<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

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

                        Commission File Number: 333-62526

                      COMMONWEALTH INCOME & GROWTH FUND IV
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                       <C>
         Pennsylvania                                 23-3080409
(State or other jurisdiction of           I.R.S. Employer Identification Number)
incorporation or organization)

</TABLE>

                               470 John Young Way
                                 Exton, PA 19341
          (Address, including zip code, of principal executive offices)

                                 (610) 594-9600
               (Registrant's telephone number including area code)


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

<TABLE>
<S>                                       <C>
    Title of each class to                      Name of exchange on
      be so registered                           which each class
                                                is to be registered

           None                                        N/A

</TABLE>

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

                      Units of Limited Partnership Interest
                                (Title of Class)


     Indicate  by check mark  whether the  registrant  (i) 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,  and (ii) has been subject to such filing
requirements for the past 90 days: YES [X] NO [ ]

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of  Regulation  S-K is not  contained  herein,  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:  YES
[X] NO [ ]

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Rule 12c-2 of the Act): YES [ ] NO [X]

                                                                               1

<PAGE>

     Indicate  by check mark  whether  the  registrant  is a shell  company  (as
defined in Rule 12b-2 of the Act): YES [ ] NO [X]

     Aggregate  Market  Value of Voting and  Non-Voting  Common  Equity  Held by
non-affiliates of the Registrant: N/A

     Indicate by check mark if the registrant is a well-known  seasoned  issuer,
(as defined in Rule 405 of the Act): YES [ ] NO [X]

                       DOCUMENTS INCORPORATED BY REFERENCE
 (Specific sections incorporated are identified under applicable items herein)

      Certain exhibits to the Company's Registration Statement on Form S-1
                             (File No. 333-62526).

                                    FORM 10-K
                                DECEMBER 31, 2005

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                 <C>

                                          PART I
Item 1.     Business                                                                  3
Item 1A.    Risk Factors                                                             11
Item 1B.    Unresolved Staff Comments                                                12
Item 2.     Properties                                                               12
Item 3.     Legal Proceedings                                                        12
Item 4.     Submission of Matters to a Vote of Security Holders                      12

                                          PART II
Item 5.     Market for Registrant's Common Equity, Related Stockholder Matters
            and Issuer Purchases of Equity Securities                                12
Item 6.     Selected Financial Data                                                  15
Item 7.     Management's Discussion and Analysis of Financial Condition and
            Results of Operations                                                    16
Item 7A.    Quantitative and Qualitative Disclosures About Market Risk               20
Item 8.     Financial Statements and Supplementary Data                              20
Item 9.     Changes in and Disagreements with Accountants on Accounting and
            Financial Disclosure                                                     20
Item 9A.    Controls and Procedures                                                  21
Item 9B.    Other Information                                                        21

                                          PART III
Item 10.    Directors and Executive Officers of the Registrant                       21
Item 11.    Executive Compensation                                                   23
Item 12.    Security Ownership of Certain Beneficial Owners and Management and
            Related Stockholder Matters                                              23
Item 13.    Certain Relationships and Related Transactions                           24
Item 14.    Principal Accountant Fees and Services                                   31

                                          PART IV
Item 15.    Exhibits and Financial Statement Schedules                               32

            Index to Exhibits

            Signatures

            Certifications
</TABLE>

                                                                               2

<PAGE>

PART I

ITEM 1:           BUSINESS

GENERAL

Commonwealth Income and Growth Fund IV ("CIGF4") was formed on May 15, 2002
under the Pennsylvania Revised Uniform Limited Partnership Act. The Partnership
began offering $15,000,000 of Units of Limited Partnership to the public on
October 19, 2002. The Partnership raised the minimum capital required
($1,150,000) and commenced operations on July 8, 2002. The Partnership
terminated its offering of Units on September 15, 2003 with 749,950 Units
($14,967,729) sold and 598 investors admitted as Limited Partners of the
Partnership.

 See "The Glossary" below for the definition of capitalized terms not otherwise
defined in the text of this report.

PRINCIPAL INVESTMENT OBJECTIVES

The Partnership was formed for the purpose of acquiring various types of
Equipment, including computer peripheral and other similar capital equipment.
The Partnership utilized the net Proceeds of the Offering to purchase IBM and
IBM compatible computer peripheral and other similar capital equipment. The
Partnership utilizes Retained Proceeds and debt financing (not to exceed 30% of
the aggregate cost of the Equipment owned or subject to Conditional Sales
Contract by the Partnership at the time the debt is incurred) to purchase
additional Equipment. The Partnership acquires and leases Equipment principally
to U.S. corporations and other institutions pursuant to Operating Leases. The
Partnership retains the flexibility to enter into Full Payout Net Leases and
Conditional Sales Contracts, but has not done so.

         The Partnership's principal investment objectives are to:

         (a)   Acquire, lease and sell Equipment to generate revenues from
               operations sufficient to provide annual cash distributions to
               Limited Partners;

         (b)   Preserve and protect Limited Partners' capital;

         (c)   Use a portion of Cash Flow and Net Disposition Proceeds derived
               from the sale, refinancing or other disposition of Equipment to
               purchase additional Equipment; and

         (d)   Refinance, sell or otherwise dispose of Equipment in a manner
               that will maximize the proceeds to the Partnership.

THERE CAN BE NO ASSURANCE THAT ANY OF THESE OBJECTIVES WILL BE ATTAINED.

Limited Partners do not have the right to vote on or otherwise approve or
disapprove any particular investment to be made by the Partnership.

Although the Partnership has acquired predominately new Equipment, the
Partnership may purchase used Equipment. Generally, Equipment is acquired from
manufacturers, distributors, leasing companies, agents, owner-users,
owner-lessors, and other suppliers upon terms that vary depending upon the
Equipment and supplier involved. Manufacturers and distributors usually furnish
a limited warranty against defects in material and workmanship and some purchase
agreements for Equipment provide for service and replacement of parts during a
limited period. Equipment purchases are also made through lease brokers and on
an ad hoc basis to meet the needs of a particular lessee.

As of December 31, 2005, all Equipment purchased by the Partnership is subject
to an Operating Lease or an Operating Lease was already entered into with a
third party when the Partnership acquired an item of Equipment. The Partnership
may also engage in sale/leaseback transactions, pursuant to which the
Partnership would purchase Equipment from companies that would then immediately
lease the Equipment from the Partnership. The Partnership may also purchase
Equipment which is leased under Full Payout Net Leases or sold under Conditional
Sales Contracts at the time of acquisition or the Partnership may enter into a
Full Payout Net Lease or Conditional Sales Contract with a third party when the
Partnership acquires an item of Equipment.

                                                                               3

<PAGE>

The Partnership may enter into arrangements with one or more manufacturers
pursuant to which the Partnership purchases from such manufacturers Equipment
that has previously been leased directly by the manufacturer to third parties
("vendor leasing agreements"). The Partnership and manufacturers may agree to
nonrecourse loans to the Partnership from the manufacturers to finance the
acquisition of Equipment secured by the Equipment and the receivables due to the
manufacturers from users of such Equipment. It is expected that the
manufacturers of Equipment will provide maintenance, remarketing and other
services for the Equipment subject to such agreements. As of December 31, 2005,
the Partnership has not entered into any such agreements.

The General Partner has the discretion consistent with its fiduciary duty to
change the investment objectives of the Partnership if it determines that such a
change is in the best interest of the Limited Partners and so long as such a
change is consistent with the Partnership Agreement. The General Partner will
notify the Limited Partners if it makes such a determination to change the
Partnership's investment objectives.

TYPES OF EQUIPMENT

COMPUTER PERIPHERAL EQUIPMENT. Computer peripheral equipment consists of devices
used to convey information into and out of a central processing unit (or
"mainframe") of a computer system, such as tape drives, disk drives, tape
controllers, disk controllers, printers, terminals and related control units,
all of which are in some way related to the process of storing, retrieving, and
processing information by computer.

The Partnership acquires primarily IBM manufactured or IBM compatible equipment.
The General Partner believes that dealing in IBM or IBM compatible equipment is
particularly advantageous because of the large IBM customer base, policy of
supporting users with software and maintenance services and the large amount of
IBM and IBM compatible equipment in the marketplace.

Computer technology has developed rapidly in recent years and is expected to
continue to do so. Technological advances have permitted continued reductions in
the cost of computer processing capacity, thereby permitting applications not
economically feasible a few years ago. Much of the older IBM and IBM compatible
computer peripheral equipment has not been retired from service, because
software is generally interchangeable between older and newer equipment and
older equipment are capable of performing many of the same functions as newer
equipment. The General Partner believes, historically, that the values of
peripheral equipment have been affected less dramatically by changes in
technology than have the values of central processing units. An equipment user
who upgrades to a more advanced central processor generally can continue to use
his existing peripheral equipment. Peripheral equipment nevertheless is subject
to declines in value as new, improved models are developed and become available.
Technological advances and other factors, discussed below in Management
Discussion and Analysis, have at times caused dramatic reduction in the market
prices of older models of IBM and IBM compatible computer peripheral equipment
from the prices at which they were originally introduced.

OTHER EQUIPMENT-RESTRICTIONS. The Partnership acquires computer peripheral
equipment, such as tape drives, disk drives, tape controllers, disk controllers,
printers, terminals and related control units, all of which are in some way
related to the process of storing, retrieving and processing information by
computer. The General Partner is also authorized, but does not presently intend,
to cause the Partnership to invest in non-IBM compatible computer peripheral,
data processing, telecommunication or medical technology equipment. The
Partnership may not invest in any of such other types of Equipment (i) to the
extent that the purchase price of such Equipment, together with the aggregate
Purchase Price of all such other types of Equipment then owned by the
Partnership, is in excess of 25% of the total cost of all of the assets of the
Partnership at the time of the Partnership's commitment to invest therein and
(ii) unless the General Partner determines that such purchase is in the best
economic interest of the Partnership at the time of the purchase and, in the
case of non-IBM compatible peripheral Equipment, that such Equipment is
comparable in quality to similar IBM or IBM compatible Equipment. There can be
no assurance that any Equipment investments can be found which meet this
standard. Accordingly, there can be no assurance that investments of this type
will be made by the Partnership.

                                                                               4

<PAGE>

DIVERSIFICATION

Diversification is generally desirable to minimize the effects of changes in
specific industries, local economic conditions or similar risks. However, the
extent of the Partnership's diversification, in the aggregate and within each
category of Equipment, depends in part upon the financing which can be assumed
by the Partnership or borrowed from third parties on satisfactory terms. The
Partnership's policy not to borrow on a recourse basis will further limit its
financing options. Diversification also depends on the availability of various
types of Equipment. Through December 31, 2005, the Partnership has acquired a
diversified Equipment portfolio, which it has leased to 41 different companies
located throughout the United States. The allocations are as follows:

<TABLE>
<CAPTION>
                                        EQUIPMENT TYPE                         APPROXIMATE %
                                ---------------------------------------------------------------
                                <S>                                         <C>
                                           Servers                                 33%
                                      Telecommunications                           22%
                                         Workstations                              15%
                                           Printers                                13%
                                           Storage                                  8%
                                     Data Communications                            4%
                                         Audio Visual                               4%
                                        Asset Tracking                              1%
                                ---------------------------------------------------------------
                                            TOTAL                                 100%
                                ---------------------------------------------------------------
</TABLE>

During the operational stage of the Partnership, the Partnership may not at any
one point in time lease (or sell pursuant to a Conditional Sales Contract) more
than 25% of the Equipment to a single Person or Affiliated group of Persons.

DESCRIPTION OF LEASES

The Partnership to date has purchased, and in the future intends to continue to
purchase only Equipment that is subject to a lease or for which a lease or
similar agreement will be entered into contemporaneously with the consummation
of the Partnership's acquisition of the Equipment. The General Partner to date
has leased and in the future intends to lease most of the Equipment purchased by
the Partnership to third parties pursuant to Operating Leases. Operating Leases
are relatively short-term (12 to 48 month) leases under which the aggregate
noncancellable rental payments during the original term of the lease are not
sufficient to permit the lessor to recover the purchase price of the subject
Equipment. The Equipment may also be leased pursuant to Full Payout Net Leases.
Full Payout Net Leases are leases under which the aggregate noncancellable
rental payments during the original term of the lease are at least sufficient to
recover the purchase price of the subject Equipment. It is anticipated that the
Partnership will enter into few, if any, Full Payout net Leases. The General
Partner may also enter into Conditional Sales Contracts for Equipment. A
Conditional Sales Contract generally provides that the noncancellable payments
to the seller over the term of the contract are sufficient to recover the
investment in such Equipment and to provide a return on such investment. Under a
Conditional Sales Contract, the seller reserves title to and retains a security
interest in, the Equipment until the Purchase Price of the Equipment is paid. As
of December 31, 2005, the Partnership has not entered into any Full Payout Net
Leases or Conditional Sales Contracts for Equipment and does not presently
intend to do so.

In general, the terms of the Partnership's leases, whether the Equipment is
leased pursuant to an Operating lease or a Full Payout Net Lease, depend upon a
variety of factors, including: the desirability of each type of lease from both
an investment and a tax point of view; the relative demand among lessees for
Operating or Full Payout Net Leases; the type and use of Equipment and its
anticipated residual value; the business of the lessee and its credit rating;
the availability and cost of financing; regulatory considerations; the
accounting treatment of the lease sought by the lessee or the Partnership; and
competitive factors.

                                                                               5

<PAGE>

An Operating Lease generally represents a greater risk to the Partnership than a
Full Payout Net Lease, because in order to recover the purchase price of the
subject Equipment and earn a return on such investment, it is necessary to renew
or extend the Operating Lease, lease the Equipment to a third party at the end
of the original lease term, or sell the Equipment. On the other hand, the term
of an Operating Lease is generally much shorter than the term of a Full Payout
Net Lease, and the lessor is thus afforded an opportunity under an Operating
Lease to re-lease or sell the subject Equipment at an earlier stage of the
Equipment's life cycle than under a Full Payout Net Lease. Also, the annual
rental payments received under an Operating Lease are ordinarily higher than
those received under a Full Payout Net Lease.

The Partnership's policy is to generally enter into "triple net leases" (or the
equivalent, in the case of a Conditional Sales Contract) which typically provide
that the lessee or some other party bear the risk of physical loss of the
Equipment; pay taxes relating to the lease or use of the Equipment; maintain the
Equipment; indemnify the Partnership-lessor against any liability suffered by
the Partnership as the result of any act or omission of the lessee or its
agents; maintain casualty insurance in an amount equal to the greater of the
full value of the Equipment and a specified amount set forth in the lease; and
maintain liability insurance naming the Partnership as an additional insured
with a minimum coverage which the General Partner deems appropriate. In
addition, the Partnership may purchase "umbrella" insurance policies to cover
excess liability and casualty losses, to the extent deemed practicable and
advisable by the General Partner. As of December 31, 2005, all leases that have
been entered into are "triple net leases".

The General Partner has not established any standards for lessees to whom it
will lease Equipment and, as a result, there is not an investment restriction
prohibiting the Partnership from doing business with any lessees. However, a
credit analysis of all potential lessees is undertaken by the General Partner to
determine the lessee's ability to make payments under the proposed lease. The
General Partner may refuse to enter into an agreement with a potential lessee
based on the outcome of the credit analysis.

The terms and conditions of the Partnership's leases, or Conditional Sales
Contracts, are each determined by negotiation and may impose substantial
obligations upon the Partnership. Where the Partnership assumes maintenance or
service obligations, the General Partner generally causes the Partnership to
enter into separate maintenance or service agreements with manufacturers or
certified maintenance organizations to provide such services. Such agreements
generally require annual or more frequent adjustment of service fees. As of
December 31, 2005, the Partnership has not entered into any such agreements.

Remarketing fees are paid to the leasing companies from which the Partnership
purchases leases. These are fees that are earned by the leasing companies when
the initial terms of the lease have been met. The Partnership believes that this
is a valuable method since it entices the leasing company from whom we have
purchased the lease from to assist in the extension, or "remarket", of the
lease, or possibly sell the equipment to the lessee. This remarketing fee is
factored in when negotiating an extension or sales.

BORROWING POLICIES

The General Partner, at its discretion, may cause the Partnership to incur debt
in the maximum aggregate amount of 30% of the aggregate cost of the Equipment
owned, or subject to Conditional Sales Contract, by the Partnership at the time
the debt is incurred, with monies received that is not considered "original
proceeds". The Partnership incurs only non-recourse debt, which is secured by
Equipment and lease income therefrom. Such leveraging permits the Partnership to
increase the aggregate amount of its depreciable assets, and, as a result,
potentially increases both its lease revenues and its federal income tax
deductions above those levels, which would be achieved without leveraging. There
is no limit on the amount of debt that may be incurred in connection with the
acquisition of any single item of Equipment. Any debt incurred is fully
amortized over the term of the initial lease or Conditional Sales Contract to
which the Equipment securing the debt is subject. The precise amount borrowed by
the Partnership depends on a number of factors, including the types of Equipment
acquired by the Partnership; the creditworthiness of the lessee; the
availability of suitable financing; and prevailing interest rates. The
Partnership is flexible in the degree of leverage it employs, within the
permissible limit. There can be no assurance that credit will be available to
the Partnership in the amount or at the time desired or on terms considered
reasonable by the General Partner. As of December 31, 2005, the aggregate
nonrecourse debt outstanding of $1,653,000 was 12.0% of the aggregate cost of
the Equipment owned.

                                                                               6

<PAGE>

The Partnership may purchase some items of Equipment without leverage. If the
Partnership purchases an item of Equipment without leverage and thereafter
suitable financing becomes available, it may then obtain the financing, secure
the financing with the purchased Equipment to the extent practicable and invest
any proceeds from such financing in additional items of Equipment, or it may
distribute some or all of such proceeds to the Limited Partners. Any such later
financing will be on terms consistent with the terms applicable to borrowings
generally. As of December 31, 2005, the Partnership has not exercised this
option.

To date, the General Partner has not caused the Partnership to borrow funds at
fixed interest rates and plans to continue borrowing additional funds, to the
fullest extent practicable. The Partnership may borrow funds at rates, which
vary with the "prime" or "base" rate. If lease revenues were fixed, a rise in
the "prime" or "base" rate would increase borrowing costs and reduce the amount
of the Partnership's income and cash available for distribution. Therefore, the
General Partner is permitted to borrow funds to purchase Equipment at
fluctuating rates only if the lease for such Equipment provides for fluctuating
rental payments calculated on a similar basis.

Any additional debt incurred by the Partnership must be nonrecourse. Nonrecourse
debt, in the context of the business to be conducted by the Partnership, means
that the lender providing the funds can look for security only to the Equipment
pledged as security and the proceeds derived from leasing or selling such
Equipment. Neither the Partnership nor any Partner (including the General
Partner) would be liable for repayment of any nonrecourse debt.

Loan agreements may also require that the Partnership maintain certain reserves
or compensating balances and may impose other obligations upon the Partnership.
Moreover, since a significant portion of the Partnership's revenues from the
leasing of Equipment will be reserved for repayment of debt, the use of
financing reduces the cash, which might otherwise be available for distributions
until the debt has been repaid and may reduce the Partnership's Cash Flow over a
substantial portion of the Partnership's operating life. As of December 31,
2005, no such agreements existed.

The General Partner and any of its Affiliates may, but are not required to, make
loans to the Partnership on a short-term basis. If the General Partner or any of
its Affiliates makes such a short-term loan to the Partnership, the General
Partner of Affiliate may not charge interest at a rate greater that the interest
rate charged by unrelated lenders on comparable loans for the same purpose in
the same locality. In no event is the Partnership required to pay interest on
any such loan at an annual rate greater than three percent over the "prime rate'
from time to time announced by PNC Bank, Philadelphia, Pennsylvania ("PNC
Bank"). All payments of principal and interest on any financing provided by the
General Partner or any of its affiliates are due and payable by the Partnership
within 12 months after the date of the loan.

