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EXCEL - IDEA: XBRL DOCUMENT - WNC HOUSING TAX CREDIT FUND VI LP SERIES 6Financial_Report.xls
EX-32.2 - EXHIBIT 32.2 - WNC HOUSING TAX CREDIT FUND VI LP SERIES 6ex32-2.htm
EX-32.1 - EXHIBIT 32.1 - WNC HOUSING TAX CREDIT FUND VI LP SERIES 6ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - WNC HOUSING TAX CREDIT FUND VI LP SERIES 6ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - WNC HOUSING TAX CREDIT FUND VI LP SERIES 6ex31-1.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: 000-26869

 

WNC HOUSING TAX CREDIT FUND VI, L.P., Series 6

(Exact name of registrant as specified in its charter)

 

California   33-0761578
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
     
17782 Sky Park Circle    
Irvine, CA   92614-6404
(Address of principal executive offices)   (Zip Code)

 

(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 15
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 22
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 27
Item 8. Financial Statements and Supplementary Data 28
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 29
Item 9A. Controls and Procedures 29
Item 9B. Other Information 30
     
  Part III  
     
Item 10. Directors, Executive Officers and Corporate Governance 30
Item 11. Executive Compensation 33
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 35
Item 13. Certain Relationships and Related Transactions, and Director Independence 36
Item 14. Principal Accountant Fees and Services 36
     
  Part IV  
     
Item 15. Exhibits and Financial Statement Schedules 37
Signatures 47

 

2
 

 

PART I.

 

Item 1. Business

 

Organization

 

WNC Housing Tax Credit Fund VI, L.P., Series 6 (the “Partnership”) is a California Limited Partnership formed under the laws of the State of California on March 3, 1997. The Partnership was formed to acquire limited partnership interests in other limited partnerships or limited liability companies (“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 Complexes. Each Local Limited Partnership is governed by its agreement of limited partnership or limited liability company operating agreement (the “Local Limited Partnership Agreement”).

 

The general partner of the Partnership is WNC & Associates, Inc. (“Associates” or the “General Partner”). The chairman and 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 prospectus and supplements thereto, filed with the U.S. Securities and Exchange Commission, on June 23, 1997, 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. The offering of Partnership Units has concluded and 20,500 Partnership Units, representing subscriptions in the amount of $20,456,595, net of discounts of $16,100 for volume purchases and dealer discounts of $27,305 had been accepted. As of March 31, 2014, a total of 20,480 Partnership Units remain outstanding. The General Partner has a 1% interest in operating profits and losses, taxable income and losses, in cash available for distribution from the Partnership and Low Income Housing Tax Credits of the Partnership. The investors in the Partnership (“Limited Partners”) will be allocated the remaining 99% of these items in proportion to their respective investments.

 

The Partnership shall continue in full force and effect until December 31, 2052 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 Tax 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 seeking to sell its Local Limited Partnership Interests. Nonetheless, 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 whether 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 March 3, 1997 (the “Partnership Agreement”), will be accomplished in the near term. Furthermore, the 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. If a Local Limited Partnership Interest or the related Housing Complex is not sold, it is anticipated that the Local General Partner would continue to operate such Housing Complexes. Notwithstanding the preceding, circumstances beyond the control of the General Partner or the Local General Partners may occur during the ten-year credit delivery 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 fifteen Local Limited Partnerships, four have been sold or otherwise disposed of as of March 31, 2014. Each of these Local Limited Partnerships owns or owned one Housing Complex that was eligible for the Federal Low Income Housing Tax Credit. 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 15-year Compliance Period of the Eleven Housing Complexes:

 

Expiration Date for 15-year Compliance Period
 
Local Limited
Partnership Name
  Compliance Period
Expiration Date
     
Boonville Associates I, L.P.   2016
Brighton Ridge Apartments L.P.   2014
Cotton Mill Elderly Living Center, L.P.   2016
Country Club Investors, L.P.   2013
Desloge Associates I, L.P.   2014
Kechel Towers, L.P.   2014
St. Susanne Associates I, L.P.   2015
Summer Wood Ltd.   2014
Wagner Partnership 99 Limited Partnership   2016
West Liberty Family Apartments, Ltd.   2017
West Mobile County Housing, Ltd.   2014

 

With that in mind, the General Partner is continuing its review of the Housing Complexes, with special emphasis on the more mature Housing Complexes such as any that have satisfied the IRS compliance requirements. 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, Partnership cash flow, 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 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.

 

4
 

 

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.

 

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 Partnerships, 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 had sold its Local Limited Partnership Interest in Trenton Village Apts., LP.

 

During the year ended March 31, 2014, the Partnership sold its Local Limited Partnership interests in Ottawa I Limited Partnership and Preservation Partners I, L.P. The Housing Complex of United Development Co., L.P.-97.0 (“UD 97.0”) was also disposed of as described below. The Compliance Periods for each of these Local Limited Partnerships has expired so there is no risk of tax credit recapture to the investors in the Partnership. The net investment balance had reached zero at the time of disposition for all three of the Local Limited Partnerships as listed in the table below.

