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EX-31.2 - CERTIFICATION - WNC HOUSING TAX CREDIT FUND VI LP SERIES 10nat6-10_ex312.htm
EX-32.2 - CERTIFICATION - WNC HOUSING TAX CREDIT FUND VI LP SERIES 10nat6-10_ex322.htm
EX-31.1 - CERTIFICATION - WNC HOUSING TAX CREDIT FUND VI LP SERIES 10nat6-10_ex311.htm
EX-32.1 - CERTIFICATION - WNC HOUSING TAX CREDIT FUND VI LP SERIES 10nat6-10_ex321.htm


 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q
(Mark One)
S  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2015

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: 000-50837

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
 
California
33-0974362
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)

17782 Sky Park Circle, Irvine, CA 92614
( Address of principle executive offices )
 
(714) 622-5565
( Telephone Number )

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 o                                            

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o                 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer o Accelerated filer o Non-accelerated filer x Smaller reporting company o

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


 
 
 
 
 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A California Limited Partnership)

INDEX TO FORM 10-Q

For the Quarterly Period Ended December 31, 2015

PART I. FINANCIAL INFORMATION
 
   
Item 1. Financial Statements
 
    
 
Condensed Balance Sheets As of December 31, 2015 and March 31, 2015
3
    
 
Condensed Statements of Operations For the Three and Nine Months Ended December 31, 2015 and 2014
4
    
 
Condensed Statement of Partners' Equity (Deficit) For the Nine Months Ended December 31, 2015
5
    
 
Condensed Statements of Cash Flows For the Nine Months Ended December 31, 2015 and 2014
6
   
Notes to Condensed Financial Statements
7
 
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
16
   
Item 3. Quantitative and Qualitative Disclosures about Market Risks
18
   
Item 4. Controls and Procedures
18
   
PART II. OTHER INFORMATION
 
   
Item 1. Legal Proceedings
19
   
Item 1A.  Risk Factors
19
   
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
19
   
Item 3.  Defaults Upon Senior Securities
19
   
Item 4.  Mine Safety Disclosures
19
   
Item 5.  Other Information
19
   
Item 6.  Exhibits
19
   
Signatures
20

 
2

 
 
 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
(A California Limited Partnership)
 
CONDENSED BALANCE SHEETS
(Unaudited)
 
   
December 31,
2015
   
March 31,
2015
 
ASSETS
 
 
Cash and cash equivalents
  $ 37,224     $ 14,591  
Investments in Local Limited Partnerships, net (Note 2)
    -       148,733  
Other assets
    2,700       -  
                 
             Total Assets
  $ 39,924     $ 163,324  
                 
LIABILITIES AND PARTNERS' DEFICIT
 
                 
Liabilities:
               
Accrued fees and expenses due to General Partner and affiliates (Note 3)
  $ 976,243     $ 923,518  
                 
Total Liabilities
    976,243       923,518  
                 
Partners’ Deficit:
               
General Partner
    (12,279 )     (12,103 )
Limited Partners (25,000 Partnership Units authorized; 13,148 Partnership Units issued and outstanding)
    (924,040 )     (748,091 )
 
               
Total Partners’ Deficit
    (936,319 )     (760,194 )
                 
Total Liabilities and Partners’ Deficit
  $ 39,924     $ 163,324  
 
See accompanying notes to condensed financial statements
 
 
3

 
 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
 (A California Limited Partnership)

CONDENSED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended December 31, 2015 and 2014
 (Unaudited)
 
   
2015
   
2014
 
   
Three
   
Nine
   
Three
   
Nine
 
   
Months
   
Months
   
Months
   
Months
 
Operating income
                       
Reporting fees
  $ -     $ 11,254     $ -     $ 1,000  
                                 
Total operating income
    -       11,254       -       1,000  
                                 
Operating expenses and loss:
                               
  Asset management fees (Note 3)
    18,437       61,280       22,914       68,742  
  Impairment loss (Note 1)
    -       125,322       -       413,639  
  Legal and accounting fees
    2,200       28,300       1,200       23,300  
  Other
    2,413       7,169       2,759       9,731  
                                 
Total operating expenses and loss
    23,050       222,071       26,873       515,412  
                                 
Loss from operations
    (23,050 )     (210,817 )     (26,873 )     (514,412 )
                                 