REFINANCING POLICIES

Subject to the limitations set forth in "Borrowing Policies" above, the
Partnership may refinance its debt from time to time. With respect to a
particular item of Equipment, the General Partner will take into consideration
such factors as the amount of appreciation in value, if any, to be realized, the
possible risks of continued ownership, and the anticipated advantages to be
obtained for the Partnership, as compared to selling such Equipment. As of
December 31, 2005, the Partnership has no such debt.

Refinancing, if achievable, may permit the Partnership to retain an item of
Equipment and at the same time to generate additional funds for reinvestment in
additional Equipment or for distribution to the Limited Partners.

LIQUIDATION POLICIES

The General Partner intends to cause the Partnership to begin disposing of its
Equipment in approximately January 2012. Notwithstanding the Partnership's
objective to sell all of its assets and dissolve by December 31, 2012, the
General Partner may at any time cause the Partnership to dispose of all its
Equipment and, dissolve the Partnership upon the approval of Limited Partners
holding a Majority in Interest of Units.

                                                                               7

<PAGE>

Particular items of Equipment may be sold at any time if, in the judgment of the
General Partner, it is in the best interest of the Partnership to do so. The
determination of whether particular items of Partnership Equipment should be
sold or otherwise disposed of is made by the General Partner after consideration
of all relevant factors (including prevailing general economic conditions,
lessee demand, the General Partner's views of current and future market
conditions, the cash requirements of the Partnership, potential capital
appreciation, cash flow and federal income tax considerations), with a view
toward achieving the principal investment objectives of the Partnership. As
partial payment for Equipment sold, the Partnership may receive purchase money
obligations secured by liens on such Equipment.

MANAGEMENT OF EQUIPMENT

Equipment management services for the Partnership's Equipment is provided by the
General Partner and its Affiliates and by persons employed by the General
Partner. Such services will consist of collection of income from the Equipment,
negotiation and review of leases, Conditional Sales Contracts and sales
agreements, releasing and leasing-related services, payment of operating
expenses, periodic physical inspections and market surveys, servicing
indebtedness secured by Equipment, general supervision of lessees to assure that
they are properly utilizing and operating Equipment, providing related services
with respect to Equipment, supervising, monitoring and reviewing services
performed by others in respect to Equipment and preparing monthly Equipment
operating statements and related reports.

COMPETITION

The equipment leasing industry is highly competitive. The Partnership competes
with leasing companies, equipment manufacturers and their affiliated financing
companies, distributors and entities similar to the Partnership (including other
programs sponsored by the General Partner), some of which have greater financial
resources than the Partnership and more experience in the equipment leasing
business than the General Partner. Other leasing companies and equipment
manufacturers, their affiliated financing companies and distributors may be in a
position to offer equipment to prospective lessees on financial terms, which are
more favorable, that those which the Partnership can offer. They may also be in
a position to offer trade-in privileges, software, maintenance contracts and
other services, which the Partnership may not be able to offer. Equipment
manufacturers and distributors may offer to sell equipment on terms (such as
liberal financing terms and exchange privileges), which will afford benefits to
the purchaser similar to those obtained through leases. As a result of the
advantages, which certain of its competitors may have, the Partnership may find
it necessary to lease its Equipment on a less favorable basis than certain of
its competitors.

The computer peripheral equipment industry is extremely competitive. Competitive
factors include pricing, technological innovation and methods of financing.
Certain manufacturer-lessors maintain advantages through patent protection,
where applicable, and through a policy that combines service and hardware with
payment accomplished through a single periodic charge.

The dominant firms in the computer marketplace are Dell, IBM, Hewlett Packard,
Sun Systems and Cisco. Because of the substantial resources and dominant
position of these companies, revolutionary changes with respect to computer
systems, pricing, marketing practices, technological innovation and the
availability of new and attractive financing plans would occur at any time.
Significant action in any of these areas by these firms might materially
adversely affect the partnerships' business or the other manufacturer's with
whom the General Partner might negotiate purchase and other agreements. Any
adverse affect on these manufacturers could be reflected in the overall return
realized by the Partnership on equipment from those manufacturers.

                                                                               8

<PAGE>

INVESTMENTS

Through March 28, 2006, the Partnership has purchased, or has made the
commitment to purchase, the following Equipment:

<TABLE>
<CAPTION>
            LESSEE                    MFG              EQUIPMENT             LIST        PURCHASE      MONTHLY    LEASE
                                                      DESCRIPTION            PRICE         PRICE        RENTAL     TERM
<S>                              <C>              <C>                     <C>            <C>           <C>        <C>
            Anteon                    ICL               Routers             $16,210       $ 7,047       $  444     16
            Anteon                    ICL               Routers              15,266         8,112          437     19
            Anteon                    IBM            Communications          13,575         9,410          397     25
            Anteon                    HP                Servers              15,192        10,779          492     23
            Anteon                   Dell               Terminal             13,229        11,165          442     27
            Anteon                   Nokia              Routers              19,811        15,532          658     25
            Anteon                   Nokia              Routers              13,135        10,253          420     26
            Anteon                Dell/Epson          Workstations           24,481        18,636          675     30
            Anteon                   Epson              Hardware             27,422        21,166          760     30
            Anteon                   Nokia                Tape                9,695         7,166          257     30
            Anteon                Dell/Cisco      Workstations/Servers       26,924        25,068          851     32
            Anteon                   Cisco               CON-OS              18,314        14,673          485     33
            Anteon                   Dell               Software             17,804        15,527          500     34
       Daimler Chrysler             Visara         NCT Base Ethernet      1,280,418       831,622       21,932     36
          GE Medical                 Cisco                VPN                65,215        43,277        1,141     36
          GE Medical                 Nokia             Telephone            125,200        81,388        2,194     36
      Jefferson Smurfit              Dell             Workstations          264,425       183,385        5,119     34
 Occupational Health & Rehab     Cisco/Compaq         Workstations          367,350       249,823        7,331     36
 Occupational Health & Rehab     Cisco/Compaq            Router             348,480       236,967        7,548     36
      Preferred Freezer              Dell               Servers              89,363        45,803        1,289     36
      Preferred Freezer              Dell               Servers             106,704        54,092        1,522     36
      Preferred Freezer              Dell               Servers              56,163        36,506        1,045     36
      Preferred Freezer              Dell               Scanners              7,700         5,100          150     34
      Preferred Freezer            Panasonic         Communications          35,845        23,591          663     36
Vatterott Educational Systems        Dell         Workstations/Server        84,855        56,089        1,581     36
Vatterott Educational Systems        Dell             Workstations           55,438        36,756        1,036     36
Vatterott Educational Systems        Dell             Workstations           37,780        25,054          705     36
Vatterott Educational Systems        Dell             Workstations           50,475        33,465          942     36
Vatterott Educational Systems        Dell             Workstations           23,650        14,520          409     36
Vatterott Educational Systems        Dell             Workstations           28,030        18,584          523     36
Vatterott Educational Systems        Dell             Workstations           19,730        13,080          369     36
Vatterott Educational Systems        Dell             Workstations           25,800        23,741          670     36
Vatterott Educational Systems        Dell             Workstations            8,707         5,773          163     36
  Christian Brothers College          IBM             Workstations           69,575        49,698        1,454     34
    Datapage Technologies            Dell             Workstation            26,000        17,706          544     32
          Paric Corp                  HP            Servers/Printers         68,900        44,035        1,648     26
          Paric Corp                  HP          Printers/Workstation       30,115        20,153          574     35
          Paric Corp                  HP          Printers/Workstation       19,626        11,197          447     24
          Paric Corp                  HP           Printers/Terminals        76,000        42,516        1,980     20
   Environmental Mgmt Corp        Cisco-Dell      Printers/Workstation       89,500        60,344        2,110     25
       Garlich Printing             Galaxy               Server              61,450        33,950        1,286     23
    C. Hagar & Sons Hinge           Toshiba        Workstation/Server        22,520        10,460          424     29
    C. Hagar & Sons Hinge            Dell        Workstation/Server          47,823        26,662          888     22
    C. Hagar & Sons Hinge             IBM        Workstation/Server           2,234         1,382           60     25
       Marketing Direct               IBM             Server/Tape           120,625        70,855        2,657     25
       Marketing Direct               IBM          Server/Workstation        28,000        17,744          580     30
       Marketing Direct               IBM          Server/Workstation        24,281        15,370          425     36
            MyCart                    IBM               Servers              19,200        12,386          393     31
          Paric Corp                 Sony                 Tape               17,300        11,379          324     35
          Paric Corp                Gxaryte        Telecommunications        18,200        12,016          342     35
          Paric Corp                Gxaryte        Telecommunications        30,115        20,183          574     35
    Physician First Health       Microsystems         Workstation            15,790        11,566          320     36
Vatterott Educational Systems        Dell             Workstation            22,125         8,547          426     18
Vatterott Educational Systems        Dell             Workstation            28,400        11,632          532     20
Vatterott Educational Systems        Dell             Workstation            14,460         6,152          269     21
Vatterott Educational Systems        Dell             Workstation            23,500        10,640          450     22
Vatterott Educational Systems        Dell             Workstation            20,792         9,885          387     24
Vatterott Educational Systems        Dell             Workstation            14,770         7,271          275     25
Vatterott Educational Systems        Dell             Workstation            13,938         7,311          260     27
         Westar Corp                 Cisco               Router              19,993        13,010          440     29

</TABLE>

                                                                               9

<PAGE>

<TABLE>
<S>                              <C>              <C>                     <C>            <C>           <C>        <C>
  Preferred Freezer Systems          Dell          Server/Workstation       136,020        88,451        2,489     36
       Kellogg USA Inc              Compaq            Workstation            12,727         8,758          276     28
       Kellogg USA Inc              Compaq            Workstation            13,600         9,706          298     29
       Kellogg USA Inc              Compaq            Workstation             8,675         6,149          184     30
       Kellogg USA Inc              Compaq            Workstation            14,750        10,478          299     32
       Kellogg USA Inc              Compaq            Workstation            20,300        14,407          411     32
       Kellogg USA Inc              Compaq            Workstation            19,850        14,076          392     33
       Kellogg USA Inc              Compaq            Workstation             7,250         5,122          201     22
       Kellogg USA Inc              Compaq            Workstation             4,950         3,415          134     22
       Kellogg USA Inc              Compaq            Workstation             2,350         1,648           67     21
       Kellogg USA Inc              Compaq            Workstation             2,410         1,707           67     22
       Kellogg USA Inc              Compaq            Workstation             3,765         2,681           75     33
       Kellogg USA Inc              Compaq            Workstation             2,900         2,057           56     34
      GE Medical Systems            Net App           Fiber Chanel           37,250        26,520        1,052     23
         Hertz Corp.                  HP                Servers           1,092,200       779,810       20,306     36
 Thomson Consumer Electronics      Christie           Workstation           666,440       433,190       11,486     36
                                    Digital
         XM Satellite                 Sun             Workstation           407,140       285,000        7,973     36
      GE Medical Systems            Compaq               Server              27,235        17,704          458     36
       Cone Mills Corp              Nortel            Workstation            35,400        23,529          652     36
       Cone Mills Corp              Nortel            Workstation           107,000        70,106        1,960     36
       Daimler Chrysler             Visara           Communication           64,400        41,860        1,080     36
   Kaiser Foundation Health                             Storage           1,238,745       718,473       18,769     36
   BFS Diversified Products         Compaq            Workstation           145,718       102,003        2,975     35
   BFS Diversified Products         Compaq            Workstation           150,141       105,099        3,065     32
    Occupational Health &           Citrix               Server             400,317       280,222        8,318     36
        Rehabilitation
   Allserve System Corp (A)          Avaya           Communication        1,114,155       724,200       21,513     36
       Daimler Chrysler             Visara           Communication          550,000       357,517        9,428     36
       Daimler Chrysler             Visara           Communication          106,125        68,982        1,819     36
       Northrup Grumman               Sun                Server             421,500       331,724       10,004     30
       Daimler Chrysler             Visara           Communication          510,350       126,446        3,335     36
         Refco Group                  HP              Workstation           254,352       165,329        4,739     36
         Refco Group                 Dell             Workstation           303,000       196,949        5,751     36
     Walker & Assoc. Inc.       HP / Panasonic        Workstation           180,000       135,045        3,718     36
   BFS Diversified Products         Compaq            Workstation           465,600       302,639        8,949     36
   Allserve System Corp (A)         Gateway              Server             643,385       418,200       12,423     36
   Allserve System Corp (A)         Nortel           Communication        1,114,153       724,200       21,513     36
       Bank of America                IBM                Server           1,106,353       731,990       22,902     27
       Bank of America                IBM                Server              75,858        55,603        1,750     28
 Dominion Resources Services        Fujitsu              Server              39,250        25,512        1,355     19
       Kellogg USA Inc                IBM             Workstation           180,845       117,501        3,370     32
            Hertz                     HP                Servers             186,855       186,855        4,717     36
           Chrysler                Intermec             Printers              4,815         4,815          197     24
           Chrysler                Intermec             Printers              4,221         4,221          171     24
   Allserve System Corp (A)         Nortel           Communications         418,200       418,200       12,423     36
            Xerox                   Sunfire             Servers             481,243       481,243       12,428     36
    L-3 Integrated Systems          Konica              Printer             342,349       342,349        9,868     33
         Allen Chase                Toshiba             Servers              19,854        19,854        1,194     14
         Amcol Int'l                Compaq              Servers              24,955        24,955        1,167     19
       Mitsubishi Power            Panasonic          Workstations           33,768        33,768        1,031     32
      Matsushita Mobile            Panasonic          Workstations           22,200        22,200          830     25
    Dietrich Milk Products            IBM             Workstations           31,850        31,850        1,085     28
       BFS Diversified              Compaq              Servers              29,638        29,638          864     34
       BFS Diversified              Compaq              Servers              40,177        40,177        1,143     35
            Xerox                     Sun               Storage               6,499         6,499          167     34
       Weight Watchers               ADIC             Tape Library          110,871       110,871        3,125     36
       Weight Watchers                HP                Servers             165,713       165,713        4,552     36
           Pepsico                  Konica              Printers            135,991       135,991        3,746     36
      Mitsubishi Motors             Toshiba             Printers            319,979       319,979        8,570     36
     Principal Financial           Nexpress             Printers            416,007       416,007        8,850     42
   Allserve System Corp (A)         Nortel               Server             503,778       503,778       14,965     36
   Hollingsworth Marketing           Xerox              Printer             498,559       498,559       13,489     35

</TABLE>

                                                                              10

<PAGE>

<TABLE>
<S>                              <C>              <C>                     <C>            <C>           <C>        <C>
         Alcatel USA                  Sun          Small Sun Servers         57,316        56,578        2,186     23
        America Online                Sun         Midrange Sun Servers      269,766       275,161        6,973     36
          Convergys                   HP          Midrange HP Servers       116,079       101,974        3,081     30
                                                    Small HP/Compaq
          JC Penney                   HP                Servers              51,891        38,871        4,192     24
    Milton Hershey Medical                          Small HP/Compaq
           Center                     HP                Servers             112,348       116,336        9,218     11
            Qwest                   Stratus      Misc High End Servers      510,432       520,641       46,517     36
           Raytheon                   HP           Desktops - Tier 1        130,488       123,050        3,751     30
           Raytheon                   HP           Desktops - Tier 1         56,196        55,752        1,615     31
                                                      Engineering
           Raytheon                   HP              Workstations           49,749        50,744        1,334     36
                                                      Engineering
           Raytheon                   HP              Workstations           55,710        56,824        1,494     36
            Sprint                    STK             Tape Drives           234,702       239,396        6,135     36
             UCN                      HP          High End Sun Servers      331,732       348,703       10,148     36
            Xerox                     Sun               Storage              12,644         7,101          353     17
            Xerox                     IBM          Small IBM Servers         18,057        12,459          492     22
            Xerox                    Dell             Dell Servers           14,823        11,376          411     24
            Xerox                     Sun         Midrange Sun Servers       17,812        15,911          480     30
            Xerox                     Sun          Small Sun Servers         19,445        17,328          532     30
            Xerox                     IBM          Small IBM Servers         13,654        12,167          373     30
            Xerox                     IBM          Small IBM Servers         14,136        12,597          387     30
            Xerox                     IBM          Small IBM Servers          9,363         8,344          256     30
            Xerox                     Sun         Midrange Sun Servers       24,999        24,042          675     33
            Xerox                     Sun          Small Sun Servers          5,999         6,043          162     35
            Xerox                     Sun               Storage              13,814        13,916          373     35
            Xerox                     IBM          Small IBM Servers         13,841         8,130          387     18
            Xerox                   NetApp              Storage              14,121         9,739          385     22
          Convergys                   Sun          Small Sun Servers         18,250        14,269          375     34
            Geico                     HP              Workstations           91,839        52,135        1,449     33
            Geico                    Dell             Workstations            7,525         3,629          117     27
            Geico                     HP              Workstations          153,773        80,436        2,430     30
            Geico                  Panasonic          Workstations          137,250        60,480        2,133     24
                                                      Engineering
     Alliant Techsystems             Dell             Workstations           64,695        39,593        1,083     36

</TABLE>

(A) - See discussion of Legal Proceedings at Item 3.

RESERVES

Because the Partnership's leases are on a "triple-net" basis, no permanent
reserve for maintenance and repairs will be established from the Offering
Proceeds. However, the General Partner, in its sole discretion, may retain a
portion of the Cash Flow and Net Disposition Proceeds available to the
Partnership for maintenance, repairs and working capital. There are no
limitations on the amount of Cash Flow and Net Disposition Proceeds that may be
retained as reserves. Since no reserve will be established if available Cash
Flow of the Partnership is insufficient to cover the Partnership's operating
expenses and liabilities, it may be necessary for the Partnership to obtain
additional funds by refinancing its Equipment or borrowing.

GENERAL RESTRICTIONS

         Under the Partnership Agreement, the Partnership is not permitted,
among other things, to:

         (a)   Invest in junior trust deeds unless received in connection with
               the sale of an item of Equipment in an aggregate amount that does
               not exceed 30% of the assets of the Partnership on the date of
               the investment;

         (b)   Invest in or underwrite the securities of other issuers;

         (c)   Acquire any Equipment for Units;

                                                                              11

<PAGE>

         (d)   Issue senior securities (except that the issuance to lenders of
               notes or other evidences of indebtedness in connection with the
               financing or refinancing of Equipment or the Partnership's
               business shall not be deemed to be the issuance of senior
               securities);

         (e)   Make loans to any Person, including the General Partner or any of
               its Affiliates, except to the extent a Conditional Sales Contract
               constitutes a loan;

         (f)   Sell or lease any Equipment to, lease any Equipment from, or
               enter into any sale- leaseback transactions with, the General
               Partner or any of its Affiliates; or

         (g)   Give the General Partner or any of its Affiliates an exclusive
               right or employment to sell the Partnership's Equipment.

The General Partner has also agreed in the Partnership Agreement to use its best
efforts to assure that the Partnership shall not be deemed an "investment
company" as such term is detained in the Investment Company Act of 1940.

The General Partner and its Affiliates may engage in other activities, whether
or not competitive with the Partnership. The Partnership Agreement provides,
however, that neither the General Partner nor any of its Affiliates may receive
any rebate or "give up" in connection with the Partnership's activities or
participate in reciprocal business arrangements that circumvent the restrictions
in the Partnership Agreement against dealings with Affiliates.

