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EXCEL - IDEA: XBRL DOCUMENT - WNC HOUSING TAX CREDIT FUND V LP SERIES 4Financial_Report.xls
EX-32.2 - EXHIBIT 32.2 - WNC HOUSING TAX CREDIT FUND V LP SERIES 4ex32-2.htm
EX-32.1 - EXHIBIT 32.1 - WNC HOUSING TAX CREDIT FUND V LP SERIES 4ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - WNC HOUSING TAX CREDIT FUND V LP SERIES 4ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - WNC HOUSING TAX CREDIT FUND V LP SERIES 4ex31-1.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

 

For the fiscal year ended March 31, 2014

 

OR

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

Commission file number: 0-21897

 

WNC HOUSING TAX CREDIT FUND V, L.P., Series 4

(Exact name of registrant as specified in its charter)

 

California   33-0707612
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)

 

17782 Sky Park Circle, Irvine, CA

92614-6404 (Zip code)

(Address of principal executive offices)

 

(714) 662-5565

(Telephone Number)

 

Securities registered pursuant to Section 12(b) of the Act:

 

NONE

 

Securities registered pursuant to section 12(g) of the Act:

 

UNITS OF LIMITED PARTNERSHIP INTEREST

(Title of Class)

 

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 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 Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [  ]

 

Indicate by check mark 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. [X]

 

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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ] Non-accelerated filer [X] 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]

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

 

INAPPLICABLE

 

DOCUMENTS INCORPORATED BY REFERENCE

 

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).

 

NONE

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
     
  Part I  
     
Item 1. Business 3
Item 1A. Risk Factors 6
Item 1B. Unresolved Staff Comments 15
Item 2. Properties 16
Item 3. Legal Proceedings 20
Item 4. Mine Safety Disclosures 20
     
  Part II  
     
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 20
Item 6. Selected Financial Data 21
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 29
Item 8. Financial Statements and Supplementary Data 30
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 31
Item 9A. Controls and Procedures 31
Item 9B. Other Information 32
     
  Part III  
     
Item 10. Directors, Executive Officers and Corporate Governance 33
Item 11. Executive Compensation 36
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 38
Item 13. Certain Relationships and Related Transactions, and Director Independence 38
Item 14. Principal Accountant Fees and Services 39
     
  Part IV  
     
Item 15. Exhibits and Financial Statement Schedules 40
Signatures 49

 

2
 

 

PART I.

 

Item 1. Business

 

Organization

 

WNC Housing Tax Credit Fund V, L.P., Series 4 (the “Partnership”) is a California Limited Partnership formed under the laws of the State of California on July 26, 1995, and commenced operations on July 1, 1996. The Partnership was formed to acquire limited partnership interests in other limited partnerships (“Local Limited Partnerships”) which own multi-family housing complexes (“Housing Complexes”) that are eligible for Federal low income housing tax credits (“Low Income Housing Tax Credits”). The local general partners (the “Local General Partners”) of each Local Limited Partnership retain responsibility for maintaining, operating and managing the Housing Complex. Each Local Limited Partnership is governed by its agreement of limited partnership (the “Local Limited Partnership Agreement”).

 

The general partner of the Partnership is WNC & Associates, Inc. (the “General Partner” or “Associates”). The chairman and the president of Associates own all of the outstanding stock of Associates. The business of the Partnership is conducted primarily through the General Partner, as the Partnership has no employees of its own.

 

Pursuant to a registration statement filed with the Securities and Exchange Commission (the “SEC”) on July 26, 1995, the Partnership commenced a public offering of 25,000 units of limited partnership interest (“Partnership Units”) at a price of $1,000 per Partnership Unit. As of the close of the public offering on July 11, 1997 a total of 22,000 Partnership Units representing subscriptions in the amount of $21,914,830, net of dealer discounts of $5,620 and volume discounts of $79,550, had been sold. As of March 31, 2014, a total of 21,932 Partnership Units remain outstanding. Holders of Partnership Units are referred to herein as “Limited Partners”.

 

The Partnership shall continue in full force and effect until December 31, 2050 unless terminated prior to that date pursuant to the Partnership Agreement (as defined below) or law.

 

Description of Business

 

The Partnership’s principal business objective is to provide its Limited Partners with Low Income Housing Tax Credits. The Partnership’s principal business therefore consists of investing as a limited partner or non-managing member in Local Limited Partnerships each of which will own and operate a Housing Complex which will qualify for the Low Income Housing Tax Credits. In general, under Section 42 of the Internal Revenue Code, an owner of low income housing can receive the Low Income Housing Tax Credits to be used to reduce Federal taxes otherwise due in each year of a ten-year credit period. Each Housing Complex is subject to a 15-year compliance period (the “Compliance Period”), and under state law may have to be maintained as low income housing for 30 or more years.

 

As a consequence of the provisions of tax law in effect for dispositions of buildings prior to August 2008, in order to avoid recapture of Low Income Housing Credits, the Partnership expected that it would not dispose of its interests in Local Limited Partnerships (“Local Limited Partnership Interests”) or approve the sale by any Local Limited Partnership of its Housing Complex prior to the end of the applicable Compliance Period. That provision of law was amended in 2008 (i) to provide that there would be no recapture on sale of a Low Income Housing Tax Credit building during the Compliance Period if it were reasonable to expect at the time of sale that the building would continue to be operated as qualified low income housing (see “Exit Strategy” below) and (ii) to eliminate the possibility of posting a bond against potential recapture. The Partnership is not seeking to sell its Local Limited Partnership Interests. And, because of (i) the nature of the Housing Complexes and the Local Limited Partnership Interests, (ii) the difficulty of predicting the resale market for low-income housing, (iii) the current economy, and (iv) the ability of lenders to disapprove of transfer, it is not possible at this time to predict when the liquidation of the Partnership’s assets and the disposition of the proceeds, if any, in accordance with the Partnership’s Agreement of Limited Partnership dated May 5, 1996 (the “Partnership Agreement”), would occur. Furthermore, the recent codification of the economic substance doctrine as part of 2010 legislation has created some uncertainty about the deductibility of losses from low income housing that is not generating Low Income Housing Tax Credits, and this could have an adverse effect on the resale market for Housing Complexes and Local Limited Partnership Interests. Until a Local Limited Partnership Interest or the related Housing Complex is sold, it is anticipated that the Local General Partner would continue to operate such Housing Complex. Notwithstanding the preceding, circumstances beyond the control of the General Partner or the Local General Partners may occur during the ten-year credit period and/or the Compliance Period, which would require the Partnership to approve the disposition of a Housing Complex prior to the end thereof, possibly resulting in recapture of Low Income Housing Tax Credits.

 

3
 

 

The Partnership originally invested in fourteen Local Limited Partnerships, nine of which had been sold or otherwise disposed as of March 31, 2014. Each of these Local Limited Partnerships owns or owned a single Housing Complex that was eligible for the Low Income Housing Tax Credits. Certain Local Limited Partnerships may also benefit from additional government programs promoting low- or moderate-income housing.

 

Exit Strategy

 

The Compliance Period for a Housing Complex is generally 15 years following construction or rehabilitation completion. Associates was one of the first in the industry to offer syndicated investments in Low Income Housing Tax Credits. The initial programs have completed their Compliance Periods.

 

Upon the sale of a Local Limited Partnership Interest or Housing Complex after the end of the Compliance Period, there would be no recapture of Low Income Housing Tax Credits. A sale prior to the end of the Compliance Period must satisfy the “reasonable belief” test outlined above to avoid recapture.

 

The following table reflects the end of the ten-year credit period and the Compliance Period of each Housing Complex:

 

Local Limited Partnership Name   Expected last year of
credit delivery
  15-year
Compliance
Period
         
Ashford Place Limited Partnership   2008   2012
Belen Vista Associates Limited Partnership   2007   2012
Bolivar Plaza Apartments, LP   2010   2014
Mountain Vista Associates Limited Partnership   2011   2011
Wynwood Place, Limited Partnership   2009   2013

 

The General Partner is continuing its review of the Housing Complexes. The proceeds from the disposition of any Housing Complex will be used first to pay debts and other obligations per the applicable Local Limited Partnership Agreement. Any remaining proceeds will then be paid to the partners of the Local Limited Partnership, including the Partnership, in accordance with the terms of the applicable Local Limited Partnership Agreement.

 

Upon identifying those Housing Complexes with the highest potential for a successful sale, refinancing or re-syndication, the Partnership expects to proceed with efforts to liquidate them or the applicable Local Limited Partnership Interests. The objective is to wind down the Partnership after Low Income Housing Tax Credits are no longer available. Local Limited Partnership Interests may be disposed of at any time by the General Partner in its discretion. While liquidation of the Housing Complexes or the applicable Local Limited Partnership Interests continues to be evaluated, the dissolution of the Partnership was not imminent as of March 31, 2014.

 

The proceeds from the disposition of any Housing Complex will be used first to pay debts and other obligations per the applicable Local Limited Partnership Agreement. Any remaining proceeds will then be paid to the partners of the Local Limited Partnership, including the Partnership, in accordance with the terms of the applicable Local Limited Partnership Agreement.

 

4
 

 

The sale of a Housing Complex may be subject to other restrictions and obligations. Accordingly, there can be no assurance that a Local Limited Partnership will be able to sell its Housing Complex. Even if it does so, there can be no assurance that any amounts of cash will be distributed to the Limited Partners, as the proceeds first would be used to pay Partnership obligations and to fund reserves. Similarly, there can be no assurance that the Partnership will be able to sell its Local Limited Partnership Interests, or that cash therefrom would be available for distribution to the Limited Partners.

 

As of March 31, 2013, the Partnership sold the Housing Complexes of Mesa Verde Apartments, L.P and The North Central Limited Partnership. The Partnership also sold its Local Limited Partnership Interest in Lamar Plaza Apartments, LP and D. Hilltop Apartments, Ltd. The Compliance Period for Mesa Verde Apartments, L.P, The North Central Limited Partnership and Lamar Plaza Apartments, LP expired after the date of sale. The Purchaser has guaranteed that the Local Limited Partnership will stay in compliance with the Low Income Housing Tax Credit code, therefore there was no risk of recapture.

 

During the year ended March 31, 2014, the Housing Complex of Blessed Rock of El Monte, a CA Partnership (“Blessed Rock”) was sold. The Partnership also sold its Local Limited Partnership interests in Woodland, Ltd., Greyhound Associates I, L.P. and Crescent City Apartment, a California Limited Partnership. The following table reflects the five dispositions during the year ended March 31, 2014. No distributions were made to the Limited Partners as a result of these dispositions. Each of the Local Limited Partnerships had completed its Compliance Period so there is no risk of recapture to the investors in the Partnership:

 

Local Limited
Partnership
  Debt at
12/31
prior to
sale date
   Appraisal
Value
   Date of
Sale
   Sales
Proceeds
   Actual
Sale
Related
Expenses
   Investment
balance at
date of sale
   Gain on
sale
 
Blessed Rock of El Monte, a CA Partnership  $2,054,000   $6,910,000    4/12/2013   $2,355,384   $2,251   $547,889   $1,805,244 
Woodland, Ltd   1,341,720    226,000    7/31/2013    28,001    4,424    -    23,577 
Greyhound Associates I, L.P   435,203    115,000    8/31/2013    5,000    4,381    -    619 
Crescent City Apartment, a California Limited Partnership   2,681,206    320,000    10/1/2013    50,000    12,275    -    37,725 
Cleveland Apartments, L.P   1,454,052    1,070,000    2/27/2014    44,499    19,069    -    25,430 

 

5
 

 

The following table represents the use of the cash proceeds from the dispositions of the Local Limited Partnerships during the year ended March 31, 2014:

 

Local Limited Partnership  Cash
proceeds
   Reimburse
for GP
interest
   Payment of
Local
Limited
Partnership’s
real estate
taxes
   Reimburse
GP or
affiliates
for
expenses 
   Payment of
accrued
asset
management
fees
   Reimburse
GP or
affiliates
for debts
   Remaining
cash to
remain in
reserves
for future
expenses
 
Blessed Rock of El Monte, a CA Partnership  $2,355,384   $-   $-   $25,852   $181,045   $785,650   $1,362,837 
Woodland, Ltd   28,001    -    -    23,000    -    -    5,001 
Greyhound Associates I, L.P   5,000    -    -    -    -    -    5,000 
Crescent City Apartment, a California Limited Partnership   50,000    -    -    -    21,868    -    28,132 
Cleveland Apartments, L.P   44,499    5,501    38,210    -    6,289    -    - 

 

As of March 31, 2014, the Local Limited Partnership interest in Ashford Place Limited Partnership was identified to be sold. Ashford Place was appraised for $2,560,000 and had a mortgage note balance of $1,780,549 as of December 31, 2013. The Partnership’s investment balance is zero. The Compliance Period has been completed therefore there is no risk of recapture and investor approval is not required. The estimated sales price is $5,000. The Partnership has incurred $24,804 in sale related expenses which will be netted against the proceeds from the sale in calculating the gain/loss on sale. No distributions will be made to the Limited Partners as the result of this sale. The closing date for the Local Limited Partnership Interest sale has not yet been determined.

 

Item 1A. Risk Factors

 

Set forth below are the risks the Partnership believes are the most significant material risks to the Limited Partners. The Partnership and the Local Limited Partnerships operate in a continually changing business environment and, therefore, new risks emerge from time to time. This section contains some forward-looking statements. For an explanation of the qualifications and limitations on forward-looking statements, see Item 7.

