<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, 2004

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

                        Commission File Number: 33-62526

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

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

                               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:

                                              Name of exchange on
     Title of each class to                    which each class
        be so registered                      is to be registered
     ----------------------                   -------------------
              None                                    N/A

           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]

                       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. 33-62526).

<PAGE>

                                    FORM 10-K
                                DECEMBER 31, 2004

                                TABLE OF CONTENTS
<TABLE>
<S>         <C>                                                                      <C>
                                           PART I
Item 1.     Business                                                                  3
Item 2.     Properties                                                               11
Item 3.     Legal Proceedings                                                        11
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 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. As of December 31, 2004, 749,950 Units
($14,967,729) have been 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, 2004, 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

                                                                               3
<PAGE>

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.

        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, 2004, 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 is 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

                                                                               4
<PAGE>

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.

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, 2004, 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:

                     EQUIPMENT TYPE                      APPROXIMATE %
               -------------------------                --------------
                     Workstations                            22%
                        Servers                              32%
               Communication Controllers                     25%
                   High-end Printers                         11%
                        Routers                               2%
                   Low-end Printers                           2%
                    Optical Storage                           6%
                         TOTAL                              100%

        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, 2004, 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

                                                                               5
<PAGE>

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.

        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, 2004, 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, 2004, 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.

                                                                               6
<PAGE>

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, 2004, the
aggregate nonrecourse debt outstanding of $2,036,000 was 14.0% of the aggregate
cost of the Equipment owned.

        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, 2004, 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,
2004, 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, 2004, the Partnership has no such debt.

                                                                               7
<PAGE>

        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.

        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

                                                                               8
<PAGE>

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.

INVESTMENTS

        Through March 28, 2005, the Partnership has purchased, or has made the
commitment to purchase, the following Equipment:

<TABLE>
<CAPTION>
                                                            EQUIPMENT             LIST         PURCHASE        MONTHLY      LEASE
             LESSEE                     MFG                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
</TABLE>

                                                                               9
<PAGE>

<TABLE>
 <S>                               <C>                  <C>                      <C>              <C>             <C>          <C>
        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
   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 Digital         Workstation             666,440        433,190         11,486       36
          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 &
         Rehabilitation                Citrix                 Server               400,317        280,222          8,318       36
      Allserve System Corp             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            Gateway                 Server               643,385        418,200         12,423       36
      Allserve System Corp             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             Nortel             Communications           418,200        418,200         12,423       36
             Xerox                    Sunfire                Servers               481,243        481,243         12,428       36
</TABLE>

                                                                              10
<PAGE>

<TABLE>
    <S>                              <C>                   <C>                     <C>            <C>             <C>          <C>
     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             Nortel                 Server               503,778        503,778         14,965       36
    Hollingsworth Marketing            Xerox                 Printer               498,559        498,559         13,489       35
</TABLE>

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;

        (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.

                                                                              11
<PAGE>

        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.

EMPLOYEES

        The Partnership has no employees and received administrative and other
services from a related party, Commonwealth Capital Corp (CCC), which has 34
employees as of December 31, 2004.

ITEM 2:            PROPERTIES

                             NOT APPLICABLE

ITEM 3:            LEGAL PROCEEDINGS

                             NOT APPLICABLE

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

                             NOT APPLICABLE

PART II

ITEM 5:            MARKET FOR THE REGISTRANTS COMMON EQUITY AND
                   RELATED STOCKHOLDER MATTERS

        There is no public market for the Units nor is it anticipated that one
will develop. As of December 31, 2004, there were 598 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

                                                                              12
<PAGE>

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).

        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, 2004, the General Partner has not redeemed
any Units. Additionally, no 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

                                                                              13
<PAGE>

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.

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 have 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 the period of July 8, 2002 (Commencement of Operations) through
December 31, 2004.

          QUARTER ENDED             2004           2003            2002
      -------------------       ------------   ------------    ------------
            MARCH 31            $    371,737   $    103,475              --
            JUNE 30                  371,226        179,842              --
          SEPTEMBER 30               371,226        288,677    $     22,964
          DECEMBER 31                371,226        354,498          63,579
             TOTAL              $  1,485,415   $    926,492    $     86,543

                                                                              14
<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, 2004, 2003
and 2002. 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>
STATEMENTS OF OPERATIONS DATA:                      2004            2003            2002
--------------------------------------------    ------------    ------------    ------------
<S>                                             <C>             <C>             <C>
Lease Income                                    $  4,365,487    $  1,645,547    $    142,205
Net (Loss)                                          (341,208)       (994,448)       (453,921)
Cash Distributions                                 1,500,420         935,899          87,417
Net (Loss) Per Limited Partner Unit                    (0.45)          (1.92)          (3.77)
Cash Distribution Per Limited Partner Unit              1.98            1.80             .72
</TABLE>

                                                                              15
<PAGE>

                            PERIOD ENDED DECEMBER 31,

<TABLE>
<CAPTION>
OTHER DATA:                                         2004            2003            2002
--------------------------------------------    ------------    ------------    ------------
<S>                                             <C>             <C>             <C>
Net cash provided by (used in) operating
activities                                      $     93,833    $  2,260,738    $   (388,968)
Net cash (used in) investing activities           (2,481,996)     (6,877,103)     (2,247,159)
Net cash provided by (used in) financing
 activities                                       (1,536,969)      8,749,878       3,145,907
</TABLE>

                               AS OF DECEMBER 31,

<TABLE>
<CAPTION>
                                                    2004            2003            2002
                                                ------------    ------------    ------------
<S>                                             <C>             <C>             <C>
Total Assets                                    $ 11,502,859    $ 15,032,718    $  2,782,599
Notes Payable                                      2,035,898       1,816,668              --
Partners' Capital                                  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.

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.