Equity in losses of Local Limited
                               
   Partnerships (Note 2)
    -       (23,411 )     (33,178 )     (99,057 )
Gain on sale of Local Limited Partnerships
      -         58,099         -         -  
                                 
Interest income
    2       4       1       1  
                                 
Net loss
  $ (23,048 )   $ (176,125 )   $ (60,050 )   $ (613,468 )
                                 
Net loss allocated to:
                               
General Partner
  $ (23 )   $ (176 )   $ (60 )   $ (613 )
                                 
Limited Partners
  $ (23,025 )   $ (175,949 )   $ (59,990 )   $ (612,855 )
                                 
Net loss per Partnership Unit
  $ (1 )   $ (13 )   $ (5 )   $ (47 )
                                 
Outstanding weighted Partnership Units
    13,148       13,148       13,148       13,148  
 
See accompanying notes to condensed financial statements
 
 
4

 
 
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1
 (A California Limited Partnership)
 
CONDENSED STATEMENT OF PARTNERS’ EQUITY (DEFICIT)
For the Nine Months Ended December 31, 2015
(Unaudited)
 
   
General
   
Limited
       
   
Partner
   
Partners
   
Total
 
                   
Partners’ deficit at March 31, 2015
  $ (12,103 )   $ (748,091 )   $ (760,194 )
                         
Net loss
    (176 )     (175,949 )     (176,125 )
                         
Partners’ deficit at December 31, 2015
  $ (12,279 )   $ (924,040 )   $ (936,319 )
 
See accompanying notes to condensed financial statements
 
 
5

 
 
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
 (A California Limited Partnership)

CONDENSED STATEMENTS OF CASH FLOWS
For the Nine Months Ended December 31, 2015 and 2014
(Unaudited)
 
   
2015
   
2014
 
Cash flows from operating activities:
           
Net loss
  $ (176,125 )   $ (613,468 )
Adjustments to reconcile net loss to net
               
cash used in operating activities:
               
Impairment loss
    125,322       413,639  
Equity in losses of Local Limited Partnerships
    23,411       99,057  
Increase in other assets
    (2,700 )     -  
Increase in accrued fees and expenses due to
               
General Partner and affiliates
    52,725       96,772  
Gain on sale of Local Limited Partnerships
    (58,099 )     -  
                 
Net cash used in operating activities
    (35,466 )     (4,000 )
                 
Cash flows from investing activities:
               
Distributions received from Local Limited Partnerships
    -       9,102  
Net proceeds from sale of Local Limited Partnerships
    58,099       -  
                 
Net cash provided by investing activities
    58,099       9,102  
                 
Net increase in cash and cash equivalents
    22,633       5,102  
                 
Cash and cash equivalents, beginning of period
    14,591       7,498  
                 
Cash and cash equivalents, end of period
  $ 37,224     $ 12,600  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Taxes paid
  $ -     $ -  
                 
 
See accompanying notes to condensed financial statements
 
 
6

 
 
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1
(A California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
 
For the Quarterly Period Ended December 31, 2015
(Unaudited)
 
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

The accompanying condensed unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q for quarterly reports under Section 13 or 15(d) of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended December 31, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2016. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-K for the fiscal year ended March 31, 2015.

Organization

WNC Housing Tax Credit Fund VI, L.P., Series 10 (the “Partnership”) is a California Limited Partnership formed under the laws of the State of California on July 17, 2001, and commenced operations on February 28, 2003. The Partnership was formed to acquire limited partnership interests in other limited partnerships ("Local Limited Partnerships") which own multi-family housing complexes (“Housing Complexes”) that are eligible for Federal low income housing tax credits (“Low Income Housing Tax Credits”). The local general partners (the “Local General Partners”) of each Local Limited Partnership retain responsibility for maintaining, operating and managing the Housing Complex. Each Local Limited Partnership is governed by its agreement of limited partnership (the “Local Limited Partnership Agreement”).

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

The Partnership shall continue in full force and effect until December 31, 2062, 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 13,153 Partnership Units representing subscriptions in the amount of $13,119,270, net of dealer discounts of $31,220 and volume discounts of $2,510, had been accepted. As of December 31, 2015 and March 31, 2015 a total of 13,148 Partnership Units remain outstanding. The General Partner has a 0.1% interest in operating profits and losses, taxable income and losses, cash available for distribution from the Partnership and Low Income Housing Tax Credits of the Partnership. The investors (the “Limited Partners”) in the Partnership will be allocated the remaining 99.9% of these items in proportion to their respective investments.