ITEM 1A: RISK FACTORS

THERE IS NO PUBLIC MARKET FOR THE UNITS, AND YOU MAY BE UNABLE TO SELL OR
TRANSFER YOUR UNITS AT A TIME AND PRICE OF YOUR CHOOSING

There exists no public market for the units, and the general partner does not
expect a public market for units to develop. The units cannot be pledged or
transferred without the consent of the general partner. The units should be
purchased as a long-term investment only. The general partner intends to limit
the number of transfers to no more than that number permitted by one of the safe
harbors available under the tax laws and regulations to prevent CIGF4 from being
taxed as a corporation. Generally, these safe harbors require that all nonexempt
transfers and redemptions of units in any calendar year not exceed two percent
of the outstanding interests in the capital or profits of CIGF4.

The general partner has sole discretion in deciding whether we will redeem units
in the future. Consequently, you may not be able to liquidate your investment in
the event of an emergency. You must be prepared to hold your units for the life
of CIGF4. CIGF4's life cycle will last approximately 10 to 12 years, and any
extension of this period will require an amendment to the partnership agreement,
which must be approved by a majority of the limited partners. You may be able to
resell your units, if at all, only at a discount to the offering price, which
may be significant, and the redemption or sale price may be less than the price
you originally paid for your units.

INFORMATION TECHNOLOGY EQUIPMENT WE PURCHASE WILL DEPRECIATE IN VALUE AND/OR
BECOME OBSOLETE OR LOSE VALUE AS NEW TECHNOLOGY IS DEVELOPED, WHICH CAN REDUCE
THE VALUE OF YOUR UNITS AND YOUR ULTIMATE CASH RETURN.

Residual value is the amount realized upon the sale or release of equipment when
the original lease has expired. The residual value of our equipment may decline
if technological advancements make it obsolete or change market preferences. The
residual value depends on, among other factors, the condition of the equipment,
the cost of comparable new equipment, the technological obsolescence of the
equipment and supply and demand for the equipment.

In either of these events, the equipment we purchased may have little or no
residual value. This will result in insufficient assets for us to distribute
cash in a total amount equal to the invested capital of the limited partners
over the term of our existence. Also, such an occurrence may reduce the value of
the units. Although currently we expect CIGF4 to acquire predominantly new
equipment, CIGF4 may purchase used equipment. There is no limitation on the
amount of used equipment which CIGF4 may acquire. The acquisitions of used
equipment may increase the risk that such equipment will become obsolete so that
it will have little or no residual value.

                                                                              12

<PAGE>

WE PAY SIGNIFICANT FEES TO THE GENERAL PARTNER AND AFFILIATES, WHICH REDUCE CASH
AVAILABLE FOR DISTRIBUTIONS.

The general partner and its affiliates, including Commonwealth Capital
Securities Corp., will receive substantial fees. Some fees will be paid without
regard to the amount of distributions paid or the success or profitability of
CIGF4's operations and investments. For example, an increase in portfolio
turnover or the amount of leverage used to purchase equipment may increase the
fees we pay to the general partner. Such compensation and fees were established
by the general partner and are not based on arm's-length negotiations.
Our operations may not ultimately be successful and we may be unable to meet our
stated investment objectives. Specifically, sufficient cash may ultimately not
be available for distribution to investors. Our general partner sponsors four
other public equipment leasing programs with investment objectives similar to
CIGF4. The general partner has also sponsored several privately held equipment
leasing programs. Results for these prior public and private programs have in
some cases been lower than originally anticipated.

ANY DELAY IN ACQUIRING EQUIPMENT WILL DIMINISH OUR RETURNS.

Due to competition with other lessors, we may experience difficulty in obtaining
and leasing appropriate equipment. Our ability to acquire and lease equipment
may also be adversely affected by interest rates, the availability of capital or
increases in corporate liquidity, since prospective lessees may prefer to raise
capital, incur debt or use internally-generated cash to purchase equipment
rather than enter the leasing market.


ITEM 1B: UNRESOLVED STAFF COMMENTS

              NOT APPLICABLE

EMPLOYEES

The Partnership had no employees in 2005 and received administrative and other
services from a related party, Commonwealth Capital Corp (CCC), which had 51
employees as of December 31, 2005.

ITEM 2:  PROPERTIES

              NOT APPLICABLE

ITEM 3:  LEGAL PROCEEDINGS

In the 4th quarter of 2005, CCC identified payment problems with Allserve
Systems Corp. ("Allserve"), one of the Partnerships' lessees. The bank had
returned a number of Allserve's checks issued in October 2005. The Partnership
immediately began communication with the lessee, only to ultimately find that
they filed for protection under Chapter 11 of the United States Bankruptcy Code
on November 18, 2005. The General Partner responded to the Bankruptcy petition
promptly and assertively. Counsel was retained for the Partnership. All
litigation meetings and equipment inspections were attended by the General
Partner, for purpose of identifying and tagging all assets belonging to the
Partnership. The Partnership owns either all or portions of 5 equipment leases
with Allserve, with original purchase prices of approximately $2,789,000.

                                                                              13

<PAGE>

On January 12, 2006, the trustee filed a petition before the court asking for
the bankruptcy petition to be changed to a Chapter 7 Liquidation, due to
Allerve's inability to pay its ongoing bills and the trustee's belief that
Allserve was not being honest in its dealings with the Trustee. The Judge
granted this request.

An official creditors' committee ("Creditors' Committee") was organized by the
Trustee in February 2006. An officer of CCC is a member of the Creditors'
Committee. Other creditors affected and represented on the creditors committee
include IBM Credit LLC, DB Zwirn and Universal Equipment Leasing. A forensic
accounting firm is being retained by the Creditors' Committee to investigate
transfers of significant quantities of cash from Allserve accounts, prior to its
Bankruptcy petition. On March 16, 2006, the Trustee granted stay relief to allow
the Partnership and other creditors to take possession of their assets. As of
March 23, 2006, the Partnership has recovered all of its equipment which was
subject to leases with Allserve. The equipment has been relocated to an asset
management location in New Jersey, where it will be audited and tested, as well
as evaluated for sale or re-lease.

The equipment leases were purchased by the Partnership between December 2003 and
December 2004. The Partnership believes there is resale value for this equipment
and will be pursuing resale and litigation options in an attempt to maximize
investor's total return on this equipment. The Partnership received lease
payments up through and including September 2005. Therefore the Partnership has
recovered a portion of the equipment's purchase price to date. The Partnership
has recorded a reserve against all outstanding rentals in the amount of
approximately $261,000 and has also recorded impairment charges of approximately
$363,000 to reflect the assets at their current estimated net realizable value.

ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

              NOT APPLICABLE

PART II

ITEM 5: MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
        AND ISSUER PURCHASES OF EQUITY SECURITIES

There is no public market for the Units nor is it anticipated that one will
develop. As of December 31, 2005, there were 596 holders of Units. The Units are
not listed on any exchange or permitted to trade on any over-the-counter market.
In addition, there are substantial restrictions on the transferability of Units.

GENERAL LIMITATIONS

Units cannot be transferred without the consent of the General Partner, which
may be withheld in its absolute discretion. The General Partner monitors
transfers of Units in an effort to ensure that all transfers are within certain
safe harbors promulgated by the IRS to furnish guidance regarding publicly
traded partnerships. These safe harbors limit the number of transfers that can
occur in any one year. The General Partner intends to cause the Partnership to
comply with the safe harbor that permits nonexempt transfers and redemptions of
Units of up to five percent of the total outstanding interest in the
Partnership's capital or profits in any one year.

REDEMPTION PROVISION

Upon the conclusion of the 30-month period following the termination of the
Offering, the Partnership may, at the sole discretion of the General Partner,
repurchase a number of the outstanding Units. After such 30-month period, on a
semi-annual basis, the General Partner, at its discretion, will establish an
amount for redemption, generally not to exceed two percent of the outstanding
Units per year, subject to the General Partner's good faith determination that
such redemptions will not (a) cause the Partnership to be taxed as a corporation
under Section 7704 of the Code or (b) impair the capital or operations of the
Partnership. (The Partnership may redeem Units in excess of the two percent
limitation if, in the good faith judgment of the General Partner, the conditions
imposed in the preceding sentence would remain satisfied.) The redemption price
for Units will be 105% of the selling Limited Partner's Adjusted Capital
Contributions attributable to the Units for sale. Following the determination of
the annual redemption amount, redemptions will occur on a semi-annual basis and
all requests for redemption, which must be made in writing, must be on file as
of the Record Date in which the redemption is to occur. The General Partner will
maintain a master list of requests for redemption with priority being given to
Units owned by estates, followed by IRAs and Qualified Plans. All other requests
will be considered in the order received. Redemption requests made by or on
behalf of Limited Partners who are not affiliated with the General Partner or
its Affiliates will be given priority over those made by Limited Partners who
are affiliated with the General Partner or its Affiliates. All redemption
requests will remain in effect until and unless canceled, in writing, by the
requesting Limited Partner(s).

                                                                              14

<PAGE>

The Partnership will accept redemption requests beginning 30 months following
the termination of the Offering. There will be no limitations on the period of
time that a redemption request may be pending prior to its being granted.
Limited Partners will not be required to hold their interest in the Partnership
for any specified period prior to their making a redemption request.

In order to make a redemption request, Limited Partners will be required to
advise the General Partner in writing of such request. Upon receipt of such
notification, the Partnership will provide detailed forms and instructions to
complete the request. At December 31, 2005, the General Partner has redeemed
1,200 Units. Additionally, no additional Limited Partners have requested
redemption of their Units.

EXEMPT TRANSFERS

The following six categories of transfers are exempt transfers for purposes of
calculating the volume limitations imposed by the IRS and will generally be
permitted by the General Partner:

         (1)   Transfers in which the basis of the Unit in the hands of the
               transferee is determined, in whole or in part, by reference to
               its basis in the hands of the transferor (for example, Units
               acquired by corporations in certain reorganizations,
               contributions to capital, gifts of Units, Units contributed to
               another partnership, and nonliquidating as well as liquidating
               distributions by a parent partnership to its partners of
               interests in a sub partnership);

         (2)   Transfers at death;

         (3)   Transfers between members of a family (which include brothers and
               sisters, spouse, ancestors, and lineal descendants);

         (4)   Transfers resulting from the issuance of Units by the Partnership
               in exchange for cash, property, or services;

         (5)   Transfers resulting from distributions from Qualified Plans; and

         (6)   Any transfer by a Limited Partner in one or more transactions
               during any 30-day period of Units representing in the aggregate
               more than five percent of the total outstanding interests in
               capital or profits of the Partnership.

ADDITIONAL RESTRICTIONS ON TRANSFER

Limited Partners who wish to transfer their Units to a new beneficial owner are
required to pay the Partnership up to $50 for each transfer to cover the
Partnership's cost of processing the transfer application and take such other
actions and execute such other documents as may be reasonably requested by the
General Partner. There is no charge for re-registration of a certificate in the
event of a marriage, divorce, death, or trust so long as the transfer is not a
result of a sale of the Units.

In addition, the following restrictions apply to each transfer: (i) no transfer
may be made if it would cause 25% or more of the outstanding Units to be owned
by benefit plans; and (ii) no transfer is permitted unless the transferee
obtains such governmental approvals as may reasonably be required by the General
Partner, including without limitation, the written consents of the Pennsylvania
Securities Commissioner and of any other state securities agency or commission
having jurisdiction over the transfer.

                                                                              15

<PAGE>

ALLOCATION AND DISTRIBUTION BETWEEN THE GENERAL PARTNER AND THE LIMITED PARTNERS

Cash distributions, if any, are made quarterly on March 31, June 30, and
September 30, and December 31, of each year. Distributions are made 99% to the
Limited Partners and one percent to the General Partner until the Limited
Partners has received an amount equal to their Capital Contributions plus the
Priority Return; thereafter, cash distributions will be made 90% to Limited
Partners and 10% to the General Partner. Distributions made in connection with
the liquidation of the Partnership or a Partner's Units will be made in
accordance with the Partner's positive Capital Account balance as determined
under the Partnership Agreement and Treasury Regulations.

The Priority Return is calculated on the Limited Partners' Adjusted Capital
Contributions for their Units. The Adjusted Capital Contributions will initially
be equal to the amount paid by the Limited Partners for their Units. If
distributions at any time exceed the Priority Return, the excess will reduce the
Adjusted Capital Contributions, decreasing the base on which the Priority Return
is calculated.

If the proceeds resulting from the sale of any Equipment are reinvested in
Equipment, sufficient cash will be distributed to the Partners to pay the
additional federal income tax resulting from such sale for a Partner in a 38.6%
federal income tax bracket or, if lower, the maximum federal income tax rate in
effect for individuals for such taxable year.

Generally, the General Partner is allocated Net Profits equal to its cash
distributions (but not less than one percent of Net Profits) and the balance is
allocated to the Limited Partners. Net Profits arising from transactions in
connection with the termination or liquidation of the Partnership are allocated
in the following order: (1) First, to each Partner in an amount equal to the
negative amount, if any, of his Capital Account; (2) Second, an amount equal to
the excess of the proceeds which would be distributed to the Partners based on
the Operating Distributions to the Partners over the aggregate Capital Accounts
of all the Partners, to the Partners in proportion to their respective shares of
such excess, and (3) Third, with respect to any remaining Net Profits, to the
Partners in the same proportions as if the distributions were Operating
Distributions. Net Losses, if any, are in all cases allocated 99% to the Limited
Partners and one percent to the General Partner.

Net Profits and Net Losses are computed without taking into account, in each
taxable year of the Partnership, any items of income, gain, loss or deduction
required to be specially allocated pursuant to Section 704(b) of the Code and
the Treasury Regulation promulgated thereunder. No Limited Partner is required
to contribute cash to the capital of the Partnership in order to restore a
closing Capital Account deficit, and the General Partner has only a limited
deficit restoration obligation under the Partnership Agreement.

Quarterly distributions in the following amounts were paid to the Limited
Partners during 2003, 2004, and 2005:

<TABLE>
<CAPTION>

            QUARTER ENDED                       2005                  2004                  2003
------------------------------------------------------------------------------------------------------
<S>                                        <C>                   <C>                    <C>
               MARCH 31                     $   371,028           $   371,737            $  103,475
               JUNE 30                          370,929               371,226               179,842
             SEPTEMBER 30                       370,731               371,226               288,677
             DECEMBER 31                        370,631               371,226               354,498
------------------------------------------------------------------------------------------------------
                TOTAL                       $ 1,483,319           $ 1,485,415            $  926,492
------------------------------------------------------------------------------------------------------

</TABLE>

                                                                              16

<PAGE>

ALLOCATIONS AND DISTRIBUTIONS AMONG THE LIMITED PARTNERS

Except during the Offering Period, Cash Available for Distribution that is
allocable to the Limited Partners is apportioned among and distributed to them
solely with reference to the number of Units owned by each as of the Record Date
for each such distribution. During the Offering Period, Cash Available for
Distribution which is allocable to the Limited Partners was apportioned among
and distributed to them with reference to both (i) the number of Units owned by
each as of each Record Date and (ii) the number of days since the previous
Record Date (or, in the case of the first Record Date, the commencement of the
Offering Period) that the Limited Partner owned the Units.

After the Offering Period, Net Profits, Net Losses and Cash Available for
Distribution allocable to the Limited Partners is apportioned among them in
accordance with the number of Units owned by each. A different convention was
utilized during the Offering Period, whereby Net Profits and Net Losses
allocable to Limited Partners were apportioned among them in the ratio which the
product of the number of Units owned by a Limited Partner multiplied by the
number of days in which the Limited Partner owns such Units during the period
bears to the sum of such products for all Limited Partners.

In addition, where a Limited Partner transfers Units during a taxable year, the
Limited Partner may be allocated Net Profits for a period for which such Limited
Partner does not receive a corresponding cash distribution.

ITEM 6:  SELECTED FINANCIAL DATA

The following tables sets forth, in summary form, selected financial data for
the Partnership as of and for the periods ended December 31, 2002 through
December 31, 2005. This table is qualified in its entirety by the more detailed
information and financial statements presented elsewhere in this report, and
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements and
related notes thereto included herein.

                            PERIOD ENDED DECEMBER 31,

<TABLE>
<CAPTION>

                                                                                                        JULY 8, 2002
                                                                                                      (COMMENCEMENT OF
                                                                                                    OPERATIONS) THROUGH
        STATEMENTS OF OPERATIONS DATA:               2005              2004             2003         DECEMBER 31, 2002
--------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>               <C>              <C>             <C>
Lease Income                                        $4,940,262        $4,365,487      $1,645,547                $142,205
Net (Loss)                                            (700,240)         (341,208)       (994,448)               (453,921)
Cash Distributions                                   1,498,302         1,500,420         935,899                  87,417
Net (Loss) allocated to Limited Partners              (715,223)         (356,213)     (1,003,855)               (454,795)
Net (Loss) Per Limited Partner Unit                      (0.95)            (0.45)          (1.92)                  (3.77)
Cash Distribution Per Limited Partner Unit                1.99              1.98            1.80                     .72

</TABLE>

                                                                              17

<PAGE>

                            PERIOD ENDED DECEMBER 31,

<TABLE>
<CAPTION>

                                                                                                         JULY 8, 2002
                                                                                                       (COMMENCEMENT OF
                                                                                                     OPERATIONS) THROUGH
                  OTHER DATA:                         2005              2004            2003          DECEMBER 31, 2002
--------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>               <C>              <C>             <C>
Net cash provided by (used in) operating            $2,017,517           $93,833     $2,260,738                ($388,968)
activities
Net cash (used in) investing activities               (366,070)       (2,481,996)    (6,877,103)              (2,247,159)
Net cash (used in) provided by financing            (1,478,900)       (1,536,969)     8,749,878                3,145,907
activities

</TABLE>

                               AS OF DECEMBER 31,

<TABLE>
<CAPTION>

                                                      2005              2004              2003            2002
                                                 ------------------------------------------------------------------
<S>                                              <C>                  <C>           <C>               <C>
Total Assets                                        $8,556,768       $11,502,859      $15,032,718        $2,782,599
Notes Payable                                        1,653,066         2,035,898        1,816,668               ---
Partners' Capital                                    6,642,100         8,858,467       10,700,095         2,692,986

</TABLE>

Net loss per unit is computed based upon net loss allocated to the Limited
Partners and the weighted average number of equivalent Units outstanding during
the year. Cash distribution per Unit is computed based upon distributions
allocated to the Limited Partners and the weighted average number of equivalent
Units outstanding during the year.

ITEM 7:  MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Partnership's discussion and analysis of its financial condition and results
of operations are based upon its financial statements which have been prepared
in accordance with accounting principles generally accepted in the United
States. The preparation of these financial statements requires the Partnership
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. The Partnership bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

The Partnership believes that its critical accounting policies affect its more
significant judgments and estimates used in the preparation of its financial
statements.

                                                                              18

<PAGE>

COMPUTER EQUIPMENT

CCC, on behalf of the Partnership and other affiliated partnerships, acquires
computer equipment subject to associated debt obligations and lease agreements
and allocates a participation in the cost, debt and lease revenue to the various
partnerships based on certain risk factors.

REVENUE RECOGNITION

Through December 31, 2005, the Partnership has only entered into operating
leases. Lease revenue is recognized on a monthly basis in accordance with the
terms of the operating lease agreements.

The Partnership reviews a customer's credit history before extending credit and
may establish a provision for uncollectible accounts receivable based upon the
credit risk of specific customers, historical trends and other information.

LONG-LIVED ASSETS

The Partnership evaluates its long-lived assets when events or circumstances
indicate that the value of the asset may not be recoverable. The Partnership
determines whether impairment exists by estimating the undiscounted cash flows
to be generated by each asset. If the estimated undiscounted cash flows are less
than the carrying value of the asset then impairment exists. The amount of the
impairment is determined based on the difference between the carrying value and
the fair value. Fair value is determined based on estimated discounted cash
flows to be generated by the asset.

Depreciation on computer equipment for financial statement purposes is based on
the straight-line method over estimated useful lives of four years.