                                                                              16
<PAGE>

REVENUE RECOGNITION

        Through December 31, 2004, 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, 2004, the Partnership generated cash
flow from operating activities of $93,800, which includes a net loss of
$341,000, reduced by depreciation and amortization expenses of $3,414,000 and a
decrease in accounts payable of $2,207,000 relating to computer equipment. Other
noncash activities included in the determination of the net loss include direct
payments of lease income by lessees to banks of $1,104,000 for the year ended
December 31, 2004.

        The Partnership's primary source of capital for the year ended December
31, 2004 was cash from operations of $93,800 and proceeds from the sale of
computer equipment of approximately $74,000. For the year ended December 31,
2003 and for the period of July 8, 2002 (Commencement of Operations) through
December 31, 2002, the primary sources of capital were contributions of limited
partners of approximately $11,341,000 and $3,627,000, respectively and proceeds
from the sale of computer equipment of approximately $14,000 and $101,000,
respectively. The primary uses of cash for the year ended December 31, 2004,
2003 and for the period of July 8, 2002 (Commencement of Operations) through
December 31, 2002, were for capital expenditures for new equipment totaling
$2,474,000, $6,401,000 and $2,225,000, respectively, an advance to CCC in the
amount of approximately $230,000 for the year ended December 31, 2003,
acquisition fees of approximately $161,000, $490,000 and $123,000, respectively,
offering costs of approximately $1,404,000 and $393,000, for December 31 2003
and 2002, respectively and for the payment of distributions to partners totaling
$1,500,000, $936,000 and $87,000, respectively.

        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, 2004, 2003 and 2002, the
Partnership had approximately $213,000, $4,510,000 and $338,000, respectively,
invested in these money market accounts.

        As of December 31, 2004, the Partnership has a non-interest bearing
unsecured receivable from CCC, a related party to the Partnership, in the amount
of approximately $243,000. CCC, through its indirect subsidiaries, including the
General Partner of the Partnership, earns fees based on revenues and new

                                                                              17
<PAGE>

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, commencing in the quarter ending March,
2004.

        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 minimizes the Partnership's operating expenses. As
of December 31, 2004, the Partnership had future minimum rentals on
noncancellable operating leases of $4,598,000 for the year ended 2005 and
$3,591,000 thereafter. The Partnership incurred debt during 2004 and 2003 in the
amount of $1,323,000 and $2,184,000, respectively. As of December 31, 2004, the
outstanding debt was $2,036,000, with a weighted average interest rate of 6.10%
and will be payable through October 2007.

        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.

        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, 2004 and 2003, and the period of July
8, 2002 (Commencement of Operations) through December 31, 2002, the Partnership
recognized income of $4,376,000, $1,679,000, and $150,000 respectively and
expenses of $4,718,000, $2,673,000, and $604,000 respectively resulting in net
loss of $341,000, $994,000, and $454,000 in 2004, 2003 and the period of July 8,
2002 (Commencement of Operations) through December 31, 2002 respectively.

        For the years ended December 31, 2004 and 2003, and the period of July
8, 2002 (Commencement of Operations) through December 31, 2002, lease income was
$4,365,000, $1,646,000 and $142,000, respectively. For the year ended December
31, 2004, and 2003 the Partnership entered into approximately 142 and 87 leases,
respectively, and for the period of July 8, 2002 (Commencement of Operations)
through December 31, 2002, the Partnership entered into approximately 33 leases.

        For the years ended December 31, 2004 and 2003, and the period of July
8, 2002 (Commencement of Operations) through December 31, 2002, the Partnership
recognized interest income of $11,000, $27,000, and $8,000, 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, 2004 and 2003, the Partnership sold
equipment with a net book value of $107,000 and $14,000, respectively for a net
loss of approximately $33,000 for 2004 and a net gain of approximately $400 for
2003. For the period of July 8, 2002 (Commencement of Operations) through
December 31, 2002, the Partnership sold equipment with a net book value of
$106,000 for a net loss of approximately $6,000.

        For the years ended December 31, 2004 and 2003, and the period of July
8, 2002 (Commencement of Operations) through December 31, 2002, 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 $947,000,
$1,180,000 and $443,000, respectively. There was an increase in reimbursable
expenses with the administration and

                                                                              18
<PAGE>

operation of the Partnership charged by CCC, a related party, of approximately
$165,000. 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. These expenses decreased by approximately $87,000, $37,000, $90,000,
$116,000, and $36,000, respectively.

        For the years ended December 31, 2003 and the period of July 8, 2002
(Commencement of Operations) through December 31, 2002, organizational costs
were approximately $103,000 and $38,000, respectively. No organizational costs
were paid in 2004.

        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, 2004 and 2003, and the period of July 8, 2002
(Commencement of Operations) through December 31, 2002, the equipment management
fee was approximately $218,000, $81,000 and $7,000 respectively.

        For the years ended December 31, 2004 and 2003, interest expense was
approximately $105,000 and $42,000, respectively as a result of new leases with
associated debt obligations purchased during the year. There was no interest
expense incurred during the period of July 8, 2002 (Commencement of Operations)
through December 31, 2002.

        Depreciation and amortization expenses consist of depreciation on
computer equipment, impairment charges, and amortization of equipment
acquisition fees. For the years ended December 31, 2004, 2003, and the period of
July 8, 2002 (Commencement of Operations) through December 31, 2002, these
expenses totaled approximately $3,352,000, $1,266,000 and $110,000,
respectively.

        The Partnership identified specific computer equipment and associated
equipment acquisition costs, which were reevaluated due to technological
changes. In 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 $62,000 in the fourth quarter of
2004 to record the assets at their estimated fair value. Such amounts have been
included in depreciation expense in the accompanying financial statements. In
2003 and for the period of July 8, 2002 through December 31, 2002, the
Partnership determined that no impairment had occurred.

NET LOSS

        For the years ended December 31, 2004 and 2003, and the period of July
8, 2002 (Commencement of Operations) through December 31, 2002, net loss was
$341,000, $994,000 and $454,000, respectively.