The proceeds from the disposition of any of the Housing Complexes will be used first to pay debts and other obligations per the respective Local Limited Partnership Agreement. Any remaining proceeds will then be paid to the 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 from the proceeds remaining after payment of Partnership obligations and funding reserves, equal to their capital contributions and their return on investment (as defined in the Partnership Agreement). The General 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.

 
7

 
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1
(A California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
 
For the Quarterly Period Ended December 31, 2015
(Unaudited)
 
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Risks and Uncertainties

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

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

The Partnership has invested in a limited number of Local Limited Partnerships. Such limited diversity means that the results of operation of each single Housing Complex will have a greater impact on the Partnership. With limited diversity, poor performance of one Housing Complex could impair the Partnership’s ability to satisfy its investment objectives. Each Housing Complex is subject to mortgage indebtedness. If a Local Limited Partnership failed to pay its mortgage, it could lose its Housing Complex in foreclosure. If foreclosure were to occur during the first 15 years (the “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 a 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.

 
8

 
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1
(A California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
 
For the Quarterly Period Ended December 31, 2015
(Unaudited)
 
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

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.

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 February 28, 2017.

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 the 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.

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

Exit Strategy

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

Upon the sale of a Local Limited Partnership Interest or Housing Complex after the end of the Compliance Period, there would be no recapture of Low Income Housing Tax Credits. A sale prior to the end of the Compliance Period could result in recapture if certain conditions are not met. None of the Housing Complexes have completed their 15-year 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, and the tax consequences to the Limited Partners from the sale of the Housing Complexes.

Upon identifying those Housing Complexes with the highest potential for a successful sale, refinancing or re-syndication, the Partnership expects to proceed with efforts to liquidate them. The objective is to maximize the Limited Partners’ return wherever possible and, ultimately, to wind down the Partnership as Low Income Housing Tax Credits are no longer available. Local Limited Partnership interests may be disposed of any time by the General Partner in its discretion. While liquidation of the Housing Complexes continues to be evaluated, the dissolution of the Partnership was not imminent as of December 31, 2015.
 
 
9

 
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1
(A California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
For the Quarterly Period Ended December 31, 2015
(Unaudited)
 
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

As of December 31, 2015, the Partnership has identified the following Local Limited Partnerships for possible disposition.

Local Limited Partnership
 
Debt at 12/31/14
   
Appraisal value
   
Estimated sales price
   
Estimated sales expenses
Melodie Meadows Associates
    1,193,322     $ 690,000       *     $ 2,700  

* Estimated price and close date has yet to be determined. The Local Limited Partnership is not under contract to be purchased as of the report filing.

During the nine months ended December 31, 2015, the Partnership sold its Local Limited Partnership interest in FDI-Green Manor 2003 (“Green Manor”). Green Manor was appraised for $390,000 and had a mortgage balance of $1,029,016 as of December 31, 2014. The Partnership received $30,000 in cash proceeds, all of which were used to reimburse the General Partner or affiliates for expenses paid on its behalf. The Partnership incurred $3,450 in sale related expenses which was netted against the proceeds from the sale in calculating the gain on sale. The Partnership’s investment balance is zero; therefore a gain of $26,550 was recorded. The Compliance Period for Green Manor has not yet expired. A Recapture Guarantee Surety Bond was issued to the Purchaser to guarantee the repayment of the recaptured tax credits and interests arising from any non-compliance as provided in Section 42 of the Internal Revenue Code arising after the date of the sale.

During the nine months ended December 31, 2015, the Partnership sold its Local Limited Partnership interest in FDI-Pine Meadows 2003 (“Pine Meadows”). Pine Meadows was appraised for $510,000 and had a mortgage balance of $949,356 as of December 31, 2014. The Partnership received $35,000 in cash proceeds, of which $23,624 was used to reimburse the General Partner or affiliates for expenses paid on its behalf, and the remaining $11,376 was retained in reserves for future operating expenses. The Partnership incurred $3,451 in sale related expenses which was netted against the proceeds from the sale in calculating the gain on sale. The Partnership’s investment balance is zero; therefore a gain of $31,549 was recorded. The Compliance Period for Pine Meadows has not yet expired. A Recapture Guarantee Surety Bond was issued to the Purchaser to guarantee the repayment of the recaptured tax credits and interests arising from any non-compliance as provided in Section 42 of the Internal Revenue Code arising after the date of the sale.
 