REIMBURSABLE EXPENSES

Reimbursable expenses, which are charged to the Partnership by CCC in connection
with the administration and operation of the Partnership, are allocated to the
Partnership based upon several factors including, but not limited to, the number
of investors, compliance issues, and the number of existing leases.

LIQUIDITY AND CAPITAL RESOURCES

For the year ended December 31, 2005, the Partnership generated cash flow from
operating activities of $2,017,000, which includes a net loss of $700,000,
reduced by depreciation and amortization expenses of $4,312,000 and a decrease
in accounts payable to affiliated limited partnerships of $377,000. Other
non-cash activities included in the determination of the net loss include direct
payments of lease income by lessees to banks of $1,359,000 for the year ended
December 31, 2005.

The Partnership's primary source of capital for the years ended December 31,
2005 and 2004 was from proceeds from the sale of computer equipment of
approximately $249,000 and $74,000, respectively. For the year ended December
31, 2003 the primary source of capital was contributions of limited partners of
approximately $11,341,000 and proceeds from the sale of computer equipment of
approximately $14,000.

The primary uses of cash for the year ended December 31, 2005, 2004 and 2003,
were for capital expenditures for new equipment totaling $569,000, $2,474,000
and $6,401,000, respectively, acquisition fees of approximately $53,000,
$161,000 and $490,000, respectively, and for the payment of distributions to
partners totaling $1,498,000, $1,500,000 and $936,000, respectively. In
addition, there was an advance to CCC in the amount of approximately $230,000
for the year ended December 31, 2003 and offering costs of approximately
$1,404,000 for December 31, 2003.

Cash is invested in money market accounts that invest directly in treasury
obligations pending the Partnership's use of such funds to purchase additional
computer equipment, to pay Partnership expenses or to make distributions to the
Partners. At December 31, 2005 and 2004, the Partnership had approximately
$740,000 and $213,000, respectively, invested in these money market accounts.

                                                                              19

<PAGE>

As of December 31, 2005, the Partnership has a non-interest bearing unsecured
receivable from CCC, a related party to the Partnership, in the amount of
approximately $206,000. CCC, through its indirect subsidiaries, including the
General Partner of the Partnership, earns fees based on revenues and new lease
purchases from this fund. CCC intends to repay these receivables, through
acquisition fees, debt placement fees and reimbursement of expenses, with a
minimum amount of $12,500 per quarter, which commenced in the quarter ended
March 31, 2004. It is the intent of CCC and the General Partner to repay the
note by December 31, 2007. During the year ended December 31, 2005, CCC
reimbursed the Partnership approximately $37,000.

The Partnership's investment strategy of acquiring computer equipment and
generally leasing it under triple-net leases to operators who generally meet
specified financial standards minimize the Partnership's operating expenses. As
of December 31, 2005, the Partnership had future minimum rentals on
noncancellable operating leases of $2,514,000 for the year ended 2006 and
$937,000 thereafter. The Partnership incurred debt during 2005 and 2004 in the
amount of $976,000 and $1,323,000, respectively. As of December 31, 2005, the
outstanding debt was $1,653,000, with a weighted average interest rate of 6.10%
and will be payable through June 2008.

CCC, on behalf of the Partnership and other affiliated partnerships, acquires
computer equipment subject to associated debt obligations and lease agreements
and allocates a participation in the cost, debt and lease revenue to the various
partnerships based on certain risk factors.

In the 4th quarter of 2005, CCC identified payment problems with Allserve
Systems Corp. ("Allserve"), one of the Partnerships' lessees. The bank had
returned a number of Allserve's checks issued in October 2005. The Partnership
immediately began communication with the lessee, only to ultimately find that
they filed for protection under Chapter 11 of the United States Bankruptcy Code
on November 18, 2005. The General Partner responded to the Bankruptcy petition
promptly and assertively. Counsel was retained for the Partnership. All
litigation meetings and equipment inspections were attended by the General
Partner, for purpose of identifying and tagging all assets belonging to the
Partnership. The Partnership owns either all or portions of 5 equipment leases
with Allserve, with original purchase prices of approximately $2,789,000.

On January 12, 2006, the trustee filed a petition before the court asking for
the bankruptcy petition to be changed to a Chapter 7 Liquidation, due to
Allerve's inability to pay its ongoing bills and the trustee's belief that
Allserve was not being honest in its dealings with the Trustee. The Judge
granted this request.

An official creditors' committee ("Creditors' Committee") was organized by the
Trustee in February 2006. An officer of CCC is a member of the Creditors'
Committee. Other creditors affected and represented on the creditors committee
include IBM Credit LLC, DB Zwirn and Universal Equipment Leasing. A forensic
accounting firm is being retained by the Creditors' Committee to investigate
transfers of significant quantities of cash from Allserve accounts, prior to its
Bankruptcy petition. On March 16, 2006, the Trustee granted stay relief to allow
the Partnership and other creditors to take possession of their assets. As of
March 23, 2006, the Partnership has recovered all of its equipment which was
subject to leases with Allserve. The equipment has been relocated to an asset
management location in New Jersey, where it will be audited and tested, as well
as evaluated for sale or re-lease.

The equipment leases were purchased by the Partnership between December 2003 and
December 2004. The Partnership believes there is resale value for this equipment
and will be pursuing resale and litigation options in an attempt to maximize
investor's total return on this equipment. The Partnership received lease
payments up through and including September 2005. Therefore the Partnership has
recovered a portion of the equipment's purchase price to date. The Partnership
has recorded a reserve against all outstanding rentals in the amount of
approximately $261,000 and has also recorded impairment charges of approximately
$363,000 to reflect the assets at their current estimated net realizable value.

                                                                              20

<PAGE>

The Partnership's cash flow from operations is expected to continue to be
adequate to cover all operating expenses, liabilities, and distributions to
Partners during the next 12-month period. If available Cash Flow or Net
Disposition Proceeds are insufficient to cover the Partnership expenses and
liabilities on a short and long term basis, the Partnership will attempt to
obtain additional funds by disposing of or refinancing Equipment, or by
borrowing within its permissible limits. The Partnership may also reduce the
distributions to its Partners if it deems necessary. Since the Partnership's
leases are on a "triple-net" basis, no reserve for maintenance and repairs are
deemed necessary.

RESULTS OF OPERATIONS

For the years ended December 31, 2005, 2004, and 2003, the Partnership
recognized income of $4,949,000, $4,376,000 and $1,678,000 respectively and
expenses of $5,649,000, $4,718,000 and $2,673,000 respectively resulting in net
loss of $700,000 , $341,000 and $994,000 in 2005, 2004 and 2003 respectively.

For the years ended December 31, 2005, 2004, and 2003, lease income was
$4,940,000, $4,365,000 and $1,646,000 respectively. For the years ended December
31, 2005, 2004, and 2003, the Partnership entered into approximately 101, 142
and 87 leases, respectively.

For the years ended December 31, 2005, 2004, and 2003, the Partnership
recognized interest income of $8,000, $11,000 and $33,000 respectively as a
result of monies being invested in money market accounts that invest directly in
treasury obligations pending the Partnership's use of such funds to purchase
additional computer equipment, to pay Partnership expenses or to make
distributions to the Partners

For the years ended December 31, 2005, 2004, and 2003, the Partnership sold
equipment with a net book value of $416,000, $107,000 and $14,000 respectively
for a net loss of approximately $167,000 and $33,000 in 2005 and 2004,
respectively, and a net gain of $400 in 2003.

For the years ended December 31, 2005, 2004, and 2003, operating expenses,
excluding depreciation, consist of accounting, legal, outside service fees and
reimbursement of expenses to CCC for administration and operation of the
Partnership. The operating expenses totaled approximately $554,000, $947,000 and
$1,180,000 respectively. The decrease in 2005 was primarily attributable to a
decrease in reimbursable expenses associated with the administration and
operation of the Partnership charged by CCC, a related party, of approximately
$300,000. During 2004, there were decreases in printing services, legal fees,
travel, due diligence, and advertising as a result of the termination of the
offering period in 2003.

The equipment management fee is approximately 5% of the gross lease revenue
attributable to equipment that is subject to operating leases. For the years
ended December 31, 2005, 2004 and 2003 the equipment management fee was
approximately $247,000, $218,000 and $82,000, respectively.

For the years ended December 31, 2005, 2004, and 2003, interest expense was
approximately $108,000, $105,000 and $42,000 respectively as a result of new
leases with associated debt obligations purchased during the year.

Depreciation and amortization expenses consist of depreciation on computer
equipment, impairment charges, and amortization of equipment acquisition fees.
For the years ended December 31, 2005, 2004, and 2003, these expenses totaled
approximately $4,311,000, $3,414,000 and $1,266,000 respectively.

The Partnership identified specific computer equipment and associated equipment
acquisition costs, which were reevaluated due to technological changes. In 2005,
the Partnership determined that the carrying amount of certain assets was
greater than the undiscounted cash flows to be generated by these assets. The
Partnership recorded charges of $443,000 and $62,000 in the fourth quarter of
2005 and 2004, respectively, to record the assets at their estimated fair value.
Such amounts have been included in depreciation expense in the accompanying
financial statements.

                                                                              21

<PAGE>

NET LOSS

For the years ended December 31, 2005, 2004, and 2003, net loss was $700,000,
$341,000, and $994,000, respectively. The changes in net loss were attributable
to the changes in revenues and expenses, and the impairment of assets associated
with Allserve, as discussed above.

COMMITMENTS AND CONTINGENCIES

    CONTRACTUAL CASH OBLIGATIONS

The following table presents our contractual cash obligations as of December 31,
2005:

<TABLE>
<CAPTION>

                                                                         PAYMENTS DUE BY PERIOD

                                     TOTAL                  2006                 2007              2008
-------------------------------------------------------------------------------------------------------------
<S>                           <C>                      <C>                   <C>                 <C>
Installment notes payable
due 2006:
     Principal                            $261,002              $261,002               $----            $----
     Interest                                3,982                 3,982                ----             ----

Installment notes payable
due 2007:
     Principal                             982,376               582,387             399,989             ----
     Interest                               50,269                39,906              10,363             ----

Installment notes payable
due 2008:
     Principal                             409,688               172,920             182,837           53,931
     Interest                               27,832                18,549               8,631              652
-------------------------------------------------------------------------------------------------------------
TOTAL                                   $1,735,149            $1,078,746            $601,820          $54,583
=============================================================================================================

</TABLE>

                        RECENT ACCOUNTING PRONOUNCEMENTS

In May 2005, the Financial Accounting Standards Board (FASB) issued SFAS No.
154, "Accounting Changes and Error Corrections" (SFAS No. 154) which replaces
APB No. 20 "Accounting Changes" and SFAS No. 3, "Reporting Accounting Changes in
Interim Financial Statements -- An Amendment of APB Opinion No. 28." SFAS No.154
provides guidance on the methods issuers should use to account for and report
accounting changes and error corrections. Specifically, this statement requires
that issuers retrospectively apply any voluntary change in accounting principles
to prior period financial statements, if it is practicable to do so. This
principle replaces APB No. 20, which required that most voluntary changes in
accounting principle be recognized by including the cumulative effect of the
change to the new accounting principle on prior periods in the net income
reported by the issuer in the period in which it instituted the change. SFAS No.
154 also redefines the term "restatement" to mean the correction of an error by
revising previously issued financial statements. Unless adopted early, SFAS No.
154 is effective for accounting changes and corrections of errors made in fiscal
years beginning after December 15, 2005. The Partnership does not expect the
adoption of SFAS No. 154 to have an impact on its financial position or results
of operations.

                                                                              22

<PAGE>

ITEM 7.A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Partnership believes its exposure to market risk is not material due to the
fixed interest rate of its long-term debt and its associated fixed revenue
streams.

ITEM 8: FINANCIAL STATEMENTS

Our financial statements for the fiscal years ended December 31, 2005 and 2004,
and the report thereon of Asher and Company, Ltd. and the report thereon of BDO
Seidman, LLP for the fiscal year ended December 31, 2003, are included in this
annual report.

ITEM 9:  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Effective October 11, 2004, the registrant dismissed its principal independent
accounting firm, BDO Seidman, LLP. BDO Seidman, LLP's report on the registrant's
financial statements for 2003 did not contain any adverse opinion or a
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles. The decision to change accountants was
approved by the board of directors of the registrant's general partner. During
the registrant's 2003 fiscal year and the interim period prior to such
dismissal, the registrant had no disagreements with BDO Seidman, LLP on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of BDO Seidman, LLP, would have caused BDO Seidman, LLP to make
reference to the subject matter of the disagreements in connection with its
report. Further, during the registrant's 2003 recent fiscal year and the interim
period prior to such dismissal, there occurred no reportable events, as set
forth in Item 304(a)(1)(v) of Regulation S-K.

The registrant provided BDO Seidman, LLP with a copy of this disclosure on or
prior to the date hereof and requested BDO Seidman, LLP to provide the
registrant with a letter addressed to the Securities and Exchange Commission
stating whether it agreed with the statements contained herein. A copy of such
letter will be filed by amendment to this report when and if it is received by
the registrant.

Also effective October 11, 2004, the registrant retained Asher & Company, Ltd.
of Philadelphia, Pennsylvania as its principal independent accounting firm. The
registrant believes that Asher & Company, Ltd. is an accounting firm of a size
and scope of experience better suited to the registrant's current needs than the
registrant's former accounting firm.

During 2003, we had not consulted with Asher & Company, Ltd. on any matter that
(i) involved the application of accounting principles to a specific completed or
contemplated transaction, or the type of audit opinion that might be rendered on
our financial statements, in each case where written or oral advice was
provided, that was an important factor considered by us in reaching a decision
as to the accounting, auditing or financial reporting issue; or (ii) was either
the subject of a disagreement or event, as that term is described in item
304(a)(1)(iv)(A) of Regulation S-X.

ITEM 9A: CONTROLS AND PROCEDURES

Our management, under the supervision and with the participation of the
principal executive officer and principal financial officer, have evaluated the
effectiveness of our controls and procedures related to our reporting and
disclosure obligations as of December 31, 2005, which is the end of the period
covered by this Annual Report on Form 10-K. Based on that evaluation, the
principal executive officer and principal financial officer have concluded that
our disclosure controls and procedures are sufficient to provide that (a)
material information relating to us, including our consolidated subsidiaries, is
made known to these officers by our and our consolidated subsidiaries other
employees, particularly material information related to the period for which
this periodic report is being prepared; and (b) this information is recorded,
processed, summarized, evaluated and reported, as applicable, within the time
periods specified in the rules and forms promulgated by the Securities and
Exchange Commission.

                                                                              23

<PAGE>

ITEM 9B: OTHER INFORMATION

         NONE

ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

GENERAL

The Partnership does not have any Directors or executive officers.

The General Partner, a wholly owned subsidiary of Commonwealth of Delaware,
Inc., a Delaware corporation, which is in turn a wholly-owned subsidiary of CCC,
a Pennsylvania corporation, was incorporated in Pennsylvania on August 26, 1993.
The General Partner also acts as the General Partner for Commonwealth Income &
Growth Fund I, Commonwealth Income & Growth Fund II, Commonwealth Income &
Growth Fund III, Commonwealth Income & Growth Fund V, and Commonwealth Income &
Growth Fund VI. The principal business office of the General Partner is 470 John
Young Way, Suite 300, Exton, PA 19341, and its telephone number is 610-594-9600.
The General Partner manages and controls the affairs of the Partnership and has
sole responsibility for all aspects of the Partnership's operations. The
officers of the General Partner devote such time to the affairs of the
Partnership as in the opinion of the General Partner is necessary to enable it
to perform its function as General Partner. The officers of the General Partner
are not required to spend their full time in meeting their obligations to the
Partnership.

The directors and officers of the General Partner and key employees of CCC are
as follows:

<TABLE>
<CAPTION>

NAME                       TITLE
-----------------------------------------------------------------------------------------------------
<S>                        <C>
George S. Springsteen      Chairman of the Board, Treasurer and Chief Executive Officer of CCC, CCSC,
                           and Commonwealth Income & Growth Fund, Inc. ("CIGF, Inc.")

Kimberly A. Springsteen    Director, Secretary, President & Chief Operations Officers of CCC, CCSC and
                           CIGF, Inc. Chief Compliance Officer of CCSC.

Henry J. Abbott            Director, Senior Vice President & Portfolio Manager of CCC,  CCSC and
                           CIGF, Inc.

Lynn A. Franceschina       Controller, Senior Vice President of CCC, CCSC and CIGF, Inc.

Katrina M. Mason           Due Diligence Officer, Senior Vice President of CCC, CCSC and CIGF, Inc.

Jay Dugan                  Chief Technology Officer, Senior Vice President of CCC, CCSC and CIGF, Inc.

Donald Bachmayer           Accounting Manager, Vice President of CCC, CCSC, and CIGF, Inc.

Mark Hershenson            Broker Services Manager, Vice President of CCC, CCSC and CIGF, Inc.

James Pruett               Compliance Officer, Assistant Vice President of CCC, CCSC and CIGF, Inc.

Donnamarie D. Abbott       Investor Services Manager, Assistant Vice President of CCC, and CIGF, Inc.

</TABLE>

                                                                              24

<PAGE>

         GEORGE S. SPRINGSTEEN, age 71, is a founding stockholder, Chairman of
the Board and Chief Executive Officer of Commonwealth Capital Corp. since 1978.
In addition, Mr. Springsteen serves as Chairman of the Board and Chief Executive
Officer and registered principal of the broker/dealer, Commonwealth Capital
Securities Corp and the General Partner, Commonwealth Income & Growth Fund Inc.
He oversees numerous equipment investment portfolios and is responsible for
business development. Mr. Springsteen and his wife, Kim, are the sole
shareholders of the parent company and its affiliates. Mr. Springsteen oversees
the Portfolio Advisory Committee, the Audit Committee, the Disaster Recovery
Committee and the Facilities Committee. Before starting Commonwealth, Mr.
Springsteen managed a portfolio of $120 million at Granite Computer Corp.,
bought their portfolio and founded his own firm. Mr. Springsteen attended the
University of Delaware and holds his NASD Series 22, 63 and 39 licenses. Mr.
Springsteen is a member of the Equipment Leasing Association and a founding
member of the Computer Dealers Leasing Association prior to, as well as a member
of the Investment Program Association. (Mr. Springsteen is the spouse of
Kimberly A. Springsteen)

         KIMBERLY A. SPRINGSTEEN, age 46, joined Commonwealth in 1997, as a
founding registered principal and Chief Compliance Officer of its broker/dealer,
Commonwealth Capital Securities Corp. and serves as Director and Secretary,
President and Chief Operating Officer of the parent and its affiliates. Ms.
Springsteen is responsible for oversight of daily operations, due diligence and
business development. Ms. Springsteen also oversees the Portfolio Advisory
Committee, the Audit Committee, the Disaster Recovery Committee and the
Facilities Committee. Ms. Springsteen has developed and presented numerous
motivational, informational and sales training workshops over the past 25 years.
Prior to Commonwealth, Ms. Springsteen served as Senior Vice President &
Marketing Manager in the Alternative Investments Department of Wheat
First/Butcher & Singer, a broker/dealer headquartered in Richmond, Virginia,
where she raised over $450,000,000 of capital in the real estate, equipment
leasing, tax credit and energy-related industries. Ms. Springsteen holds her
NASD Series 7, 63 and 39 licenses and is a member of the Equipment Leasing
Association, the Financial Planners Association and serves on the Board of
Trustees for the Investment Program Association. Ms. Springsteen is the wife of
George Springsteen and is co-shareholder of the parent and its affiliates.