 

Local Limited
Partnership
  Debt at 12/31/12   Appraisal
value
   Sales
Proceeds
   Sale related
expenses
   Gain (loss)
on sale
 
                     
Ottawa I Limited Partnership  $1,357,433   $425,102   $15,000   $524   $14,476 
                          
Preservation Partners I, L.P.   1,807,455    1,178,055    45,000    1,573    43,427 
                          
United Development Co., L.P.-97.0 (*)   1,150,275    2,000,000    -    2,183    (2,183)

 

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

 

Local Limited Partnership  Cash Proceeds   Reimburse GP
or affiliates
for expenses
   Payment of
accrued asset
management
fees
   Remaining cash to
remain in reserves
for future
expenses
 
                 
Ottawa I Limited Partnership  $15,000   $10,000   $-   $5,000 
                     
Preservation Partners I, L.P.   45,000    30,000    -    15,000 
                     
United Development Co., L.P.-97.0 (*)   -    -    -    - 

 

(*) UD 97.0 has filed for bankruptcy and the property was disposed of under the supervision of the bankruptcy court. There were no cash proceeds to the Partnership for this deal. The mortgage note on the Partnership was in technical default due to the fact that the property taxes were not current. The Housing Complex was transferred, along with all the encumbrances of debt, with the disposition. UD 97.0 was dissolved as of December 31, 2013.

 

5
 

 

During the year ended March 31, 2014, Brighton Ridge Apartments, L.P., Cotton Mill Elderly Living Center, L.P., West Mobile County Housing, LTD, Summer Wood Apartments, L.P., Kechel Tower, L.P., St. Susanne Associates I, L.P., Country Club Investors, L.P., Boonville Associates I, L.P., Wagner Partnership 99, L.P., and West Liberty Family Apartments, Ltd. were identified for disposition. Contracts have been drafted and are currently under review by potential purchasers of the Limited Partnership interests. As of the date of this report, the estimated purchase prices are still unknown.

 

Item 1A. Risk Factors

 

Set forth below are the principal risks the Partnership believes are material 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.

 

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 will 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. Even when 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.

 

6
 

 

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 significant amount of cash will be distributed to the Limited Partners. 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. In as much 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.

 

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.

 

7
 

 

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.

 

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 subsidizer. Regulations may prohibit the removal of a Local General Partner or permit removal only with the prior approval of the subsidizer. 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 which must be paid at such time. If that happens, a Limited Partner’s return may be derived only from the Low Income Housing Tax Credits and tax losses. Similar risks apply to sales of Local Limited Partnership Interests.

 

8
 

 

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. And 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.

 

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 first 15 years 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 all periods presented, the Partnership has reduced the carrying amount to zero with respect to all of its investments.

 

9
 

 

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.

 

For each of the years ended March 31, 2014, 2013 and 2012, 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 any 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 $9,465, $43,460 and $250,984, respectively.

 

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

 

10
 

 

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.

 

Tax liability on sale of 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.

 

11
 

 

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.

 

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.

 

12
 

 

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.

 

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. It is unlikely that a public market will develop for the purchase and sale of Partnership Units. 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.

 

13
 

 

Limitations on liability of the General Partner to the Partnership. The ability of Limited Partners to sue the General Partner and it affiliates is subject to limitations. The Partnership Agreement limits the liability of the General Partner and it affiliates to the Limited Partners. The General Partner and it 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 it 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.

 

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 were 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 are subject to substantial restrictions in the Partnership Agreement.

 

Anticipated future and existing cash resources of the Partnership are not sufficient to pay existing liabilities of the Partnership. However, substantially all of the existing liabilities of the Partnership are payable to the General Partner and/or its affiliates.

 

The Partnership’s accrued payables consist primarily of the asset management fees payable to the General Partner. These asset management fees payable increased by approximately $53,000, $61,000 and $61,000 for the years ended March 31, 2014, 2013 and 2012, respectively. The Partnership’s future contractual cash obligations consist primarily of its obligations to pay future annual asset management fees. These will equal approximately $44,000 per year through the termination of the Partnership, which must occur no later than December 31, 2052. 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.

 

Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through June 30, 2015.

 

14
 

 

Item 1B. Unresolved Staff Comments

 

Not Applicable

 

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 the remaining Housing Complexes as of the dates or for the periods indicated:

 

WNC Housing Tax Credit Fund VI, L.P. Series 6                    
                     
         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
Partnership
   Amount of
Investment
Paid to
Date
   Number of
Units
   Estimated
Aggregate Low
Income
Housing Tax
Credits (1)
   Mortgage
Balances of Local
Limited
Partnership
 
                           
Boonville Associates I, L.P. (2)  Boonville, Missouri  Central Missouri Counties’ Human Development Corporation  $2,195,000   $2,195,000    48   $3,027,000   $513,000 
                                
Brighton Ridge Apartments, L.P. (2)  Edgefield, South Carolina  The Piedmont Foundation of South Carolina, Inc.   926,000    926,000    44    1,302,000    384,000 
                                
Cotton Mill Elderly Living Center, L.P. (2)  Rock Island, Illinois  Elderly Living Development, Inc. and Quad Cities Redevelopment Resources, Inc.   1,040,000    1,040,000    31    1,445,000    631,000 
                                
Country Club Investors, L.P. (2)  Richmond, Virginia  Mark-Dana Corporation   305,000    305,000    97    359,000    2,123,000 
                                
Desloge Associates I, L.P.  Desloge, Missouri  East Missouri Action Agency, Inc.   1,059,000    1,059,000    32    1,629,000    437,000 
                                
Kechel Towers, L.P. (2)  Logansport, Indiana  Compass Square Development Corporation   1,348,000    1,348,000    23    1,258,000    319,000 
                                
St. Susanne Associates I, L.P. (2)  Mt. Vernon, Missouri  Southwind Community Development   255,000    255,000    16    337,000    618,000 
                                
Summer Wood Ltd. (2)  Camden, Alabama  ACHR Housing Corporation   1,237,000    1,237,000    32    1,707,000    875,000 

 

15
 

 

WNC Housing Tax Credit Fund VI, L.P. Series 6                    
                     
         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
Partnership
   Amount of
Investment
Paid to Date
   Number
of Units
   Estimated
Aggregate Low
Income Housing
Tax Credits (1)
   Mortgage Balances
of Local Limited
Partnership
 