 

6
 

 

(a)Risks arising from the Internal Revenue Code rules governing Low Income Housing Tax Credits

 

Low Income Housing Tax Credits might not be available. If a Housing Complex does not satisfy the requirements of Internal Revenue Code Section 42, then the Housing Complex will not be eligible for Low Income Housing Tax Credits.

 

Low Income Housing Tax Credits might be less than anticipated. The Local General Partners calculate the amount of the Low Income Housing Tax Credits. No opinion of counsel will cover the calculation of the amount of Low Income Housing Tax Credits. The IRS could challenge the amount of the Low Income Housing Tax Credits claimed for any Housing Complex under any of a number of provisions set forth in Internal Revenue Code Section 42. A successful challenge by the IRS would decrease the amount of the Low Income Housing Tax Credits from the amount paid for by the Partnership. Although each Housing Complex has completed its Compliance Period, the IRS generally can audit an information income tax return for a period of three years following the filing date of the return. A determination by the IRS that the amount of Low Income Housing Tax Credits taken for an open year could result in a recapture of credits with interest. If it does, recapture will be a portion of all Low Income Housing Tax Credits taken in prior years for that Housing Complex, plus interest. During the first 11 years of the Compliance Period, non-compliance results in one-third of the Low Income Housing Tax Credits up to that point for the particular Housing Complex being recaptured, plus interest. Between years 12 and 15, the recapture is phased out ratably.

 

Low Income Housing Tax Credits may be recaptured if Housing Complexes are not owned and operated for 15 years. Housing Complexes must comply with Internal Revenue Code Section 42 for the 15-year Compliance Period. Low Income Housing Tax Credits will be recaptured with interest to the extent that a Housing Complex is not rented as low income housing or in some other way does not satisfy the requirements of Internal Revenue Code Section 42 during the Compliance Period.

 

There can be no assurance that recapture will not occur. If it does, recapture will be a portion of all Low Income Housing Tax Credits taken in prior years for that Housing Complex, plus interest. During the first 11 years of the Compliance Period, non-compliance results in one-third of the Low Income Housing Tax Credits up to that point for the particular Housing Complex being recaptured, plus interest. Between years 12 and 15, the recapture is phased out ratably.

 

Sales of Housing Complexes after 15 years are subject to limitations which may impact a Local Limited Partnership’s ability to sell its Housing Complex. Each Local Limited Partnership executes an extended low income housing commitment with the state in which the Housing Complex is located. The extended low income housing commitment states the number of years that the Local Limited Partnership and any subsequent owners must rent the Housing Complex as low income housing. Under Federal law, the commitment must be for at least 30 years. The commitment, actually agreed to, may be significantly longer than 30 years. In prioritizing applicants for Low Income Housing Tax Credits, most states give additional points for commitment periods in excess of 30 years. On any sale of the Housing Complex during the commitment period, the purchaser would have to agree to continue to rent the Housing Complex as low income housing for the duration of the commitment period. This requirement reduces the potential market, and possibly the sales price, for the Housing Complexes. The sale of a Housing Complex may be subject to other restrictions. For example, Federal lenders or subsidizers may have the right to approve or disapprove a purchase of a Housing Complex. Accordingly, there can be no assurance that a Local Limited Partnership will be able to sell its Housing Complex. Even if it does so, there can be no assurance that any amount of cash will be distributed to the Limited Partners. The Partnership would first use sale proceeds to pay obligations of the Partnership. As a result, a material portion of the Low Income Housing Tax Credits may represent a return of the money originally invested in the Partnership.

 

As part of the recently enacted health care legislation, Congress has codified the economic substance doctrine. Because of its recent enactment, the full reach of this provision is unclear. Inasmuch as Housing Complexes might offer no benefit to a purchaser other than tax benefits, it is possible that the economic substance doctrine could be interpreted to limit deduction of tax losses from Housing Complexes, which would be expected to have a significant adverse effect on the sale value of the Housing Complexes and the Local Limited Partnership Interests.

 

7
 

 

Limited Partners can only use Low Income Housing Tax Credits in limited amounts. The ability of an individual or other non-corporate Limited Partner to claim Low Income Housing Tax Credits on his individual tax return is limited. For example, an individual Limited Partner can use Low Income Housing Tax Credits to reduce his tax liability on:

 

  · an unlimited amount of passive income, which is income from entities such as the Partnership, and
     
  · $25,000 in income from other sources.

 

However, the use of Low Income Housing Tax Credits by an individual against these types of income is subject to ordering rules, which may further limit the use of Low Income Housing Tax Credits. Some corporate Limited Partners are subject to similar and other limitations. They include corporations which provide personal services, and corporations which are owned by five or fewer shareholders.

 

Any portion of a Low Income Housing Tax Credit which is allowed to a Limited Partner under such rules is then aggregated with all of the Limited Partner’s other business credits. The aggregate is then subject to the general limitation on all business credits. That limitation provides that a Limited Partner can use business credits to offset the Limited Partner’s annual tax liability equal to $25,000 plus 75% of the Limited Partner’s tax liability in excess of $25,000. However, there may be limits on the use of business credits to offset any alternative minimum tax. All of these concepts are extremely complicated.

 

(b)Risks related to investment in Local Limited Partnerships and Housing Complexes

 

Because the Partnership has few investments, each investment will have a great impact on the Partnership’s results of operations. Any single Housing Complex experiencing poor operating performance, impairment of value or recapture of Low Income Housing Tax Credits will have a significant impact upon the Partnership as a whole.

 

The failure to pay mortgage debt could result in a forced sale of a Housing Complex. Each Local Limited Partnership leverages the Partnership’s investment therein by incurring mortgage debt. A Local Limited Partnership’s revenues could be less than its debt payments and taxes and other operating costs. If so, the Local Limited Partnership would have to use working capital reserves, seek additional funds, or suffer a forced sale of its Housing Complex, which could include a foreclosure. The same results could occur if government subsidies ceased. Foreclosure would result in a loss of the Partnership’s capital invested in the Housing Complex. Foreclosure could also result in a recapture of Low Income Housing Tax Credits, and a loss of Low Income Housing Tax Credits for the year in which the foreclosure occurs. If the Housing Complex is highly-leveraged, a relatively slight decrease in the rental revenues could adversely affect the Local Limited Partnership’s ability to pay its debt service requirements. Mortgage debt may be repayable in a self-amortizing series of equal installments or with a large balloon final payment. Balloon payments maturing prior to the end of the anticipated holding period for the Housing Complex create the risk of a forced sale if the debt cannot be refinanced. There can be no assurance that additional funds will be available to any Local Limited Partnership if needed on acceptable terms or at all.

 

The Partnership does not control the Local Limited Partnerships and must rely on the Local General Partners. The Local General Partners will make all management decisions for the Local Limited Partnerships and the Housing Complexes. The Partnership has very limited rights with respect to management of the Local Limited Partnerships. The Partnership will not be able to exercise any control with respect to Local Limited Partnership business decisions and operations. Consequently, the success of the Partnership will depend on the abilities of the Local General Partners.

 

8
 

 

Housing Complexes subsidized by other government programs are subject to additional rules which may make it difficult to operate and sell Housing Complexes. Some or all of the Housing Complexes receive or may receive government financing or operating subsidies in addition to Low Income Housing Tax Credits. The following are risks associated with some such subsidy programs:

 

  Obtaining tenants for the Housing Complexes. Government regulations limit the types of people who can rent subsidized housing. These regulations may make it more difficult to rent the residential units in the Housing Complexes.
     
  Obtaining rent increases. In many cases rents can only be increased with the prior approval of the subsidizing agency.
     
  Limitations on cash distributions. The amount of cash that may be distributed to owners of subsidized Housing Complexes is less than the amount that could be earned by the owners of non-subsidized Housing Complexes.
     
  Limitations on sale or refinancing of the Housing Complexes. A Local Limited Partnership may be unable to sell its Housing Complex or to refinance its mortgage loan without the prior approval of the lender or state allocating agency. The lender or state allocating agency may withhold such approval in the discretion of the lender or state allocating agency. Approval may be subject to conditions, including the condition that the purchaser continues to operate the property as affordable housing for terms which could be as long as 30 years or more. In addition, any prepayment of a mortgage may result in the assessment of a prepayment penalty.
     
  Limitations on transfers of interests in Local Limited Partnerships. The Partnership may be unable to sell its interest in a Local Limited Partnership without the prior approval of the lender or state allocating agency. The lender or state allocating agency may withhold such approval in the discretion of the lender or state allocating agency. Approval may be subject to conditions.
     
  Limitations on removal and admission of Local General Partners. The Partnership may be unable to remove a Local General Partner from a Local Limited Partnership except for cause, such as the violation of the rules of the lender or state allocating authority. Regulations may prohibit the removal of a Local General Partner or permit removal only with the prior approval of the lender. Regulations may also require approval of the admission of a successor Local General Partner even upon the death or other disability of a Local General Partner.
     
  Limitations on subsidy payments. Subsidy payments may be fixed in amount and subject to annual legislative appropriations. The rental revenues of a Housing Complex, when combined with the maximum committed subsidy, may be insufficient to meet obligations. Congress or the state legislature, as the case may be, may fail to appropriate or increase the necessary subsidy. In those events, the mortgage lender could foreclose on the Housing Complex unless a workout arrangement could be negotiated.
     
  Possible changes in applicable regulations. Legislation may be enacted which adversely revises provisions of outstanding mortgage loans. Such legislation has been enacted in the past.
     
  Limited Partners may not receive distributions if Housing Complexes are sold. There is no assurance that Limited Partners will receive any cash distributions from the sale or refinancing of a Housing Complex. The price at which a Housing Complex is sold may not be high enough to pay the mortgage and other expenses at the Local Limited Partnership and Partnerships levels which must be paid at such time. If that happens, a Limited Partner’s return would be derived only from the Low Income Housing Tax Credits and tax losses. Similar risks apply to sales of Local Limited Partnership Interests.

 

Uninsured casualties could result in losses and recapture. There are casualties which are either uninsurable or not economically insurable. These include earthquakes, floods, wars and losses relating to hazardous materials or environmental matters. If a Housing Complex experienced an uninsured casualty, the Partnership could lose both its invested capital and anticipated profits in such property. Even if the casualty were an insured loss, the Local Limited Partnership might be unable to rebuild the destroyed property. A portion of prior Low Income Housing Tax Credits could be recaptured and future Low Income Housing Tax Credits could be lost if the Housing Complex were not restored within a reasonable period of time. Any liability judgments against the Local Limited Partnership could exceed available insurance proceeds or otherwise materially and adversely affect the Local Limited Partnership. The cost of liability and casualty insurance has increased in recent years. Casualty insurance has become more difficult to obtain and may require large deductible amounts.

 

9
 

 

Housing Complexes without financing or operating subsidies may be unable to pay operating expenses. If a Local Limited Partnership were unable to pay operating expenses, one result could be a forced sale of its Housing Complex. If a forced sale occurs during the Compliance Period of a Housing Complex, a partial recapture of Low Income Housing Tax Credits could occur. In this regard, some of the Local Limited Partnerships may own Housing Complexes which have no subsidies other than Low Income Housing Tax Credits. Those Housing Complexes do not have the benefit of below-market-interest-rate financing or operating subsidies which often are important to the feasibility of low income housing. Those Housing Complexes rely solely on rents to pay expenses. However, in order for any Housing Complex to be eligible for Low Income Housing Tax Credits, it must restrict the rent which may be charged to tenants. Over time, the expenses of a Housing Complex will increase. If a Local Limited Partnership cannot increase its rents, it may be unable to pay increased operating expenses.

 

The Partnership’s investment protection policies will be worthless if the net worth of the Local General Partners is not sufficient to satisfy their obligations. There is a risk that the Local General Partners will be unable to perform their financial obligations to the Partnership. The General Partner has not established a minimum net worth requirement for the Local General Partners. Rather, at the time of the Partnership’s investment, each Local General Partner demonstrated a net worth which the General Partner believed was appropriate under the circumstances. The assets of the Local General Partners are likely to consist primarily of real estate holdings and similar assets. The fair market value of these types of assets is difficult to estimate. These types of assets cannot be readily liquidated to satisfy the financial guarantees and commitments which the Local General Partners make to the Partnership. Moreover, other creditors may have claims on these assets. No escrow accounts or other security arrangements will be established to ensure performance of a Local General Partner’s obligations. The cost to enforce a Local General Partner’s obligations may be high. If a Local General Partner does not satisfy its obligations the Partnership may have no remedy, or the remedy may be limited to removing the Local General Partner as general partner of the Local Limited Partnership.

 

Fluctuating economic conditions can reduce the value of real estate. The Partnership’s principal business objective is providing its Limited Partners with Low Income Housing Tax Credits, not the generation of gains from the appreciation of real estate held by the Local Limited Partnerships. In its financial statements, the Partnership has carried its investments in Local Limited Partnerships at values equal to or less than the sum of the total amount of the remaining future Low Income Housing Tax Credits estimated to be allocated to the Partnership and the estimated residual value to the Partnership of its interests in the Local Limited Partnerships. As of March 31, 2014, 2013, and 2012, the Partnership had reduced the carrying amount to $0 with respect to five, nine, and ten, respectively, of its investments.