         HENRY J. ABBOTT, age 55, joined Commonwealth in 1998, as a Portfolio
Manager. Mr. Abbott serves as a Director, Senior Vice President and Portfolio
Manager of the parent and its affiliates. Mr. Abbott is a registered principal
of the broker/dealer. Mr. Abbott is responsible for lease acquisitions,
equipment dispositions and portfolio review. Additionally, Mr. Abbott is also
responsible for oversight of residual valuation, due diligence, equipment
inspections, negotiating renewal and purchase options and remarketing off lease
equipment. Mr. Abbott serves as senior member on the Portfolio Advisory
Committee, the Audit Committee, the Disaster Recovery Committee and the
Facilities Committee. Prior to Commonwealth, Mr. Abbott has been active in the
commercial lending industry, working primarily on asset-backed transactions for
more than 30 years. Mr. Abbott attended St. John's University and holds his NASD
Series 7, 63 and 24 licenses. Mr. Abbott was a founding partner of Westwood
Capital LLC in New York, a Senior Vice President for IBJ Schroeder Leasing
Corporation and has managed a group specializing in the provision of operating
lease finance programs in the high technology sector. Mr. Abbott brings
extensive knowledge and experience in leasing and has managed over $1.5 billion
of secured transactions. Mr. Abbott is a member of the Equipment Leasing
Association and the Investment Program Association.

         LYNN A. FRANCESCHINA, age 34 joined Commonwealth in 2001 and serves as
Senior Vice President and Controller of the parent and its affiliates. Ms.
Franceschina is responsible for the oversight of all accounting, cash
management, financial reporting and audit and tax preparation functions. During
the period of March 2004 to October 2004, Ms. Franceschina was employed with
Wilmington Trust Corp., where she was a part in the development of policies and
procedures related to Sarbanes Oxley and its documentation. Prior to
Commonwealth, in 1994 until 1999, Ms. Franceschina served as a Senior Accountant
with Duquesne University, and from 1999 to 2000, a Senior Financial Analyst for
Environ Products. Ms. Franceschina attended Robert Morris University and holds a
Bachelor of Science in Accounting. Ms. Franceschina serves on the Portfolio
Advisory Committee and the Disaster Recovery Committee, as well as a member of
the Equipment Leasing Association, the Investment Program Association and the
Institute of Management Accountants.

                                                                              25

<PAGE>

         KATRINAM. MASON, age 33, joined Commonwealth in 2002 and serves as
Senior Vice President, Broker/Dealer Relations Manager and Due Diligence Manager
of the parent and its affiliates. Ms. Mason is a registered principal of the
broker/dealer. Ms. Mason is responsible for managing due diligence and
broker/dealer development, as well as coordination of the national sales and
marketing effort, syndication and product development. Ms. Mason serves on the
Disaster Recovery Committee and the Website Committee. Prior to Commonwealth,
Ms. Mason worked at ICON Securities, an equipment leasing sponsor, from 1997 to
2002 and served as President from 2001 to 2002. Prior to that, Ms. Mason served
as a Regional Marketing Director of Textainer Capital, an equipment-leasing
sponsor. Ms. Mason attended the University of California at Santa Barbara and
holds a Bachelor of Arts and also attended University of San Francisco and holds
an MBA. Ms Mason holds her NASD Series 7, 22, 63 & 24 licenses. Ms. Mason is a
member of the Equipment Leasing Association, the Financial Planners Association
and the Investment Program Association.

         JAY DUGAN, age 57, joined Commonwealth in 2002 and serves as Senior
Vice President and Chief Technology Officer of the parent and its affiliates.
Mr. Dugan is responsible for the information technology vision, security and
operation and ongoing development, including network configurations, protection
of corporate assets and maximizing security and efficiency of information flow.
Prior to Commonwealth, Mr. Dugan founded First Securities USA, an NASD member
firm, in 1988 and operated that firm through 1998. From 1999 until 2002, Mr.
Dugan was an independent due diligence consultant until he came to Commonwealth
to develop that area of the firm. Mr. Dugan attended St. Petersburg College and
holds an AS Degree in Computer Networking Technology. Mr. Dugan is a Microsoft
Certified Systems Engineer, Microsoft Certified Database Administrator and
Comp-Tia Certified Computer Technician. Mr. Dugan is a senior member of the
Disaster Recovery Committee, as well as oversight member of the Website
Committee.

         DONALD A. BACHMAYER, age 41, joined Commonwealth in 2004 and serves as
Vice President and Accounting Manager of the General Partner, CCC and certain of
its subsidiaries where he has been employed since 2004. Mr. Bachmayer is
responsible for financial reporting and analysis, cash management and tax
compliance. He is a member of the Portfolio Advisory Committee. Prior to joining
Commonwealth, from 2002 to 2004, Mr. Bachmayer served as Accounting Supervisor
for LEAF Financial, an equipment-leasing sponsor, where his responsibilities
included cash management, commission and syndication reporting. From 1997 to
2001, Mr. Bachmayer was a senior accountant/auditor with Fishbein & Company,
P.C., certified public accountants, with responsibilities including audit,
financial reporting, cash management, commission and syndication reporting, and
tax preparation. Mr. Bachmayer attended LaSalle University and holds a Bachelor
of Science in Accounting.

         MARK HERSHENSON, age 40, joined Commonwealth in 2002 and serves as Vice
President and Broker Services Manager of the parent and its affiliates. Mr.
Hershenson is responsible for management of all custodial relationships, broker
services in the areas of product education and production goals, wholesaler
scheduling/support and internal sales staff. Prior to Commonwealth, Mr.
Hershenson served as part of a financial planning practice at American United
Life from 1999 through 2002. He has written a book for the Florida Insurance
Commissioner on how to sell insurance products. Additionally, in 1991 through
1998, Mr. Hershenson served as sales trainer fat MetLife for over 100 registered
representatives. Mr. Hershenson attended Stonehill College and holds a
Bachelor's in Psychology, with a concentration in Marketing/Organizational
Behaviorism and Master's level coursework in Financial Planning though American
College. Mr. Hershenson holds his NASD Series 6, 7 and 63 licenses. Mr.
Hershenson is a member of the Equipment Leasing Association and the Investment
Program Association.

         JAMES PRUETT, age 40, joined Commonwealth in 2002 and serves as
Assistant Vice President and Compliance Officer of the parent and its
affiliates. Mr. Pruett is responsible for management of regulatory policies and
procedures, assisting in compliance internal audit, associate regulatory
filings, broker/dealer registrations, state and broker/dealer financial
regulatory reporting requirements. Mr. Pruett assists in the management of
shareholder records and updates. Mr. Pruett is a member of the Website
Committee. Mr. Pruett holds his NASD Series 22 and 63 licenses. Prior to joining
Commonwealth, Mr. Pruett served as Managing Editor/Associate Publisher for
Caliber Entertainment, a publishing and entertainment licensing company. Mr.
Pruett's responsibilities included oversight of production of publishing
library, as well as serving as Editor-in-Chief for all publications and
additionally served as Media Relations Liaison. Mr. Pruett is a member of the
Equipment Leasing Association and the Investment Program Association.

                                                                              26

<PAGE>

         DONNAMARIE D. ABBOTT, age 47, joined Commonwealth in 2001 and serves as
Assistant Vice President and Investor Services Manager of the parent and its
affiliates. Ms. Abbott is responsible for management of daily operations in
Investor Services, from pre-formation stage through issuance of investors' final
distribution, communication, audited financial report, including fund masters,
blue sky coordination, subscription processing, distributions, transfers of
interest, redemptions, reporting and tax reporting. Ms. Abbott is a member of
the Office Development Committee, the Website Committee and the Disaster
Recovery Committee. Ms. Abbott holds her NASD Series 22 and 63 licenses. Prior
to joining Commonwealth, Ms. Abbott served as a Pennsylvania licensed realtor.
Ms. Abbott is a member of the Equipment Leasing Association and a member of the
Investment Program Association.

The directors and officers of the General Partner are required to spend only
such time on the Partnership's affairs as is necessary in the sole discretion of
the directors of the General Partner for the proper conduct of the Partnership's
business. A substantial amount of time of such directors and officers is
expected to be spent on matters unrelated to the Partnership, particularly after
the Partnership's investments have been selected. Under certain circumstances,
such directors and officers are entitled to indemnification from the
Partnership.

The Partnership has no audit committee financial expert, as defined under
Section 229.401 of the Exchange Act, serving on its audit committee. An audit
committee is not required because the Partnership is not a listed security as
defined by Section 240.10A-3; therefore, no audit committee financial expert is
required.

CODE OF ETHICS

In view of the fiduciary obligation that the General Partner has to the
Partnership, the General Partner believes an adoption of a formal code of ethics
is unnecessary and would not benefit the Partnership, particularly, in light of
Partnership's limited business activities.

ITEM 11: EXECUTIVE COMPENSATION

The Partnership does not have any Directors or executive officers.

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         NONE

                                                                              27

<PAGE>

ITEM 13:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following table summarizes the types, amounts and recipients of compensation
to be paid by the Partnership directly or indirectly to the General Partner and
its Affiliates. Some of these fees are paid regardless of the success or
profitability of the Partnership's operations and investments. While such
compensation and fees were established by the General Partner and are not based
on arm's-length negotiations, the General Partner believes that such
compensation and fees are comparable to those that would be charged by an
unaffiliated entity or entities for similar services. The Partnership Agreement
limits the liability of the General Partner and its Affiliates to the
Partnership and the Limited Partners and provides indemnification to the General
Partner and its Affiliates under certain circumstances.

<TABLE>
<CAPTION>

                                                                                     AMOUNT           AMOUNT            AMOUNT
      ENTITY RECEIVING                                                              INCURRED         INCURRED          INCURRED
        COMPENSATION                         TYPE OF COMPENSATION                  DURING 2005      DURING 2004       DURING 2003

                                        OFFERING AND ORGANIZATION STAGE
-----------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>                                                  <C>              <C>               <C>
The General Partner           ORGANIZATIONAL  FEE. An  Organization  Fee equal to        $0               $0              $291,000
                              three percent of the first  $10,000,000  of Limited
                              Partners' Capital  Contributions and two percent of
                              the  Limited  Partners'  Capital   Contribution  in
                              excess  of  $10,000,000,  as  compensation  for the
                              organization  of  the  Partnership..   The  General
                              Partner  pays  all   Organizational   and  Offering
                              Expenses, other than Underwriter's  Commissions and
                              a non-accountable  expense allowance payable to the
                              Dealer  Manager  that is equal to the lesser of (i)
                              one  percent  of  the  Offering  proceeds  or  (ii)
                              $50,000.

The General Partner's         SELLING  COMMISSIONS  AND DEALER  MANAGER FEES. The        $0               $0             $1,318,000
Affiliates                    amount of underwriting  commissions  (which include
                              selling commissions and dealer manager fees)
                              ranged between four and nine percent of capital
                              contributions based upon the quantity of units
                              sold to a single investor. The units were offered
                              to the public through Commonwealth Capital
                              Securities Corp., which received selling
                              commissions of up to eight percent on all sales of
                              units and acted as the dealer manager for which it
                              received a dealer manager fee of one percent on
                              all sales of units. In addition, during 2003, the
                              Partnership paid CCC approximately $156,000 for
                              additional underwriting expenses.

                                             OPERATIONAL AND SALE
                                             OR LIQUIDATION STAGES

The General Partner           EQUIPMENT    ACQUISITION    FEE.    An    Equipment       $8,000          $161,000         $490,000
                              Acquisition  Fee of four  percent  of the  Purchase
                              Price  of  each  item  of  Equipment  purchased  as
                              compensation    for   the    negotiation   of   the
                              acquisition  of the Equipment and the lease thereof
                              or sale under a  Conditional  Sales  Contract.  The
                              fee was paid  upon  each  closing  of the  Offering
                              with  respect  to the  Equipment  purchased  by the
                              Partnership  with the net  proceeds of the Offering
                              available  for  investment  in  Equipment.  If  the
                              Partnership   acquires   Equipment   in  an  amount
                              exceeding   the  net   proceeds  of  the   Offering
                              available  for  investment  in  Equipment,  the fee
                              will be paid when such  Equipment is  acquired.  Of
                              this amount,  approximately $80,000 has been earned
                              by  the  General  Partner   relating  to  equipment
                              acquired  in  2004.   The   remaining   balance  of
                              approximately   $98,000   will   be   earned   with
                              acquisitions in future periods.

The General Partner and its   REIMBURSABLE   EXPENSES.   The   General   and  its      $367,000         $840,000         $673,000
Affiliates                    Affiliates  Partner are  entitled to  reimbursement
                              by the Partnership for the cost of goods, supplies
                              or services obtained and used by the General
                              Partner in connection with the administration and
                              operation of the Partnership from third parties
                              unaffiliated with the General Partner. In
                              addition, the General Partner and its affiliates
                              are entitled to reimbursement of certain expenses
                              incurred by the General Partner and its affiliates
                              in connection with the administration and
                              operation of the Partnership. The amounts set
                              forth on this table do not include expenses
                              incurred in the offering of Units.

The General Partner           DEBT PLACEMENT FEE. As  compensation  for arranging      $10,000           $13,000          $22,000
                              Term Debt to finance the  acquisition  of Equipment
                              to the  Partnership,  a fee equal to one percent of
                              such  indebtedness;  provided,  however,  that such
                              fee  is  reduced  to  the  extent  the  Partnership
                              incurs such fees to third  Parties,  un  affiliated
                              with  the  General  Partner  or  the  lender,  with
                              respect  to such  indebtedness  and no such  fee is
                              paid with  respect to  borrowings  from the General
                              Partner or its Affiliates.

</TABLE>

                                                                              28

<PAGE>

<TABLE>
<S>                           <C>                                                  <C>              <C>               <C>
The General Partner           EQUIPMENT  MANAGEMENT  FEE. A monthly  fee equal to      $247,000         $218,000          $82,000
                              the lesser of (I) the fees  which  would be charged
                              by an independent  third party for similar services
                              for  similar  equipment  or (ii) the sum of (a) two
                              percent   of   (1)   the   Gross   Lease   Revenues
                              attributable  to Equipment which is subject to Full
                              Payout  Net   Leases   which   contain   net  lease
                              provisions  plus  (2) the  purchase  price  paid on
                              Conditional  Sales  Contracts  as  received  by the
                              Partnership  and  (b)  five  percent  of the  Gross
                              Lease Revenues  attributable  to Equipment which is
                              subject to Operating Leases.

The General Partner           EQUIPMENT  LIQUIDATION  FEE.  With  respect to each      $9,000            $2,000           $1,000
                              item  of  Equipment  sold  by the  General  Partner
                              (other than in connection with a Conditional  Sales
                              Contract),  a fee equal to the lesser of (i) 50% of
                              the  Competitive  Equipment Sale Commission or (ii)
                              three   percent   of  the  sales   price  for  such
                              Equipment.  The payment of such fee is subordinated
                              to the  receipt by the  Limited  Partners  of (i) a
                              return  of  their  Capital  Contributions  and  10%
                              annum  cumulative  return,   compounded  daily,  on
                              Adjusted Capital Contributions  ("Priority Return")
                              and (ii) the Net  Disposition  Proceeds  from  such
                              sale in accordance with the Partnership  Agreement.
                              Such fee is reduced to the extent any liquidation
                              or resale fees are paid to unaffiliated parties.

The General Partner           PARTNERSHIP  INTEREST.  The  General  Partner has a      $14,983          $15,005           $9,407
                              present  and  continuing  one  percent  interest of
                              $1,000 in the Partnership's  item of income,  gain,
                              loss, deduction, credit, and tax preference. In
                              addition, the General Partner receives one percent
                              of Cash Available for Distribution until the
                              Limited Partners have received distributions of
                              Cash Available for Distribution equal to their
                              Capital Contributions plus the 10% Priority Return
                              and thereafter, the General Partner will receive
                              10% of Cash Available for Distribution.

</TABLE>

The Partnership is subject to various conflicts of interest arising out of its
relationships with the General Partner and its Affiliates. These conflicts
include the following:

COMPETITION WITH GENERAL PARTNER AND AFFILIATES: COMPETITION FOR MANAGEMENT'S
TIME

The General Partner and its Affiliate sponsor other investor programs, which are
in potential competition with the Partnership in connection with the purchase of
Equipment as well as opportunities to lease and sell such Equipment. Competition
for Equipment has occurred and is likely to occur in the future. The General
Partner and its Affiliates may also form additional investor programs, which may
be competitive with the Partnership.

If one or more investor programs and the Partnership are in a position to
acquire the same Equipment, the General Partner will determine which program
will purchase the Equipment based upon the objectives of each and the
suitability of the acquisition in light of those objectives. The General Partner
will generally afford priority to the program or entity that has had funds
available to purchase Equipment for the longest period of time. If one or more
investor programs and the Partnership are in a position to enter into lease with
the same lessee or sell Equipment to the same purchaser, the General Partner
will generally afford priority to the Equipment which has been available for
lease or sale for the longest period of time.

Certain senior executives of the General Partner and its Affiliates also serve
as officers and directors of the other programs and are required to apportion
their time among these entities. The Partnership is, therefore, in competition
with the other programs for the attention and management time of the General
Partner and Affiliates. The officers and directors of the General Partner are
not required to devote all or substantially all of their time to the affairs of
the Partnership.

                                                                              29

<PAGE>

ACQUISITIONS

CCC and the General Partner or other Affiliates of the General Partner may
acquire Equipment for the Partnership provided that (i) the Partnership has
insufficient funds at the time the Equipment is acquired, (ii) the acquisition
is in the best interest of the partnership and (iii) no benefit to the General
Partner or its Affiliates arises from the acquisition except for compensation
paid to CCC, the General Partner or such other Affiliate as disclosed in this
Report. CCC, the General Partner or their Affiliates will not hold Equipment for
more than 60 days prior to transfer to the Partnership. If sufficient funds
become available to the Partnership within such 60 day period, such Equipment
may be resold to the Partnership for a price not in excess of the sum of the
cost of the Equipment to such entity and any accountable Acquisition Expenses
payable to third parties which are incurred by such entity and interest on the
Purchase Price from the date of purchase to the date of transfer to the
Partnership. CCC, the General Partner or such other Affiliate will retain any
rent or other payments received for the Equipment, and bear all expenses and
liabilities, other than accountable Acquisition Expenses payable to third
parties with respect to such Equipment, for all periods prior to the acquisition
of the Equipment by the Partnership. Except as described above, there will be no
sales of Equipment to or from any Affiliate of CCC.

In certain instances, the Partnership may find it necessary, in connection with
the ordering and acquisition of Equipment, to make advances to manufacturers or
vendors with funds borrowed from the General Partner for such purpose. The
Partnership does not borrow money from the General Partner or any of its
Affiliates with a term in excess of twelve months. Interest is paid on loans or
advances (in the form of deposits with manufacturers or vendors of Equipment or
otherwise) from the General Partner of its Affiliates from their own funds at a
rate equal to that which would be charged by third party financing institutions
on comparable loans from the same purpose in the same geographic area, but in no
event in excess of the General Partner's or Affiliate's own cost of funds. In
addition, if the General Partner or its Affiliates borrow money and loan or
advance it on a short-term basis to or on behalf of the Partnership, the General
Partner or such affiliates shall receive no greater interest rate and financing
charges from the Partnership than that which unrelated lender charge on
comparable loans. The Partnership will not borrow money from the General Partner
or any of its affiliates for a term in excess of twelve months.

If the General Partner or any of its Affiliates purchases Equipment in its own
name and with its own funds in order to facilitate ultimate purchase by the
Partnership, the purchaser is entitled to receive interest on the funds expended
for such purchase on behalf of the Partnership. Simple interest on any such
temporary purchases is charged on a floating rate basis not in excess of three
percent over the "prime rate" from time to time announced by PNC Bank, from the
date of initial acquisition to the date of repayment by the
Partnership/ownership transfer.