 
10

 
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1
(A California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
For the Quarterly Period Ended December 31, 2015
(Unaudited)
 
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Method of Accounting for Investments in Local Limited Partnerships

The Partnership accounts for its investments in Local Limited Partnerships using the equity method of accounting, whereby the Partnership adjusts its investment balance for its share of the Local Limited Partnerships’ results of operations and for any contributions made and distributions received. The Partnership reviews the carrying amount of an individual investment in a Local Limited Partnership for possible impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such investment may not be recoverable. Recoverability of such investment is measured by the estimated value derived by management, generally consisting of the sum of the remaining future Low Income Housing Tax Credits estimated to be allocable to the Partnership and the estimated residual value to the Partnership. If an investment is considered to be impaired, the Partnership reduces the carrying value of its investment in any such Local Limited Partnership. The accounting policies of the Local Limited Partnerships, generally, are expected to be consistent with those of the Partnership. Costs incurred by the Partnership in acquiring the investments were capitalized as part of the investment and were being amortized over 30 years.

“Equity in losses of Local Limited Partnerships” for each of the periods ended December 31, 2015 and 2014, respectively has been recorded by the Partnership. Management’s estimate for the three and nine month periods is based on either actual unaudited results reported by the Local Limited Partnerships or historical trends in the operations of the Local Limited Partnerships. Equity in losses from the Local Limited Partnerships allocated to the Partnership are 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 (see Note 2).

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

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

 
11

 
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1
(A California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
For the Quarterly Period Ended December 31, 2015
(Unaudited)
 
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

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 December 31, 2015 and March 31, 2015, the Partnership had $37,224 and $14,591 in cash and cash equivalents, respectively.

Reporting Comprehensive Income

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

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 2012 remain open.

Net Loss Per Partnership Unit

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

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.

Impairment

The Partnership reviews its investments in Local Limited Partnerships for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of such investments may not be recoverable. Recoverability is measured by a comparison of the carrying amount of the investment to the sum of the total amount of the remaining Low Income Housing Tax Credits allocated to the Partnership and any estimated residual value of the investment. For the nine months ended December 31, 2015 and 2014, impairment loss related to investments in Local Limited Partnerships was $125,322 and $413,639, respectively.

 
12

 
WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1
(A California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
For the Quarterly Period Ended December 31, 2015
(Unaudited)
NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS

As of December 31, 2015 and March 31, 2015, the Partnership had acquired limited partnership interests in 4 and 6 Local Limited Partnerships, respectively, each of which owns one Housing Complex, consisting of an aggregate of 218 and 317 apartment units, respectively. 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, as defined, 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 tax credits of the Local Limited Partnerships.

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

   
For the Nine
Months Ended
December 31, 2015
   
For the Year Ended
March 31, 2015
 
Investments per balance sheet, beginning of period
  $ 148,733     $ 664,639  
Impairment loss
    (125,322 )     (413,639 )
Distributions received from Local Limited Partnership
    -       (9,101 )
Equity in losses of Local Limited Partnerships
    (23,411 )     (93,166 )
Investments per balance sheet, end of period
  $ -     $ 148,733  
 
Selected financial information for the nine months ended December 31, 2015 and 2014 from the unaudited combined condensed financial statements of the Local Limited Partnerships in which the Partnership has invested is as follows:

COMBINED CONDENSED STATEMENTS OF OPERATIONS
 
   
   
2015
   
2014
 
Revenues
  $ 1,030,000     $ 1,109,000  
Expenses:
               
  Interest expense
    168,000       146,000  
  Depreciation and amortization
    357,000       431,000  
  Operating expenses
    697,000       819,000  
Total expenses
    1,222,000       1,396,000  
                 
Net loss
  $ (192,000 )     (287,000 )
Net loss allocable to the Partnership
  $ (192,000 )   $ (287,000 )
Net loss recorded by the Partnership
  $ (23,000 )   $ (99,000 )
 
Certain Local Limited Partnerships incurred 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 the operations of such Local Limited Partnerships. If additional capital contributions are not made when they are required, the Partnership's investment in certain of such Local Limited Partnerships could be impaired, and the loss and recapture of the related Low Income Housing Tax Credits could occur.
 