 

Any investment in real estate is subject to risks from fluctuating economic conditions. These conditions can adversely affect the ability to realize a profit or even to recover invested capital. Among these conditions are:

 

  the general and local job market,
     
  the availability and cost of mortgage financing,
     
  monetary inflation,
     
  tax, environmental, land use and zoning policies,
     
  the supply of and demand for similar properties,
     
  neighborhood conditions,
     
  the availability and cost of utilities and water.

 

A loss in value of an investment in a Local Limited Partnership, other than a temporary decline, is recorded by the Partnership in its financial statements as an impairment loss. Impairment is measured by comparing the Partnership’s carrying amount in the investment to the sum of the total amount of the remaining future Low Income Housing Tax Credits estimated to be allocated to the Partnership and the estimated residual value to the Partnership. For the years ended March 31, 2014, 2013, and 2012, impairment loss related to investments in Local Limited Partnerships was $100,779, $0, and $0, respectively.

 

10
 

 

(c)Tax risks other than those relating to tax credits

 

In addition to the risks pertaining specifically to Low Income Housing Tax Credits, there are other Federal income tax risks. Additional Federal income tax risks associated with the ownership of Partnership Units and the operations of the Partnership and the Local Limited Partnerships include, but are not limited to, the following:

 

No opinion of counsel as to certain matters. No legal opinion is obtained regarding matters:

 

  the determination of which depends on future factual circumstances,
     
  which are peculiar to individual Limited Partners, or
     
  which are not customarily the subject of an opinion.

 

The more significant of these matters include:

 

  allocating purchase price among components of a property, particularly as between buildings and fixtures, the cost of which is depreciable, and the underlying land, the cost of which is not depreciable,
     
  characterizing expenses and payments made to or by the Partnership or a Local Limited Partnership,
     
  identifying the portion of the costs of any Housing Complex which qualify for historic and other tax credits,
     
  applying to any specific Limited Partner the limitation on the use of tax credits and tax losses. Limited Partners must determine for themselves the extent to which they can use tax credits and tax losses, and the application of the alternative minimum tax to any specific Limited Partner, or the calculation of the alternative minimum tax by any Limited Partner. The alternative minimum tax could reduce the tax benefits from an investment in the Partnership.

 

There can be no assurance, therefore, that the IRS will not challenge some of the tax positions adopted by the Partnership. The courts could sustain an IRS challenge. An IRS challenge, if successful, could have a detrimental effect on the Partnership’s ability to realize its investment objectives.

 

Passive activity rules will limit deduction of the Partnership’s losses and impose tax on interest income. The Internal Revenue Code imposes limits on the ability of most investors to claim losses from investments in real estate. An individual may claim these so-called passive losses only as an offset to income from investments in real estate or rental activities. An individual may not claim passive losses as an offset against other types of income, such as salaries, wages, dividends and interest. These passive activity rules will restrict the ability of most Limited Partners to use losses from the Partnership as an offset of non-passive income.

 

The Partnership may earn interest income on its reserves and loans. The passive activity rules generally will categorize interest as portfolio income, and not passive income. Passive losses cannot be used as an offset to portfolio income. Consequently, a Limited Partner could pay tax liability on portfolio income from the Partnership.

 

At risk rules might limit deduction of the Partnership’s losses. If a significant portion of the financing used to purchase Housing Complexes does not consist of qualified nonrecourse financing, the “at risk” rules will limit a Limited Partner’s ability to claim Partnership losses to the amount the Limited Partner invests in the Partnership. The “at risk” rules of the Internal Revenue Code generally limit a Limited Partner’s ability to deduct Partnership losses to the sum of:

 

  the amount of cash the Limited Partner invests in the Partnership, and
     
  the Limited Partner’s share of Partnership qualified nonrecourse financing.

 

Qualified nonrecourse financing is non-convertible, nonrecourse debt which is borrowed from a government, or with exceptions, any person actively and regularly engaged in the business of lending money.

 

11
 

 

Tax liability on sale of a Housing Complex or Local Limited Partnership Interest may exceed the cash available from the sale. When a Local Limited Partnership sells a Housing Complex it will recognize gain. Such gain is equal to the difference between:

 

  the sales proceeds plus the amount of indebtedness secured by the Housing Complex, and
     
  the adjusted basis for the Housing Complex. The adjusted basis for a Housing Complex is its original cost, plus capital expenditures, minus depreciation.

 

Similarly, when the Partnership sells an interest in a Local Limited Partnership the Partnership will recognize gain. Such gain is equal to the difference between:

 

  the sales proceeds plus the Partnership’s share of the amount of indebtedness secured by the Housing Complex, and
     
  the adjusted basis for the interest. The adjusted basis for an interest in a Local Limited Partnership is the amount paid for the interest, plus income allocations and cash distributions, less loss allocations.

 

Accordingly, gain will be increased by the depreciation deductions taken during the holding period for the Housing Complex. In some cases, a Limited Partner could have a tax liability from a sale greater than the cash distributed to the Limited Partner from the sale.

 

Alternative minimum tax liability could reduce a Limited Partner’s tax benefits. If a Limited Partner pays alternative minimum tax, the Limited Partner could suffer a reduction in benefits from an investment in the Partnership. The application of the alternative minimum tax is personal to each Limited Partner. Tax credits may not be utilized to reduce alternative minimum tax liability.

 

IRS could audit the returns of the Partnership, the Local Limited Partnerships or the Limited Partners. The IRS can audit the Partnership or a Local Limited Partnership at the entity level with regard to issues affecting the entity. The IRS does not have to audit each Limited Partner in order to challenge a position taken by the Partnership or a Local Limited Partnership. Similarly, only one judicial proceeding can be filed to contest an IRS determination. A contest by the Partnership of any IRS determination might result in high legal fees.

 

An audit of the Partnership or a Local Limited Partnership also could result in an audit of a Limited Partner. An audit of a Limited Partner’s tax returns could result in adjustments both to items that are related to the Partnership and to unrelated items. The Limited Partner could then be required to file amended tax returns and pay additional tax plus interest and penalties.

 

A successful IRS challenge to tax allocations of the Partnership or a Local Limited Partnership would reduce the tax benefits of an investment in the Partnership. Under the Internal Revenue Code, a partnership’s allocation of income, gains, deductions, losses and tax credits must have substantial economic effect. Substantial economic effect is a highly-technical concept. The fundamental principle is two-fold. If a partner will benefit economically from an item of partnership income or gain, that item must be allocated to him so that he bears the correlative tax burden. Conversely, if a partner will suffer economically from an item of partnership deduction or loss, that item must be allocated to him so that he bears the correlative tax benefit. If a partnership’s allocations do not have substantial economic effect, then the partnership’s tax items are allocated in accordance with each partner’s interest in the partnership. The IRS might challenge the allocations made by the Partnership:

 

  between the Limited Partners and the General Partner,
     
  among the Limited Partners, or
     
  between the Partnership and a Local General Partner.

 

If any allocations were successfully challenged, a greater share of the income or gain or a lesser share of the losses or tax credits might be allocated to the Limited Partners. This would increase the tax liability or reduce the tax benefits to the Limited Partners.

 

12
 

 

Tax liabilities could arise in later years of the Partnership. After a period of years following commencement of operations by a Local Limited Partnership, the Local Limited Partnership may generate profits rather than losses. A Limited Partner would have tax liability on his share of such profits unless he could offset the income with:

 

  unused passive losses from the Partnership or other investments, or
     
  current passive losses from other investments.

 

In such circumstances, the Limited Partner would not receive a cash distribution from the Partnership with which to pay any tax liability.

 

IRS challenge to tax treatment of expenditures could reduce losses. The IRS may contend that fees and payments of the Partnership or a Local Limited Partnership:

 

  should be deductible over a longer period of time or in a later year,
     
  are excessive and may not be capitalized or deducted in full,
     
  should be capitalized and not deducted, or
     
  may not be included as part of the basis for computing tax credits.

 

Any such contention by the IRS could adversely impact, among other things:

 

  the eligible basis of a Housing Complex used to compute Low Income Housing Tax Credits,
     
  the adjusted basis of a Housing Complex used to compute depreciation,
     
  the correct deduction of fees,
     
  the amortization of organization and offering expenses and start-up expenditures.

 

If the IRS were successful in any such contention, the anticipated Low Income Housing Tax Credits and losses of the Partnership would be reduced, perhaps substantially.

 

Changes in tax law might reduce the value of Low Income Housing Tax Credits. Although all Low Income Housing Tax Credits are allocated to a Housing Complex at commencement of the 10-year credit period, there can be no assurance that future legislation may not adversely affect an investment in the Partnership. For example, legislation could reduce or eliminate the value of Low Income Housing Tax Credits. In this regard, before 1986, the principal tax benefit of an investment in low income housing was tax losses. These tax losses generally were used to reduce an investor’s income from all sources on a dollar-for-dollar basis. Investments in low income housing were made in reliance on the availability of such tax benefits. However, tax legislation enacted in 1986 severely curtailed deduction of such losses.

 

New administrative or judicial interpretations of the law might reduce the value of Low Income Housing Tax Credits. Many of the provisions of the Internal Revenue Code related to low income housing and real estate investments have not been interpreted by the IRS in regulations, rulings or public announcements, or by the courts. In the future, these provisions may be interpreted or clarified by the IRS or the courts in a manner adverse to the Partnership or the Local Limited Partnerships. The IRS constantly reviews the Federal tax rules, and can revise its interpretations of established concepts. Any such revisions could reduce or eliminate tax benefits associated with an investment in the Partnership.

 

State income tax laws may adversely affect the Limited Partners. A Limited Partner may be required to file income tax returns and be subject to tax and withholding in each state or local taxing jurisdiction in which: a Housing Complex is located, the Partnership or a Local Limited Partnership engages in business activities, or the Limited Partner is a resident. Corporate Limited Partners may be required to pay state franchise taxes.

 

The tax treatment of particular items under state or local income tax laws may vary materially from the Federal income tax treatment of such items. Nonetheless, many of the Federal income tax risks associated with an investment in the Partnership may also apply under state or local income tax law. The Partnership may be required to withhold state taxes from distributions or income allocations to Limited Partners in some instances.

 

13
 

 

(d)Risks related to the Partnership and the Partnership Agreement

 

The Partnership may be unable to timely provide financial reports to the Limited Partners which would adversely affect their ability to monitor Partnership operations. Historically, the Partnership has been unable to timely file and provide investors with all of its required periodic reports. In some instances, the delay has been substantial. Each Local General Partner is required to retain independent public accountants and to report financial information to the Partnership in a timely manner. There cannot be any assurance that the Local General Partners will satisfy these obligations. If not, the Partnership would be unable to provide to the Limited Partners in a timely manner its financial statements and other reports. That would impact the Limited Partners’ ability to monitor Partnership operations. The Partnership’s failure to meet its filing requirements under the Securities Exchange Act of 1934 could reduce the liquidity for the Partnership Units due to the unavailability of public information concerning the Partnership. The failure to file could also result in sanctions imposed by the SEC. Any defense mounted by the Partnership in the face of such sanctions could entail legal and other fees, which would diminish cash reserves.

 

Lack of liquidity of investment. There is no public market for the purchase and sale of Partnership Units, and it is unlikely that one will develop. Accordingly, Limited Partners may not be able to sell their Partnership Units promptly or at a reasonable price. Partnership Units should be considered as a long-term investment because the Partnership is unlikely to sell any Local Limited Partnership Interests for at least 15 years. Partnership Units cannot be transferred to tax-exempt or foreign entities, or through a secondary market. The General Partner can deny effectiveness of a transfer if necessary to avoid adverse tax consequences from the transfer. The General Partner does not anticipate that any Partnership Units will be redeemed by the Partnership.

 

The Limited Partners will not control the Partnership and must rely totally on the General Partner. The General Partner will make all management decisions for the Partnership. Management decisions include exercising powers granted to the Partnership by a Local Limited Partnership. Limited Partners have no right or power to take part in Partnership management.

 

Individual Limited Partners will have no recourse if they disagree with actions authorized by a vote of the majority. The Partnership Agreement grants to Limited Partners owning more than 50% of the Partnership Units the right to:

 

  remove the General Partner and elect a replacement general partner,
     
  amend the Partnership Agreement,
     
  terminate the Partnership.

 

Accordingly, a majority-in-interest of the Limited Partners could cause any such events to occur, even if Limited Partners owning 49% of the Partnership Units opposed such action.

 

Limitations on liability of the General Partner to the Partnership. The ability of Limited Partners to sue the General Partner and its affiliates is subject to limitations. The Partnership Agreement limits the liability of the General Partner and its affiliates to the Limited Partners. The General Partner and its affiliates will not be liable to the Limited Partners for acts and omissions: performed or omitted in good faith, and performed or omitted in a manner which the General Partner reasonably believed to be within the scope of its authority and in the best interest of the Limited Partners, provided such conduct did not constitute negligence or misconduct.

 

Therefore, Limited Partners may be less able to sue the General Partner and its affiliates than would be the case if such provisions were not included in the Partnership Agreement.

 

Associates and its affiliates are serving as the general partners of many other partnerships. Depending on their corporate area of responsibility, the officers of Associates initially devote approximately 5% to 50% of their time to the Partnership. These individuals spend significantly less time devoted to the Partnership after the investment of the Partnership’s capital in Local Limited Partnerships.