The Partnership does not invest in equipment Limited Partnerships, general
partnerships or joint ventures, except that (a) the Partnership may invest in
general partnerships or joint ventures with persons other that equipment
Programs formed by the General Partner or its Affiliates, which partnerships or
joint ventures own specific equipment; provided that (i) the Partnership has or
acquires a controlling interest in such ventures or partnerships, (ii) the
non-controlling interest is owned by a non-Affiliated, and (iii) the are no
duplicate fees; and (b) the Partnership may invest in joint venture arrangements
with other equipment Programs formed by the General Partner or its Affiliates if
such action is in the best interest of all Programs and if all the following
conditions are met: (i) all the Programs have substantially identical investment
objectives; (ii) there are no duplicate fees; (iii) the sponsor compensation is
substantially identical in each Program; (iv) the Partnership has a right of
first refusal to buy another Program's interest in a joint venture if the other
Program wishes to sell equipment held in the joint venture; (v) the investment
of each Program is on substantially the same terms and conditions; and (vi) the
joint venture is formed either for the purpose of effecting appropriated
diversification for the Programs or for the purpose of relieving the General
Partner or its Affiliates from a commitment entered into pursuant to certain
provisions of the Partnership Agreement.

                                                                              30

<PAGE>

GLOSSARY

The following terms used in this Report shall (unless otherwise expressly
provided herein or unless the context otherwise requires) have the meanings set
forth below.

"Acquisition Expenses" means expenses relating to the prospective selection and
acquisition of or investment in Equipment by the Partnership, whether or not
actually acquired, including, but not limited to, legal fees and expenses,
travel and communication expenses, costs of appraisal, accounting fees and
expenses and other related expenses.

"Acquisition Fees" means the total of all fees and commissions paid by any party
in connection with the initial purchase of Equipment acquired by the
Partnership. Included in the computation of such fees or commissions shall be
the Equipment Acquisition Fee and any commission, selection fee, construction
supervision fee, financing fee, non-recurring management fee or any fee of a
similar nature, however designated.

"Adjusted Capital Contributions" means Capital Contributions of the Limited
Partners reduced by any cash distribution received by the Limited Partners
pursuant to the Partnership Agreement, to the extent such distributions exceed
any unpaid Priority Return as of the date such distributions were made.

"Affiliate" means, when used with reference to a specified Person, (i) any
person, that directly or indirectly through one or more intermediaries controls
or is controlled by or is under common control with the specified Person, (ii)
any Person that is a director or an executive officer of, partner in, or serves
in a similar capacity to, the specified Person, or any Person of which the
specified Person is an executive officer or partner or with respect to which the
specified Person serves in a similar capacity, (iii) any Person owning or
controlling 10% or more of the outstanding voting securities of such specified
Person, or (iv) if such Person is an officer, director or partner, any entity
for which such Person acts in such capacity.

"Capital Account" means the bookkeeping account maintained by the Partnership
for each Partner.

"Capital Contributions" means in the case of the General Partner, the total
amount of money contributed to the Partnership by the General Partner, and in
the case of Limited Partners, $20 for each Unit, or where the context requires,
the total Capital Contributions of all the Partners.

"Cash Available for Distribution" means Cash Flow plus Net Disposition Proceeds
plus cash funds available for distribution from Partnership reserves, less such
amounts as the General Partner, in accordance with the Partnership Agreement,
causes the Partnership to reinvest in Equipment or interests therein, and less
such amounts as the General Partner, in its sole discretion, determines should
be set aside for the restoration or enhancement of Partnership reserves.

"Cash Flow" for any fiscal period means the sum of (i) cash receipts from
operations, including, but not limited to, rents or revenues arising from the
leasing or operation of the Equipment and interest, if any, earned on funds on
deposit for the Partnership, but not including Net Disposition Proceeds, minus
(ii) all cash expenses and costs incurred and paid in connection with the
ownership, lease, management, use and/or operation of the Equipment, including,
but not limited to, fees for handling and storage; all interest expenses paid
and all repayments of principal regarding borrowed funds; maintenance; repair
costs; insurance premiums; accounting and legal fees and expenses; debt
collection expenses; charges, assessments or levies imposed upon or against the
Equipment; ad valorem, gross receipts and other property taxes levied against
the Equipment; and all costs of repurchasing Units in accordance with the
Partnership Agreement; but not including depreciation or amortization of fees or
capital expenditures, or provisions for future expenditures, including, without
limitation, Organizational and Offering Expenses.

"Closing Date" means October 23, 2003.

"Code" means the Internal Revenue Code of 1986, as amended, and as may be
amended from tine to time by future federal tax statutes.

"Competitive Equipment Sale Commission" means that brokerage fee paid for
services rendered in connection with the purchase or sale of Equipment, which is
reasonable, customary, and competitive in light of the size, type, and location
of the Equipment.

                                                                              31

<PAGE>

"Conditional Sales Contract" means an agreement to sell Equipment to a buyer in
which the seller reserves title to, and retains a security interest in, the
Equipment until the Purchase Price of the Equipment is paid.

"Effective Date" means October 19, 2002, the date on which the Partnership's
Registration Statement on Form S-1 was declared effective by the United States
Securities and Exchange Commission.

"Equipment" means each item of and all of the computer peripheral and other
similar capital equipment purchased, owned, operated, and/or leased by the
Partnership or in which the Partnership has acquired a direct or indirect
interest, together with all appliances, parts, instruments, accessories,
furnishings, or other equipment included therein and all substitutions,
renewals, or replacements of, and all additions, improvements, and accessions
to, any and all thereof.

"Full Payout Net Lease" means an initial Net Lease of the Equipment under which
the non-cancelable rental payments due (and which can be calculated at the
commencement of the Net Lease) during the initial noncancelable fixed term (not
including any renewal or extension period of the lease or other contract for the
use of the Equipment are at least sufficient to recover the Purchase Price of
the Equipment.

"General Partner" means Commonwealth Income & Growth Fund, Inc. and any
additional, substitute or successor general partner of the Partnership.

"Gross Lease Revenues" means Partnership gross receipts from leasing or other
operation of the Equipment, except that, to the extent the Partnership has
leased the Equipment from an unaffiliated party, it shall mean such receipts
less any lease expense.

"IRS" means the Internal Revenue Service.

"Limited Partner" means a person who acquires Units and who is admitted to the
Partnership as a limited partner in accordance with the terms of the Partnership
Agreement.

"Majority in Interest" means, with respect to the Partnership, Limited Partners
holding more than 50% of the outstanding Units held by all Limited Partners at
the Record Date for any vote or consent of the Limited Partners.

"Net Dispositions Proceeds" means the net proceeds realized by the Partnership
from the refinancing, sale or other disposition of Equipment, including
insurance proceeds or lessee indemnity payments arising from the loss or
destruction of Equipment, less such amounts as are used to satisfy Partnership
liabilities.

"Net Lease" means a lease or other contract under which the owner provides
equipment to a lessee or other operator in return for a payment, and the lessee
assumes all obligations and pays for the operation, repair, maintenance and
insuring of the equipment.

"Net Profits" or "Net Losses" shall be computed in accordance with Section
703(a) of the Code (including all items of income, gain, loss or deduction
required to be stated separately pursuant to Section 703(a) (1) of the Code) for
each taxable year of the Partnership or shorter period prior to an interim
closing of the Partnership's books with the following adjustments: (I) any
income of the Partnership that is exempt from federal income tax and not
otherwise taken into account in computing Net Profits and Net Loss pursuant to
this definition shall be added to such taxable income or shall reduce such
taxable loss; (ii) any expenditure of the Partnership described in Code Section
705(a) (2) (B) or treated as Code Section 705(a) (2) (B) expenditures pursuant
to Treasury Regulations section 1.704-1(b) (2) (iv) (i) and not otherwise taken
into account in computing Net Profits and Net Losses pursuant to this definition
shall be subtracted from such taxable income or loss; (iii) items of income,
gain, loss and deduction specially allocated pursuant to Section 7.3 of the
Partnership Agreement shall not be included in the computation of Net Profits or
Net Loss; and if property is reflected on the books of the Partnership at a book
value that differs from the adjusted tax basis of the property in accordance
with Treasury Regulation Section 1.704-1(b) (2) (iv) (d) or (f), depreciation,
amortization, and gain or loss with respect to such property shall be determined
by reference to such book value in a manner consistent with Treasury Regulation
Section 1.704-1(b) (2) (iv) (g). The terms "Net Profit" or "Net Losses" shall
include the Partnership's distributive share of the profit or loss of any
partnership or joint venture in which it is a partner or joint venturer.

                                                                              32

<PAGE>

"Offering" means the initial public offering of Units in the Partnership.

"Offering Period" means the period commencing the Effective Date and ending the
last day of the calendar month in which the Closing Date occurs.

"Operating Distributions" means the quarterly distributions made to the Partners
pursuant to Article 8 of the Partnership Agreement.

"Operating Lease" means a lease or other contractual arrangement under which an
unaffiliated party agrees to pay the Partnership, directly or indirectly, for
the use of the Equipment, and which is not a Full Payout Net Lease.

"Organizational and Offering Expenses" means the expenses incurred in connection
with the organization of the Partnership and in preparation of the Offering,
including Underwriting Commissions, listing fees and advertising expenses
specifically incurred in connection with the distribution of the Units.

"Partner (s)" means any one or more of the General Partner and the Limited
Partners.

"Partnership" means Commonwealth Income & Growth Fund IV, a Pennsylvania limited
partnership.

"Partnership Agreement" means that Limited Partnership Agreement of Commonwealth
Income & Growth Fund IV by and among the General Partner and the Limited
Partners, pursuant to which the Partnership is governed.

"Person" means an individual, partnership, limited liability company, joint
venture, corporation, trust, estate or other entity.

"Priority Return" means an amount equal to a return at a rate of 10% per annum,
compounded daily, on the Adjusted Capital Contribution for all outstanding
Units, which amount shall begin accruing at the end of the calendar quarter in
which such Units are sold by the Partnership.

"Proceeds" means proceeds from the sale of the Units.

"Program" means a limited or general partnership, joint venture, unincorporated
association or similar organization, other than a corporation formed and
operated for the primary purpose of investment in and the operation of or gain
from an interest in Equipment.

"Purchase Price" means, with respect to any Equipment, an amount equal to the
sum of (i) the invoice cost of such Equipment or any other such amount paid to
the seller, (ii) any closing, delivery and installation charges associated
therewith not included in such invoice cost and paid by or on behalf of the
Partnership, (iii) the cost of any capitalized modifications or upgrades paid by
on or behalf of the Partnership in connection with its purchase of the
Equipment, and (iv) solely for purposes of the definition of Full Payout Net
Lease, the amount of the Equipment Acquisition Fee and any other Acquisition
Fees.

"Retained Proceeds" means Cash Available for Distribution, which instead of
being distributed to the Partners is retained by the Partnership for the purpose
of acquiring or investing in Equipment.

"Term Debt" means debt of the Partnership with a term in excess of twelve
months, incurred with respect to acquiring or investing in Equipment, or
refinancing non-Term Debt, but not debt incurred with respect to refinancing
existing Partnership Term Debt.

"Unit" means a Limited Partnership interest in the Partnership.

                                                                              33

<PAGE>

ITEM 14: PRINCIPAL ACCOUNTING FEES AND SERVICES

AUDIT FEES

The aggregate fees billed for each of the fiscal years ended December 31, 2005
and 2004 for professional services rendered by the Partnership's independent
registered public accounting firm for the audit of our annual financial
statements and review of the financial statements included in our Form 10-Q or
services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements for those fiscal years were
$96,608 and $138,880, respectively.

AUDIT-RELATED FEES

The aggregate fees billed in the fiscal years ended December 31, 2005 and 2004
for assurance and related services by the Partnership's independent registered
public accounting firm that are reasonably related to the performance of the
audit or review of the registrant's financial statements and are not reported
under the paragraph captioned "Audit Fees" above are $0 and $0, respectively.

TAX FEES

The aggregate fees billed in the fiscal years ended December 31, 2005 and 2004
for professional services rendered by the Partnership's independent registered
public accounting firm for tax compliance, tax advice and tax planning were $0
and $0, respectively.

ALL OTHER FEES

The aggregate fees billed in the fiscal years ended December 31, 2005 and 2004
for products and services provided by the Partnership's independent registered
public accounting firm, other than the services reported above under other
captions of this Item 14 are $0 and $0, respectively.

PRE-APPROVAL POLICIES AND PROCEDURES

All audit related services, tax planning and other services were pre-approved by
the Board of Directors of the General Partner, which concluded that the
provision of such services by the Partnership's Partnership's independent
registered public accounting firm was compatible with the maintenance of that
firm's independence in the conduct of its auditing functions. The policy of the
General Partner provides for pre-approval of these services and all audit
related, tax or other services not prohibited under Section 10A(g) of the
Securities Exchange Act of 1934, as amended to be performed for us by our
independent auditors, subject to the de minimus exception described in Section
10A(i)(1)(B) of the Exchange Act on an annual basis and on individual
engagements if minimum thresholds are exceeded.

The percentage of audit-related, tax and other services that were approved by
the board of directors is zero (-0-).

                                                                              34

<PAGE>

PART IV

ITEM 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 10-K

<TABLE>
<S>      <C>                                                                                     <C>
(a)(1)       Financial Statements

         Report of Independent Registered Public Accounting Firm                                    1

         Report of Independent Registered Public Accounting Firm                                    2

         Balance Sheets as of December 31, 2005 and 2004                                          3-4

         Statements of Operations for the years ended December 31, 2005, 2004 and 2003              5

         Statements of Partners' Capital (Deficit) for the years ended December 31, 2005,
         2004 and 2003                                                                              6

         Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003            7-8

         Notes to Financial Statements                                                           9-24

         Supplemental Schedules                                                                    25

</TABLE>

(a)(2)   Schedules.

         Schedules are omitted because they are not applicable, not required, or
because the required information is included in the financial statements and
notes thereto.

(a)(3)   Exhibits.

         * 3.1    Certificate of Limited Partnership

         * 3.2    Agreement of Limited Partnership

         *        Incorporated by reference from the Partnership's Registration
                  Statement on Form S-1 (Registration No. 333-62526)

(b)      Reports on Form 8-K

(c)      Exhibits.

         31.1     Rule 13a-14(a)/15d-14(a) Certifications by the Principal
                  Executive Officer

         31.2     Rule 13a-14(a)/15d-14(a) Certifications by the Principal
                  Financial Officer

         32       Section 1350 Certifications by the Principal Executive Officer
                  and Principal Financial Officer

                                   SIGNATURES

         Pursuant to the requirements of Section 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf April 7, 2006 by the undersigned thereunto duly authorized.


                             COMMONWEALTH INCOME & GROWTH FUND IV
                                 By: COMMONWEALTH INCOME &
                                     GROWTH FUND, INC., General Partner


                             By: /s/ George S. Springsteen
                                 --------------------------------
                                 George S. Springsteen, Chief Executive Officer

                                                                              35

<PAGE>

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on April 11, 2006:

<TABLE>
<CAPTION>

SIGNATURE                           CAPACITY
------------------------------------------------------------------------------------------
<S>                                 <C>
/s/ GEORGE S. SPRINGSTEEN           Chairman, Chief Executive Officer and Sole Director of
-------------------------           Commonwealth Income & Growth Fund, Inc.
George S. Springsteen

/s/ KIMBERLY A. SPRINGSTEEN         President, Chief Operating Officer and Secretary of
---------------------------         Commonwealth Income & Growth Fund, Inc.
Kimberly A. Springsteen

</TABLE>

                                                                              36




<PAGE>


                                                           COMMONWEALTH INCOME &
                                                                  GROWTH FUND IV


                                                                        CONTENTS


<TABLE>

                  <S>                                                                                       <C>

                  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                                      1

                  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                                      2

                  FINANCIAL STATEMENTS
                      Balance sheets                                                                         3-4
                      Statements of operations                                                                 5
                      Statements of partners' capital                                                          6
                      Statements of cash flows                                                               7-8

                  NOTES TO FINANCIAL STATEMENTS                                                             9-24

                  SUPPLEMENTAL SCHEDULES
                        Changes in allowance for doubtful accounts                                            25
</TABLE>

<PAGE>



             Report of Independent Registered Public Accounting Firm



The Partners
Commonwealth Income & Growth Fund IV
Exton, Pennsylvania


         We have audited the accompanying balance sheets of Commonwealth Income
& Growth Fund IV ("Partnership") as of December 31, 2005 and 2004 and the
related statements of operations and Partners' capital and cash flows for each
of the two years then ended. Our audits also included the financial statement
schedule of valuation and qualifying accounts as of and for the years ended
December 31, 2005 and 2004. These financial statements and the financial
statement schedule are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements and the
financial statement schedule based on our audits.

         We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The 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 Commonwealth Income
& Growth Fund IV as of December 31, 2005 and 2004 and the results of its
operations and cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.



/s/ ASHER & COMPANY, Ltd.


Philadelphia,                                                       Pennsylvania
April 5, 2006



                                                                               1

<PAGE>


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



The Partners
Commonwealth Income & Growth Fund IV
Exton, Pennsylvania

We have audited the accompanying Statements of operations, partners' capital,
and cash flows of Commonwealth Income & Growth Fund IV as of December 31, 2003.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Commonwealth Income & Growth
Fund IV for the period ended December 31, 2003, in conformity with accounting
principles generally accepted in the United States.


                                                   /s/ BDO Seidman, LLP


Philadelphia, Pennsylvania
March 12, 2004


                                                                               2
<PAGE>




                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                                  BALANCE SHEETS


<TABLE>
<CAPTION>

December 31,                                                                             2005                2004
--------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                 <C>

ASSETS

Cash and cash equivalents                                                   $         891,708    $        719,161
Lease income receivable, net of reserves of $260,937 and $0 at December               180,993             157,741
     31, 2005 and 2004, respectively
Accounts receivable, affiliated limited partnerships                                   22,684                 ---
Deferred revenue                                                                          189                 913
Refundable deposits                                                                     1,130               1,130
--------------------------------------------------------------------------------------------------------------------

                                                                                    1,096,704             878,945
--------------------------------------------------------------------------------------------------------------------

COMPUTER EQUIPMENT, at cost                                                        14,103,160          14,299,155
ACCUMULATED DEPRECIATION                                                           (7,161,685)         (4,386,199)
--------------------------------------------------------------------------------------------------------------------

                                                                                    6,941,475           9,912,956
--------------------------------------------------------------------------------------------------------------------

EQUIPMENT ACQUISITION COSTS AND DEFERRED EXPENSES, net
     of accumulated amortization of $394,011 and $248,122, at December
     31, 2005 and 2004, respectively                                                  220,786             369,202
Prepaid acquisition fees, General Partner                                              91,671              98,321
Accounts receivable, Commonwealth Capital Corp                                        206,132             243,435
--------------------------------------------------------------------------------------------------------------------

                                                                                      518,589             710,958
--------------------------------------------------------------------------------------------------------------------

TOTAL ASSETS                                                                $       8,556,768    $     11,502,859
====================================================================================================================
</TABLE>


                                                                               3
<PAGE>



                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                                  BALANCE SHEETS


<TABLE>
<CAPTION>

December 31,                                                                             2005                2004
--------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                  <C>

LIABILITIES AND PARTNERS' CAPITAL

LIABILITIES
     Accounts payable                                                       $         102,254    $        118,403
     Accounts payable, General Partner                                                 39,628              53,075
     Accounts payable, other affiliated partnerships                                      ---             376,552
     Unearned lease income                                                            119,720              60,464
     Notes payable                                                                  1,653,066           2,035,898
--------------------------------------------------------------------------------------------------------------------

TOTAL LIABILITIES                                                                   1,914,668           2,644,392
--------------------------------------------------------------------------------------------------------------------

PARTNERS' CAPITAL
     General Partner                                                                    1,000               1,000
     Limited Partners                                                               6,641,100           8,857,467
--------------------------------------------------------------------------------------------------------------------

TOTAL PARTNERS' CAPITAL                                                             6,642,100           8,858,467
--------------------------------------------------------------------------------------------------------------------


TOTAL LIABILITIES AND PARTNERS' CAPITAL                                     $       8,556,768    $     11,502,859
====================================================================================================================
</TABLE>

                                 See accompanying notes to financial statements.


