, California		92630
(Address of principal executive offices)		(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 x 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. ¨

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Form S-11 Registration Statement filed December 17, 1982 are incorporated by reference into Part IV of this report.

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, 2011, 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:


Address	City, State	Date of Acquisition	Restaurant Constructed	Date of Commencement 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.

Item 3.

Legal Proceedings

The Partnership is not a party to any material pending legal proceedings.

Item 4.

Mine Safety Disclosures

Not applicable.

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 264 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.

Communication from Certain Limited Partners

During the third quarter of 2011, several limited partners communicated to the General Partner their desire to sell all of the properties and then dissolve the Partnership. Pursuant to the Partnership agreement, any decision to sell all of the properties and to dissolve the Partnership would require approval from a majority in interest of limited partners. During the fourth quarter, the aforementioned limited partners withdrew their desire to sell all of the properties and dissolve the Partnership. The General Partner is not aware of any plans or activity with respect to any potential sale of properties or dissolution of the Partnership.

Item 6.

Selected Financial Data

The selected financial data presented as of and for the years ended December 31, 2011, 2010, 2009, 2008, and 2007, 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.

Item 6.

Selected Financial Data — (Continued)


	Years Ended December 31,
	2011		2010		2009		2008		2007

Rental revenues	$	415,270	$	410,415	$	434,004	$	443,351	$	435,344

General and administrative expense		78,055		60,422		64,794		64,782		66,626

Depreciation expense		36,852		37,465		55,268		55,268		55,268

Interest and other income		717		681		990		1,826		2,457

Net income		301,080		313,209		314,932		325,127		315,907

Net income per limited partnership unit		1.80		1.87		1.89		1.95		1.89

Cash distributions per limited partnership unit		2.04		2.11		2.29		2.24		2.27

Total assets		1,509,951		1,539,029		1,578,174		1,643,562		1,692,501

Long-term obligations		137,953		137,953		137,953		137,953		137,953

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

The Partnership 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.

Item 7.

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

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,
	2011		2010		2009
Orangethorpe Ave., Placentia, CA	$	181,898	$	181,474	$	188,989
Lakeshore Drive, Lake Elsinore, CA		151,698		145,878		151,851
Highland Ave., San Bernardino, CA		81,674		83,063		93,164

Total	$	415,270	$	410,415	$	434,004

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 $415,270 during the year ended December 31, 2011, which represents an increase of $4,855 from 2010. The changes in rental revenues between 2010 and 2011 are directly attributable to increases in sales levels at the restaurants under lease due to local competitive and industry factors.

The Partnership earned rental revenues of $410,415 during the year ended December 31, 2010, which represents a decrease of $23,589 from 2009. The changes in rental revenues between 2009 and 2010 are directly attributable to decreases in sales levels at the restaurants under lease due to local competitive and industry factors.

There was no supplemental rent for the years ended December 31, 2011, 2010 and 2009. 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.

Item 7.

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

Results of Operations—(Continued)

The following table breaks down general and administrative expenses by type of expense:


	Percentage of Total General and Administrative Expense
	Years Ended December 31,
	2011			2010			2009
Accounting fees		57.12	%		69.72	%		65.87	%
Distribution of information to limited partners		28.38			26.32			27.90
Other		14.50			3.96			6.23

		100.00	%		100.00	%		100.00	%

General and administrative costs increased by $17,633 from 2010 to 2011. The increase was caused primarily by legal fees related to the communication from certain limited partners in regards to their desire to sell all of the properties and then dissolve the Partnership (see Note 10), costs related to a new mandatory filing process known as XBRL, and increased costs for the distribution of information to limited partners.

General and administrative costs decreased by $4,372 from 2009 to 2010. The decrease was caused primarily by decreased printing costs and bank charges.

Depreciation expense decreased $613 in 2011 and $17,803 in 2010 because some of the assets became fully depreciated. Depreciation expense in 2009 was $55,268.

Net income decreased by $12,129 from 2010 to 2011 due to the increase in general and administrative expenses of $17,633 which was partially offset by the increase in revenues of $4,855, the increase in interest and other income of $36, and the decrease in depreciation expense of $613.