 

14
 

 

The interests of Limited Partners may conflict with the interests of the General Partner and its affiliates. The General Partner and its affiliates are committed to the management of more than 100 other limited partnerships that have investments similar to those of the Partnership. The General Partner and its affiliates receive substantial compensation from the Partnership. The General Partner decides how the Partnership’s investments in Housing Complexes are managed, and when the investments will be sold. The General Partner may face a conflict in these circumstances because the General Partner’s share of fees and cash distributions from the transaction may be more or less than their expected share of fees if a Housing Complex was not sold. The Partnership has not developed any formal process for resolving conflicts of interest. However, the General Partner is subject to a fiduciary duty to exercise good faith and integrity in handling the affairs of the Partnership, and that duty will govern its actions in all such matters. Furthermore, the manner in which the Partnership can operate and sell investments is subject to substantial restrictions as outlined in the Partnership Agreement.

 

The Partnership’s accrued payables consist primarily of the asset management fees payable to the General Partner and the capital contributions payable to Local Limited Partnerships. The asset management fees payable for the years ended March 31, 2014, 2013 and 2012, had a net increase (decrease) of $(176,000), $50,000 and $26,000, respectively. The Partnership’s future contractual cash obligations consist of its obligations to pay future annual asset management fees and the payables due to the Local Limited Partnerships. The future annual asset management fees will equal approximately $23,000 per year through the termination of the Partnership, which must occur no later than December 31, 2050. Though the amounts payable to the General Partner and/or its affiliates are contractually currently payable, the Partnership anticipates that the General Partner and/or its affiliates will not require the payment of these contractual obligations until capital reserves are in excess of the aggregate of the existing contractual obligations and anticipated future foreseeable obligations of the Partnership. The Partnership would be adversely affected should the General Partner and/or its affiliates demand current payment of the existing contractual obligations and or suspend services for this or any other reason.

 

Item 1B. Unresolved Staff Comments

 

Not Applicable

 

15
 

 

Item 2. Properties

 

Through its investments in Local Limited Partnerships, the Partnership holds indirect ownership interests in the Housing Complexes. The following table reflects the status of those Housing Complexes as of the dates or for the periods indicated:

 

WNC HOUSING TAX CREDIT FUND V, L.P., Series 4                
                           
         As of March 31, 2014   As of December 31, 2013 
Local Limited
Partnership Name
  Location  General Partner Name  Partnership’s
Total Investment
in Local Limited
Partnerships
   Amount of
Investment
Paid to Date
   Number of
Units
   Estimated
Aggregate Low
Income Housing
Tax Credits (1)
   Mortgage Balances
of Local Limited
Partnerships
 
                           
Ashford Place, a Limited Partnership (3)  Shawnee,
Oklahoma
  WNC Oklahoma, LLC  $2,317,000   $2,317,000    100   $3,931,000   $1,780,000 
                                
Belen Vista Associates, Limited Partnership  Belen, New
Mexico
  Monarch Properties, Inc. and Low Income Housing Foundation of NM   416,000    416,000    57    714,000    1,442,000 
                                
Bolivar Plaza Apartments, LP  Bolivar,
Missouri
  MBL Development Co.   1,181,000    1,181,000    32    1,658,000    342,000 
                                
Cleveland Apartments L.P.(2)  Coffeyville,
Kansas
  Williams Management and Consulting, Inc. and Eastern Housing Corp.   N/A    N/A    48    737,000    1,454,000 
                                
Mountain Vista Associates Limited Partnership  Los Alamos,
New Mexico
  Monarch Properties, Inc. and Low Income Housing Foundation of NM   315,000    315,000    53    543,000    1,353,000 
                                
Wynwood Place, Limited Partnership  Raleigh, North Carolina  Greystone Affordable
Housing
   534,000    534,000    24    780,000    400,000 
                                
         $4,763,000   $4,763,000    314   $8,363,000   $6,771,000 

 

(1)Represents aggregate anticipated Low Income Housing Tax Credits to be received over the 10-year credit period if Housing Complexes are retained and rented in compliance with credit rules for the 15-year Compliance Period. All of the anticipated Low Income Housing Credits have been received from the Local Limited Partnerships and are no longer available to the Limited Partners.

 

(2)The Local Limited Partnership was sold subsequent to December 31, 2013 but prior to March 31, 2014.

 

(3)The Local Limited Partnership was identified for disposition but has not yet been sold as of the filing date.

 

16
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., Series 4            
             
   For the year ended December 31, 2013 
Local Limited
Partnership Name
  Rental Income   Net Income
(Loss)
   Low Income Housing
Tax Credits
Allocated to
Partnership
 
             
Ashford Place, a Limited Partnership (2)  $533,000   $(117,000)   98.99%
                
Belen Vista Associates, Limited Partnership   470,000    (77,000)   98.99%
                
Bolivar Plaza Apartments   119,000    (40,000)   98.98%
                
Cleveland Apartments L.P.(1)   277,000    (79,000)   99.98%
                
Mountain Vista Associates Limited Partnership   321,000    2,000    98.99%
                
Wynwood Place, Limited Partnership   128,000    (75,000)   99.98%
                
   $1,848,000   $(386,000)     

 

(1) The Local Limited Partnership was sold subsequent to December 31, 2013 but prior to March 31, 2014.

 

(2) The Local Limited Partnership was identified for disposition but has not yet been sold as of the filing date.

 

17
 

 

WNC Housing Tax Credit Fund V, L.P., Series 4                   
                    
      Occupancy Rates  
      As of December 31,  
Local Limited
Partnership Name
  Location  General Partner Name  2013   2012   2011   2010   2009 
                           
Ashford Place, a Limited Partnership  Shawnee, Oklahoma  WNC Oklahoma, LLC   88%   93%   54%   82%   94%
                                
Belen Vista Associates, Limited Partnership  Belen, New Mexico  Monarch Properties, Inc. and Low Income Housing Foundation of NM   93%   100%   100%   100%   100%
                                
Blessed Rock of El Monte, a CA Limited Partnership  El Monte, California  Everland, Inc.   N/A    100%   100%   100%   100%
                                
Bolivar Plaza Apartments  Bolivar, Missouri  MBL Development Co.   100%   100%   100%   100%   100%
                                
Cleveland Apartments L.P.  Coffeyville, Kansas  Williams Management and Consulting, Inc. and Eastern Housing Corp.   96%   83%   85%   90%   96%
                                
Crescent City Apartments, a California Limited Partnership  Crescent City, California  Crescent City Surf, Inc.   N/A    100%   100%   91%   98%
                                
D. Hilltop Apartments Ltd.  Prairie View, Texas  Donald W. Sowell   N/A    N/A    96%   83%   92%
                                
Greyhound Associates I, L.P.  Windsor, Missouri  WCM Community Development Corp.   N/A    88%   71%   67%   96%
                                
Lamar Plaza Apts., L.P.  Lamar, Missouri  MBL Development Co.   N/A    N/A    N/A    N/A    96%

 

18
 

 

WNC Housing Tax Credit Fund V, L.P., Series 4                 
                           
         Occupancy Rates  
         As of December 31,  
Local Limited
Partnership Name
  Location  General Partner
Name
   2013    2012    2011    2010    2009 
                                
Mesa Verde Apartments Limited Partnership  Roswell, New Mexico  Shelter Resource Corporation   N/A    N/A    N/A    N/A    63%
                                
Mountain Vista Associates Limited Partnership  Los Alamos, New Mexico  Monarch Properties, Inc. and Low Income Housing Foundation of NM   83%   94%   92%   91%   87%
                                
North Central Limited Partnership  New York, New York  City and Suburban Development Corp.   N/A    N/A    N/A    100%   89%
                                
Woodland, Ltd.  Marion, Alabama  ACHR Corp.   N/A    90%   95%   100%   95%
                                
Wynwood Place, Limited Partnership  Raleigh, North Carolina  Greystone Affordable Housing   88%   83%   88%   96%   88%
          91%   95%   88%   93%   90%

 

19
 

 

Item 3. Legal Proceedings

 

NONE

 

Item 4. Mine Safety Disclosures

 

NOT APPLICABLE

 

PART II.

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Item 5a.

 

a) The Partnership Units are not traded on a public exchange but were sold through a public offering. It is not anticipated that any public market will develop for the purchase and sale of any Partnership Units and none exists. Partnership Units can be assigned or otherwise transferred only if certain requirements in the Partnership Agreement are satisfied.
   
b) At March 31, 2014, there were 1,327 Limited Partners and no assignees of Partnership Units who were not admitted as Limited Partners.
   
c) The Partnership was not designed to provide operating cash distributions to Limited Partners. It is possible that the Partnership could make distributions from sale proceeds, if the Partnership is able to sell its Local Limited Partnership Interests or Housing Complexes for more than the related closing costs and any then accrued obligations of the Partnership. There can be no assurance in this regard. Any distributions would be made in accordance with the terms of the Partnership Agreement. March 31, 2014, the Partnership did not make any cash distributions to the Limited Partners.
   
d) No securities are authorized for issuance by the Partnership under equity compensation plans.
   
e) The Partnership does not issue common stock.
   
f) No unregistered securities were sold by the Partnership during the years ended March 31, 2014.

 

Item 5b. Use of Proceeds

 

NOT APPLICABLE

 

Item 5c. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

 

NONE

 

20
 

 

Item 6. Selected Financial Data

 

Selected balance sheet information for the Partnership is as follows:

 

   March 31, 
   2014   2013   2012   2011   2010 
                     
ASSETS                         
Cash  $1,254,665   $296,821   $20,488   $153,987   $25,677 
Investments in Local Limited Partnerships, net   -    650,468    629,335    606,786    697,775 
Prepaid expenses   -    -    -    28,130    - 
Other assets   24,805    17,775    -    -    - 
                          
Total Assets  $1,279,470   $965,064   $649,823   $788,903   $723,452 
                          
LIABILITIES                    
Payables to Local Limited Partnerships  $-   $33,810   $33,810   $33,810   $39,310 
Accrued fees and expenses due to General Partner and affiliates   40,233    194,984    204,132    131,632    311,427 
Accounts payable   -    -    -    920    - 
Prepaid disposition proceeds   4,950    260,000    -    -    - 
                          
Total Liabilities   45,183    488,794    237,942    166,362    350,737 
                          
PARTNERS’ EQUITY   1,234,287    476,270    411,881    622,541    372,715 
                          
Total Liabilities and Partners’ Equity  $1,279,470   $965,064   $649,823   $788,903   $723,452 

 

21
 

 

Selected results of operations for the Partnership are as follows:

 

   For the Years Ended
March 31,
 
   2014   2013   2012   2011   2010 
                     
Loss from operations (Note 1)  $(349,538)   (46,266)   (248,397)  $(155,522)  $(371,966)
Equity in income (losses) from Local Limited Partnerships   -    38,184    37,676    20,687    (23,171)
Gain on sale of Local Limited Partnerships   1,892,595    16,953    -    382,388    - 
Interest income   610    35    61    2,273    18 
                          
Net income (loss)  $1,543,667    8,906    (210,660)  $249,826   $(395,119)
                          
Net income (loss) allocated to:                         
General Partner  $15,437    89    (2,107)  $2,498   $(3,951)
                          
Limited Partners  $1,528,230    8,817    (208,553)  $247,328   $(391,168)
                          
Net income (loss) per Partnership Unit  $69.68    .40    (9.50)  $11.25   $(17.79)
                          
Outstanding weighted Partnership Units   21,932    21,952    21,955    21,990    21,990 

 

Note 1 - Loss from operations for the years ended March 31, 2014, 2013, 2012, 2011, and 2010 include a charge for impairment losses on investments in Local Limited Partnerships of $100,779, $0, $0, $87,338, and $185,972, respectively. (See Note 2 to the financial statements.)

 

22
 

 

Selected results of cash flows for the Partnership are as follows:

 

   For the Years Ended March 31,
   2014   2013   2012   2011   2010 
                     
Net cash provided by (used in):                         
                          
Operating activities  $(371,137)  $(8,383)  $38,969   $(265,716)  $4,234 
Investing activities   2,114,631    284,716    (172,468)   394,026    - 
Financing activities   (785,650)   -    -    -    - 
                          
Net change in cash   957,844    276,333    (133,499)   128,310    4,234 
                          
Cash, beginning of year   296,821    20,488    153,987    25,677    21,443 
                          
Cash, end of year  $1,254,665   $296,821   $20,488   $153,987   $25,677 

 

Low Income Housing Tax Credits per Partnership Unit were as follows for the years ended December 31:

 

   2013   2012   2011   2010   2009 
                     
Federal  $-    -   $-   $7   $18 
State   -    -    -    -    - 
                          
Total  $-    -   $-   $7   $18 

 

23
 

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward Looking Statements

 

With the exception of the discussion regarding historical information, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other discussions elsewhere in this Form 10-K contain forward looking statements. Such statements are based on current expectations subject to uncertainties and other factors which may involve known and unknown risks that could cause actual results of operations to differ materially from those projected or implied. Further, certain forward-looking statements are based upon assumptions about future events which may not prove to be accurate.

 

Risks and uncertainties inherent in forward looking statements include, but are not limited to, the Partnership’s future cash flows and ability to obtain sufficient financing, level of operating expenses, conditions in the Low Income Housing Tax Credits property market and the economy in general, changes in law rules and regulations, and legal proceedings. Historical results are not necessarily indicative of the operating results for any future period.