                                                                              19
<PAGE>

COMMITMENTS AND CONTINGENCIES

        CONTRACTUAL CASH OBLIGATIONS

The following table presents our contractual cash obligations as of December 31,
2004:

<TABLE>
<CAPTION>
                                                   PAYMENTS DUE BY PERIOD
                                 ---------------------------------------------------------
                                     TOTAL          2005           2006           2007
                                 ------------   ------------   ------------   ------------
<S>                              <C>            <C>            <C>            <C>
Installment notes payable
 due 2005:
   Principal                     $    139,927   $    139,927   $         --   $         --
   Interest                             3,169          3,169             --             --

Installment notes payable
 due 2006:
   Principal                          865,709        620,443        245,266             --
   Interest                            35,554         31,924          3,630             --

Installment notes payable
 due 2007:
   Principal                        1,030,262        385,943        406,699        237,620
   Interest                            75,750         45,493         24,738          5,519
                                 ------------   ------------   ------------   ------------
TOTAL                            $  2,150,371   $  1,226,899   $    680,333   $    243,139
                                 ============   ============   ============   ============
</TABLE>

                        RECENT ACCOUNTING PRONOUNCEMENTS

                              INTERPRETATION NO. 46

In January 2003, FASB issued Interpretation No. 46, "Consolidation of Variable
Interest Entities" ("Interpretation No. 46"), which clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from the other parties. Interpretation No. 46 is applicable immediately
for variable interest entities created after January 31, 2003. In December 2003,
FASB issued a revision to Interpretation 46 ("FIN 46-R") to clarify the
provisions of FIN 46. The application of FIN 46-R is effective for public
companies, other than small business issuers, after March 15, 2004. Management
believes that the adoption of Interpretation No. 46-R did not have an impact on
the financial position and results of operations.

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, 2004
and 2003, and the reports thereon of Asher and Company, Ltd. and BDO Seidman,
LLP respectively, 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 reports on the
registrant's financial statements for the two most recently completed fiscal
years 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


                                                                              20
<PAGE>

directors of the registrant's general partner. During the registrant's two most
recent fiscal years 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 two most recent fiscal years 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 October 11, 2004 and requested BDO Seidman, LLP to provide the
registrant with a letter addressed to the Securities and Exchange Commission
stating whether it agrees with the statements contained herein. A copy of such
letter filed by amendment to this report when it was 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 our two most recent fiscal years, we have 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 offer, have evaluated the
effectiveness of our controls and procedures related to our reporting and
disclosure obligations as of December 31, 2004, 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.

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 and Growth Fund I, Commonwealth Income and Growth Fund II
and Commonwealth Income & Growth Fund III. 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

                                                                              21
<PAGE>

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:

NAME                         TITLE
-------------------------    ---------------------------------------------------
George S. Springsteen        Chairman of the Board of Directors and President of
                             the General Partner and CCC

Kimberly A. Springsteen      Executive Vice President, Chief Operating Officer
                             and Secretary of the General Partner and CCC

Henry J. Abbott              Senior Vice President, Director and Portfolio
                             Manager of the General Partner & CCC

Jay Dugan                    Senior Vice President & IT Manager of the General
                             Partner & CCC

Lynn A. Franceschina         Vice President and Controller of the General
                             Partner and CCC

Donald Bachmayer             Assistant Vice President and Accounting Manager of
                             the General Partner and CCC

Dorothy A. Ferguson          Assistant Vice President & Compliance Manager of
                             the General Partner & CCC

Karen Tramontano             Assistant Vice President & Marketing Manager of the
                             General Partner & CCC

David Borham                 Assistant Vice President & Investor Relations
                             Manager of the General Partner & CCC

        GEORGE S. SPRINGSTEEN, age 70, is President of both CCC and the General
Partner. Mr. Springsteen is also President of the general partners or
controlling entities of several prior programs sponsored by CCC with objectives
similar to the Partnership's. He has been the sole shareholder and director of
CCC since its formation in 1978. From 1971 to 1978, Mr. Springsteen was involved
in the computer leasing business of Granite Computer Corporation. Mr.
Springsteen served as Vice President of Marketing, in addition to other
capacities, and managed a portfolio of approximately $120,000,000 of IBM
computers and peripherals. In 1978, Granite Computer Corporation sold its
equipment portfolio and left the equipment leasing business. Mr. Springsteen
acquired a portion of Granite's portfolio, client base, employees and corporate
offices in Jenkintown, Pennsylvania. The new company began operations as CCC in
May of 1978. Mr. Springsteen received a Bachelor of Science degree from the
University of Delaware in 1957. (Mr. Springsteen is the spouse of Kimberly A.
Springsteen)

        KIMBERLY A. SPRINGSTEEN, age 45, is Executive Vice President, Chief
Operating Officer and Secretary of CCC and the General Partner and joined CCC in
1997. She is also the President of Commonwealth Capital Securities Corp. From
1980 to 1997, Ms. Springsteen was employed with Wheat First Butcher Singer, a
broker/dealer headquartered in Richmond, Virginia. While at Wheat First Butcher
Singer, Ms. Springsteen, Senior Vice President, served as Marketing Manager for
the Direct Investments Department, with over $450,000,000 of investments under
management in real estate, equipment leasing and energy-related industries. Ms.
Springsteen holds Series 7, 63 and 39 NASD licenses and is a member of the
Equipment Leasing Association, Investment Partnership Association, and
International Association for Financial Planning. (Ms. Springsteen is the spouse
of George S. Springsteen)

        HENRY J. ABBOTT, age 54, is Senior Vice President and Portfolio Manager
of CCC and has been employed by CCC since 1998. Mr. Abbot has been active in the
commercial lending industry, working primarily on asset-backed transactions for
more than twenty-seven years. Prior to joining CCC Mr. Abbott

                                                                              22
<PAGE>

was a founding partner of Westwood Capital LLC, in New York. Prior to that, as
Senior Vice President for IBJ Schroder Leasing Corporation where Mr. Abbott
managed a group specializing in providing operating lease financing programs in
the high technology sector. Mr. Abbott brings extensive knowledge and experience
in all facets of asset-backed financing and has successfully managed $1.5
billion of secured transactions. Mr. Abbott attended St. John's University. Mr.
Abbott is a member of the Equipment Leasing Association.