                                                                               4
<PAGE>




                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                        STATEMENT OF OPERATIONS


<TABLE>
<CAPTION>

Years ended December 31,                                                     2005              2004                  2003
----------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                  <C>                <C>

INCOME
     Lease                                                     $        4,940,262   $     4,365,487    $        1,645,547
     Interest and other                                                     8,292            10,945                32,719
     Gain on sale of computer equipment                                       ---               ---                   384
----------------------------------------------------------------------------------------------------------------------------

TOTAL INCOME                                                            4,948,554         4,376,432             1,678,650
----------------------------------------------------------------------------------------------------------------------------

EXPENSES
     Operating, excluding depreciation                                    554,442           946,876             1,180,077
     Organizational costs                                                     ---               ---               103,146
     Equipment management fee, General Partner                            247,013           218,274                81,840
     Interest                                                             107,986           105,201                42,366
     Depreciation                                                       4,100,700         3,231,173             1,196,712
     Amortization of equipment acquisition costs and
         deferred expenses                                                211,174           183,150                68,957
     Bad Debt Expense                                                     260,937               ---                   ---
     Loss on sale of computer equipment                                   166,542            32,966                   ---
----------------------------------------------------------------------------------------------------------------------------

TOTAL EXPENSES                                                          5,648,794         4,717,640             2,673,098
----------------------------------------------------------------------------------------------------------------------------

NET (LOSS)                                                     $         (700,240)  $      (341,208)   $         (994,448)

===========================================================================================================================

NET (LOSS) ALLOCATED TO LIMITED PARTNERS                       $         (715,223)  $      (356,213)   $       (1,003,855)


NET (LOSS) PER EQUIVALENT LIMITED PARTNERSHIP UNIT             $            (0.95)  $         (0.45)   $            (1.92)

WEIGHTED AVERAGE NUMBER OF EQUIVALENT
     LIMITED PARTNERSHIP UNITS OUTSTANDING DURING THE YEAR                749,400           749,950               515,678
===========================================================================================================================
</TABLE>

                                 See accompanying notes to financial statements.



                                                                               5
<PAGE>



                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                 STATEMENTS OF PARTNERS' CAPITAL


<TABLE>
<CAPTION>

                                         General       Limited
                                         Partner       Partner        General           Limited
                                           Units         Units        Partner          Partners              Total
---------------------------------------------------------------------------------------------------------------------
<S>                                       <C>          <C>       <C>              <C>               <C>

BALANCE, December 31, 2002                     50       181,566  $       1,000    $    2,691,986    $     2,692,986

Contributions                                 ---       568,384            ---        11,341,175         11,341,175
Offering costs                                ---           ---            ---        (1,403,719)        (1,403,719)
Net income (loss)                             ---           ---          9,407        (1,003,855)          (994,448)
Distributions                                 ---           ---         (9,407)         (926,492)          (935,899)
---------------------------------------------------------------------------------------------------------------------

BALANCE, December 31, 2003                     50       749,950  $       1,000    $   10,699,095    $    10,700,095

Net income (loss)                             ---           ---         15,005          (356,213)          (341,208)
Distributions                                 ---           ---        (15,005)       (1,485,415)        (1,500,420)
---------------------------------------------------------------------------------------------------------------------

BALANCE, December 31, 2004                     50       749,950  $       1,000    $    8,857,467    $     8,858,467

Net income (loss)                             ---           ---         14,983          (715,223)          (700,240)
Redemptions                                   ---          (550)           ---           (17,825)           (17,825)
Distributions                                 ---           ---        (14,983)       (1,483,319)        (1,498,302)
---------------------------------------------------------------------------------------------------------------------

BALANCE, DECEMBER 31, 2005                     50       749,400  $       1,000    $    6,641,100    $     6,642,100
=====================================================================================================================
</TABLE>

                                 See accompanying notes to financial statements.



                                                                               6
<PAGE>




                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                        STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>

Years ended December 31,                                                         2005                2004            2003
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>                    <C>              <C>

CASH FLOWS FROM OPERATING ACTIVITIES
     Net (loss)                                                    $         (700,240)    $      (341,208) $     (994,448)

     Adjustments to reconcile net (loss) to net
         cash provided by operating activities
              Depreciation and amortization                                 4,311,874           3,414,323       1,265,669
              (Gain) loss on sale of computer
                  equipment                                                   166,542              32,966            (384)

              Other noncash activities included in
                  determination of net (loss)                              (1,358,870)         (1,103,890)       (427,805)

              Changes in assets and liabilities
                      Lease income receivable                                 (23,252)            (68,745)        (58,039)
                      Accounts receivable,
                           affiliated limited partnerships                        ---             429,454         (46,902)
                      Other receivables                                       (22,684)              3,737          99,873
                      Deferred revenue                                            724               1,525          (2,438)
                      Refundable deposits                                         ---                 ---          (1,130)
                      Accounts payable                                        (16,150)         (2,207,043)      2,304,960
                      Accounts payable, General
                           Partner                                            (13,447)            (17,949)         70,218
                      Accounts payable,
                           Commonwealth Capital Corp.                          (9,684)              9,684         (61,807)
                      Accounts payable,
                            affiliated limited partnerships                  (376,552)                ---             ---
                      Other accrued expenses                                      ---             (17,000)         17,000
                      Unearned lease income                                    59,256             (42,021)         95,971
------------------------------------------------------------------------------------------------------------------------------

NET CASH PROVIDED BY OPERATING ACTIVITIES                          $        2,017,517     $        93,833  $    2,260,738
------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                                                               7
<PAGE>




                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                        STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>

Years ended December 31,                                                    2005                   2004                  2003
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                           <C>               <C>

CASH FLOWS FROM INVESTING ACTIVITIES
      Capital expenditures                                  $           (562,066)         $  (2,394,884)    $      (6,401,395)

      Prepaid acquisition fees to the General Partner                        ---                    ---              (143,936)
      Net proceeds from sale of computer
          equipment                                                      248,994                 73,581                14,063
     Equipment acquisition fees to the General
         Partner                                                         (52,998)              (160,693)             (345,835)
---------------------------------------------------------------------------------------------------------------------------------

NET CASH (USED IN) INVESTING ACTIVITIES                                 (366,070)            (2,481,996)           (6,877,103)
---------------------------------------------------------------------------------------------------------------------------------

 CASH FLOWS FROM FINANCING ACTIVITIES
      Contributions                                                          ---                    ---            11,341,175
      Redemptions                                                        (17,825)                   ---                   ---
      Offering costs                                                         ---                    ---            (1,403,719)
      Distributions to partners                                       (1,498,302)            (1,500,420)             (935,899)
      Other receivable, Commonwealth Capital Corp.                        46,987                (23,318)             (229,801)
      Debt placement fee to the General
          Partner                                                         (9,760)               (13,231)              (21,878)
 --------------------------------------------------------------------------------------------------------------------------------

 NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES                  (1,478,900)            (1,536,969)            8,749,878
 --------------------------------------------------------------------------------------------------------------------------------

 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                    172,547             (3,925,132)            4,133,513

 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                          719,161              4,644,293               510,780
 --------------------------------------------------------------------------------------------------------------------------------

 CASH AND CASH EQUIVALENTS AT END OF YEAR                   $            891,708          $      719,161    $        4,644,293
 ================================================================================================================================
</TABLE>

                                 See accompanying notes to financial statements.


                                                                               8
<PAGE>



                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                   NOTES TO FINANCIAL STATEMENTS





1.      BUSINESS                 Commonwealth Income & Growth Fund IV (the
                                 "Partnership") is a limited partnership
                                 organized in the Commonwealth of Pennsylvania
                                 on May 15, 2001. The Partnership offered for
                                 sale up to 750,000 units of the limited
                                 partnership  at the purchase price of $20
                                 per unit (the "Offering"). The Partnership
                                 reached the minimum amount in escrow and
                                 commenced operations on July 8, 2002. As of
                                 September 15, 2003, the Partnership had reached
                                 full subscription, receiving $14,968,729 in
                                 contributions from limited and general
                                 partners, amounting to 750,000 units.

                                 The Partnership uses the proceeds of the
                                 Offering to acquire, own and lease various
                                 types of computer peripheral equipment and
                                 other similar capital equipment, which will be
                                 leased primarily to U.S. corporations and
                                 institutions. Commonwealth Capital Corp
                                 ("CCC"), on behalf of the Partnership and other
                                 affiliated partnerships, will acquire computer
                                 equipment subject to associated debt
                                 obligations and lease agreements and allocate a
                                 participation in the cost, debt and lease
                                 revenue to the various partnerships based on
                                 certain risk factors.

                                 The Partnership's General Partner is
                                 Commonwealth Income & Growth Fund, Inc. (the
                                 "General Partner"), a Pennsylvania corporation
                                 that is an indirect wholly owned subsidiary of
                                 CCC. CCC is a member of the Investment Program
                                 Association (IPA), Financial Planning
                                 Association (FPA), and the Equipment Leasing
                                 Association (ELA). Approximately ten years
                                 after the commencement of operations, the
                                 Partnership intends to sell or otherwise
                                 dispose of all of its computer equipment, make
                                 final distributions to partners, and to
                                 dissolve. Unless sooner terminated, the
                                 Partnership will continue until December 31,
                                 2012.

                                 Allocations of income and distributions of cash
                                 are based on the Partnership's Limited
                                 Partnership Agreement (the "Agreement"). The
                                 various allocations under the Agreement prevent
                                 any limited partner's capital account from
                                 being reduced below zero and ensure the capital
                                 accounts reflect the anticipated sharing ratios
                                 of cash distributions, as defined in the
                                 Agreement. During 2005, 2004 and 2003, annual
                                 cash distributions to limited partners were
                                 made at a rate of approximately 10% of their
                                 original contributed capital. Distributions
                                 during 2005, 2004 and 2003 reflect an annual
                                 return of capital in the amount of
                                 approximately $1.99, $1.98, and $1.80
                                 respectively, per weighted average number of
                                 limited partnership units outstanding during
                                 the year.

                                                                               9

<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                   NOTES TO FINANCIAL STATEMENTS


2.      SUMMARY OF               REVENUE RECOGNITION
        SIGNIFICANT
        ACCOUNTING               Through December 31, 2005, the Partnership has
        POLICIES                 only  entered  into  operating leases. Lease
                                 revenue is recognized on a monthly basis in
                                 accordance  with the terms of the operating
                                 lease agreements.

                                 The Partnership reviews a customer's credit
                                 history before extending credit and may
                                 establish a provision for uncollectible
                                 accounts receivable based upon the credit risk
                                 of specific customers, historical trends and
                                 other information.

                                 USE OF ESTIMATES

                                 The preparation of financial statements in
                                 conformity with generally accepted accounting
                                 principles 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 differ from those estimates.

                                 FAIR VALUE OF FINANCIAL INSTRUMENTS

                                 Statement of Financial Accounting Standards
                                 ("SFAS") No. 107, Disclosures about Fair Value
                                 of Financial Instruments, requires disclosure
                                 of the fair value of certain instruments. The
                                 carrying values of cash, receivables and
                                 payables approximate fair value due to the
                                 short term maturity of these instruments. For
                                 debt, the carrying amounts approximate fair
                                 value because the interest rates approximate
                                 current market rates.

                                                                              10

<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                   NOTES TO FINANCIAL STATEMENTS



                                 LONG-LIVED ASSETS

                                 The Partnership evaluates its long-lived assets
                                 when events or circumstances indicate that the
                                 value of the asset may not be recoverable. The
                                 Partnership determines whether impairment
                                 exists by estimating the undiscounted cash
                                 flows to be generated by each asset. If the
                                 estimated undiscounted cash flows are less than
                                 the carrying value of the asset then impairment
                                 exists. The amount of the impairment is
                                 determined based on the difference between the
                                 carrying value and the fair value. The fair
                                 value is determined based on estimated
                                 discounted cash flows to be generated by the
                                 asset. In 2005 and 2004, the Partnership
                                 determined that the carrying amount of certain
                                 assets was greater than the undiscounted cash
                                 flows to be generated by these assets. The
                                 Partnership recorded charges of $443,000 and
                                 $62,000 in the fourth quarter of 2005 and 2004,
                                 respectively, to record the assets at their
                                 estimated fair value. Such amounts have been
                                 included in depreciation expense in the
                                 accompanying financial statements. In 2003, the
                                 Partnership determined that no impairment had
                                 occurred.

                                 Depreciation on computer equipment for
                                 financial statement purposes is based on the
                                 straight-line method over estimated useful
                                 lives of four years.

                                 INTANGIBLE ASSETS

                                 Equipment acquisition costs and deferred
                                 expenses are amortized on a straight-line basis
                                 over two-to-four year lives. Unamortized
                                 acquisition costs and deferred expenses are
                                 charged to amortization expense when the
                                 associated leased equipment is sold.

                                 CASH AND CASH EQUIVALENTS

                                 The Partnership considers all highly liquid
                                 investments with a maturity of three months or
                                 less to be cash equivalents. Cash equivalents
                                 have been invested in a money market fund
                                 investing directly in Treasury obligations.
                                 Cash at December 31, 2005 and 2004 was held in
                                 the custody of one financial institution. At
                                 times, the balances may exceed federally
                                 insured limits. The Partnership mitigates this
                                 risk by depositing funds with a major financial
                                 institution. The Partnership has not
                                 experienced any losses in such accounts, and
                                 believes it is not exposed to any significant
                                 credit risk.


                                                                              11

<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                   NOTES TO FINANCIAL STATEMENTS


                                 ACCOUNTS RECEIVABLE

                                 Accounts receivable includes current accounts
                                 receivable, net of allowances and other
                                 accruals. The Partnership regularly reviews the
                                 collectability of its receivables and the
                                 credit worthiness of its customers and adjusts
                                 its allowance for doubtful accounts
                                 accordingly.

                                 INCOME TAXES

                                 The Partnership is not subject to federal
                                 income taxes; instead, any taxable income
                                 (loss) is passed through to the partners and
                                 included on their respective income tax
                                 returns.

                                 Taxable income differs from financial statement
                                 net income as a result of reporting certain
                                 income and expense items for tax purposes in
                                 periods other than those used for financial
                                 statement purposes, principally relating to
                                 depreciation, amortization, and lease income.

                                 OFFERING COSTS

                                 Offering costs are payments for selling
                                 commissions, dealer manager fees, professional
                                 fees and other offering expenses relating to
                                 the syndication. Selling commissions are 8% of
                                 the partners' contributed capital and dealer
                                 manager fees are 1% of the partners'
                                 contributed capital. These costs have been
                                 deducted from partnership capital in the
                                 accompanying financial statements.

                                 NET INCOME (LOSS) PER EQUIVALENT LIMITED
                                 PARTNERSHIP UNIT

                                 The net income (loss) per equivalent limited
                                 partnership unit is computed based upon net
                                 income (loss) allocated to the limited partners
                                 and the weighted average number of equivalent
                                 limited partner units outstanding during the
                                 year.


                                                                              12

<PAGE>
                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                   NOTES TO FINANCIAL STATEMENTS



                                 REIMBURSABLE EXPENSES

                                 Reimbursable expenses, which are charged to the
                                 Partnership by CCC in connection with the
                                 administration and operation of the
                                 Partnership,  are allocated to the Partnership
                                 based upon several factors  including, but not
                                 limited to, the number of investors, compliance
                                 issues, and the number of existing leases.

                                 RECENT ACCOUNTING PRONOUNCEMENTS

                                 In May 2005, the Financial Accounting Standards
                                 Board (FASB) issued SFAS No. 154, "Accounting
                                 Changes and Error Corrections" (SFAS No. 154)
                                 which replaces APB No. 20 "Accounting Changes"
                                 and SFAS No. 3, "Reporting Accounting Changes
                                 in Interim Financial Statements -- An Amendment
                                 of APB Opinion No. 28." SFAS No. 154 provides
                                 guidance on the methods issuers should use to
                                 account for and report accounting changes and
                                 error corrections. Specifically, this statement
                                 requires that issuers retrospectively apply any
                                 voluntary change in accounting principles to
                                 prior period financial statements, if it is
                                 practicable to do so. This principle replaces
                                 APB No. 20, which required that most voluntary
                                 changes in accounting principle be recognized
                                 by including the cumulative effect of the
                                 change to the new accounting principle on prior
                                 periods in the net income reported by the
                                 issuer in the period in which it instituted the
                                 change. SFAS No. 154 also redefines the term
                                 "restatement" to mean the correction of an
                                 error by revising previously issued financial
                                 statements. Unless adopted early, SFAS No. 154
                                 is effective for accounting changes and
                                 corrections of errors made in fiscal years
                                 beginning after December 15, 2005. The
                                 Partnership does not expect the adoption of
                                 SFAS No. 154 to have an impact on its financial
                                 position or results of operations.


3.      COMPUTER                 The Partnership is the lessor of equipment
        EQUIPMENT                under operating leases with periods generally
                                 ranging from 16 to 36 months. In general,
                                 associated costs such as repairs and
                                 maintenance, insurance and property taxes are
                                 paid by the lessee. Remarketing fees
                                 are paid to the leasing companies from which
                                 the Partnership purchases leases. These are
                                 fees that are earned by the leasing companies
                                 when the initial terms of the lease have been
                                 met. The General Partner believes that this
                                 strategy adds value since it entices the
                                 leasing company to "stay with the lease" for
                                 potential extensions, remarketing or sale of
                                 equipment. This strategy potentially minimizes
                                 any conflicts the leasing company may have with
                                 a potential new lease and will potentially
                                 assist in maximizing overall portfolio
                                 performance. The remarketing fee is tied into
                                 lease performance thresholds and is factored in
                                 the negotiation of the fee. For the years ended
                                 December 31, 2005, 2004, and 2003, the
                                 Partnership paid $22,000, $3,000, and $0,
                                 respectively.


                                                                              13

<PAGE>
                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                   NOTES TO FINANCIAL STATEMENTS



                                 The Partnership participates in leases that are
                                 shared with other affiliated partnerships. The
                                 Partnership's share of the computer equipment
                                 in which they participate at December 31, 2005
                                 and 2004 was approximately $1,188,000 and
                                 $909,000 respectively, which is included in the
                                 Partnership's fixed assets on their balance
                                 sheet, and the total cost of the equipment
                                 shared by the Partnership with other affiliated
                                 partnerships at December 31, 2005 and 2004 was
                                 approximately $2,667,000 and $1,798,000
                                 respectively. The Partnership's share of the
                                 outstanding debt associated with this equipment
                                 at December 31, 2005 and 2004 was approximately
                                 $137,000 and $258,000, respectively, which is
                                 included in the Partnership's liabilities on
                                 the balance sheet, and the total outstanding
                                 debt at December 31, 2005 and 2004 related to
                                 the equipment shared by the Partnership was
                                 approximately $266,000 and $500,000,
                                 respectively.