 

Subsequent written and oral forward looking statements attributable to the Partnership or persons acting on its behalf are expressly qualified in their entirety by cautionary statements in this Form 10-K and in other reports filed with the SEC. The following discussion should be read in conjunction with the Financial Statements and the Notes thereto included elsewhere in this filing.

 

Critical Accounting Policies and Certain Risks and Uncertainties

 

The Partnership believes that the following discussion addresses the Partnership’s most significant accounting policies, which are the most critical to aid in fully understanding and evaluating the Partnership’s reported financial results, and certain of the Partnership’s risks and uncertainties.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

 

Method of Accounting for Investments in Local Limited Partnerships

 

The Partnership accounts for its investments in Local Limited Partnerships using the equity method of accounting, whereby the Partnership adjusts its investment balance for its share of the Local Limited Partnerships’ results of operations and for any contributions made and distributions received. The Partnership reviews the carrying amount of an individual investment in a Local Limited Partnership for possible impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such investment may not be recoverable. Recoverability of such investment is measured by the estimated value derived by management, generally consisting of the product of the remaining future Low Income Housing Tax Credits estimated to be allocable to the Partnership and the estimated residual value to the Partnership. If an investment is considered to be impaired, the Partnership reduces the carrying value of its investment in any such Local Limited Partnership. The accounting policies of the Local Limited Partnerships, generally, are expected to be consistent with those of the Partnership. Costs incurred by the Partnership in acquiring the investments are capitalized as part of the investment account and were being amortized over 27.5 years. (See Notes 2 and 3 to the financial statements.)

 

24
 

 

“Equity in losses of Local Limited Partnerships” for each year ended March 31 has been recorded by the Partnership based on the twelve months of reported results provided by the Local Limited Partnerships for each year ended December 31. Equity in losses from the Local Limited Partnerships allocated to the Partnership is not recognized to the extent that the investment balance would be adjusted below zero. If the Local Limited Partnerships report net income in future years, the Partnership will resume applying the equity method only after its share of such net income equals the share of net losses not recognized during the period(s) the equity method was suspended.

 

Distributions received from the Local Limited Partnerships are accounted for as a reduction of the investment balance. Distributions received after the investment has reached zero are recognized as distribution income. As of March 31, 2014 all investments have reached zero.

 

In accordance with the accounting guidance for the consolidation of variable interest entities, the Partnership determines when it should include the assets, liabilities, and activities of a variable interest entity (VIE) in its financial statements, and when it should disclose information about its relationship with a VIE. The analysis that must be performed to determine which entity should consolidate a VIE focuses on control and economic factors. A VIE is a legal structure used to conduct activities or hold assets, which must be consolidated by a company if it is the primary beneficiary because it has (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the guidance requires continual reconsideration of the primary beneficiary of a VIE.

 

Based on this guidance, the Local Limited Partnerships in which the Partnership invests meet the definition of a VIE because the owners of the equity at risk in these entities do not have the power to direct their operations. However, management does not consolidate the Partnership’s interests in these VIEs, as it is not considered to be the primary beneficiary since it does not have the power to direct the activities that are considered most significant to the economic performance of these entities. The Partnership currently records the amount of its investment in these Local Limited Partnerships as an asset on its balance sheets, recognizes its share of partnership income or losses in the statements of operations, and discloses how it accounts for material types of these investments in its financial statements. The Partnership’s balance in investment in Local Limited Partnerships, plus the risk of recapture of tax credits previously recognized on these investments, represents its maximum exposure to loss. The Partnership’s exposure to loss on these Local Limited Partnerships is mitigated by the condition and financial performance of the underlying Housing Complexes as well as the strength of the Local General Partners and their guarantee against credit recapture to the investors in the Partnership.

 

Income Taxes

 

The Partnership has elected to be treated as a pass-through entity for income tax purposes and, as such, is not subject to income taxes. Rather, all items of taxable income, deductions and tax credits are passed through to and are reported by its owners on their respective income tax returns. The Partnership’s federal tax status as a pass-through entity is based on its legal status as a partnership. Accordingly, the Partnership is not required to take any tax positions in order to qualify as a pass-through entity. The Partnership is required to file and does file tax returns with the Internal Revenue Service and other taxing authorities. Accordingly, these financial statements do not reflect a provision for income taxes and the Partnership has no other tax positions which must be considered for disclosure. Income tax returns filed by the Partnership are subject to examination by the Internal Revenue Service for a period of three years. While no income tax returns are currently being examined by the Internal Revenue Service, tax years since 2010 remain open.

 

25
 

 

Impact of Recent Accounting Pronouncements

 

In May 2011, the FASB issued an update to existing guidance related to fair value measurements on how to measure fair value and what disclosures to provide about fair value measurements. For fair value measurements categorized as level 3, a reporting entity should disclose quantitative information of the unobservable inputs and assumptions, a description of the valuation processes and narrative description of the sensitivity of the fair value to changes in unobservable inputs. This update is effective for interim and annual periods beginning after December 15, 2011. The adoption of this update did not materially affect the Partnership’s financial statements.

 

Certain Risks and Uncertainties

 

See Item 1A for a discussion of risks regarding the Partnership.

 

To date, certain Local Limited Partnerships have incurred significant operating losses and have working capital deficiencies. In the event these Local Limited Partnerships continue to incur significant operating losses, additional capital contributions by the Partnership and/or the Local General Partners may be required to sustain the operations of such Local Limited Partnerships. If additional capital contributions are not made when they are required, the Partnership’s investment in certain of such Local Limited Partnerships could be lost, and the loss and recapture of the related Low Income Housing Tax Credits could occur.

 

Financial Condition

 

The Partnership’s assets at March 31, 2014 consisted of $1,255,000 in cash and other assets of $25,000. Liabilities at March 31, 2014 consisted of $40,000 of accrued fees and advances due to General Partner and/or its affiliates, (See “Future Contractual Cash Obligations” below) and prepaid disposition proceeds of $5,000.

 

Results of Operations

 

Year Ended March 31, 2014 Compared to Year Ended March 31, 2013 The Partnership’s net income for the year ended March 31, 2014 was $1,544,000, reflecting an increase of $1,535,000 from the net income experienced for the year ended March 31, 2013 of $9,000. That increase in net income was largely due to an increase of gain on sale of Local Limited Partnerships of $1,876,000 for the year ended March 31, 2014. The gain recorded by the Partnership can vary depending on the sales prices and values of the Housing Complexes being sold along with the number sold each year. There was an increase in impairment loss of $(101,000) during the year ended March 31, 2014 compared to the year ended March 31, 2013. The impairment loss can vary each year depending on the current estimated residual value of the investments compared to the current carrying value of each of the investments. During the year ended March 31, 2014 there were advances of $(37,000) made to Local Limited Partnerships which were reserved for in full compared to $(2,000) advanced and reserved for during the year ended March 31, 2013. The advances made to the troubled Local Limited Partnerships can vary each year depending on the operations of the individual Local Limited Partnerships. The accounting and legal fees increased by $(200,000) for the year ended March 31, 2014 compared to the year ended March 31, 2013 due to the timing of the accounting work performed. The Partnership was past due on multiple annual and quarterly filings. The Partnership is now current on all filings The write-off of other assets increased by $(9,000) during the year ended March 31, 2014. Capitalized costs from potential disposition of Local Limited Partnerships were expensed due to the length of time it has taken to dispose of the properties. Reporting fees increased by $45,000 and distribution income decreased by $(10,000) for the year ended March 31, 2014 due to the fact that Local Limited Partnerships pay the reporting fees and distribution income to the Partnership when the Local Limited Partnerships’ cash flow will allow for the payment. There was a $(38,000) decrease of equity in income of Local Limited Partnerships for the year ended March 31, 2014. The equity in income can vary each year depending on the operations of each of the Local Limited Partnerships. The asset management fees decreased by $17,000 for the year ended March 31, 2014 due to the fact that the asset management fee is calculated on the Invested Assets of the Local Limited Partnerships, which decreased due to the sales of the Local Limited Partnerships. The amortization decreased by $5,000 for the year ended march 31, 2014 due to the fact that intangibles were fully impaired during the year, thereby decreasing amortization expense.

 

26
 

 

Year Ended March 31, 2013 Compared to Year Ended March 31, 2012 The Partnership’s net income for the year ended March 31, 2013 was $9,000, reflecting an increase of $220,000 from the net loss experienced for the year ended March 31, 2012 of $(211,000). That decrease in net loss was largely due to a decrease of $178,000 in write off of advances to Local Limited Partnerships. During the year ended March 31, 2013 there were advances of $(2,000) made to Local Limited Partnerships which were reserved for in full as of March 31, 2013 compared to $(180,000) advanced and reserved for during the year ended March 31, 2012. The advances made to the troubled Local Limited Partnerships can vary each year depending on the operations of the individual Local Limited Partnerships. The accounting and legal fees increased by $(5,000) for the year ended March 31, 2013 compared to the year ended March 31, 2012 due to the timing of the accounting work performed. Reporting fees decreased by $(2,000) which was offset by an increase of $20,000 in distribution income for the year ended March 31, 2013 due to the fact that Local Limited Partnerships pay the reporting fees and distribution income to the Partnership when the Local Limited Partnerships’ cash flow will allow for the payment. For the year ended March 31, 2013 there was a gain on sale of Local Limited Partnership of $17,000 compared to no gain for the year ended March 31, 2012. The gain recorded by the Partnership can vary depending on the sales prices and values of the Housing Complexes being sold along with the number sold each year.

 

Liquidity and Capital Resources

 

Year Ended March 31, 2014 Compared to Year Ended March 31, 2013 The net increase in cash during the year ended March 31, 2014 was $958,000 compared to a net increase in cash for the year ended March 31, 2013 of $276,000. During the year ended March 31, 2014, the Partnership paid $209,000 of accrued asset management fees compared to none during the year ended March 31, 2013. During the year ended March 31, 2014 the Partnership reimbursed the General Partner or an affiliate $262,000 for operating expenses paid on its behalf compared to $47,000 paid during the year ended March 31, 2013. The accrued asset management fees and reimbursement of operating expenses are paid after management reviews the cash position of the Partnership. The Partnership also collected $45,000 more in reporting fees and $(10,000) less in distributions for the year ended March 31, 2014 compared to the year ended March 31, 2012 due to the fact that Local Limited Partnerships pay the reporting fees and distributions to the Partnership when the Local Limited Partnerships’ cash flow will allow for the payment. The Partnership advanced $37,000 to troubled Local Limited Partnerships during the year ended March 31, 2014 compared to $2,000 advanced during the year ended March 31, 2013 as discussed above. During the year ended March 31, 2014 the Partnership received $5,000 in prepaid disposition proceeds compared to $260,000 collected during the year ended March 31, 2013. The cash represented deposits for dispositions that were anticipated to close subsequent to the respective year ends. During the year ended March 31, 2014 the Partnership received $2,180,000 in net proceeds from the disposition of Local Limited Partnerships compared to $17,000 during the year ended March 31, 2013. The gain on sale of Local Limited partnerships will vary from period to period, depending on the number of Housing Complexes that have been identified for disposition, the values of such Housing Complexes and the closing dates of transactions. The Partnership also paid $(786,000) of disposition proceeds to the General partner for advances previously forgiven. During the year ended March 31, 2014, the Partnership made $(34,000) in capital contributions to a Local Limited Partnership compared to no contribution made during the year ended March 31, 2014. Capital contributions are paid when the Local Limited Partnership reaches certain benchmarks.

 

27
 

 

Year Ended March 31, 2013 Compared to Year Ended March 31, 2012 The net increase in cash during the year ended March 31, 2013 was $276,000 compared to a net decrease in cash for the year ended March 31, 2012 of $(134,000). During the year ended March 31, 2013, the Partnership did not pay any accrued asset management fees compared to $25,000 paid during the year ended March 31, 2012. During the year ended March 31, 2013 the Partnership reimbursed the General Partner or an affiliate $47,000 for operating expenses paid on its behalf compared to $8,000 paid during the year ended March 31, 2012. The accrued asset management fees and reimbursement of operating expenses are paid after management reviews the cash position of the Partnership. The Partnership also collected $2,000 less in reporting fees and $20,000 more in distributions for the year ended March 31, 2013 compared to the year ended March 31, 2012 due to the fact that Local Limited Partnerships pay the reporting fees and distributions to the Partnership when the Local Limited Partnerships’ cash flow will allow for the payment. The Partnership advanced $2,000 to troubled Local Limited Partnerships during the year ended March 31, 2013 compared to $180,000 advanced during the year ended March 31, 2012 as discussed above. During the year ended March 31, 2013 the Partnership received $260,000 in prepaid disposition proceeds compared to no such fees collected during the year ended March 31, 2012. The cash represented deposits for two dispositions that were anticipated to close subsequent to March 31, 2013. During the year ended March 31, 2013 the Partnership received $17,000 in net proceeds from the disposition of Local Limited Partnerships compared to no proceeds during the year ended March 31, 2012. The gain on sale of Local Limited partnerships will vary from period to period, depending on the number of Housing Complexes that have been identified for disposition, the values of such Housing Complexes and the closing dates of transactions.