 
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WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1
(A California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
For the Quarterly Period Ended December 31, 2015
(Unaudited)

NOTE 2 - INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS, continued

Troubled Housing Complexes
 
FDI-Pine Meadows 2003, Ltd. (“FDI-Pine Meadows”) is a rehabilitated 59-unit multifamily apartment complex consisting of fifteen one-story buildings containing one-bedroom units located in Hempstead, Texas. The rehabilitation began in June 2004 and was completed in October 2005 and the property had achieved 100% tax credit occupancy. The Local Limited Partnership’s expected last year of tax credits delivery was 2014 and the Local Limited Partnership’s Compliance Period ends in 2018.
 
FDI-Pine Meadows had not performed as anticipated and was on the watch list due to a low debt coverage ratio (“DCR”) and low economic occupancy. A combination of problem and non-paying tenants being evicted has contributed to the low occupancy rate as well as a low DCR. Physical occupancy was at 65% at the end of the first quarter of 2015.
 
FDI-Green Manor 2003, Ltd. (“FDI-Green Manor”) is a rehabilitated 40-unit multifamily apartment complex consisting of five two-story buildings containing one and two-bedroom units located in Hempstead, Texas. The rehabilitation began in July 2004 and was completed in January 2005 and the property had achieved 100% tax credit occupancy. The Local Limited Partnership’s expected last year of tax credits delivery was 2014 and the Local Limited Partnership’s Compliance Period ends in 2018.

FDI-Green Manor had not performed as anticipated and was on the watch list due to low DCR, low economic occupancy and a depleted reserve account. A combination of low occupancy rate and increased utility expenses contributed to accumulated vacancy loss, as well as a low DCR.

As of December 31, 2015, the Partnership sold its Local Limited Partnership interests in both FDI-Pine Meadows and FDI-Green Manor.

 
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WNC HOUSING TAX CREDIT FUND IV, L.P., SERIES 1
(A California Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
For the Quarterly Period Ended December 31, 2015
(Unaudited)

NOTE 3 - RELATED PARTY TRANSACTIONS

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

(a)  
An annual asset management fee not to exceed 0.5% 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 $61,280 and $68,742 were incurred during the nine months ended December 31, 2015 and 2014, respectively. No payments of those fees was made during the nine months ended December 31, 2015 and 2014.
 
 
(b)  
A subordinated disposition fee in an amount equal to 1% of the sale price of real estate sold by the Local Limited Partnerships. Payment of this fee is subordinated to the Limited Partners receiving distributions equal to their capital contributions and their return on investment (as defined in the Partnership Agreement) and is payable only if services are rendered in the sales effort. No such fee was incurred for all periods presented.
 
 
(c)  
The Partnership reimburses the General Partner or its affiliates for operating expenses incurred on behalf of the Partnership. Operating expense reimbursements paid were $53,624 and $5,000 during the nine months ended December 31, 2015 and 2014, respectively.

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

   
December 31,
2015
   
March 31,
2015
 
             
Asset management fee payable
  $ 946,514     $ 885,234  
Expenses paid by the General Partner or an affiliate on behalf of the Partnership
    29,729       38,284  
Total
    976,243     $ 923,518  

The General Partner and/or its affiliates do not anticipate that these accrued fees will be paid in full 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 February 28, 2017.
 
 
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Item 2. 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-Q 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, our future cash flows and ability to obtain sufficient financing, level of operating expenses, conditions in the Low Income Housing Tax Credit 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-Q and in other reports filed with the Securities and Exchange Commission.

The following discussion and analysis compares the results of operations for the three and nine months ended December 31, 2015 and 2014, and should be read in conjunction with the condensed financial statements and accompanying notes included within this report.

Financial Condition

The Partnership’s assets at December 31, 2015 consisted of $37,000 in cash and cash equivalents and $3,000 in other assets. Liabilities at December 31, 2015 consisted of $976,000 of accrued fees and expenses due to General Partner and affiliates.

Results of Operations

Three Months Ended December 31, 2015 Compared to Three Months Ended December 31, 2014  The Partnership's net loss for the three months ended December 31, 2015 was $23,000, reflecting a decrease of $37,000 from the net loss of $60,000 for the three months ended December 31, 2014. The decrease in the net loss is primarily due to a $33,000 decrease in equity in losses of Local Limited Partnerships for the three months ended December 31, 2015 compared to the three months ended December 31, 2014. The equity in losses of Local Limited Partnerships can vary from year to year depending on the operations of the Local Limited Partnerships. As all remaining investments in Local Limited Partnerships have been reduced to zero, no further equity in losses of Local Limited Partnerships is expected to be recognized by the Partnership. The Partnership’s asset management fees decreased $5,000 for the three months ended December 31, 2015 compared to the three months ended December 31, 2014. These fees are calculated based on the value of the invested assets, which decreased due to the sale of Local Limited Partnerships. Legal and accounting fees increased $1,000 due to the timing of the accounting work performed.