Net income decreased by $1,723 from 2009 to 2010 due to the decrease in revenues of $23,589 and the decrease in interest and other income of $309, which was partially offset by the decrease in general and administrative expenses of $4,372 and the decrease in depreciation expense of $17,803.

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.

Item 7.

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

Critical Accounting Policies and Estimates—(Continued)

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.

Item 8.

Financial Statements and Supplementary Data

PART I. INFORMATION

INDEX


		PAGE NUMBER
Report of Independent Registered Public Accounting Firm—Squar, Milner, Peterson, Miranda & Williamson, LLP		9

Balance Sheets at December 31, 2011 and 2010		10

Statements of Income for the years ended December 31, 2011, 2010 and 2009		11

Statements of Partners’ Equity for the years ended December 31, 2011, 2010 and 2009		12

Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009		13

Notes to Financial Statements		14-19

Schedule III—Real Estate and Accumulated Depreciation		25

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, 2011 and 2010 and the related statements of income, partners’ equity, and cash flows for each of the three years in the period ended December 31, 2011. 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. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

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, 2011 and 2010 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2011, 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.

/s/ Squar, Milner, Peterson, Miranda & Williamson, LLP

Newport Beach, California

March 23, 2012

DEL TACO INCOME PROPERTIES IV

BALANCE SHEETS


	December 31,
	2011			2010
ASSETS
CURRENT ASSETS:
Cash	$	118,245		$	111,469
Receivable from Del Taco LLC		35,694			34,544
Deposits		552			704

Total current assets		154,491			146,717

PROPERTY AND EQUIPMENT:
Land		868,344			868,344
Land improvements		368,356			368,356
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		1,655,889			1,619,037

		1,355,460			1,392,312

	$	1,509,951		$	1,539,029


LIABILITIES AND PARTNERS’ EQUITY

CURRENT LIABILITIES:
Payable to limited partners	$	17,368		$	16,581
Accounts payable		21,079			10,477

Total current liabilities		38,447			27,058

OBLIGATION TO GENERAL PARTNER		137,953			137,953

PARTNERS’ EQUITY:
Limited partners; 165,375 units outstanding at December 31, 2011 and December 31, 2010		1,351,349			1,391,411
General partner-Del Taco LLC		(17,798	)		(17,393	)

		1,333,551			1,374,018

	$	1,509,951		$	1,539,029

See accompanying notes to financial statements.

DEL TACO INCOME PROPERTIES IV

STATEMENTS OF INCOME


	Years Ended December 31,
	2011		2010		2009
RENTAL REVENUES	$	415,270	$	410,415	$	434,004

EXPENSES:
General and administrative		78,055		60,422		64,794
Depreciation		36,852		37,465		55,268

		114,907		97,887		120,062

Operating income		300,363		312,528		313,942

OTHER INCOME:
Interest		92		106		115
Other		625		575		875

Net income	$	301,080	$	313,209	$	314,932

Net income per limited partnership unit (Note 2)	$	1.80	$	1.87	$	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.

DEL TACO INCOME PROPERTIES IV

STATEMENTS OF PARTNERS’ EQUITY


Years Ended December 31, 2011, 2010, and 2009
	Limited Partners					General
	Units		Amount			Partner			Total
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
Net Income		—		310,077			3,132			313,209
Cash Distributions		—		(349,223	)		(3,527	)		(352,750	)

Balance, December 31, 2010		165,375		1,391,411			(17,393	)		1,374,018
Net Income		—		298,070			3,010			301,080
Cash Distributions		—		(338,132	)		(3,415	)		(341,547	)

Balance, December 31, 2011		165,375	$	1,351,349		$	(17,798	)	$	1,333,551

See accompanying notes to financial statements.

DEL TACO INCOME PROPERTIES IV

STATEMENTS OF CASH FLOWS


	Years Ended December 31,
	2011			2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income	$	301,080		$	313,209		$	314,932
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		36,852			37,465			55,268
Changes in operating assets and liabilities:
Receivable from Del Taco LLC		(1,150	)		1,142			1,775
Deposits		152			(27	)		(69	)
Payable to limited partners		787			749			1,934
Accounts payable		10,602			(353	)		290

Net cash provided by operating activities		348,323			352,185			374,130

CASH FLOWS FROM FINANCING ACTIVITIES —

Cash distributions to partners		(341,547	)		(352,750	)		(382,544	)

Net change in cash		6,776			(565	)		(8,414	)

Beginning cash balance		111,469			112,034			120,448

Ending cash balance	$	118,245		$	111,469		$	112,034

See accompanying notes to financial statements.