 

Partnership’s Future Contractual Cash Obligations

 

The following table summarizes the Partnership’s future contractual cash obligations as of March 31, 2014:

 

   2015   2016   2017   2018   2019   Thereafter   Total 
                             
Asset management fees(1)  $62,958   $22,725   $22,725   $22,725   $22,725   $704,475   $858,333 
Total contractual cash obligations  $62,958   $22,725   $22,725   $22,725   $22,725   $704,475   $858,333 

 

(1)Asset management fees are payable annually until termination of the Partnership, which is to occur no later than 2050. The estimate of the fees payable included herein assumes the retention of the Partnership’s interest in all Housing Complexes owned at March 31, 2014. Amounts due to the General Partner as of March 31, 2014 have been included in the 2015 column. The General Partner does not anticipate that these fees will be paid until such time as capital reserves are in excess of the aggregate of the existing contractual obligations and the anticipated future foreseeable obligations of the Partnership.

 

For additional information regarding our asset management fees and payables to Local Limited Partnerships, see Notes 2, 3 and 5 to the financial statements included elsewhere herein.

 

28
 

 

Off-Balance Sheet Arrangements

 

The Partnership has no off-balance sheet arrangements.

 

Exit Strategy

 

See Item 1 for information in this regard.

 

Impact of New Accounting Pronouncements

 

See footnote 1 to the audited financial statements.

 

Item 7A. Quantitative and Qualitative Disclosures Above Market Risk

 

NOT APPLICABLE

 

29
 

 

Item 8. Financial Statements and Supplementary Data

 

    PAGE
     
Reports of Independent Registered Public Accounting Firms   F-1
     
Balance Sheets as of March 31, 2014 and 2013   F-4
     
Statements of Operations for the years ended March 31, 2014, 2013 and 2012   F-5
     
Statements of Partners’ Equity (Deficit) for the years ended March 31, 2014, 2013 and 2012   F-6
     
Statements of Cash Flows for the years ended March 31, 2014, 2013 and 2012   F-7
     
Notes to Financial Statements   F-8

 

30
 

 

Report of Independent Registered Public Accounting Firm

 

To the Partners
WNC Housing Tax Credit Fund V, L.P., Series 4

 

We have audited the accompanying balance sheets of WNC Housing Tax Credit Fund V, L.P., Series 4 (the “Partnership”) as of March 31, 2014 and 2013, and the related statements of operations, partners’ equity (deficit), and cash flows for the years ended March 31, 2014, 2013 and 2012. The Partnership’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of certain Local Limited Partnerships which investments represent $0 and $547,893 of the total Partnership assets as of March 31, 2014 and 2013, respectively, and $0, $38,185 and $37,677 of the total Partnership income (loss) for the years ended March 31, 2014, 2013 and 2012, respectively. Those statements were audited by other auditors, whose reports have been furnished to us, and our opinion, insofar as it relates to those Local Limited Partnerships, is based solely on the reports of the other auditors.

 

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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits 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 Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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, based on our audits and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of WNC Housing Tax Credit Fund V, L.P., Series 4 as of March 31, 2014 and 2013 and the results of its operations and its cash flows for the years ended March 31, 2014, 2013 and 2012 in conformity with accounting principles generally accepted in the United States of America.

 

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed under Item 15(a)(2) in the index related to the years ended March 31, 2014, 2013 and 2012 is presented for the purpose of complying with the Securities and Exchange Commission’s rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied to the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial statement data required to be set forth therein in relation to the basic financial statements taken as a whole.

 

/s/ CohnReznick LLP  
CohnReznick LLP  
Bethesda, Maryland  
June 10, 2014  

  

F-1
 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Partners

Blessed Rock of El Monte

 

We have audited the accompanying financial statements of Blessed Rock of El Monte, as of December 31, 2012 and the related statements of operations, changes in partners’ equity and cash flows for the year ended December 31, 2012. Blessed Rock of El Monte’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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 Blessed Rock of El Monte as of December 31, 2012 and the result of its operations and its cash flows for the year ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.

 

 

Metairie, Louisiana  

January 25, 2013

 

 

 

F-2
 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Partners

Blessed Rock of El Monte

 

We have audited the accompanying balance sheet of Blessed Rock of El Monte, a California Limited Partnership, as of December 31, 2011 and the related statements of operations, changes in partners’ capital and cash flows for the year then ended. These financial statements are the responsibility of the partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with the Standards of the Public 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 partnership has determined that it 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 partnership’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 audit provides 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 Blessed Rock of El Monte as of December 31, 2011 and the results of its operations, changes in partners’ capital and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

 

 

Metairie, Louisiana  

January 27, 2012

 

3421 N. Causeway Blvd., Suite 701. Metairie, LA 70002 Telephone (504) 837-0770 . Fax (504) 837-7102

Member of

IGAF Worldwide- Member Firms in Principal Cities . PCAOB - Public Company Accounting Oversight Board

AICPA Centers . Center for Public Company Audit Firms (SEC)

Governmental Audit Quality Center . Private Companies Practice Section (PCPS)

 

F-3
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

BALANCE SHEETS

 

   March 31, 
   2014   2013 
ASSETS          
Cash  $1,254,665   $296,821 
Other assets   24,805    17,775 
Investments in Local Limited Partnerships, net (Notes 2 and 3)   -    650,468 
           
Total Assets  $1,279,470   $965,064 
           
LIABILITIES AND PARTNERS’ EQUITY (DEFICIT)          
           
Liabilities:          
Payables to Local Limited Partnerships (Note 6)  $-   $33,810 
Accrued fees and advances due to General Partner and affiliates (Note 3)   40,233    194,984 
Prepaid disposition proceeds   4,950    260,000 
           
Total Liabilities   45,183    488,794 
           
Partners’ Equity (Deficit)          
General Partner   (672,479)   97,734 
Limited Partners (25,000 Partnership Units authorized; 21,932 and 21,952 Partnership Units issued and outstanding)   1,906,766    378,536 
           
Total Partners’ Equity (Deficit)   1,234,287    476,270 
           
Total Liabilities and Partners’ Equity (Deficit)  $1,279,470   $965,064 

 

See accompanying notes to financial statements

 

F-4
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

STATEMENTS OF OPERATIONS

 

   For the Years Ended March 31, 
   2014   2013   2012 
             
Operating income:               
Reporting fees  $51,197   $6,000   $7,916 
Distribution income   18,786    29,216    8,769 
Total operating income   69,983    35,216    16,685 
                
Operating expenses and loss:               
Amortization (Notes 2 and 3)   1,800    7,200    7,200 
Asset management fees (Note 3)   33,153    50,149    50,784 
Impairment loss (Note 2)   100,779    -    - 
Accounting and legal fees   211,476    11,401    6,439 
Write off of other assets   9,000    -    - 
Write off of advances to Local Limited Partnerships (Note 5)   36,993    2,088    180,395 
Other   26,320    10,644    20,264 
Total operating expenses and loss   419,521    81,482    265,082 
                
Loss from operations   (349,538)   (46,266)   (248,397)
                
Equity in income of Local Limited Partnerships (Note 2)   -    38,184    37,676 
Gain on sale of Local Limited Partnerships (Note 2)   1,892,595    16,953    - 
Interest income   610    35    61 
                
Net income (loss)  $1,543,667   $8,906   $(210,660)
                
Net income (loss) allocated to:               
General Partner  $15,437   $89   $(2,107)
Limited Partners  $1,528,230   $8,817   $(208,553)
                
Net income (loss) per Partnership Unit  $69.98   $.40   $(9.50)
                
Outstanding weighted Partnership Units   21,932    21,952    21,955 

 

See accompanying notes to financial statements

 

F-5
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

STATEMENTS OF PARTNERS’ EQUITY (DEFICIT)

 

For the Years Ended March 31, 2014, 2013, and 2012

 

   General
Partner
   Limited
Partners
   Total 
             
Partners’ equity (deficit) at March 31, 2011  $44,269   $578,272   $622,541 
                
Net loss   (2,107)   (208,553)   (210,660)
                
Partners’ equity (deficit) at March 31, 2012   42,162    369,719    411,881 
                
Net income   89    8,817    8,906 
                
Contributions (Note 7)   55,483    -    55,483 
                
Partners’ equity (deficit) at March 31, 2013  97,734   378,536   476,270 
                
Net income   15,437    1,528,230    1,543,667 
                
Return of capital (Note 8)   (785,650)   -    (785,650)
                
Partners’ equity (deficit) at March 31, 2014  $(672,479)  $1,906,766   $1,234,287 

 

See accompanying notes to financial statements

 

F-6
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

CONDENSED STATEMENT OF CASH FLOWS

 

For the Years Ended March 31, 2014, 2013, and 2012

 

   For The Years Ended March 31, 
   2014   2013   2012 
             
Cash flows from operating activities:               
Net income (loss)  $1,543,667   $8,906   $(210,660)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:               
Amortization   1,800    7,200    7,200 
Impairment loss   100,779    -    - 
Equity in income of Local Limited Partnerships   -    (38,184)   (37,676)
Write off of advances to Local Limited Partnerships   36,993    2,088    180,395 
Decrease in prepaid expenses   -    -    28,130 
Increase in other assets   (7,030)   (17,775)   - 
Decrease in accounts payable   -    -    (920)
Increase (decrease) in accrued fees and expenses due to General Partner and affiliates   (154,751)   46,335    72,500 
Gain on sale of Local Limited Partnerships   (1,892,595)   (16,953)   - 
                
Net cash provided by (used in) operating activities   (371,137)   (8,383)   38,969 
                
Cash flows from investing activities:               
Contributions to Local Limited Partnerships   (33,810)   -    - 
Distributions from Local Limited Partnerships   -    9,851    7,927 
Advances to Local Limited Partnerships   (36,993)   (2,088)   (180,395)
Prepaid disposition proceeds   4,950    260,000    - 
Net proceeds from sale of Local Limited Partnerships   2,180,484    16,953    - 
                
Net cash provided by (used in) investing activities   2,114,631    284,716    (172,468)
                
Cash flows from financing activities:               
Return of capital   (785,650)          
Net cash used in financing activities   (785,650)          
                
Net increase (decrease) in cash   957,844    276,333    (133,499)
                
Cash, beginning of year   296,821    20,488    153,987 
                
Cash, end of year  $1,254,665   $296,821   $20,488 
                
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION               
Taxes paid  $800   $800   $800 
                
NONCASH INVESTING AND FINANCING ACTIVITIES:               
Advances made to the Partnership by the General Partner in prior years were converted to General Partner equity  $-   $55,483   $- 

 

See accompanying notes to financial statements

 

F-7
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended March 31, 2014, 2013 and 2012

 

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization

 

WNC Housing Tax Credit Fund V, L.P., Series 4 (the “Partnership”) is a California Limited Partnership formed under the laws of the State of California on July 26, 1995, and commenced operations on July 1, 1996. The Partnership was formed to acquire limited partnership interests in other limited partnerships (“Local Limited Partnerships”) which own multi-family or senior housing complexes (“Housing Complexes”) that are eligible for Federal low income housing tax credits (“Low Income Housing Tax Credits”). The local general partners (the “Local General Partners”) of each Local Limited Partnership retain responsibility for maintaining, operating and managing the Housing Complex. Each Local Limited Partnership is governed by its agreement of limited partnership (the “Local Limited Partnership Agreement”).

 

The general partner of the Partnership is WNC & Associates, Inc. (the “General Partner” or “Associates”). The chairman and the president of Associates owns all of the outstanding stock of Associates. The business of the Partnership is conducted primarily through the General Partner, as the Partnership has no employees of its own.

 

The Partnership shall continue in full force and effect until December 31, 2050 unless terminated prior to that date pursuant to the partnership agreement or law.

 

The financial statements include only activity relating to the business of the Partnership, and do not give effect to any assets that the partners may have outside of their interests in the Partnership, or to any obligations, including income taxes, of the partners.

 

The partnership agreement authorized the sale of up to 25,000 units of limited partnership interest (“Partnership Units”) at $1,000 per Partnership Unit. The offering of Partnership Units had concluded in July 11, 1997, at which time 22,000 Partnership Units representing subscriptions in the amount of $21,914,830, net of discounts of $79,550 for volume purchases and $5,620 for dealer discounts, had been accepted. As of the year ended March 31, 2014, a total 21,932, respectively, Partnership units remain outstanding The General Partner has a 1% interest in operating profits and losses, taxable income and losses, cash available for distribution from the Partnership and Low Income Housing Tax Credits of the Partnership. The investors (the “Limited Partners”) in the Partnership will be allocated the remaining 99% of these items in proportion to their respective investments.

 

The proceeds from the disposition of any of the Housing Complexes will be used first to pay debts and other obligations per the respective Local Limited Partnership Agreement. Any remaining proceeds will then be paid to the partners of the Local Limited Partnership, including the Partnership, in accordance with the terms of the particular Local Limited Partnership Agreement. The sale of a Housing Complex may be subject to other restrictions and obligations. Accordingly, there can be no assurance that a Local Limited Partnership will be able to sell its Housing Complex. Even if it does so, there can be no assurance that any significant amounts of cash will be distributed to the Partnership. Should such distributions occur, the Limited Partners will be entitled to receive distributions from the proceeds remaining after payment of Partnership obligations and funding reserves, equal to their capital contributions and their return on investment (as defined in the Partnership Agreement). The General Partners would then be entitled to receive proceeds equal to their capital contributions from the remainder. Any additional sale or refinancing proceeds will be distributed 99% to the Limited Partners (in proportion to their respective investments) and 1% to the General Partner.