        JAY DUGAN, age 56, is Senior Vice President and Information Technology
Manager of the General Partner and CCC and has been employed by CCC since 2002.
Mr. Dugan is responsible for computer network and information systems for the
General Partner and its affiliates. Mr. Dugan was a registered securities
representative from 1988 until 1998. During that period, Mr. Dugan founded First
Securities USA, a NASD member firm, and operated that firm through 1998. From
1999 until joining CCC in 2002, Mr. Dugan was an independent due diligence
consultant.

        LYNN A. FRANCESCHINA, age 33, is Vice President and Controller of the
General Partner and CCC and certain of its subsidiaries after returning to the
organization in 2004. From the period of March 2004 to October 2004, Ms.
Franceschina was employed at Wilmington Trust Corp. where she was part of the
policies & procedures team responsible for Sarbanes Oxley documentation. From
November 2001 to February 2004, Ms. Franceschina was Vice President and
Accounting Manager of the General Partner and CCC and certain of its
subsidiaries. Prior to that, Ms. Franceschina served as Business Controls
Manager for Liquent, Inc., a regulatory publishing software developer. Ms.
Franceschina received a Bachelor of Science degree in Accounting from Robert
Morris University. Ms. Franceschina is a member of the Institute of Management
Accountants and the Equipment Leasing Association.

        DONALD BACHMAYER, age 40, is Assistant Vice President and Accounting
Manager of the General Partner and CCC and certain of its subsidiaries where he
has been employed since 2004. From 1997 to 2001, Mr. Bachmayer was an accountant
with Fishbein & Company, P.C., certified public accountants. Prior to joining
Commonwealth, Mr. Bachmayer was employed as Accounting Supervisor for LEAF
Financial, an equipment leasing sponsor. Mr. Bachmayer received a B.S. degree in
Accounting from LaSalle University.

        DOROTHY A. FERGUSON, age 62, is Assistant Vice President of CCC and has
been employed by CCC since 1995. She brought with her over 20 years experience
in commercial banking and finance. Prior to joining Commonwealth, she held
positions as a Banking Officer and Administrative Assistant to the Chairman of a
large Philadelphia based bank, as well as Executive Secretary to the CEO of an
international manufacturing management group.

        KAREN TRAMONTANO, age 52, Assistant Vice President & Marketing Manger,
joined Commonwealth in 2000, brining with her over a decade of experience of
international marketing and customer relations. Ms. Tramontano is responsible
for the generation and distribution of all marketing materials for the Manager's
investment programs. Prior to joining Commonwealth, Ms. Tramontano served from
1973 to 1983 as executive liaison to the President of V&V Noordland, Inc., an
international commercial company, and served as an office manager for a small
business in Florida from 1998 to 2000. Ms. Tramontano coordinates Commonwealth's
home office marketing department, which serves our broker dealer community and
registered representatives across the country. Ms. Tramontano attended Suffolk
College in New York, with a Major in Advertising/Promotion.

        DAVID BORHAM, age 27, Assistant Vice President & Marketing Manager,
joined Commonwealth in 2000, bringing with him 2 years of Customer Service
experience. Mr. Borham holds a Series 22 NASD license and is responsible for the
management of investor database maintenance and all investor inquiries and
correspondence. Prior to joining Commonwealth, Mr. Borham served as a Customer
Relations Representative in the food service industry for Dilworth Town Inn from
1996 to 2000. Mr. Borham attended Delaware County Community College. (Mr. Borham
is the son of Kimberly A. Springsteen)

                                                                              23
<PAGE>

        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

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 2004     DURING 2003      DURING 2002
--------------------------   ---------------------------------------------------   -----------    -------------    -------------
<S>                          <C>                                                   <C>            <C>              <C>
                                        OFFERING AND ORGANIZATION STAGE

The General Partner          ORGANIZATIONAL FEE. An Organization Fee equal to      $         0    $     291,000    $     109,000
                             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.
</TABLE>

                                                                              24
<PAGE>

<TABLE>
<S>                          <C>                                                   <C>            <C>              <C>
The General Partner's        SELLING COMMISSIONS AND DEALER MANAGER FEES. The      $         0    $   1,318,000    $     323,000
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               $   161,000    $     490,000    $     123,000
                             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            $   840,000    $     673,000    $     366,000
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     $    13,000    $      22,000    $           0
                             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.

The General Partner          EQUIPMENT MANAGEMENT FEE. A monthly fee equal to      $   218,000    $      82,000    $       7,000
                             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.
</TABLE>

                                                                              25
<PAGE>

<TABLE>
<S>                          <C>                                                   <C>            <C>              <C>
The General Partner          RE-LEASE FEE. As Compensation for providing           $         0    $           0    $           0
                             re-leasing services for any Equipment for which the
                             General Partner has, following the expiration of,
                             or default under, the most recent lease of
                             Conditional Sales Contract, arranged a subsequent
                             lease of Conditional Sales Contract for the use of
                             such Equipment to a lessee or other party, other
                             than the current or most recent lessee of other
                             operator of such equipment or its Affiliates
                             ("Re-lease"), the General Partner will receive, on
                             a monthly basis, a Re3-lease Fee equal to the
                             lesser of (a) the fees which would be charged by an
                             independent third party of comparable services for
                             comparable equipment or (b) two percent of Gross
                             Lease Revenues derived from such Re-lease.

The General Partner          EQUIPMENT LIQUIDATION FEE. With respect to each       $     2,000    $       1,000    $       3,000
                             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   $    15,005    $       9,407    $         874
                             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

                                                                              26
<PAGE>

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.

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.

                                                                              27
<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.

                                                                              28
<PAGE>

"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.