Nine Months Ended December 31, 2015 Compared to the Nine Months Ended December 31, 2014 The Partnership's net loss for the nine months ended December 31, 2015 was $176,000, reflecting a decrease of $437,000 from the net loss of $613,000 for the nine months ended December 31, 2014. There was a $58,000 increase in gain on sale during the nine months ended December 31, 2015. The gain on sale of Local Limited Partnerships will vary from period to period depending on the value and sales price of the Housing Complexes that have been identified for disposition and the closing date of such transaction. The Partnership experienced a $76,000 decrease in equity in losses of Local Limited Partnerships for the nine months ended December 31, 2015 compared to the nine months ended December 31, 2014. The equity in losses of Local Limited Partnerships can vary from year to year depending on the operations of the Local Limited Partnerships. As all remaining investments in Local Limited Partnerships have been reduced to zero, no further equity in losses of Local Limited Partnerships is expected to be recognized by the Partnership. Impairment loss decreased by $289,000 for the nine months ended December 31, 2015 compared to the nine months ended December 31, 2014. The impairment loss can vary each year depending on the annual decrease in Low Income Housing Tax Credits allocated to the Partnership and the current estimated residual value to the Partnership compared to the current carrying value of each of the investments to the Partnership. In addition, there was a $5,000 increase in legal and accounting fees for the nine months ended December 31, 2015 due to the timing of the accounting work performed. Asset
 
 
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

Management fees decreased $8,000 for the nine months ended December 31, 2015 as discussed above. There was a $3,000 decrease in other expenses for the nine months ended. December 31, 2015 due mainly to outsourcing of printing expenses related to investor reports during the nine months ended December 31, 2014. There was a $10,000 increase in reporting fees for the nine months ended December 31, 2015 compared to the nine months ended December 31, 2014. Local Limited Partnerships pay the reporting fees to the Partnership when the Local Limited Partnerships’ cash flows will allow for the payment.

Capital Resources and Liquidity

Nine Months Ended December 31, 2015 Compared to Nine Months Ended December 31, 2014  The net increase in cash and cash equivalents during the nine months ended December 31, 2015 was $23,000, compared to net increase cash and cash equivalents of $5,000 used during the nine months ended December 31, 2014. The Partnership received $58,000 in net proceeds from the sale of two Local Limited Partnerships during the nine months ended December 31, 2015 compared to no proceeds received during the nine months ended December 31, 2014. Proceeds received from disposition vary depending on the sale prices and the value of the Housing Complexes that are sold. The Partnership reimbursed the General Partner or an affiliate $54,000 for expenses paid on its behalf during the nine months ended December 31, 2015 compared to $5,000 reimbursed during the nine months ended December 31, 2014. Reimbursements of operating expense are paid after management reviews the cash position of the Partnership. Reporting fees increased by $10,000 and distributions decreased by $9,000 for the nine months ended December 31, 2015. The Local Limited Partnerships pay reporting fees and distributions to the Partnership when the Local Limited Partnerships’ cash flows will allow for the payment.

During the nine months ended December 31, 2015, accrued payables, which consist primarily of asset management fees to the General Partner or affiliates, increased by $53,000. The General Partner does not anticipate that these accrued fees will be paid in full until such time as capital reserves are in excess of future foreseeable working capital requirements of the Partnership.

The Partnership expects its future cash flows, together with its net available assets as of December 31, 2015, to be insufficient to meet all currently foreseeable future cash requirements. Associates has agreed to continue providing advances sufficient enough to fund the operations and working capital requirements of the Partnership through February 28, 2017.

Recent Accounting Changes

In January 2014, the FASB issued an amendment to the accounting and disclosure requirements for investments in qualified affordable housing projects. The amendments provide guidance on accounting for investments by a reporting entity in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for the low-income housing tax credit. The amendments permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received, and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). The amendments are effective for interim and annual periods beginning after December 15, 2014 and should be applied retrospectively to all periods presented. Early adoption is permitted. The adoption of this update is not expected to materially affect the Partnership's financial statements.