 

F-8
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended March 31, 2014, 2013 and 2012

 

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

Risks and Uncertainties

 

An investment in the Partnership and the Partnership’s investments in Local Limited Partnerships and their Housing Complexes are subject to risks. These risks may impact the tax benefits of an investment in the Partnership, and the amount of proceeds available for distribution to the Limited Partners, if any, on liquidation of the Partnership’s investments. Some of those risks include the following:

 

The Low Income Housing Tax Credits rules are extremely complicated. Noncompliance with these rules results in the loss of future Low Income Housing Tax Credits and the fractional recapture of Low Income Housing Tax Credits already taken. In most cases the annual amount of Low Income Housing Tax Credits that an individual can use is limited to the tax liability due on the person’s last $25,000 of taxable income. The Local Limited Partnerships may be unable to sell the Housing Complexes at a price which would result in the Partnership realizing cash distributions or proceeds from the transaction. Accordingly, the Partnership may be unable to distribute any cash to its Limited Partners. Low Income Housing Tax Credits may be the only benefit from an investment in the Partnership.

 

The Partnership has invested in a limited number of Local Limited Partnerships. Such limited diversity means that the results of operation of each single Housing Complex will have a greater impact on the Partnership. With limited diversity, poor performance of one Housing Complex could impair the Partnership’s ability to satisfy its investment objectives. Each Housing Complex is subject to mortgage indebtedness. If a Local Limited Partnership failed to pay its mortgage, it could lose its Housing Complex in foreclosure. If foreclosure were to occur during the first 15 years, the loss of any remaining future Low Income Housing Tax Credits, a fractional recapture of prior Low Income Housing Tax Credits, and a loss of the Partnership’s investment in the Housing Complex would occur. The Partnership is a limited partner or non-managing member of each Local Limited Partnership. Accordingly, the Partnership will have very limited rights with respect to management of the Local Limited Partnerships. The Partnership will rely totally on the Local General Partners. Neither the Partnership’s investments in Local Limited Partnerships, nor the Local Limited Partnerships’ investments in Housing Complexes, are readily marketable. To the extent the Housing Complexes receive government financing or operating subsidies, they may be subject to one or more of the following risks: difficulties in obtaining tenants for the Housing Complexes; difficulties in obtaining rent increases; limitations on cash distributions; limitations on sales or refinancing of Housing Complexes; limitations on transfers of interests in Local Limited Partnerships; limitations on removal of Local General Partners; limitations on subsidy programs; and possible changes in applicable regulations. Uninsured casualties could result in loss of property and Low Income Housing Tax Credits and recapture of Low Income Housing Tax Credits previously taken. The value of real estate is subject to risks from fluctuating economic conditions, including employment rates, inflation, tax, environmental, land use and zoning policies, supply and demand of similar properties, and neighborhood conditions, among others.

 

The ability of Limited Partners to claim tax losses from the Partnership is limited. The IRS may audit the Partnership or a Local Limited Partnership and challenge the tax treatment of tax items. The amount of Low Income Housing Tax Credits and tax losses allocable to the Limited Partners could be reduced if the IRS were successful in such a challenge. The alternative minimum tax could reduce tax benefits from an investment in the Partnership. Changes in tax laws could also impact the tax benefits from an investment in the Partnership and/or the value of the Housing Complexes.

 

All of the Low Income Housing Tax Credits anticipated to be realized from the Local Limited Partnerships have been realized. The Partnership does not anticipate being allocated any Low Income Housing Tax Credits from the Local Limited Partnerships in the future. Until all Local Limited Partnerships have completed the 15 year Low Income Housing Tax Credit Compliance Period, risks exist for potential recapture of prior Low Income Housing Tax Credits received.

 

F-9
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended March 31, 2014, 2013 and 2012

 

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

No trading market for the Partnership Units exists or is expected to develop. Limited Partners may be unable to sell their Partnership Units except at a discount and should consider their Partnership Units to be a long-term investment. Individual Limited Partners will have no recourse if they disagree with actions authorized by a vote of the majority of Limited Partners.

 

Exit Strategy

 

The Compliance Period for a Housing Complex is generally 15 years following construction or rehabilitation completion. Associates was one of the first in the industry to offer syndicated investments in Low Income Housing Tax Credits. The initial programs have completed their Compliance Periods.

 

Upon the sale of a Local Limited Partnership Interest or Housing Complex after the end of the Compliance Period, there would be no recapture of Low Income Housing Tax Credits. A sale prior to the end of the Compliance Period could result in recapture if certain conditions are not met.

 

With that in mind, the General Partner is continuing its review of the Housing Complexes. The review considers many factors, including extended use requirements (such as those due to mortgage restrictions or state compliance agreements), the condition of the Housing Complexes, and the tax consequences to the Limited Partners from the sale of the Housing Complexes.

 

Upon identifying those Housing Complexes with the highest potential for a successful sale, refinancing or re-syndication, the Partnership expects to proceed with efforts to liquidate them. The objective is to maximize the Limited Partners’ return wherever possible and, ultimately, to wind down the Partnership as Low Income Housing Tax Credits are no longer available. Local Limited Partnership Interests may be disposed of any time by the General Partner in its discretion. While liquidation of the Housing Complexes continues to be evaluated, the dissolution of the Partnership was not imminent as of March 31, 2014.

 

Upon management of the Partnership identifying a Local Limited Partnership for disposition, costs incurred by the Partnership in preparation for the disposition are deferred. Upon the sale of the Local Limited Partnership, the Partnership nets the costs that had been deferred against the proceeds from the sale in determining the gain or loss on sale of the Local Limited Partnership. Deferred disposition costs are included in other assets on the balance sheets.

 

The proceeds from the disposition of any of the Housing Complexes will be used first to pay debts and other obligations per the respective Local Limited Partnership Agreement. Any remaining proceeds will then be paid to the partners of the Local Limited Partnership, including the Partnership, in accordance with the terms of the particular Local Limited Partnership Agreement. The sale of a Housing Complex may be subject to other restrictions and obligations. Accordingly, there can be no assurance that a Local Limited Partnership will be able to sell its Housing Complex. Even if it does so, there can be no assurance that any significant amounts of cash will be distributed to the Partnership, as the proceeds first would be used to pay Partnership obligations and funding of reserves.

 

As of March 31, 2013, the Partnership sold the Housing Complexes of Mesa Verde Apartments, L.P and The North Central Limited Partnership. The Partnership also sold its Local Limited Partnership Interest in Lamar Plaza Apartments, LP and D. Hilltop Apartments, Ltd. The Compliance Period for Mesa Verde Apartments, L.P, The North Central Limited Partnership and Lamar Plaza Apartments, LP expired after the date of sale. The Purchaser has guaranteed that the Local Limited Partnership will stay in compliance with the Low Income Housing Tax Credit code, therefore there was no risk of recapture.

 

F-10
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended March 31, 2014, 2013 and 2012

 

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

During the year ended March 31, 2014, the Housing Complex of Blessed Rock of El Monte, a CA Partnership (“Blessed Rock”) was sold. The Partnership also sold its Local Limited Partnership interests in Woodland, Ltd., Greyhound Associates I, L.P. and Crescent City Apartment, a California Limited Partnership. The following table reflects the five dispositions during the year ended March 31, 2014. No distributions were made to the Limited Partners as a result of these dispositions. Each of the Local Limited Partnerships had completed its Compliance Period so there is no risk of recapture to the investors in the Partnership:

 

Local Limited Partnership  Debt at 12/31 prior to sale date   Appraisal Value   Date of Sale   Sales Proceeds   Actual Sale Related Expenses   Investment balance at date of sale   Gain on sale 
Blessed Rock of El Monte, a CA Partnership  $2,054,000   $6,910,000    4/12/2013   $2,355,384   $2,251   $547,889   $1,805,244 
Woodland, Ltd   1,341,720    226,000    7/31/2013    28,001    4,424    -    23,577 
Greyhound Associates I, L.P   435,203    115,000    8/31/2013    5,000    4,381    -    619 
Crescent City Apartment, a California Limited Partnership   2,681,206    320,000    10/1/2013    50,000    12,275    -    37,725 
Cleveland Apartments, L.P   1,454,052    1,070,000    2/27/2014    44,499    19,069    -    25,430 

 

The following table represents the use of the cash proceeds from the dispositions of the Local Limited Partnerships during the year ended March 31, 2014:

 

Local Limited Partnership  Cash proceeds   Reimburse for GP interest   Payment of Local Limited Partnership’s real estate taxes   Reimburse GP or affiliates for expenses   Payment of accrued asset management fees   Reimburse GP or affiliates for debts   Remaining cash to remain in reserves for future expenses 
Blessed Rock of El Monte, a CA Partnership  $2,355,384   $-   $-   $25,852   $181,045   $785,650   $1,362,837 
Woodland, Ltd   28,001    -    -    23,000    -    -    5,001 
Greyhound Associates I, L.P   5,000    -    -    -    -    -    5,000 
Crescent City Apartment, a California Limited Partnership   50,000    -    -    -    21,868    -    28,132 
Cleveland Apartments, L.P   44,499    5,501    38,210    -    6,289    -    - 

  

As of March 31, 2014, the Local Limited Partnership interest in Ashford Place Limited Partnership was identified to be sold. Ashford Place was appraised for $2,560,000 and had a mortgage note balance of $1,780,549 as of December 31, 2013. The Partnership’s investment balance is zero. The Compliance Period has been completed therefore there is no risk of recapture and investor approval is not required. The estimated sales price is $5,000. The Partnership has incurred $24,804 in sale related expenses which will be netted against the proceeds from the sale in calculating the gain/loss on sale. No distributions will be made to the Limited Partners as the result of this sale. The closing date for the Local Limited Partnership Interest sale has not yet been determined.

 

F-11
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended March 31, 2014, 2013 and 2012

 

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

Method of Accounting For Investments in Local Limited Partnerships

 

The Partnership accounts for its investments in Local Limited Partnerships using the equity method of accounting, whereby the Partnership adjusts its investment balance for its share of the Local Limited Partnerships’ results of operations and for any contributions made and distributions received. The Partnership reviews the carrying amount of an individual investment in a Local Limited Partnership for possible impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such investment may not be recoverable. Recoverability of such investment is measured by the estimated value derived by management, generally consisting of the sum of the remaining future Low Income Housing Tax Credits estimated to be allocable to the Partnership and the estimated residual value to the Partnership. If an investment is considered to be impaired, the Partnership reduces the carrying value of its investment in any such Local Limited Partnership. The accounting policies of the Local Limited Partnerships, generally, are expected to be consistent with those of the Partnership. Costs incurred by the Partnership in acquiring the investments are capitalized as part of the investment account and were being amortized over 27.5 years. (See Note 2)

 

“Equity in losses of Local Limited Partnerships” for each year ended March 31 has been recorded by the Partnership based on the twelve months of reported results provided by the Local Limited Partnerships for each year ended December 31. Equity in losses from the Local Limited Partnerships allocated to the Partnership is not recognized to the extent that the investment balance would be adjusted below zero. If the Local Limited Partnerships report net income in future years, the Partnership will resume applying the equity method only after its share of such net income equals the share of net losses not recognized during the period(s) the equity method was suspended. As of March 31, 2009, all Local Limited Partnerships were not considered to have any residual value in consideration of the current economic circumstances. (See Note 2)

 

In accordance with the accounting guidance for the consolidation of variable interest entities, the Partnership determines when it should include the assets, liabilities, and activities of a variable interest entity (VIE) in its financial statements, and when it should disclose information about its relationship with a VIE. The analysis that must be performed to determine which entity should consolidate a VIE focuses on control and economic factors. A VIE is a legal structure used to conduct activities or hold assets, which must be consolidated by a company if it is the primary beneficiary because it has (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the guidance requires continual reconsideration of the primary beneficiary of a VIE.

 

Based on this guidance, the Local Limited Partnerships in which the Partnership invests meet the definition of a VIE because the owners of the equity at risk in these entities do not have the power to direct their operations. However, management does not consolidate the Partnership’s interests in these VIEs, as it is not considered to be the primary beneficiary since it does not have the power to direct the activities that are considered most significant to the economic performance of these entities. The Partnership currently records the amount of its investment in these Local Limited Partnerships as an asset on its balance sheets, recognizes its share of partnership income or losses in the statements of operations, and discloses how it accounts for material types of these investments in its financial statements. The Partnership’s balance in investment in Local Limited Partnerships, plus the risk of recapture of tax credits previously recognized on these investments, represents its maximum exposure to loss. The Partnership’s exposure to loss on these Local Limited Partnerships is mitigated by the condition and financial performance of the underlying Housing Complexes as well as the strength of the Local General Partners and their guarantee against credit recapture to the investors in the Partnership.

 

F-12
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended March 31, 2014, 2013 and 2012

 

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

Distributions received from the Local Limited Partners are accounted for as a reduction of the investment balance. Distributions received after the investment has reached zero are recognized as distribution income. As of March 31, 2014 and 2013, all investment accounts in Local Limited Partnerships had reached zero.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

 

Cash and Cash Equivalents

 

The Partnership considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. For all periods presented, the Partnership had no cash equivalents.

 

Concentration of Credit Risk

 

For certain periods presented, the Partnership maintained cash balances at certain financial institutions in excess of the federally insured maximum. The Partnership believes it is not exposed to any significant financial risk on cash.

 

Reporting Comprehensive Income

 

The Partnership had no items of other comprehensive income for all periods presented.

 

Net Income (Loss) Per Partnership Unit

 

Net income (loss) per Partnership Unit includes no dilution and is computed by dividing income (loss) allocated to Limited Partners by the weighted average Partnership Units outstanding during the period. Calculation of diluted net income (loss) per Partnership Unit is not required.