"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)

                                                                              29
<PAGE>

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.

"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.

                                                                              30
<PAGE>

"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.

ITEM 14:        PRINCIPAL ACCOUNTING FEES AND SERVICES

AUDIT FEES

The aggregate fees billed for each of the fiscal years ended December 31, 2004
and 2003 for professional services rendered by the principal accountant 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 $138,880 and $77,000, respectively.

AUDIT-RELATED FEES

The aggregate fees billed in the fiscal years ended December 31, 2004 and 2003
for assurance and related services by the principal accountant 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, 2004 and 2003
for professional services rendered by the principal accountant 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, 2004 and 2003
for products and services provided by the principal accountant, 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 General Partner, which concluded that the provision of such services by the
Partnership's auditors 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-).

                                                                              31
<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                      3

        Report of Independent Registered Public Accounting Firm                      4

        Balance Sheets as of December 31, 2004 and 2003                            5-6

        Statements of Operations for the period of July 8, 2002 (Commencement
         of Operations) through the year ended December 31, 2004                     7

        Statements of Partners' Capital for the period of July 8, 2002
         (Commencement of Operations) through the year ended December 31, 2004       8

        Statements of Cash Flows for the period of July 8, 2002 (Commencement
         of Operations) through the year ended December 31, 2004                  9-10

        Notes to Financial Statements                                            11-25
</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



<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV

                                                                        CONTENTS

      REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                 3

      REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                 4

      FINANCIAL STATEMENTS
          Balance sheets                                                    5-6
          Statements of operations                                            7
          Statements of partners' capital                                     8
          Statements of cash flows                                         9-10

      NOTES TO FINANCIAL STATEMENTS                                       11-25

<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Partners
Commonwealth Income & Growth Fund IV
Exton, Pennsylvania

We have audited the accompanying balance sheet of Commonwealth Income & Growth
Fund IV (the "Partnership") as of December 31, 2004 and the related statements
of operations, Partners' capital and cash flows for the year then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit 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 as of December 31, 2004 and the results of its operations and its cash
flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.

/s/ Asher & Company,Ltd.
Philadelphia, Pennsylvania
March 29, 2005

                                                                               3

<PAGE>



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Partners
Commonwealth Income & Growth Fund IV
Exton, Pennsylvania

We have audited the accompanying balance sheet of Commonwealth Income & Growth
Fund IV as of December 31, 2003 and the related statements of operations and
cash flows for the year ended December 31, 2003 and the period of July 8, 2002
(Commencement of Operations) through December 31, 2002 and the related
statements of partners' capital for the year ended December 31, 2003 and 2002.
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
audits 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 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 at December 31, 2003 and the results of its operations and its cash
flows for the year ended December 31, 2003 and the period of July 8, 2002
(Commencement of Operations) through December 31, 2002, in conformity with
accounting principles generally accepted in the United States.


                                                        /s/ BDO Seidman, LLP


Philadelphia, Pennsylvania
March 12, 2004


                                                                               4

<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV

                                                                  BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,                                                        2004            2003
------------------------------------------------------------   --------------   --------------
<S>                                                            <C>              <C>
ASSETS

Cash and cash equivalents                                      $      719,161   $    4,644,293
Lease income receivable                                               157,741           88,996
Accounts receivable, affiliated limited partnerships                       --           52,902
Other receivables                                                          --            3,737
Deferred revenue                                                          913            2,438
Refundable deposits                                                     1,130            1,130
                                                               --------------   --------------
                                                                      878,945        4,793,496
                                                               --------------   --------------
COMPUTER EQUIPMENT, at cost                                        14,299,155       10,738,728
ACCUMULATED DEPRECIATION                                           (4,386,199)      (1,285,576)
                                                               --------------   --------------
                                                                    9,912,956        9,453,152
                                                               --------------   --------------
EQUIPMENT ACQUISITION COSTS AND DEFERRED EXPENSES, net
 of accumulated amortization of $248,122 and
 $72,840, respectively                                                369,202          378,428
PREPAID ACQUISITION FEES, GENERAL PARTNER                              98,321          177,841
ACCOUNTS RECEIVABLE, COMMONWEALTH CAPITAL CORP                        243,435          229,801
                                                               --------------   --------------
                                                                      710,958          786,070
                                                               --------------   --------------
TOTAL ASSETS                                                   $   11,502,859   $   15,032,718
                                                               ==============   ==============
</TABLE>

                                                                               5
<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV

                                                                  BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,                                                        2004            2003
------------------------------------------------------------   --------------   --------------
<S>                                                            <C>              <C>
LIABILITIES AND PARTNERS' CAPITAL

LIABILITIES
  Accounts payable, primarily for equipment purchases          $      118,403   $    2,325,446
  Accounts payable, General Partner                                    53,075           71,024
  Accounts payable, other affiliated partnerships                     376,552               --
  Other accrued expenses                                                   --           17,000
  Unearned lease income                                                60,464          102,485
  Notes payable                                                     2,035,898        1,816,668
                                                               --------------   --------------
TOTAL LIABILITIES                                                   2,644,392        4,332,623
                                                               --------------   --------------
PARTNERS' CAPITAL
  General Partner                                                       1,000            1,000
  Limited Partners                                                  8,857,467       10,699,095
                                                               --------------   --------------
TOTAL PARTNERS' CAPITAL                                             8,858,467       10,700,095
                                                               --------------   --------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL                        $   11,502,859   $   15,032,718
                                                               ==============   ==============
</TABLE>

                                 See accompanying notes to financial statements.