                           
Wagner Partnership
99 Limited Partnership (2)
  Wagner, South Dakota  Lutheran Social Services of South Dakota and Weinburg Investments, Inc.   232,000    232,000    26    334,000    778,000 
                                
West Liberty Family Apartments, Ltd. (2)  West Liberty, Kentucky  Joe B. Curd, Jr. and Janie Sheets Curd   318,000    318,000    20    474,000    1,184,000 
                                
West Mobile County
Housing, Ltd. (2)
  Theodore, Alabama  Apartment Developers, Inc. and Thomas H. Cooksey   1,858,000    1,858,000    55    2,543,000    1,103,000 
                                
         $10,773,000   $10,773,000    424   $14,415,000   $8,965,000 

 

(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 Tax Credits have been received from the Local Limited Partnerships and allocated to the Limited Partners and General Partner and are no longer available to be allocated to the Partnership’s Limited Partners.
  
(2)The Local Limited Partnership has been identified for sale as of March 31, 2014.

 

16
 

 

WNC Housing Tax Credit Fund VI, L.P. Series 6            
             
   For the Year Ended December 31, 2013
Local Limited Partnership Name  Rental Income   Net Income (Loss)   Low Income
Housing Tax
Credits Allocated to
Partnership
 
             
Boonville Associates I, L.P. (1)  $181,000   $(108,000)   99.97%
                
Brighton Ridge Apartments L.P. (1)   339,000    20,000    98.99%
                
Cotton Mill Elderly Living Center, L.P. (1)   127,000    (87,000)   99.98%
                
Country Club Investors, L.P. (1)   673,000    (43,000)   66.99%
                
Desloge Associates I, L.P.   121,000    (48,000)   99.89%
                
Kechel Towers, L.P. (1)   131,000    (967,000)   99.98%
                
St. Susanne Associates I, L.P. (1)   107,000    6,000    99.98%
                
Summer Wood Ltd. (1)   102,000    (63,000)   99.98%
                
Wagner Partnership 99 Limited Partnership (1)   116,000    (28,000)   99.98%
                
West Liberty Family Apartments, Ltd. (1)   80,000    (59,000)   99.98%
                
West Mobile County Housing, Ltd. (1)   248,000    (64,000)   99.98%
                
   $2,225,000   $(1,441,000)     

 

(1)The Local Limited Partnership has been identified for sale as of March 31, 2014.

 

17
 

 

WNC Housing Tax Credit Fund VI, L.P. Series 6                    
                     
         Occupancy Rates
As of December 31,
Local Limited Partnership Name  Location  General Partner Name  2013   2012   2011   2010   2009 
                           
Boonville Associates I, L.P.  Boonville, Missouri  Central Missouri Counties’ Human Development Corporation   98%   98%   94%   100%   98%
                                
Brighton Ridge Apartments, L.P.  Edgefield, South Carolina  The Piedmont Foundation of South Carolina, Inc.   93%   100%   95%   93%   93%
                                
Cotton Mill Elderly Living Center, L.P.  Rock Island, Illinois  Elderly Living Development, Inc. and Quad Cities Redevelopment Resources, Inc.   90%   87%   100%   94%   94%
                                
Country Club Investors, L.P.  Richmond, Virginia  Mark-Dana Corporation   96%   97%   96%   81%   87%
                                
Desloge Associates I, L.P.  Desloge, Missouri  East Missouri Action Agency, Inc.   91%   88%   97%   100%   100%
                                
Kechel Towers, L.P.  Logansport, Indiana  Compass Square Development Corporation   100%   100%   100%   100%   100%
                                
Ottawa I, L.P.  Oglesby, Illinois  Michael K. Moore   N/A    88%   88%   88%   88%
                                
Preservation Partners I, L.P.  Pontiac and Taylorville, Illinois  Michael K. Moore and Affordable Housing Development Fund, Inc.   N/A    94%   94%   97%   97%
                                
St. Susanne Associates I, L.P.  Mt. Vernon, Missouri  Southwind Community Development   100%   100%   100%   100%   100%
                                
Summer Wood Ltd.  Camden, Alabama  ACHR Housing Corporation   97%   78%   84%   75%   94%

 

18
 

 

WNC Housing Tax Credit Fund VI, L.P. Series 6                    
                     
         Occupancy Rates
As of December 31,
Local Limited
Partnership Name
  Location  General Partner Name  2013   2012   2011   2010   2009 
                           
Trenton Village Apartments, L.P.  Trenton, Missouri  MBL Development, Co.   N/A    N/A    N/A    N/A    94%
                                
United Development Co., L.P. - 97.0  Memphis, Tennessee  Harold E. Buehler, Sr. and Jo Ellen Buehler   N/A    88%   88%   93%   93%
                                
Wagner Partnership 99 Limited Partnership  Wagner, South Dakota  Lutheran Social Services of South Dakota and Weinburg Investments, Inc.   77%   81%   92%   92%   81%
                                
West Liberty Family Apartments, Ltd.  West Liberty, Kentucky  Joe B. Curd, Jr. and Janie Sheets Curd   100%   100%   95%   100%   100%
                                
West Mobile County Housing, Ltd.  Theodore, Alabama  Apartment Developers, Inc. and Thomas H. Cooksey   95%   89%   91%   93%   85%
                                
      Weighted average   94%   92%   93%   92%   93%

 

N/A – The Partnership sold its interest in the Local Limited Partnership prior to the respective year end.