                                 The following is a schedule of future minimum
                                 rentals on noncancelable operating leases at
                                 December 31, 2005:
<TABLE>
<CAPTION>


                                  Years ending December 31,              Amount
                                  ------------------------------------------------
                                      <S>                         <C>

                                      2006                        $   2,514,000
                                      2007                              841,000
                                      2008                               96,000
                                  ------------------------------------------------

                                                                  $   3,451,000
                                  ================================================
</TABLE>


                                                                              14
<PAGE>
                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                   NOTES TO FINANCIAL STATEMENTS



   4. SIGNIFICANT                Lessees exceeding 10% of lease income for the
      CUSTOMERS                  years ended:
<TABLE>
<CAPTION>

                                  Lessee                   2005       2004      2003
                                  --------------------------------------------------
                                 <S>                       <C>        <C>       <C>

                                  Lessee A                 20%        18%      ---
                                  Lessee B                ---         10%       20%
                                  Lessee C                ---        ---        14%
                                  --------------------------------------------------
                                  TOTAL % OF LEASE INCOME  20%        28%       34%
                                  ==================================================
</TABLE>

                                  Lessees exceeding 10% of net accounts
                                  receivable at December 31:
<TABLE>
<CAPTION>

                                   Lessee                            2005       2004
                                  ---------------------------------------------------
                                 <S>                                 <C>        <C>

                                  Lessee B                           31%        45%
                                  Lessee D                           34%        14%
                                  Lessee E                           20%        17%
                                  ---------------------------------------------------
                                  TOTAL % OF ACCOUNTS RECEIVABLE     85%        76%
                                  ===================================================
</TABLE>
5.  RELATED PARTY                 ORGANIZATIONAL FEE
    TRANSACTIONS

                                  The General Partner is entitled to be paid an
                                  Organizational Fee equal to three percent of
                                  the first $10,000,000 of Limited Partners'
                                  Capital Contributions and two percent of the
                                  Limited Partners' Capital Contributions in
                                  excess of $10,000,000, as compensation for the
                                  organization of the Partnership. No
                                  organizational fees were earned by the General
                                  Partner in 2005. During 2003, the Partnership
                                  paid approximately $291,000 in organizational
                                  fees. There were no amounts due as of December
                                  31, 2005 and 2004.

                                  SELLING COMMISSION AND DEALER MANAGER FEES

                                  The Partnership paid to Commonwealth Capital
                                  Securities Corp. (CCSC), an affiliate of
                                  Commonwealth Capital Corp., an aggregate of up
                                  to 9% of the partners' contributed capital as
                                  selling commissions and dealer manager
                                  reallowance fees, after the required
                                  $1,150,000 minimum subscription amount was
                                  sold. During 2003, selling commissions and
                                  dealer manager fees of approximately
                                  $1,162,000 were paid to CCSC. In addition,
                                  during 2003, the Partnership paid CCC
                                  approximately $156,000 for additional
                                  underwriting expenses. There were no amounts
                                  due as of December 31, 2005, 2004 and 2003.

                                                                              15
<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                   NOTES TO FINANCIAL STATEMENTS


                                  REIMBURSABLE EXPENSES

                                  The General Partner and its affiliates are
                                  entitled to reimbursement by the Partnership
                                  for the cost of supplies or services obtained
                                  and used by the General Partner in connection
                                  with the administration and operation of the
                                  Partnership from third parties unaffiliated
                                  with the General Partner. In addition, the
                                  General Partner and its affiliates are
                                  entitled to reimbursement for certain expenses
                                  incurred by the General Partner and its
                                  affiliates in connection with the
                                  administration and operation of the
                                  Partnership. An understanding exists between
                                  CCC and the Partnership, whereby CCC will not
                                  be reimbursed for the administration of the
                                  Partnership for as long as the Partnership has
                                  not broken escrow. When the Partnership
                                  reached the minimum amount to break escrow,
                                  the Partnership reimbursed CCC for its share
                                  of the expenses to administer the Partnership
                                  retroactively from the effective date through
                                  the date of the first closing. During 2005,
                                  2004, and 2003, the Partnership recorded
                                  $367,000, $840,000, and $673,000 respectively,
                                  for reimbursement of expenses to the General
                                  Partner. At December 31, 2005, 2004, and 2003,
                                  the amount due to CCC was approximately
                                  $14,300, $9,700, and $20,500 respectively.


                                  EQUIPMENT ACQUISITION FEE

                                  The General Partner is entitled to be paid an
                                  equipment acquisition fee of 4% of the
                                  purchase price of each item of equipment
                                  purchased as compensation for the negotiation
                                  of the acquisition of the equipment and lease
                                  thereof or sale under a conditional sales
                                  contract. The fee was paid upon each closing
                                  of the Offering with respect to the equipment
                                  to be purchased by the Partnership with the
                                  net proceeds for the Offering available for
                                  investment in equipment. If the Partnership
                                  acquires equipment in an amount exceeding the
                                  net proceeds of the Offering available for
                                  investment in equipment, the fee will be paid
                                  when such equipment is acquired. During 2005,
                                  equipment acquisition fees of approximately
                                  $7,000 were earned by the General Partner. The
                                  balance of approximately $92,000 will be
                                  earned in future periods. During 2004,
                                  equipment acquisition fees of approximately
                                  $161,000 were earned by the General Partner,
                                  including $80,000 which was paid to the
                                  General Partner during 2003. During 2003,
                                  equipment acquisition fees of approximately
                                  $490,000 were paid to the General Partner.
                                  Approximately $346,000 was earned by the
                                  General Partner relating to equipment acquired
                                  in 2003, including $34,000 which was paid to
                                  the General Partner during 2002.

                                                                              16
<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                   NOTES TO FINANCIAL STATEMENTS

                                  DEBT PLACEMENT FEE

                                  As compensation for arranging term debt to
                                  finance the acquisition of equipment by the
                                  Partnership, the General Partner is paid a fee
                                  equal to 1% of such indebtedness; provided,
                                  however, that such fee shall be reduced to the
                                  extent the Partnership incurs such fees to
                                  third parties, unaffiliated with the General
                                  Partner or the lender, with respect to such
                                  indebtedness and no such fee will be paid with
                                  respect to borrowings from the General Partner
                                  or its affiliates. During 2005, 2004, and
                                  2003, the Partnership paid approximately
                                  $10,000, $13,000, and $22,000, in debt
                                  placement fees to the General Partner,
                                  respectively. There were no amounts due as of
                                  December 31, 2005, 2004, and 2003.

                                  EQUIPMENT MANAGEMENT FEE

                                  The General Partner is entitled to be paid a
                                  monthly fee equal to the lesser of (i) the
                                  fees which would be charged by an independent
                                  third party for similar services for similar
                                  equipment or (ii) the sum of (a) two percent
                                  of (1) the gross lease revenues attributable
                                  to equipment which is subject to full payout
                                  net leases which contain net lease provisions
                                  plus (2) the purchase price paid on
                                  conditional sales contracts as received by the
                                  Partnership and (b) 5% of the gross lease
                                  revenues attributable to equipment which is
                                  subject to operating leases. During 2005,
                                  2004, and 2003, equipment management fees of
                                  approximately $247,000, $218,000, and $82,000
                                  respectively, were paid to the General Partner
                                  as determined pursuant to section (ii) above.

                                                                              17
<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                   NOTES TO FINANCIAL STATEMENTS

                                  RELEASE FEE

                                  As compensation for providing releasing
                                  services for any equipment for which the
                                  General Partner has, following the expiration
                                  of, or default under, the most recent lease or
                                  conditional sales contract, arranged a
                                  subsequent lease or conditional sales contract
                                  for the use of such equipment to a lessee or
                                  other party, other than the current or most
                                  recent lessee or other operator of such
                                  equipment or its affiliates ("Release"), the
                                  General Partner shall receive, on a monthly
                                  basis, a Release Fee equal to the lesser of
                                  (a) the fees which would be charged by an
                                  independent third party for comparable
                                  services for comparable equipment or (b) two
                                  percent of gross lease revenues derived from
                                  such Release. There were no such fees paid to
                                  the General Partner in 2005, 2004 and 2003.

                                  EQUIPMENT LIQUIDATION FEE

                                  With respect to each item of equipment sold by
                                  the General Partner (other than in connection
                                  with a conditional sales contract), a fee
                                  equal to the lesser of (i) 50% of the
                                  competitive equipment sale commission or (ii)
                                  three percent of the sales price for such
                                  equipment is payable to the General Partner.
                                  The payment of such fee is subordinated to the
                                  receipt by the limited partners of the net
                                  disposition proceeds from such sale in
                                  accordance with the Partnership Agreement.
                                  Such fee will be reduced to the extent any
                                  liquidation or resale fees are paid to
                                  unaffiliated parties. During 2005, 2004, and
                                  2003, the General Partner earned equipment
                                  liquidation fees of approximately $9,000,
                                  $2,000, and $1,000, respectively.

                                  ACCOUNTS RECEIVABLE -- COMMONWEALTH CAPITAL
                                  CORP

                                  As of December 31, 2005, the Partnership has
                                  an unsecured, non-interest bearing receivable
                                  from CCC, a related party to the Partnership,
                                  in the amount of approximately $206,000, which
                                  originated primarily in 2003. CCC, through its
                                  indirect subsidiaries, including the General
                                  Partner of the Partnership, earns fees based
                                  on revenues and new lease purchases from this
                                  fund. CCC intends to repay these receivables,
                                  through acquisition fees, debt placement fees
                                  and reimbursement of expenses, with a minimum
                                  amount of $12,500 per quarter, which commenced
                                  in the quarter ended March, 2004. It is the
                                  intent of CCC and the General Partner to repay
                                  the note by December 31, 2007. During the year
                                  ended December 31, 2005, CCC reimbursed the
                                  Partnership approximately $37,000.

                                                                              18
<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                   NOTES TO FINANCIAL STATEMENTS

6. NOTES PAYABLE                  Notes payable consisted of the following:

<TABLE>
<CAPTION>

                                  December 31,                                    2005                      2004
                                  -------------------------------------------------------------------------------
                                  <S>                                           <C>              <C>


                                  Installment notes payable to banks; interest
                                  ranging from 5.00% to 6.75%, due in monthly
                                  installments ranging from $151 to $4,212,
                                  including interest, with final payments from
                                  January through December 2005.                $      ---        $      139,927

                                  Installment notes payable to banks; interest
                                  ranging from 4.76% to 6.00%, due in monthly
                                  installments ranging from $155 to $22,902,
                                  including interest, with final payments from
                                  January through December 2006.                   261,002               865,709

                                  Installment notes payable to banks; interest
                                  ranging from 4.29% to 7.5%, due in monthly
                                  installments ranging from $256 to $13,489,
                                  including interest, with final payments from
                                  January through December 2007.                   982,376               1,030,262


                                  Installment notes payable to
                                  banks; interest ranging from
                                  5.32% to 6.06%, due in monthly
                                  installments ranging from $162 to
                                  $6,973, including interest, with
                                  final payments from January
                                  through June 2008.                               409,688                    ---
                                  ---------------------------------------------------------------------------------
                                                                                $1,653,066        $      2,035,898
                                  =================================================================================
</TABLE>



                                                                              19
<PAGE>
                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                   NOTES TO FINANCIAL STATEMENTS

                                   These notes are secured by specific computer
                                   equipment and are nonrecourse liabilities of
                                   the Partnership. Aggregate maturities of
                                   notes payable for each of the years
                                   subsequent to December 31, 2005 are as
                                   follows:
<TABLE>
<CAPTION>

                                  Year ending December 31,                                                  Amount
                                  ---------------------------------------------------------------------------------
                                  <S>                                                           <C>

                                      2006                                                          $     1,016,309
                                      2007                                                                  582,826
                                      2008                                                                   53,931
                                  ---------------------------------------------------------------------------------
                                                                                                    $     1,653,066
                                  =================================================================================
</TABLE>

7.      SUPPLEMENTAL               Other  noncash  activities  included  in the
        CASH FLOW                  determination  of net  loss are as follows:
        INFORMATION

<TABLE>
<CAPTION>

Year ended December 31,                                                             2005                  2004               2003
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                    <C>                       <C>
Lease income, net of interest expense on
     notes payable realized as a result of direct payment of
     principal by lessee to bank                                       $       1,358,870     $       1,103,890         $  347,571
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                   No interest or principal on notes payable was
                                   paid by the Partnership because direct
                                   payment was made by lessee to the bank in
                                   lieu of collection of lease income and
                                   payment of interest and principal by the
                                   Partnership.

                                                                              20
<PAGE>
                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                   NOTES TO FINANCIAL STATEMENTS


                                   Noncash investing and financing activities
                                   include the following:
<TABLE>
<CAPTION>

Year ended December 31,                                                                2005               2004               2003
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                   <C>                      <C>
Debt assumed in connection with purchase
     of computer equipment                                              $           976,000    $     1,323,000       $  2,164,000

Prepaid Acquisitions fees earned by the General Partner                               6,650             79,520                 --
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

8.      COMMITMENTS AND            In the 4th quarter of 2005, CCC identified
        CONTINGENCIES              payment problems with Allserve Systems  Corp.
                                   ("Allserve"), one of the Partnerships'
                                   lessees. The bank had returned a number
                                   of Allserve's checks issued in October
                                   2005. The Partnership immediately began
                                   communication with the lessee, only to
                                   ultimately find that they filed for
                                   protection under Chapter 11 of the United
                                   States Bankruptcy Code on November 18, 2005.
                                   The General Partner responded to the
                                   Bankruptcy petition promptly and assertively.
                                   Counsel was retained for the Partnership. All
                                   litigation meetings and equipment inspections
                                   were attended by the General Partner, for
                                   purpose of identifying and tagging all assets
                                   belonging to the Partnership. The Partnership
                                   owns either all or portions of 5 equipment
                                   leases with Allserve, with original purchase
                                   prices of approximately $2,789,000.

                                   On January 12, 2006, the trustee filed a
                                   petition before the court asking for the
                                   bankruptcy petition to be changed to a
                                   Chapter 7 Liquidation, due to Allerve's
                                   inability to pay its ongoing bills and the
                                   trustee's belief that Allserve was not being
                                   honest in its dealings with the Trustee. The
                                   Judge granted this request.

                                   An official creditors' committee ("Creditors'
                                   Committee) was organized by the Trustee in
                                   February 2006. An officer of CCC is a member
                                   of the Creditors' Committee. Other creditors
                                   affected and represented on the creditors
                                   committee include IBM Credit LLC, DB Zwirn
                                   and Universal Equipment Leasing. A forensic
                                   accounting firm is being retained by the
                                   creditors' committee to investigate transfers
                                   of significant quantities of cash from
                                   Allserve accounts, prior to its Bankruptcy
                                   petition. On March 16, 2006, the Trustee
                                   granted stay relief to allow the Partnership
                                   and other creditors to take possession of
                                   their assets. As of March 23, 2006, the
                                   Partnership has recovered all of its
                                   equipment which was subject to leases with
                                   Allserve. The equipment has been relocated to
                                   an asset management location in New Jersey,
                                   where it will be audited and tested, as well
                                   as evaluated for sale or release.


                                                                              21
<PAGE>
                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                   NOTES TO FINANCIAL STATEMENTS


                                   The equipment leases were purchased by the
                                   Partnership between December 2003 and
                                   December 2004. The Partnership believes there
                                   is resale value for this equipment and will
                                   be pursuing resale and litigation options in
                                   an attempt to maximize investor's total
                                   return on this equipment. The Partnership
                                   received lease payments up through and
                                   including September 2005. Therefore, the
                                   Partnership has recovered a portion of the
                                   equipment's purchase price to date. The
                                   Partnership has recorded a reserve against
                                   all outstanding rentals in the amount of
                                   approximately $261,000 and has also recorded
                                   impairment charges of approximately $363,000
                                   to reflect the assets at their current
                                   estimated net realizable value.


9.       RECONCILIATION OF NET (LOSS) REPORTED FOR FINANCIAL REPORTING PURPOSES
         TO TAXABLE (LOSS) ON THE FEDERAL PARTNERSHIP RETURN

<TABLE>
<CAPTION>

 Year ended December 31,                                              2005               2004              2003
 ----------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                <C>              <C>
 Net (loss) for financial reporting                                (700,240)          (341,208)
      purposes                                             $                 $                   $      (994,448)
      Adjustments
          Gain (Loss) on sale of computer equipment                    (152)            20,730               ---
          Depreciation                                            2,000,090         (1,243,039)       (2,548,774)
          Amortization                                              159,822            137,343            39,289
          Organizational costs                                          ---                ---           149,424
          Unearned lease income                                      59,260            (42,022)           97,584
          Other                                                     649,853            (36,052)          120,188
 ----------------------------------------------------------------------------------------------------------------
 Taxable income (loss) on the Federal
      Partnership return                                   $      2,168,633  $      (1,504,248)  $    (3,136,737)
 ================================================================================================================
</TABLE>


                                                                              22
<PAGE>
                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                   NOTES TO FINANCIAL STATEMENTS

                                   The "Adjustments -- Other" includes financial
                                   statement adjustments reflected on the tax
                                   return in the subsequent year.

                                   Adjustment for (loss) on sale of equipment is
                                   due to longer useful lives for tax reporting
                                   purposes.



10.     QUARTERLY RESULTS          Summarized  quarterly financial data for the
        OF OPERATION               year ended December 31,  2005 is as follows:
        (UNAUDITED)

<TABLE>
<CAPTION>

                                                                        Quarter ended
                                             ---------------------------------------------------------------------
                                               March 31           June 30         September 30       December 31
------------------------------------------------------------------------------------------------------------------
<S>                                        <C>              <C>             <C>                 <C>
2005
REVENUES
     Lease and other                       $ 1,253,389      $  1,266,602    $    1,249,853       $     1,178,710
     Gain (loss) on sale of computer
        equipment                               (8,805)          (66,778)          (87,697)               (3,261)
------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES                               1,244,584         1,199,824         1,162,156             1,175,449

TOTAL COSTS AND EXPENSES                     1,212,440         1,249,766    $    1,147,389             1,872,658
------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS)                          $    32,144      $    (49,942)           14,767       $      (697,209)
==================================================================================================================
INCOME (LOSS) PER LIMITED PARTNER UNIT     $      0.04      $      (0.07)   $         0.02       $         (0.94)
==================================================================================================================
</TABLE>

                                                                              23

<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                   NOTES TO FINANCIAL STATEMENTS

10.     QUARTERLY RESULTS          Summarized  quarterly financial data for the
        OF OPERATION               year ended December 31,  2004 is as follows:
        (UNAUDITED)

<TABLE>
<CAPTION>
                                                                        Quarter ended
                                             ---------------------------------------------------------------------
                                               March 31          June 30         September 30        December 31
------------------------------------------------------------------------------------------------------------------
<S>                                        <C>              <C>              <C>                 <C>
2004
REVENUES
     Lease and other                       $      975,355    $    1,067,458    $     1,105,702    $     1,227,916
     Gain on sale of computer equipment
                                                      ---               ---                ---                ---
------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES                                    975,355         1,067,458          1,105,702          1,227,916

TOTAL COSTS AND EXPENSES                        1,145,746         1,054,389          1,114,493          1,403,011
------------------------------------------------------------------------------------------------------------------

NET (LOSS) INCOME                          $     (170,391)   $       13,069    $        (8,791)   $      (175,095)
==================================================================================================================

(LOSS) INCOME PER LIMITED PARTNER UNIT     $        (0.23)   $         0.02    $         (0.01)   $         (0.23)
==================================================================================================================
</TABLE>

                                                                              24
<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV


                                                          SUPPLEMENTAL SCHEDULES

<TABLE>
<CAPTION>

                                                BALANCE,        ADDITIONS
                                               BEGINNING       CHARGED TO                      BALANCE,
                                               OF PERIOD       OPERATIONS     DEDUCTIONS     END OF PERIOD
-----------------------------------------------------------------------------------------------------------
<S>                                             <C>             <C>           <C>            <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:

YEAR ENDED DECEMBER 31, 2004                       ---               ---          ---               ---
-----------------------------------------------------------------------------------------------------------

YEAR ENDED DECEMBER 31, 2005                       ---        $  260,937          ---         $ 260,937
===========================================================================================================
</TABLE>

                                                                              25