UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934
                                   For the quarterly period ended March 31, 2006
                                       OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                                               Commission File Number: 333-11625

       CAPITAL ALLIANCE INCOME TRUST LTD., A REAL ESTATE INVESTMENT TRUST
       ------------------------------------------------------------------

              (Exact name of small business issuer in its charter)

           Delaware                                             94-3240473
------------------------------------------                ----------------------
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                           Identification Number)

   100 Pine Street
   Suite 2450
   San Francisco, California                                      94111
------------------------------------------                ----------------------
   (Address of principal executive office)                      (zip code)

                                 (415) 288-9575
--------------------------------------------------------------------------------
                           (Issuer's telephone number)

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

     Title of each class               Name of each exchange on which registered
     -------------------               -----------------------------------------
Common Stock $0.01 par value                    American Stock Exchange

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes   X          No
    -----          -----

As of June 1, 2006, the issuer's common shares closed at $7.79 and the aggregate
market value of the issuer's shares of Common Stock, $.01 par value, held by
non-affiliates of the issuer was approximately $2,181,200. At that date
approximately 381,000 common shares were outstanding and 280,000 common shares
were held by non-affiliates.

Transitional Small Business Disclosure Format.    Yes              No  X
                                                     -----           -----
<PAGE>

                                TABLE OF CONTENTS



PART I

     ITEM 1     CONSOLIDATED FINANCIAL STATEMENTS                          3-5

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                6-10

     ITEM 2     MANAGEMENT'S DISCUSSION AND ANALYSIS                     11-15

     ITEM 3     CONTROLS AND PROCEDURES                                     15

PART II

     OTHER INFORMATION                                                   16-17

     SIGNATURES                                                             18

     CERTIFICATION PURSUANT TO THE SARBANES-OXLEY ACT                       19

     CERTIFICATION OF FORM 10-QSB                                           20




                                     PART I
                                     ITEM 1.


                              FINANCIAL STATEMENTS

                                   [Pages 3-5]




                                       2
<PAGE>
                      CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST
                           Consolidated Balance Sheet

<TABLE>
<CAPTION>
                                                                        March 31,      December 31,
                                                                          2006             2005
                                                                          ----             ----
                                                                       (Unaudited)
<S>                                                                   <C>             <C>
ASSETS
    Cash and cash equivalents                                         $  2,149,527    $  1,626,247
    Restricted cash                                                        435,296         280,923
    Marketable securities                                                   20,062          19,577
    Accounts receivable                                                  1,306,238         715,742
    Other assets, net                                                      108,299          91,267
    Due from related party                                                  73,119           2,244
    Notes receivable:
       Mortgage notes receivable                                        22,331,518      26,443,616
       Allowance for loan losses                                          (405,000)       (390,000)
                                                                      ------------    ------------
          Net notes receivable                                          21,926,518      26,053,616
    Real estate owned                                                    1,738,500       1,978,350
    Investments in related party                                             5,000           5,000
    Origination costs, net                                                 145,487         183,900
                                                                      ------------    ------------

    Total assets                                                      $ 27,908,046    $ 30,956,866
                                                                      ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY

    Liabilities
         Mortgage note holdbacks                                      $    435,296    $    280,923
         Bank loans payable                                              7,705,836      10,474,997
         Warehousing facilities                                          4,651,546       4,842,646
         Warehousing facilities from related party                         950,000         950,000
         Mortgage payable                                                  962,127         962,127
         Due to related party                                              497,962         343,326
         Other liabilities                                                 290,925         169,854
                                                                      ------------    ------------
    Total liabilities                                                   15,493,692      18,023,873

    Commitments and contingent liabilities

    Stockholders' equity
       Preferred stock, $.01 par value;1,600,000 shares authorized;          2,138           2,138
           213,820 shares issued and outstanding at March 31, 2006
           and December 31, 2005
       Additional paid in capital - preferred stock                      5,509,728       5,509,728
    Less treasury stock: 12,659 and 4,139 preferred shares at
           March 31, 2006 and December 31, 2005 at cost                   (186,579)       (101,389)
       Common stock, $.01 par value; 2,000,000 shares authorized;            5,001           5,001
           500,032 shares issued and outstanding at March 31, 2006
           and December 31, 2005
       Additional paid in capital - common stock                         9,370,911       9,370,911
    Less treasury stock: 119, 500 and 110,000 common shares at
           March 31, 2006 and December 31, 2005 at cost                 (1,699,771)     (1,630,734)
       Accumulated other comprehensive income                              (12,608)        (25,686)
       Accumulated deficit                                                (574,466)       (196,976)
                                                                      ------------    ------------
    Total stockholders' equity                                          12,414,354      12,932,993
                                                                      ------------    ------------
    Total liabilities and stockholders' equity                        $ 27,908,046    $ 30,956,866
                                                                      ============    ============
</TABLE>

                See accompanying notes to financial statements.