In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis”. This will improve certain areas of consolidation guidance for reporting organizations that are required to evaluate whether to consolidate certain legal entities such as limited partnerships, limited liability corporations and securitization structures. ASU 2015-02 simplifies and improves GAAP by: eliminating the presumption that a general partner should consolidate a limited partnership, eliminating the indefinite deferral of FASB Statement No. 167, thereby reducing the number of Variable Interest Entity (VIE) consolidation models from four to two (including the limited partnership consolidation model) and clarifying when fees paid to a decision maker should be a factor to include in the consolidation of VIEs. ASU 2015-02 will be effective for periods beginning after December 15, 2015. The Partnership is currently evaluating the potential impact of the adoption of this guidance on its financial statements.

 
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Item 3. Quantitative and Qualitative Disclosures About Market Risks

NOT APPLICABLE

Item 4. Controls and Procedures

(a)           Disclosure controls and procedures

As of the end of the periods covered by this report, the Partnership’s General Partner, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of Associates, carried out an evaluation of the effectiveness of the Partnership’s “disclosure controls and procedures” as defined in Securities Exchange Act of 1934 Rule 13a-15 and 15d-15. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the periods covered by this report, the Partnership’s disclosure controls and procedures were not effective to ensure that material information required to be disclosed in the Partnership’s periodic report filings with SEC is recorded, processed, summarized and reported within the time period specified by the SEC’s rules and forms, consistent with the definition of “disclosure controls and procedures” under the Securities Exchange Act of 1934.

The Partnership must rely on the Local Limited Partnerships to provide the Partnership with certain information necessary to the timely filing of the Partnership’s periodic reports. Factors in the accounting at the Local Limited Partnerships have caused delays in the provision of such information during past reporting periods, and resulted in the Partnership’s inability to file its periodic reports in a timely manner.

Once the Partnership has received the necessary information from the Local Limited Partnerships, the Chief Executive Officer and the Chief Financial Officer of Associates believe that the material information required to be disclosed in the Partnership’s periodic report filings with SEC is effectively recorded, processed, summarized and reported, albeit not in a timely manner. Going forward, the Partnership will use the means reasonably within its power to impose procedures designed to obtain from the Local Limited Partnerships the information necessary to the timely filing of the Partnership’s periodic reports.

(b)           Changes in internal controls

There were no changes in the Partnership’s internal control over financial reporting that occurred during the quarter ended December 31, 2015 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
 
 
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Part II.
Other Information
   
Item 1.
Legal Proceedings
   
 
NONE
   
Item 1A.
Risk Factors
   
 
No material changes in risk factors as previously disclosed in the Partnership’s Form 10-K.
   
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
   
 
NONE
   
Item 3.
Defaults Upon Senior Securities
   
 
NONE
   
Item 4.
Mine Safety Disclosures
 
NOT APPLICABLE
   
Item 5.
Other Information
   
 
NONE
   
Item 6.
Exhibits


31.1
Certification of the Chief Executive Officer pursuant to Rule 13a-14 or 15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)

31.2
Certification of the Chief Financial Officer pursuant to Rule 13a-14 or 15d-14, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)

32.1           Section 1350 Certification of the Chief Executive Officer. (filed herewith)

32.2           Section 1350 Certification of the Chief Financial Officer. (filed herewith)

101
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Balance Sheets at December 31, 2015 and March 31, 2015, (ii) the Condensed Statements of Operations for the three and nine months ended December 31, 2015 and 2014, (iii) the Condensed Statement of Partners’ Deficit for the nine months ended December 31, 2015, (iv) the Condensed Statements of Cash Flows for the nine months ended December 31, 2015 and 2014 and (v) the Notes to Condensed Financial Statements.
 
Exhibits 32.1, 32.2 and 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibits shall not be deemed incorporated by reference into any filing under the Securities Act of 1933 or Securities Exchange Act of 1934.
 
 
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 10
 
 
By:  WNC & ASSOCIATES, INC.    General Partner



By: /s/ Wilfred N. Cooper, Jr.

Wilfred N. Cooper, Jr.
President and Chief Executive Officer of WNC & Associates, Inc.

Date: February 11, 2016

By:  /s/ Melanie R. Wenk

Melanie R. Wenk
Senior Vice President - Chief Financial Officer of WNC & Associates, Inc.

Date: February 11, 2016

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