                                                                               6
<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV

                                                         STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                                 For the period
                                                                                                  July 8, 2002
                                                                                                 (Commencement
                                                                                                 of Operations)
                                                                                                    through
                                                                                                  December 31,
Years ended December 31,                                            2004             2003            2002 (1)
------------------------------------------------------------   --------------   --------------   --------------
<S>                                                            <C>              <C>              <C>
INCOME
  Lease                                                        $    4,365,487   $    1,645,547   $      142,205
  Interest and other                                                   10,945           32,719            8,329
  Gain on sale of computer equipment                                       --              384               --
                                                               --------------   --------------   --------------
TOTAL INCOME                                                        4,376,432        1,678,650          150,534
                                                               --------------   --------------   --------------
EXPENSES
  Operating, excluding depreciation                                   946,876        1,180,077          443,358
  Organizational costs                                                     --          103,146           38,079
  Equipment management fee, General Partner                           218,274           81,840            7,111
  Interest                                                            105,201           42,366               --
  Depreciation                                                      3,231,173        1,196,712          100,702
  Amortization of equipment acquisition costs and
   deferred expenses                                                  183,150           68,957            9,319
  Loss on sale of computer equipment                                   32,966               --            5,886
                                                               --------------   --------------   --------------
TOTAL EXPENSES                                                      4,717,640        2,673,098          604,455
                                                               --------------   --------------   --------------
NET (LOSS)                                                     $     (341,208)  $     (994,448)  $     (453,921)
                                                               ==============   ==============   ==============
NET (LOSS) PER EQUIVALENT LIMITED PARTNERSHIP UNIT             $        (0.45)  $        (1.92)  $        (3.77)
WEIGHTED AVERAGE NUMBER OF EQUIVALENT
  LIMITED PARTNERSHIP UNITS OUTSTANDING DURING THE YEAR               749,950          515,678          120,510
                                                               ==============   ==============   ==============
</TABLE>

                                 See accompanying notes to financial statements.

(1) ALTHOUGH THE PARTNERSHIP WAS FORMED ON MAY 15, 2001, THE PARTNERSHIP DID NOT
    COMMENCE OPERATIONS UNTIL JULY 8, 2002.

                                                                               7
<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, 2001 (1)                  50              --    $      1,000    $         --    $      1,000

Contributions                                   --         181,566              --       3,626,554       3,626,554
Offering costs                                  --              --              --        (393,230)       (393,230)
Net income (loss) (2)                           --              --             874        (454,795)       (453,921)
Distributions                                   --              --            (874)        (86,543)        (87,417)
                                      ------------    ------------    ------------    ------------    ------------
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
                                      ============    ============    ============    ============    ============
</TABLE>

                                 See accompanying notes to financial statements.

    (1) The General Partner contributed $1,000 in exchange for 50 units of the
        Partnership when the Partnership was organized in May 2001.

    (2) Net income (loss) is for the period July 8, 2002 (Commencement of
        Operations) through December 31, 2002.

                                                                               8
<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV

                                                        STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Years ended December 31,                                      2004            2003            2002
-------------------------------------------------------   ------------    ------------    ------------
<S>                                                       <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net (loss)                                              $   (341,208)   $   (994,448)   $   (453,921)
  Adjustments to reconcile net (loss) to net
   cash provided by (used in) operating activities
     Depreciation and amortization                           3,414,323       1,265,669         110,021
     (Gain) loss on sale of computer
      equipment                                                 32,966            (384)          5,886
     Other noncash activities included in
      determination of net (loss)                           (1,103,890)       (427,805)             --
     Changes in assets and liabilities
       Lease income receivable                                 (68,745)        (58,039)        (30,957)
       Accounts receivable,
        affiliated limited partnerships                        429,454         (46,902)         (6,000)
       Other receivables                                         3,737          99,873        (103,610)
       Deferred revenue                                          1,525          (2,438)             --
       Refundable deposits                                          --          (1,130)             --
       Accounts payable                                     (2,207,043)      2,304,960          20,486
       Accounts payable, General
        Partner                                                (17,949)         70,218             806
       Accounts payable,
        Commonwealth Capital Corp.                               9,684         (61,807)         61,807
       Other accrued expenses                                  (17,000)         17,000              --
       Unearned lease income                                   (42,021)         95,971           6,514
                                                          ------------    ------------    ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES       $     93,833    $  2,260,738    $   (388,968)
                                                          ============    ============    ============
</TABLE>

                                                                               9
<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV

                                                        STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Years ended December 31,                                      2004            2003            2002
-------------------------------------------------------   ------------    ------------    ------------
<S>                                                       <C>             <C>             <C>
CASH FLOWS FROM INVESTING ACTIVITIES
  Capital expenditures                                    $ (2,474,404)   $ (6,401,395)   $ (2,224,765)
  Prepaid acquisition fees to the General Partner               79,520        (143,936)        (33,905)
  Net proceeds from sale of computer equipment                  73,581          14,063         100,502
  Equipment acquisition fees to the General Partner           (160,693)       (345,835)        (88,991)
                                                          ------------    ------------    ------------
NET CASH (USED IN) INVESTING ACTIVITIES                     (2,481,996)     (6,877,103)     (2,247,159)
                                                          ------------    ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Contributions                                                     --      11,341,175       3,626,554
  Offering costs                                                    --      (1,403,719)       (393,230)
  Distributions to partners                                 (1,500,420)       (935,899)        (87,417)
  Other receivable, Commonwealth Capital Corp.                 (23,318)       (229,801)             --
  Debt placement fee to the General Partner                    (13,231)        (21,878)             --
                                                          ------------    ------------    ------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES         (1,536,969)      8,749,878       3,145,907
                                                          ------------    ------------    ------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS        (3,925,132)      4,133,513         509,780

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR               4,644,293         510,780           1,000
                                                          ------------    ------------    ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                  $    719,161    $  4,644,293    $    510,780
                                                          ============    ============    ============
</TABLE>

                                 See accompanying notes to financial statements.

                                                                              10
<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 2004 and 2003, annual cash
                    distributions to limited partners were made at a rate of
                    approximately 10% of their original contributed capital.