 

Income Taxes

 

The Partnership has elected to be treated as a pass-through entity for income tax purposes and, as such, is not subject to income taxes. Rather, all items of taxable income, deductions and tax credits are passed through to and are reported by its owners on their respective income tax returns. The Partnership’s federal tax status as a pass-through entity is based on its legal status as a partnership. Accordingly, the Partnership is not required to take any tax positions in order to qualify as a pass-through entity. The Partnership is required to file and does file tax returns with the Internal Revenue Service and other taxing authorities. Accordingly, these financial statements do not reflect a provision for income taxes and the Partnership has no other tax positions which must be considered for disclosure. Income tax returns filed by the Partnership are subject to examination by the Internal Revenue Service for a period of three years. While no income tax returns are currently being examined by the Internal Revenue Service, tax years since 2010 remain open.

 

F-13
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended March 31, 2014, 2013 and 2012

 

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

 

Revenue Recognition

 

The Partnership is entitled to receive reporting fees from the Local Limited Partnerships. The intent of the reporting fees is to offset (in part) administrative costs incurred by the Partnership in corresponding with the Local Limited Partnerships. Due to the uncertainty of the collection of these fees, the Partnership recognizes reporting fees as collections are made.

 

Amortization

 

Acquisition fees and costs were being amortized over 30 years using the straight-line method. Amortization expense for the years ended March 31, 2014, 2013, and 2012, was $1,800, $7,200, and $7,200, respectively. Acquisition fees have been fully amortized or impaired as of March 31, 2014.

 

Impairment

 

The Partnership reviews its investments in Local Limited Partnerships for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of such investments may not be recoverable. Recoverability is measured by a comparison of the carrying amount of the investment to the sum of the total amount of the remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investment. As of March 31, 2009, all Local Limited Partnerships were not considered to have any residual value in consideration of the current economic circumstances. No impairment loss was recorded against the investments for any of the periods presented.

 

The Partnership evaluated its intangibles for impairment in connection with its investments in Local Limited Partnerships. Impairment on the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investment. As of March 31, 2009, all Local Limited Partnerships were not considered to have any residual value in consideration of the current economic circumstances. During the years ended March 31, 2014, 2013 and 2012, an impairment loss of $100,779, $0, and $0, respectively, was recorded against the related intangibles.

 

Impact of Recent Accounting Pronouncements

 

In May 2011, the FASB issued an update to existing guidance related to fair value measurements on how to measure fair value and what disclosures to provide about fair value measurements. For fair value measurements categorized as level 3, a reporting entity should disclose quantitative information of the unobservable inputs and assumptions, a description of the valuation processes and narrative description of the sensitivity of the fair value to changes in unobservable inputs. This update is effective for interim and annual periods beginning after December 15, 2011. The adoption of this update is not expected to materially affect the Partnership’s financial statements.

 

F-14
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended March 31, 2014, 2013 and 2012

 

NOTE 2 – INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS

 

As of March 31, 2014 and 2013 the Partnership owned Limited Partnership interests in 5 and 10, respectively, Local Limited Partnerships, each of which owns one Housing complex, consisting of an aggregate of 314 and 573 respectively, apartment units. The respective Local General Partners of the Local Limited Partnerships manage the day-to-day operations of the entities. Significant Local Limited Partnership business decisions require approval from the Partnership. The Partnership, as a limited partner, is generally entitled to 99%, as specified in the Local Limited Partnership agreements, of the operating profits and losses, taxable income and losses and Low Income Housing Tax Credits of the Local Limited Partnerships, except for one of the investments for which the Partnership is entitled to 49.49% of such amount.

 

The Partnership’s Investments in Local Limited Partnerships as shown in the balance sheets at March 31, 2014 and 2013, are approximately $874,000 and $(628,000), respectively greater than (less than) the Partnership’s equity at the preceding December 31 as shown in the Local Limited Partnerships’ combined condensed financial statements presented below. This difference is primarily due to acquisition, selection, and other costs related to the acquisition of the investments which have been capitalized in the Partnership’s investment account, impairment losses recorded in the Partnership’s investment account and capital contributions payable to the Local Limited Partnerships which were netted against partner capital in the Local Limited Partnership’s financial statements. The Partnership’s equity in losses of Local Limited Partnerships is also lower than the Partnership’s equity as shown in the Local Limited Partnership’s combined condensed financial statements due to the estimated losses recorded by the Partnership for the three month period ended March 31.

 

The Partnership reviews its investments in Local Limited Partnerships for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of such investments may not be recoverable. Recoverability is measured by a comparison of the carrying amount of the investment to the sum of the total amount of the remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investment. As of March 31, 2009, all Local Limited Partnerships were not considered to have any residual value in consideration of the current economic circumstances. No impairment loss was recorded against the investments for any of the periods presented.

 

For the years ended March 31, 2014, 2013, and 2012, the Partnership evaluated its intangibles for impairment in connection with its investments in Local Limited Partnerships. Impairment on the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investment. As of March 31, 2014, all Local Limited Partnerships were not considered to have any residual value in consideration of the current economic circumstances. During the years ended March 31, 2014, 2013, and 2012, an impairment loss of $100,779, $0, and $0, respectively, was recorded against the related intangibles.

 

At March 31, 2014 and 2013 the investment accounts in certain Local Limited Partnerships have reached a zero balance. Consequently, a portion of the Partnership’s estimate of its share of losses for the years ended March 31, 2014, 2013, and 2012 amounting to approximately $384,000, $575,000, and $527,000, respectively, have not been recognized. As of March 31, 2014, the aggregate share of net losses not recognized by the Partnership amounted to approximately $1,495,000.

 

F-15
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended March 31, 2014, 2013 and 2012

 

NOTE 2 – INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

 

The following is a summary of the equity method activity of the investments in the Local Limited Partnerships for the periods presented:

 

   For The Years Ended March 31, 
   2014   2013   2012 
             
Investments per balance sheet, beginning of year  $650,468   $629,335   $606,786 
Impairment loss   (100,779)   -    - 
Disposition of Local Limited Partnership   (547,889)          
Equity in income of Local Limited Partnerships   -    38,184    37,676 
Amortization of paid acquisition fees and costs   (1,800)   (7,200)   (7,200)
Distributions received from Local Limited Partnerships   -    (9,851)   (7,927)
                
Investment per balance sheet, end of year  $-   $650,468   $629,335 

 

   For the Years Ended March 31, 
   2014   2013   2012 
             
Investments in Local Limited Partnerships, net  $-   $547,889   $519,556 
Acquisition fees and costs, net of accumulated amortization of $0, $34,200 and $27,000.   -    102,579    109,779 
Investments per balance sheet, end of period  $-   $650,468   $629,335 

 

F-16
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended March 31, 2014, 2013 and 2012

 

NOTE 2 – INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

 

The financial information from the individual financial statements of the Local Limited Partnerships include rental and interest subsidies. Rental subsidies are included in total revenues and interest subsidies are generally netted in interest expense. Approximate combined condensed financial information from the individual financial statements of the Local Limited Partnerships as of December 31 and for the years then ended is as follows:

 

COMBINED CONDENSED BALANCE SHEETS

 

   2013   2012 
ASSETS          
Buildings and improvements (net of accumulated depreciation for 2013 and 2012, of $7,387,000 and $13,626,000, respectively)  $6,185,000   $15,298,000 
Land   716,000    2,203,000 
Other assets   1,436,000    2,961,000 
Total assets  $8,337,000   $20,462,000 
           
LIABILITIES          
Mortgage and construction loans payable  $6,772,000   $13,716,000 
Due to affiliates   1,351,000    1,450,000 
Other liabilities   404,000    875,000 
           
Total liabilities   8,527,000    16,041,000 
           
PARTNERS’ CAPITAL          
WNC Housing Tax Credit Fund V, L.P.,
Series 4
   (874,000)   1,278,000 
Other partners   684,000    3,143,000 
Total partners’ equity   (190,000)   4,421,000 
Total liabilities and partners’ equity  $8,337,000   $20,462,000 

 

F-17
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended March 31, 2014, 2013 and 2012

 

NOTE 2 – INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

 

COMBINED CONDENSED STATEMENTS OF OPERATIONS

 

   2013   2012   2011 
             
Revenues  $1,893,000   $3,443,000   $3,366,000 
                
Expenses:               
Operating expenses   1,513,000    2,439,000    2,288,000 
Interest expense   317,000    575,000    601,000 
Depreciation and amortization   449,000    930,000    933,000 
                
Total expenses   2,279,000    3,944,000    3,822,000 
                
Net loss  $(386,000)  $(501,000)  $(456,000)
                
Net loss allocable to the Partnership  $(384,000)  $(537,000)  $(489,000)
                
Net income recorded by the Partnership  $-   $38,000   $38,000 

 

Certain Local Limited Partnerships have incurred significant operating losses and/or have working capital deficiencies. In the event these Local Limited Partnerships continue to incur significant operating losses, additional capital contributions by the Partnership and/or the Local General Partner may be required to sustain the operations of such Local Limited Partnerships. If additional capital contributions are not made when they are required, the Partnership’s investment in certain of such Local Limited Partnerships could be impaired, and the loss and recapture of the related Low Income Housing Tax Credits could occur.

 

F-18
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended March 31, 2014, 2013 and 2012

 

NOTE 3 – RELATED PARTY TRANSACTIONS

 

Under the terms of the Partnership Agreement, the Partnership has paid or is obligated to the General Partner or its affiliates for the following fees:

 

(a)Acquisition fees of up to 7.5% of the gross proceeds from the sale of Partnership Units as compensation for services rendered in connection with the acquisition of Local Limited Partnerships. At the end of all periods presented, the Partnership incurred acquisition fees of $1,630,375. Accumulated amortization of these capitalized costs was $0 and $34,200 as March 31, 2014 and March 31, 2013, respectively. Impairment on the intangibles is measured by comparing the Partnership’s total investment balance after impairment of investments in Local Limited Partnerships to the sum of the total of the remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investments. If an impairment loss related to the acquisition expenses is recorded, the accumulated amortization is reduced to zero at that time. As of March 31, 2014, all acquisition fees were fully amortized or impaired.

 

(b)Reimbursement of costs incurred by the General Partner or an affiliate of Associates in connection with the acquisition of Local Limited Partnerships. These reimbursements have not exceeded 1% of the gross proceeds. As of the end of all periods presented, the Partnership incurred acquisition costs of $167,533, which have been included in investments in Local Limited Partnerships. As of all periods presented, the acquisition costs were fully amortized or impaired.

 

(c)An annual asset management fee equal to the greater amount of (i) $2,000 for each Housing complex, or (ii) 0.275% of gross proceeds. In either case, the fee will be decreased or increased annually based on changes to the Consumer Price Index. However, in no event will the maximum amount exceed 0.2% of the invested assets of the Local Limited Partnerships, including the Partnership’s allocable share of the mortgages. Management fees of $33,153, $50,149 and $50,784 were incurred during the years ended March 31, 2014, 2013 and 2012, respectively, of which $209,202, $0 and $25,000 was paid, respectively.

 

(d)A subordinated disposition fee in an amount equal to 1% of the sale price may be received in connection with the sale or disposition of a Housing Complex or Local Limited Partnership interest. Payment of this fee is subordinated to the Limited Partners receiving a preferred return of 14% through December 31, 2006 and 6 % thereafter (as defined in the Partnership Agreement) and is payable only if the General Partner or its affiliates render services in the sales effort. No such fee was incurred for all periods presented.

 

(e)The Partnership reimbursed the General Partner or its affiliates for operating expenses incurred by the Partnership and paid for by the General Partner or its affiliates on behalf of the Partnership. Operating expense reimbursements were $262,208, $46,682 and $8,351 during the years ended March 31, 2014, 2013 and 2012, respectively.

 

F-19
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended March 31, 2014, 2013 and 2012

 

NOTE 3 – RELATED PARTY TRANSACTIONS, continued

 

The accrued fees and expenses due to the General Partner and affiliates consist of the following at:

 

   March 31, 
   2014   2013 
         
Asset management fee payable  $15,875   $191,924 
Expenses paid by the General Partner or an affiliate on behalf of the Partnership   24,358    3,060 
           
Total  $40,233   $194,984 

 

NOTE 4 – QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

 

The following is a summary of the quarterly operations for the years ended March 31:

 

   June 30   September 30   December 31   March 31 
2014                
Income  $7,000   $51,000   $12,000   $- 
                     
Operating expenses and loss   236,000    30,000    126,000    28,000 
                     
Income (loss) from operations   (229,000)   21,000    (114,000)   (28,000)
                     
Gain on sale of Local Limited Partnerships   1,805,000    24,000    39,000    25,000 
                     
Net income (loss)   1,576,000    45,000    (75,000)   (3,000)
                     
Net income (loss) available to Limited Partners   1,560,000    45,000    (74,000)   (3,000)
                     
Net income (loss) per Partnership Unit   71    2    (3)   - 

 

F-20
 

 

WNC HOUSING TAX CREDIT FUND V, L.P., SERIES 4

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended March 31, 2014, 2013 and 2012

 

NOTE 4 – QUARTERLY RESULTS OF OPERATIONS (UNAUDITED), continued

 

   June 30   September 30   December 31   March 31 
2013