 

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 1,055 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. For all periods presented there were no 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  $32,285   $7,113   $5,112   $13,544   $54,759 
Other assets   31,843    -    -    -    - 
Investments in Local Limited Partnerships, net   -    9,465    54,147    339,938    899,903 
                          
Total Assets  $64,128   $16,578   $59,259   $353,482   $954,662 
                          
LIABILITIES                    
                     
Accrued fees and expenses due to the General Partner and affiliates  $753,919   $574,003   $452,395   $269,159   $264,747 
                          
Total Liabilities   753,919    574,003    452,395    269,159    264,747 
PARTNERS’ EQUITY (DEFICIT)   (689,791)   (557,425)   (393,136)   84,323    689,915 
                          
Total Liabilities and Partners’ Equity (Deficit)   $64,128   $16,578   $59,259   $353,482   $954,662 

 

Selected results of operations, cash flows and other information for the Partnership are as follows:

 

   March 31, 
   2014   2013   2012   2011   2010 
                     
Loss from operations  $(188,090)  $(164,290)  $(446,609)  $(471,647)  $(1,012,446)
Equity in losses of Local Limited Partnerships   -    -    (30,851)   (187,256)   (382,180)
Gain on sale of Local Limited Partnerships   55,720    -    -    18,299    - 
Interest income   4    1    1    12    41 
Net loss  $(132,366)  $(164,289)  $(477,459)  $(640,592)  $(1,394,585)
                          
Net loss allocated to:                         
General Partner  $(1,324)  $(1,643)  $(4,775)  $(6,406)  $(13,946)
                          
Limited Partners  $(131,042)  $(162,646)  $(472,684)  $(634,186)  $(1,380,639)
                          
Net loss per Partnership Unit  $(6.40)  $(7.94)  $(23.06)  $(30.94)  $(67.35)
                          
Outstanding weighted Partnership Units   20,480    20,495    20,500    20,500    20,500 

 

Note 1 – Loss from operations for the years ended March 31, 2014, 2013, 2012, 2011 and 2010 includes a charge for impairment losses on investments in Local Limited Partnerships of $9,465, $43,460, $250,984, $365,384, and $881,075, respectively. (See Note 2 to the financial statements.)

 

21
 

 

   For the Years Ended March 31, 
   2014   2013   2012   2011   2010 
                     
Net cash provided by (used in):                         
                          
Operating activities  $(21,048)  $2,001   $(8,432)  $(59,514)  $(23,398)
Investing activities   46,220    -    -    18,299    1,872 
                          
Net change in cash   25,172    2,001    (8,432)   (41,215)   (21,526)
                          
Cash, beginning of period   7,113    5,112    13,544    54,759    76,285 
                          
Cash, end of period  $32,285   $7,113   $5,112   $13,544   $54,759 

 

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

 

   2013   2012   2011   2010   2009 
                     
Federal  $-   $2   $20   $32   $79 
State   -    -    -    -    - 
                          
Total  $-   $2   $20   $32   $79 

 

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, as well as 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 Securities and Exchange Commission. 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.

 

22
 

 

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 any 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 30 years. (See Notes 2 and 3 to the financial statements)

 

“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.

 

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.

 

23
 

 

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.

 

Impact of Recent Accounting Pronouncements

 

In May 2011, 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.

 

Anticipated future and existing cash resources of the Partnership are not sufficient to pay existing liabilities of the Partnership. However, substantially all of the existing liabilities of the Partnership are payable to the General Partner and/or its affiliates. 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 then existing contractual obligations and then 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.

 

24
 

 

Financial Condition

 

For the year ended March 31, 2014

 

The Partnership’s assets at March 31, 2014 consisted of $32,000 in cash and other assets of $32,000 (See “Method of Accounting for Investments in Local Limited Partnerships”). Liabilities at March 31, 2014 consisted of $754,000 of accrued fees and expenses due to General Partner and affiliates (See “Future Contractual Cash Obligations” below).

 

Results of Operations

 

Year Ended March 31, 2014 Compared to Year Ended March 31, 2013 The Partnership’s net loss for the year ended March 31, 2014 of $(132,000), reflecting an decrease of $32,000 from the net loss experienced for the year ended March 31, 2013 of $(164,000). The decrease in net loss was due in part to a decrease of $34,000 in impairment loss for the year ended March 31, 2014 compared to the year ended March 31, 2013. The impairment loss can vary each year depending on the annual decrease in Low Income Housing Tax Credits allocated to the Partnership compared to the current net investment balance that is being carried for the particular Local Limited Partnerships. There was an increase of $56,000 in gain on sale of Local Limited Partnerships for the year ended March 31, 2014. The gain on sale recorded by the Partnership can vary depending on the values and sale proceeds of the Local Limited Partnerships which were sold. Amortization decreased by $1,000 for the year ended March 31, 2014 compared to the year ended March 31, 2013. The Partnership evaluates its intangibles for impairment in connection with its investments in Local Limited Partnerships. As impairment is recorded against the intangibles, the amortization expense for future periods is decreased. There was also an increase of $10,000 in write-off of advances to Local Limited Partnerships for the year ended March 31, 2014 compared to the year ended March 31, 2013. Advances and write-offs vary based on the operations and needs of the Local Limited Partnerships. Legal and accounting expenses increased by $(62,000) for the year ended March 31, 2014 due to legal services related to a Local Limited Partnership and the timing of the accounting work performed. Asset management fees decreased by $9,000 for the year ended March 31, 2014. The fees are calculated based on the value of invested assets which decreased due to the sale of Local Limited Partnerships. The reporting fees increased by $11,000 for the year ended March 31, 2014. These fees vary as Local Limited Partnerships pay the reporting fees to the Partnership when the Local Limited Partnerships’ cash flows will allow for the payment.