                                                                              11

<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV

                                                   NOTES TO FINANCIAL STATEMENTS

                    Distributions during 2004 and 2003 reflect an annual return
                    of capital in the amount of approximately $1.80 per weighted
                    average number of limited partnership units outstanding
                    during the year. During 2002, annual cash distributions to
                    limited partners were made at a rate of approximately 10% of
                    their original contributed capital. Distributions during
                    2002 reflect an annual return of capital in the amount of
                    approximately $.72 per weighted average number of limited
                    partnership units outstanding during the year.

2.   SUMMARY OF     REVENUE RECOGNITION
     SIGNIFICANT
     ACCOUNTING     Through December 31, 2004, the Partnership has only entered
     POLICIES       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.

                                                                              12

<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 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 $62,000 in the fourth quarter to record
                    the assets at their estimated fair value. Such amounts have
                    been included in depreciation expense in the accompanying
                    financial statements. In 2003 and 2002, 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, 2004 and 2003 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.

                                                                              13

<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.
                                                                              14
<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

                                       INTERPRETATION NO. 46

                    In January 2003, FASB issued Interpretation No. 46,
                    "Consolidation of Variable Interest Entities"
                    ("Interpretation No. 46"), which clarifies the application
                    of Accounting Research Bulletin No. 51, "Consolidated
                    Financial Statements," to certain entities in which equity
                    investors do not have the characteristics of a controlling
                    financial interest or do not have sufficient equity at risk
                    for the entity to finance its activities without additional
                    subordinated financial support from the other parties.
                    Interpretation No. 46 is applicable immediately for variable
                    interest entities created after January 31, 2003. In
                    December 2003, FASB issued a revision to Interpretation 46
                    ("FIN 46-R") to clarify the provisions of FIN 46. The
                    application of FIN 46-R is effective for public companies,
                    other than small business issuers, after March 15, 2004.
                    Management believes that the adoption of Interpretation No.
                    46-R did not have an impact on the financial position and
                    results of operations.

3.   COMPUTER       The Partnership is the lessor of equipment under operating
     EQUIPMENT      leases with periods ranging from 16 to 36 months. In
                    general, associated costs such as repairs and maintenance,
                    insurance and property taxes are paid by the lessee.

                                                                              15
<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV

                                                   NOTES TO FINANCIAL STATEMENTS

                    The following is a schedule of future minimum rentals on
                    noncancelable operating leases at December 31, 2004:

                    Years ending December 31,              Amount
                    -------------------------          -------------
                         2005                          $   4,598,000
                         2006                              3,021,000
                         2007                                570,000
                                                       -------------
                                                       $   8,189,000
                                                       =============

     SIGNIFICANT    Lessees exceeding 10% of lease income for the years ended:
     CUSTOMERS

<TABLE>
<CAPTION>
                    Lessee                                   2004         2003         2002
                    -----------------------------------   ----------   ----------   ----------
                    <S>                                       <C>          <C>         <C>
                    Lessee A                                  11%          --          --
                    Lessee B                                  18%          20%         16%
                    Lessee C                                  --           14%         21%
                    Lessee D                                  --           --          19%
                    Lessee E                                  --           --          11%
                    Lessee F                                  --           --          18%
                                                          ----------   ----------   ----------
                    TOTAL % OF LEASE INCOME                   28%          34%         85%
                                                          ==========   ==========   ==========
</TABLE>

                    Lessees exceeding 10% of accounts receivable at December 31:

<TABLE>
<CAPTION>
                    Lessee                                    2004        2003
                    -----------------------------------   ----------   ----------
                    <S>                                       <C>          <C>
                    Lessee A                                   --          25%
                    Lessee B                                   45%         --
                    Lessee G                                   14%         --
                    Lessee H                                   17%         12%
                    Lessee I                                   --          26%
                    Lessee J                                   --          18%
                                                          ----------   ----------
                    TOTAL % OF ACCOUNTS RECEIVABLE             76%         81%
                                                          ==========   ==========
</TABLE>

4.   RELATED PARTY  ORGANIZATIONAL FEE
     TRANSACTIONS

                    The General Partner is entitled to be paid an Organizational
                    Fee

                                                                              16
<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV

                                                   NOTES TO FINANCIAL STATEMENTS

                    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.  During  2003 and 2002,  the  Partnership  paid
                    approximately  $291,000  and  $109,000,   respectively,   in
                    organizational  fees.  There  were  no  amounts  due  as  of
                    December 31, 2004 and 2003.

                    SELLING COMMISSION AND DEALER MANAGER FEES

                    The Partnership will pay 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
                    has been sold. During 2003 and 2002, selling commissions and
                    dealer manager fees of approximately $1,162,000 and
                    $323,000, respectively, 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, 2004 and 2003.

                    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 2004, 2003, and 2002, the
                    Partnership recorded $840,000, $673,000, and

                                                                              17
<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV

                                                   NOTES TO FINANCIAL STATEMENTS

                    $366,000 respectively, for reimbursement of expenses to the
                    General Partner. This amount includes approximately $103,000
                    that was incurred by CCC on behalf of the Partnership
                    through the date the Partnership broke escrow, July 8, 2002.
                    At December 31, 2004, 2003, and 2002, the amount due to CCC
                    was approximately $9,700, $20,500, and $62,000,
                    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 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. The balance of approximately $98,000 will be
                    earned in future periods. 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.
                    During 2002, equipment acquisition fees of approximately
                    $123,000 were paid to the General Partner. Of this amount,
                    approximately $89,000 was earned by the General Partner
                    relating to equipment acquired in 2002.

                    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

                                                                              18
<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV

                                                   NOTES TO FINANCIAL STATEMENTS

                    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 2004 and 2003, the
                    Partnership paid approximately $13,000 and $22,000 in debt
                    placement fees to the General Partner, respectively. There
                    were no debt placement fees paid to the General Partner in
                    2002. There were no amounts due as of December 31, 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 2004, 2003 and 2002,
                    equipment management fees of approximately $218,000 and
                    $82,000, and $7,000, respectively, were paid to the General
                    Partner as determined pursuant to section (ii) above.