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.

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. There was no supplemental rent in 2011.

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, 2011. 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. Although the Partnership at times maintains balances that exceed the federally insured limit, it has not experienced any losses related to these balances and management believes the credit risk to be minimal.

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.

Subsequent Events: Management has evaluated events subsequent to December 31, 2011 through the date of the accompanying financial statements were filed with the Securities and Exchange Commission for transactions and other events that may require adjustment of and/or disclosure in such financial statements.

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 2011, 2010, and 2009.

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, 2011, 2010, and 2009, respectively. The leases terminate in the years 2021 to 2022. Pursuant to the lease agreements, minimum rentals of $3,500 per month are due to the Partnership during the first six months of any non-operating period caused by an insured casualty loss. The Partnership had a total of three properties leased to Del Taco as of December 31, 2011, 2010, and 2009 (Del Taco, in turn, has subleased one of the restaurants to a Del Taco franchisee for each of the three years ended December 31, 2011).

The two restaurants operated by Del Taco, for which the Partnership is the lessor, had combined, unaudited sales of $2,196,433, $2,204,468, and $2,351,274 and unaudited net loss of $17,643 and unaudited net income of $796 and $40,157 for the years ended December 31, 2011, 2010, and 2009, 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 increased operating expenses. The one restaurant operated by a Del Taco franchisee, for which the Partnership is the lessor, had unaudited sales of $1,264,150, $1,215,654, and $1,265,429 for the years ended December 31, 2011, 2010, and 2009, respectively.

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 2011 and 2010. This amount was collected in January 2012 and 2011, respectively.

The General Partner received $3,415, $3,527 and $3,825 in distributions relating to its one percent interest in the Partnership for the years ended December 31, 2011, 2010 and 2009, 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:


	2011			2010		2009
Net income per financial statements	$	301,080		$	313,209	$	314,932
Excess (tax) book depreciation		(3,501	)		14,915		14,915

Taxable income	$	297,579		$	328,124	$	329,847

A reconciliation of partnership equity per the financial statements to partners’ equity for tax purposes as of December 31, 2011, is as follows (unaudited):


Partners’ equity per financial statements	$	1,333,551

Issue costs of limited partnership units capitalized for tax purposes		579,259

Difference in book vs. tax depreciation		283,111

Partners’ equity for tax purposes	$	2,195,921

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, 2011 were as follows:


Quarter Ended	Cash Distribution per Limited Partnership Unit		Weighted Average Number of Units Outstanding		Number of Units Outstanding at the End of Quarter
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

December 31, 2009	$	0.55		165,375		165,375
March 31, 2010		0.41		165,375		165,375
June 30, 2010		0.54		165,375		165,375
September 30, 2010		0.61		165,375		165,375

Total paid in 2010	$	2.11

December 31, 2010	$	0.54		165,375		165,375
March 31, 2011		0.46		165,375		165,375
June 30, 2011		0.48		165,375		165,375
September 30, 2011		0.56		165,375		165,375

Total paid in 2011	$	2.04

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 2012 amounted to $0.48 per limited partnership unit and were paid in February 2012.

NOTE 8 — RESULTS BY QUARTER (UNAUDITED)


	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Year ended December 31, 2011
Rental revenues	$	99,688	$	104,653	$	106,164	$	104,765
Net income		56,431		85,424		85,818		73,407
Net income per limited partnership unit		0.34		0.51		0.51		0.44

Year ended December 31, 2010
Rental revenues	$	99,746	$	102,420	$	105,523	$	102,726
Net income		56,277		85,710		86,449		84,773
Net income per limited partnership unit		0.34		0.51		0.52		0.50

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. The increase in payable to limited partners from December 31, 2010 to December 31, 2011 is primarily due to the increase in distribution checks that were not deposited by limited partners.

NOTE 10 — COMMUNICATION FROM CERTAIN LIMITED PARTNERS

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

None

Item 9A.

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 Securities Exchange Act of 1934 (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 Chief Financial Officer, 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 Chief Financial Officer, 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 Chief Financial Officer 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 Chief Financial Officer, 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, 2011. 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).