 

Year Ended March 31, 2013 Compared to Year Ended March 31, 2012 The Partnership’s net loss for the year ended March 31, 2013 of $(164,000), reflecting an decrease of $313,000 from the net loss experienced for the year ended March 31, 2012 of $(477,000). The decrease in net loss was due in part to a decrease of $208,000 in impairment loss for the year ended March 31, 2013 compared to the year ended March 31, 2012. The impairment loss can vary each year depending on the annual decrease in Low Income Housing Tax Credits allocated to the Partnership compared to the current net investment balance that is being carried for the particular Local Limited Partnerships. Amortization decreased by $3,000 for the year ended March 31, 2013 compared to the year ended March 31, 2012. The Partnership evaluates its intangibles for impairment in connection with its investments in Local Limited Partnerships. As impairment is recorded against the intangibles, the amortization expense for future periods is decreased. There was a $31,000 decrease in equity in losses of Local limited Partnerships for the year ended March 31, 2013. All investment balances reached zero in the prior year, therefore no further equity in losses could be recorded. There was also a decrease of $9,000 in write-off of advances to Local Limited Partnerships for the year ended March 31, 2013 compared to the year ended March 31, 2012. No advances were made during the year ended March 31, 2013 compared to $(9,000) advanced and reserved for during the year ended March 31, 2012. Advances vary based on the operations and needs of the Local Limited Partnerships. Legal and accounting expenses decreased by $65,000 for the year ended March 31, 2013 due to the timing of the accounting work performed. The reporting fees increased by $2,000 for the year ended March 31, 2013. These fees vary as Local Limited Partnerships pay the reporting fees to the Partnership when the Local Limited Partnerships’ cash flows will allow for the payment.

 

25
 

 

Liquidity and Capital Resources

 

Year Ended March 31, 2014 Compared to Year Ended March 31, 2013 The net increase in cash for the year ended March 31, 2014 was $25,000 compared to the net increase in cash for the year ended March 31, 2013 of $2,000. During the year ended March 31, 2014, the Partnership received $56,000 in net proceeds from dispositions compared to no proceeds received during the year ended March 31, 2013 as no Local Limited Partnerships were disposed of during the year ended March 31, 2013. There was an $11,000 increase in reporting fees for the year ended March 31, 2014 as discussed above. Advances of $(10,000) were made to Local Limited Partnerships during the year ended March 31, 2014 compared to no advances during the year ended March 31, 2013. Advances vary from period to period based on the operations and needs of the Local Limited Partnerships. Additionally, during the year ended March 31, 2014, the Partnership paid the General Partner or an affiliate $40,000 in reimbursements of operating expenses that were paid on the Partnership’s behalf compared to no such payments during the year ended March 31, 2013.

 

Year Ended March 31, 2013 Compared to Year Ended March 31, 2012 The net increase in cash for the year ended March 31, 2013 was $2,000 compared to the net decrease in cash for the year ended March 31, 2012 of $(8,000). There was a $2,000 increase in reporting fees for the year ended March 31, 2013 as discussed above. No advances were made to Local Limited Partnerships during the year ended March 31, 2013 compared to $(9,000) advanced during the year ended March 31, 2012 as discussed above.

 

Accrued payables, which consist primarily of related party management fees due to the General Partner, increased by approximately $180,000, $122,000 and $183,000 for the years ended March 31, 2014, 2013 and 2012, respectively. The General Partner does not anticipate that these accrued fees will be paid until such time as capital reserves are in excess of future foreseeable working capital requirements of the Partnership.

 

The Partnership currently has insufficient working capital to fund its operations. Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through June 30, 2015.

 

26
 

 

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)  $797,594   $43,675   $43,675   $43,675   $43,675   $1,441,275   $2,413,569 
Total contractual cash obligations  $797,594   $43,675   $43,675   $43,675   $43,675   $1,441,275   $2,413,569 

 

(1) Asset management fees are payable annually until termination of the Partnership, which is to occur no later than 2052. 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 until December 31, 2052. 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 asset management fees, see Note 3 to the financial statements included elsewhere herein.

 

Off-Balance Sheet Arrangements

 

The Partnerships has no off-balance sheet arrangements.

 

Exit Strategy

 

See Item 1 for information in this regard.

 

Impact of Recent Accounting Pronouncements

 

See footnote 1 to the financial statements.

 

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

 

NOT APPLICABLE

 

27
 

 

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-3
     
Statements of Operations for the years ended March 31, 2014, 2013 and 2012   F-4
     
Statements of Partners’ Equity (Deficit) for the years ended March 31, 2014, 2013 and 2012   F-5
     
Statements of Cash Flows for the years ended March 31, 2014, 2013 and 2012   F-6
     
Notes to Financial Statements   F-7

 

28
 

 

Report of Independent Registered Public Accounting Firm

 

To the Partners
WNC Housing Tax Credit Fund VI, L.P., Series 6

 

We have audited the accompanying balance sheets of WNC Housing Tax Credit Fund VI, L.P., Series 6 (the “Partnership”) as of March 31, 2014 and 2013, and the related statements of operations, partners’ equity (deficit), and cash flows for the years then ended. 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 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, the financial statements referred to above present fairly, in all material respects, the financial position of WNC Housing Tax Credit Fund VI, L.P., Series 6 as of March 31, 2014 and 2013 and the results of its operations and its cash flows for the years then ended 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 and 2013 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

WNC Housing Tax Credit Fund VI, L.P., Series 6 

 

We have audited the accompanying statements of operations, partners’ deficit and cash flows of WNC Housing Tax Credit Fund VI, L.P., Series 6 (the Partnership) for the year ended March 31, 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 audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership 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 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, WNC Housing Tax Credit Fund VI, L.P., Series 6’s results of its operations and its cash flows for the year ended March 31, 2012, in conformity with accounting principles generally accepted in the United States of America.