                    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
                                                                              19
<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV

                                                   NOTES TO FINANCIAL STATEMENTS

                    were no such fees paid to the General Partner in 2004, 2003,
                    and 2002.

                    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 2004, 2003, and 2002, the General Partner earned
                    equipment liquidation fees of approximately $2,000 and
                    $1,000, and $3,000, respectively.

                    ACCOUNTS RECEIVABLE - COMMONWEALTH CAPITAL CORP

                    As of December 31, 2004, the Partnership has an unsecured,
                    non-interest bearing receivable from CCC, a related party to
                    the Partnership, in the amount of approximately $243,000,
                    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, commencing in the quarter ended March,
                    2004. During the year ended December 31, 2004, CCC
                    reimbursed the Partnership approximately $70,000.

                                                                              20
<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV

                                                   NOTES TO FINANCIAL STATEMENTS

5.  NOTES PAYABLE   Notes payable consisted of the following:

<TABLE>
<CAPTION>
                    December 31,                                    2004             2003
                    -----------------------------------------    ------------    -----------
                    <S>                                          <C>             <C>
                    Installment notes payable to banks;
                    interest ranging from 5.75% to 7.75%,
                    due in monthly installments ranging from
                    $60 to $1,980, including interest, with
                    final payments from June through
                    December 2004.                               $         --    $    56,857

                    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        396,330

                    Installment notes payable to banks;
                    interest ranging from 4.85% to 6.00%,
                    due in monthly installments ranging from
                    $155 to $22,902, including interest,
                    with final payments from January through
                    August 2006.                                      865,709      1,363,481

                    Installment notes payable to banks;
                    interest ranging from 4.29% to 6.35%,
                    due in monthly installments ranging from
                    $3,746 to $13,489, including interest,
                    with final payments from January through
                    October 2007.                                   1,030,262             --
                                                                 ------------    -----------
                                                                 $  2,035,898    $ 1,816,668
                                                                 ============    ===========
</TABLE>
                                                                              21
<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, 2004 are as follows:

<TABLE>
<CAPTION>
                    Year ending December 31,                        Amount
                    -----------------------------------------    ------------
                        <S>                                      <C>
                        2005                                     $  1,146,313
                        2006                                          651,964
                        2007                                          237,621
                                                                 ------------
                                                                 $  2,035,898
                                                                 ============
</TABLE>

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

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

Lease income paid to original lessor in lieu
 of cash payment for computer equipment acquired                           --         80,234
                                                                 ------------    -----------
Total adjustment to net (loss) from other noncash activities     $  1,103,890    $   427,805
                                                                 ============    ===========
</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.
                                                                              22
<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV

                                                   NOTES TO FINANCIAL STATEMENTS

                    Noncash investing and financing activities include the
                    following:

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

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

<TABLE>
<CAPTION>
Year ended December 31,                                  2004          2003            2002
--------------------------------------------------   ------------   ------------   ------------
<S>                                                  <C>            <C>            <C>
Net (loss) for financial reporting purposes          $   (341,208)  $   (994,448)  $   (453,921)
  Adjustments
    Gain (Loss) on sale of computer equipment              20,730             --        (12,336)
    Depreciation                                       (1,243,039)    (2,548,774)      (611,138)
    Amortization                                          137,343         39,289          7,002
    Organizational costs                                       --        149,424         38,079
    Unearned lease income                                 (42,022)        97,584          3,506
    Other                                                 (36,052)       120,188         50,883
                                                     ------------   ------------   ------------
Taxable (loss) on the Federal Partnership return     $ (1,504,248)  $ (3,136,737)  $   (977,925)
                                                     ============   ============   ============
</TABLE>

                    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.

                                                                              23
<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV

                                                   NOTES TO FINANCIAL STATEMENTS

8.   QUARTERLY RESULTS   Summarized  quarterly financial data for the year ended
     OF OPERATION        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)                                           $   (170,391)  $     13,069   $     (8,791)  $   (175,095)
                                                     ============   ============   ============   ============
(LOSS) PER LIMITED PARTNER UNIT                      $      (0.23)  $       0.02   $      (0.01)  $      (0.23)
                                                     ============   ============   ============   ============
</TABLE>
                                                                              24
<PAGE>

                                            COMMONWEALTH INCOME & GROWTH FUND IV

                                                   NOTES TO FINANCIAL STATEMENTS

8.   QUARTERLY RESULTS   Summarized  quarterly financial data for the year ended
     OF OPERATION        December 31,  2003 is as follows:
     (UNAUDITED)

<TABLE>
<CAPTION>
                                                                           Quarter ended
                                                     ---------------------------------------------------------
                                                       March 31       June 30      September 30   December 31
                                                     ------------   ------------   ------------   ------------
<S>                                                  <C>            <C>            <C>            <C>
2003
Revenues
  Lease and other                                    $    271,842   $    318,179   $    396,443   $    691,802
  Gain on sale of computer equipment                           --             --             --            384
                                                     ------------   ------------   ------------   ------------
Total revenues                                            271,842        318,179        396,443        692,186
Total costs and expenses                                  481,373        711,654        767,544        712,527
                                                     ------------   ------------   ------------   ------------
Net (loss)                                           $   (209,531)  $   (393,475)  $   (371,101)  $    (20,341)
                                                     ============   ============   ============   ============
(Loss) per limited partner unit                      $      (0.94)  $      (0.99)  $      (0.55)  $      (0.03)
                                                     ============   ============   ============   ============
</TABLE>

                                                                              25
<PAGE>


                                   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 March 30, 2005 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, President

        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 March 30, 2005:

SIGNATURE                                            CAPACITY
-----------------------------       --------------------------------------------
/s/ GEORGE S. SPRINGSTEEN           Chairman, President and Sole Director of
-----------------------------       Commonwealth Income & Growth Fund, Inc.
George S. Springsteen

/s/ KIMBERLY A. SPRINGSTEEN         Executive Vice President Chief Operating
-----------------------------       Officer and Secretary
Kimberly A. Springsteen