Item 9A.

Controls and Procedures — (Continued)

Management has concluded that, as of December 31, 2011, 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	57
Janet D. Erickson	Executive Vice President, Purchasing	55
Steven L. Brake	Chief Financial Officer	39
John Cappasola	Chief Brand Officer	38
David Pear	Senior Vice President, Operations	48

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:

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.

Item 10.

Directors, Executive Officers, and Corporate Governance — (Continued)

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, Senior Vice President, Chief Financial Officer of Del Taco LLC. Mr. Brake has served as Chief Financial Officer since April of 2010 and previously served as Treasurer from March 2006 to April 2010 and 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 was 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.

John Cappasola, Chief Brand Officer of Del Taco LLC. Mr. Cappasola has served as our Chief Brand Officer since February 2011. He previously served as our Vice President of Marketing from March 2009 to February 2011. From September 2008 to March 2009, he served as our Vice President of Marketing Development. From August 2002 to September 2008, he held various positions in marketing, strategic development and operations at Blockbuster, Inc. of Dallas, Texas.

David Pear, Senior Vice President, Operations of Del Taco LLC. Mr. Pear has served as Senior Vice President of Operations since January 2012. From January 2009 to January of 2012 Mr. Pear served as a Director of DMA Operations for Taco Bell (Yum Brands). From 1985 to 2009, Mr. Pear served in a wide variety of operation positions with increasing level of responsibility for Domino’s Pizza, Inc.

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.

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

Item 12.

Security Ownership of Certain Beneficial Owners and Management — (Continued)

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.

Item 13.

Certain Relationships, Related Transactions, and Director Independence

(a)	Other than listed below, no transactions have occurred between the Partnership and any executive officer or director of its General Partner.

During 2011, the following transactions occurred between the Partnership and the General Partner pursuant to the terms of the partnership agreement.

(1)

The General Partner earned $3,010 as its one percent share of the net income of the Partnership.

(2)

The General Partner received $3,415 in distributions relating to its one percent interest in the Partnership.

(b)	During 2011, 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 2011 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).


	2011		2010
Audit Fees	$	17,055	$	16,563
Audit-Related Fees		—		—
Tax Fees		—		—
All Other Fees		—		—

Total	$	17,055	$	16,563

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.

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)		FinancialStatement 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 2011.

(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

		101.INS XBRLInstance Document* 101.SCH XBRLTaxonomy Extension Schema Document* 101.CAL XBRLTaxonomy Extension Calculation Linkbase Document* 101.DEF XBRLTaxonomy Extension Definition Linkbase Document* 101.LAB XBRLTaxonomy Extension Label Linkbase Document* 101.PRE XBRLTaxonomy Extension Presentation Linkbase Document*

Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections.

DEL TACO INCOME PROPERTIES IV

SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2011


							Cost capitalized		Gross amount at
			Initial cost				subsequent to		which carried at
			to company				acquisition		close of period								Life on which
Description (All Restaurants)	Encumbrances		Land & land improvements		Buildings & Improve- ments		Carrying costs		Land, buildings & improvements Total		Accumulated depreciation		Date of construction		Date acquired		depreciation in latest income statement is computed
Placentia, CA	$	—	$	465,933	$	485,961	$	—	$	951,894	$	441,213		1988		1988		20 (LI), 35 (BI)
Lake Elsinore, CA		—		449,058		468,361		—		917,419		425,235		1989		1989		20 (LI), 35 (BI)
San Bernardino, CA		—		321,709		335,538		—		657,247		304,622		1989		1989		20 (LI), 35 (BI)

								—
	$	—	$	1,236,700	$	1,289,860	$	—	$	2,526,560	$	1,171,070


	Restaurants		Accumulated Depreciation
		—
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
Additions		—		37,465
Retirements		—		—

Balances at December 31, 2010:		2,526,560		1,134,218
Additions		—		36,852
Retirements		—		—

Balances at December 31, 2011:	$	2,526,560	$	1,171,070

The aggregate cost basis of Del Taco Income Properties IV real estate assets for Federal income tax purposes was $2,526,560 at December 31, 2011.

See accompanying report of independent registered public accounting firm.

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.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company