 

Our audit was 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 year above are presented for the purpose of complying with the Securities and Exchange Commission’s rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied to the audit of the basic financial statements and, in

our opinion, fairly state 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/ Reznick Group, P.C.  
Reznick Group, P.C.  

Bethesda, Maryland

June 22, 2012

 

 

 

F-2
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

BALANCE SHEETS

 

   March 31, 
   2014   2013 
ASSETS          
           
Cash  $32,285   $7,113 
Other assets   31,843    - 
Investments in Local Limited Partnerships, net (Notes 2 and 3)   -    9,465 
           
Total Assets  $64,128   $16,578 
           
LIABILITIES AND PARTNERS’ DEFICIT          
           
Liabilities:          
Accrued fees and expenses due to General Partner and affiliates (Note 3)  $753,919   $574,003 
           
Total Liabilities   753,919    574,003 
           
Partners’ Deficit:          
General Partner   (176,728)   (175,404)
Limited Partners (25,000 Partnership Units authorized; 20,480 and 20,495, respectively, Partnership Units issued and outstanding)   (513,063)   (382,021)
           
Total Partners’ Deficit   (689,791)   (557,425)
           
Total Liabilities and Partners’ Deficit  $64,128   $16,578 

 

See accompanying notes to financial statements

 

F-3
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

STATEMENTS OF OPERATIONS

 

   For the Years Ended March 31, 
   2014   2013   2012 
Operating income:               
Reporting fees  $13,318   $2,000   $500 
                
Operating expenses and loss:               
Amortization (Notes 2 and 3)   -    1,222    3,956 
Impairment loss (Note 2)   9,465    43,460    250,984 
Asset management fees (Note 3)   52,542    61,408    61,408 
Legal and accounting   102,053    40,535    105,282 
Write off of advances to Local Limited Partnerships   9,500    -    8,932 
Other   27,848    19,665    16,547 
Total operating expenses and loss   201,408    166,290    447,109 
                
Loss from operations   (188,090)   (164,290)   (446,609)
                
Equity in losses of Local Limited Partnerships (Note 2)   -    -    (30,851)
                
Gain on sale of Local Limited Partnerships   55,720    -    - 
                
Interest income   4    1    1 
                
Net loss  $(132,366)  $(164,289)  $(477,459)
                
Net loss allocated to:               
General Partner  $(1,324)  $(1,643)  $(4,775)
Limited Partners  $(131,042)  $(162,646)  $(472,684)
                
Net loss per Partnership Unit  $(6.40)  $(7.94)  $(23.06)
                
Outstanding weighted Partnership Units   20,480    20,495    20,500 

 

See accompanying notes to financial statements

 

F-4
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(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  $(168,986)  $253,309   $84,323 
                
Net loss   (4,775)   (472,684)   (477,459)
                
Partners’ deficit at March 31, 2012   (173,761)   (219,375)   (393,136)
                
Net loss   (1,643)   (162,646)   (164,289)
                
Partners’ deficit at March 31, 2013   (175,404)   (382,021)   (557,425)
                
Net loss   (1,324)   (131,042)   (132,366)
                
Partners’ deficit at March 31, 2014  $(176,728)  $(513,063)  $(689,791)

 

See accompanying notes to financial statements

 

F-5
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

STATEMENTS OF CASH FLOWS

 

   For The Years Ended
March 31,
 
   2014   2013   2012 
             
Cash flows from operating activities:               
Net loss  $(132,366)  $(164,289)  $(477,459)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:               
Amortization   -    1,222    3,956 
Impairment loss   9,465    43,460    250,984 
Equity in losses of Local Limited Partnerships   -    -    30,851 
Gain on sale of Local Limited Partnership   (55,720)   -    - 
Write off of advances to Local Limited Partnerships   9,500    -    8,932 
Increase in other assets   (31,843)   -    - 
Increase in accrued fees and expenses due to General Partner and affiliates   179,916    121,608    183,236 
                
Net cash provided by (used in) operating activities   (21,048)   2,001    500 
                
Cash flows from investing activities:               
Net proceeds from sale of Local Limited Partnerships   55,720    -    - 
Advances to Local Limited Partnerships   (9,500)   -    (8,932)
                
Net cash provided by (used in) investing activities   46,220    -    (8,932)
                
Net increase (decrease) in cash   25,172    2,001    (8,432)
                
Cash, beginning of year   7,113    5,112    13,544 
                
Cash, end of year  $32,285   $7,113   $5,112 
                
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION               
                
Taxes paid  $-   $-   $800 

 

See accompanying notes to financial statements

 

F-6
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(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 VI, L.P., Series 6, a California Limited Partnership (the “Partnership”) was formed on March 3, 1997 under the laws of the State of California. 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 Complexes. Each Local Limited Partnership is governed by its agreement of limited partnership (the “Local Limited Partnership Agreement”).

 

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

 

The Partnership shall continue in full force and effect until December 31, 2052, 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 has concluded and 20,500 Partnership Units, representing subscriptions in the amount of $20,456,595, net of discounts of $16,100 for volume purchases and dealer discounts of $27,305 had been accepted. As of March 31, 2014 a total of 20,480 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 in the Partnership (the “Limited Partners”) will be allocated the remaining 99% of these items in proportion to their respective investments.

 

The proceeds from the disposition of any of the Local Limited Partnership properties 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 Partnership. 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 equal to their capital contributions and their return on investment (as defined in the Partnership Agreement) and the General Partner would then be entitled to receive proceeds equal to its capital contributions from the remainder. Any additional sale or refinancing proceeds will be distributed 90% to the Limited Partners (in proportion to their respective investments) and 10% to the General Partner.

 

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:

 

F-7
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

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

 

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

 

The Low Income Housing Tax Credit 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 “Compliance Period”), 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.

 

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.

 

The Partnership currently has insufficient working capital to fund its operations. Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through June 30, 2015.

 

F-8
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

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

 

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

 

Anticipated future and existing cash resources of the Partnership are not sufficient to pay existing liabilities of the Partnership. However, substantially all of the existing liabilities of the Partnership are payable to the General Partner and/or their affiliates. 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 then existing contractual obligations and then 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.

 

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. One of the Housing Complexes has completed its Compliance Period.

 

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, Partnership cash flow, 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 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. 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 had sold its Local Limited Partnership Interest in Trenton Village Apts., LP.

 

F-9
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

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 Partnership sold its Local Limited Partnership interests in Ottawa I Limited Partnership and Preservation Partners I, L.P. The Housing Complex of United Development Co., L.P.-97.0 (“UD 97.0”) was also disposed of as described below. The Compliance Periods for each of these Local Limited Partnerships has expired so there is no risk of tax credit recapture to the investors in the Partnership. The net investment balance had reached zero at the time of disposition for all three of the Local Limited Partnerships as listed in the table below.

 

Local Limited
Partnership
  Debt at
12/31/12
   Appraisal
value
   Sales
Proceeds
   Sale related
expenses
   Gain (loss) on
sale
 
                     
Ottawa I Limited Partnership  $1,357,433   $425,102   $15,000   $524   $14,476 
                          
Preservation Partners I, L.P.   1,807,455    1,178,055    45,000    1,573    43,427 
                          
United Development Co., L.P.-97.0 (*)   1,150,275    2,000,000    -    (2,183)   (2,183)

 

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

 

Local Limited
Partnership
  Cash
Proceeds
   Reimburse GP
or affiliates for
expenses
   Payment of
accrued asset
management
fees
   Remaining cash to
remain in reserves
for future
expenses
 
                 
Ottawa I Limited Partnership  $15,000   $10,000   $-   $5,000 
                     
Preservation Partners I, L.P.   45,000    30,000    -    15,000 
                     
United Development Co., L.P.-97.0 (*)   -    -    -    - 

 

(*) UD 97.0 has filed for bankruptcy and the property was disposed of under the supervision of the bankruptcy court. There were no cash proceeds to the Partnership for this deal. The mortgage note on the Partnership was in technical default due to the fact that the property taxes were not current. The Housing Complex was transferred, along with all the encumbrances of debt, with the disposition. UD 97.0 was dissolved as of December 31, 2013.

 

During the year ended March 31, 2014, Brighton Ridge Apartments, L.P., Cotton Mill Elderly Living Center, L.P., West Mobile County Housing, LTD, Summer Wood Apartments, L.P., Kechel Tower, L.P., St. Susanne Associates I, L.P., Country Club Investors, L.P., Boonville Associates I, L.P., Wagner Partnership 99, L.P., and West Liberty Family Apartments, Ltd. were identified for disposition. Contracts have been drafted and are currently under review by potential purchasers of the Limited Partnership interests. As of the date of this report, the estimated purchase prices are still unknown.

 

F-10
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

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 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 allocated to the Partnership and any 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 and were being amortized over 30 years. (See Notes 2 and 3)

 

“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.

 

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-11
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

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 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 of the balances in Local Limited Partnerships have 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. As of both March 31, 2014 and 2013, the Partnership had no cash equivalents.

 

Reporting Comprehensive Income

 

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

 

Net Loss Per Partnership Unit

 

Net loss per Partnership Unit includes no dilution and is computed by dividing loss allocated to Limited Partners by the weighted average Partnership Units outstanding during the period. Calculation of diluted net 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.

 

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.

 

F-12
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

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

 

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

 

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 $0, $1,222 and $3,956, respectively. Acquisition fees and costs have been fully amortized or impaired as of March 31, 2014.

 

Impairment

 

The Partnership reviews its investments in Local Limited Partnership 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. For the years ended March 31, 2014, 2013 and 2012 impairment loss related to investments in Local Limited Partnerships was $0, $0 and $192,213, respectively.

 

The Partnership also evaluates 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 the remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investment. For the years ended March 31, 2014, 2013 and 2012, impairment loss on the intangibles was $9,465, $43,460 and $58,771, respectively.

 

Impact of Recent Accounting Pronouncements

 

In May 2011, 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.

 

F-13
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

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 owns Local Limited Partnership interests in 11 and 14 Local Limited Partnerships, respectively, each of which owns one Housing Complex consisting of an aggregate 424 and 576, 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 99.98%, 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.

 

The Partnership’s investments in Local Limited Partnerships as shown in the balance sheets at March 31, 2014 and 2013 are approximately $(859,000) and $(2,216,000), respectively, less than the Partnership’s equity at the preceding December 31 as shown in the Local Limited Partnerships’ combined financial statements presented below. This difference is primarily due to unrecorded losses as discussed below, and acquisition, selection and other costs related to the acquisition of the investments which have been capitalized in the Partnership’s investment account along with 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 Partnerships’ financial statements.

 

The Partnership reviews its investments in Local Limited Partnership 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. For the years ended March 31, 2014, 2013 and 2012, impairment loss related to investments in Local Limited Partnerships was $0, $0 and $192,213.

 

The Partnership also evaluates 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 the remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investment. For the years ended March 31, 2014, 2013 and 2012, impairment loss on the intangibles was $9,465, $43,460 and $58,771, respectively.

 

As of March 31, 2014 and 2013, the investment accounts in all 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 $1,453,000, $696,000 and $752,000, respectively, have not been recognized. As of March 31, 2014, the aggregate share of net losses not recognized by the Partnership amounted to approximately $4,069,000.

 

F-14
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

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 Local Limited Partnerships for periods presented:

 

   For The Years Ended March 31, 
   2014   2013   2012 
Investments per balance sheet, beginning of period  $9,465   $54,147   $339,938 
Impairment loss   (9,465)   (43,460)   (250,964)
Equity in losses of Local Limited Partnerships   -    -    (30,851)
Amortization of paid acquisition fees and costs   -    (1,222)   (3,956)
                
Investments per balance sheet, end of period  $-   $9,465   $54,147 

 

   For the Years Ended March 31, 
   2014   2013   2012 
Investments in Local Limited Partnerships, net  $-   $-    - 
Acquisition fees and costs, net of accumulated amortization of $0, $438 and $2,355   -    9,465    54,147 
Investments per balance sheet, end of period  $-   $9,465    54,147 

 

F-15
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

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 includes rental and interest subsidies. Rental subsidies are included in total revenues and interest subsidies are generally netted against 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  $11,826,000 and $14,882,000 respectively)  $12,140,000   $18,312,000 
Land   1,384,000    1,663,000 
Other assets   1,247,000    1,523,000 
           
Total assets  $14,771,000   $21,498,000 
           
LIABILITIES          
Mortgage loans payable  $8,965,000   $13,498,000 
Due to related parties   1,362,000    2,099,000 
Other liabilities   1,075,000    1,102,000 
           
Total liabilities   11,402,000    16,699,000 
           
PARTNERS’ EQUITY          
WNC Housing Tax Credit Fund VI, L.P., Series 6   859,000    2,225,000 
Other partners   2,510,000    2,574,000 
           

Total partners’ equity

   3,369,000    4,799,000 
            

Total liabilities and partners’ equity

  $14,771,000   $21,498,000 

 

F-16
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

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  $2,346,000   $3,183,000   $3,250,000 
                
Expenses:               
Operating expenses   324,000    2,174,000    2,304,000 
Interest expense   763,000    550,000    566,000 
Depreciation and amortization   2,700,000    1,122,000    1,120,000 
                
Total expenses   3,787,000    3,846,000    3,990,000 
                
Net loss  $(1,441,000)  $(663,000)  $(740,000)
                
Net loss allocable to the Partnership  $(1,427,000)  $(655,000)  $(735,000)
                
Net loss recorded by the Partnership  $-   $-   $(31,000)

 

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 Partners may be required to sustain 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-17
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

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 their affiliates for the following items:

 

Acquisition fees equal to 7% 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 $1,435,000, which have been included in investments in Local Limited Partnerships. Accumulated amortization of these capitalized costs was $0 and $438 as of March 31, 2014 and 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 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.

 

Reimbursement of costs incurred by the General Partners or an affiliate in connection with the acquisition of the Local Limited Partnerships. These reimbursements have not exceeded 2% of the gross proceeds. As of the end of all periods presented, the Partnership had incurred acquisition costs of $111,334 which have been included in investments in Local Limited Partnerships. Accumulated amortization was $111,334 for all periods presented.

 

An annual asset management fee equal to 0.2% of the Invested Assets of the Partnership, as defined. “Invested Assets” means the sum of the Partnership’s investment in Local Limited Partnership interests and the Partnership’s allocable share of mortgage loans on and other debts related to the Housing Complexes owned by such Local Limited Partnerships. Asset management fees of $52,542, $61,408 and $61,408 were incurred during the years ended March 31, 2014, 2013 and 2012, respectively, none of which were paid during the years ended March 31, 2014, 2013 and 2012.

 

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 paid were approximately $40,000, $0 and $0 during the years ended March 31, 2014, 2013 and 2012, respectively.

 

A subordinated disposition fee in an amount equal to 1% of the sales price of real estate sold. Payment of this fee is subordinated to the limited partners receiving a preferred return of 12% through December 31, 2008 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.

 

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

 

   March 31, 
   2014   2013 
Expenses paid by the General Partner or an affiliate on behalf of the Partnership  $357,242   $229,868 
Asset management fee payable   396,677    344,135 
           
Total  $753,919   $574,003 

 

F-18
 

 

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 6

(A California Limited Partnership)

 

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

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

 

NOTE 3 - RELATED PARTY TRANSACTIONS, continued

 

The General Partner and/or its affiliates do not anticipate that these accrued fees will be paid until such time as capital reserves are in excess of the future foreseeable working capital requirements of the Partnership. The Partnership currently has insufficient working capital to fund its operations. Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through June 30, 2015.

 

NOTE 4 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

 

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

 

2014  June 30   September 30   December 31   March 31 
                 
Income  $12,000   $-   $1,000   $- 
                     
Operating expenses and loss   (73,000)   (58,000)   (42,000)   (29,000)
                     
Loss from operations   (61,000)   (58,000)   (41,000)   (29,000)
                     
Gain (loss) on sale of Local Limited Partnerships   -    -    57,000    (1,000)
                     
Net income (loss)   (61,000)   (58,000)   16,000    (30,000)
                     
Net income (loss) available to Limited Partners   (60,000)   (57,000)   16,000    (30,000)
                     
Net income (loss) per Partnership Unit   (3)   (3)   1    (1)

 

2013  June 30   September 30   December 31   March 31 
                 
Income  $2,000   $-   $-   $- 
                     
Operating expenses and loss   (95,000)   (29,000)   (19,000)   (23,000)
                     
Loss from operations   (93,000)   (29,000)   (19,000)   (23,000)
                     
Net loss   (93,000)   (29,000)   (19,000)   (23,000)
                     
Net loss available to Limited Partners   (92,000)   (29,000)   (19,000)   (23,000)