                                       3
<PAGE>
                      CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST
                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                                          Three Months Ended
                                                                                                March 31
                                                                                           2006         2005
                                                                                           -----        ----
<S>                                                                                     <C>          <C>
REVENUES
       Interest income                                                                  $ 636,274    $ 608,274
       Loan origination income                                                            131,678      180,661
       Service release premium                                                             85,144       40,551
       Other income                                                                         7,311       17,353
                                                                                        ---------    ---------
           Total revenues                                                                 860,407      846,839

EXPENSES
       Loan servicing fees to related parties                                             139,502      121,983
       Management fees to related parties                                                  81,356       86,453
       Interest expense on loans                                                          299,383      210,422
       Interest expense on loans from related parties                                      30,402          ---
       Loan origination costs                                                              62,931       39,139
       Provision for loan losses                                                           20,000       17,891
       Wages and salaries                                                                 152,643      143,042
       Taxes                                                                                4,975       10,873
       Amortization                                                                         5,550        8,241
       General and administrative                                                         156,693      160,095
                                                                                        ---------    ---------
             Total expenses                                                               953,435      798,139
                                                                                        ---------    ---------

INCOME (LOSS) FROM CONTINUING OPERATIONS                                                  (93,028)      48,700

       Operating expenses of real estate owned                                            (44,614)     (11,785)
       Gain (loss) on real estate owned                                                  (239,850)     (20,000)
       Loss from asset held for disposal                                                      ---          440
                                                                                        ---------    ---------
             Total loss and income from asset held for disposal and real estate owned    (284,464)     (31,345)
                                                                                        ---------    ---------

NET INCOME (LOSS)                                                                       $(377,492)   $  17,355
                                                                                        =========    =========

PREFERRED DIVIDENDS                                                                           -         93,077
                                                                                        ---------    ---------

NET INCOME  (LOSS) AVAILABLE TO COMMON                                                  $(377,492)   $ (75,722)
                                                                                        =========    =========

BASIC EARNINGS PER COMMON SHARE                                                         $   (0.98)   $   (0.17)
                                                                                        =========    =========

DILUTED EARNINGS PER COMMON SHARE                                                       $   (0.98)   $   (0.17)
                                                                                        =========    =========

DIVIDENDS PAID PER PREFERRED SHARE                                                      $     -      $    0.44
                                                                                        =========    =========

DIVIDENDS PAID PER COMMON SHARE                                                         $     -      $    0.10
                                                                                        =========    =========

BASIC COMMON SHARES                                                                       384,215      438,343
                                                                                        =========    =========

DILUTED COMMON SHARES                                                                     384,215      476,743
                                                                                        =========    =========
</TABLE>

                See accompanying notes to financial statements.

                                        4
<PAGE>
                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A REAL ESTATE INVESTMENT TRUST
                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                              Three Months Ended
                                                                                   March 31
                                                                              2006           2005
                                                                              ----           ----
<S>                                                                      <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
      Net Income (Loss)                                                  $  (377,490)   $    17,355
      Adjustments to reconcile net income (loss) to net cash (used in)
        provided by operating activities:
        Provision for loan losses (net)                                       15,000         10,000
        Amortization                                                             ---          8,241
        Loss on real estate owned                                            239,850         20,000
        (Increase) decrease in accounts receivable                          (590,496)      (340,097)
        (Increase) in other assets                                            (3,954)       (15,656)
        Change in due to / due from related party                             83,761         47,445
        Increase (decrease) in other liabilities                             121,071        151,221
                                                                         -----------    -----------
          Net cash (used in) provided by operating activities               (512,258)      (101,491)

CASH FLOWS FROM INVESTING ACTIVITIES
      Sale of (investment in) marketable securities                             (485)       (18,620)
      (Increase) decrease of investment in related party                         ---            ---
      (Increase) decrease in origination costs                                38,413          6,947
      (Increase) decrease in warehousing facilities                         (191,100)           ---
      (Increase) decrease in warehousing facilities to related party             ---        402,846
      (Loss) from asset held for sale                                            ---         17,712
      (Increase) decrease in net mortgage notes receivable                 4,112,098       (833,485)
                                                                         -----------    -----------
        Net cash (used in) provided by investing activities                3,958,926       (424,600)

CASH FLOWS FROM FINANCING ACTIVITIES
      Net proceeds from bank loans                                               ---       1,029,000
      Payments of bank loans                                              (2,769,161)            ---
      Purchase of treasury stock                                            (154,227)      (197,104)
      Preferred dividends paid                                                   ---        (93,077)
      Common dividends paid                                                      ---        (43,774)
                                                                         -----------    -----------
        Net cash provided by (used in) by financing activities            (2,923,388)       695,045
                                                                         -----------    -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                    523,280        168,954

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                           1,626,247        155,462
                                                                         -----------    -----------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                               $ 2,149,527    $   324,416
                                                                         ===========    ===========

SUPPLEMENTAL CASH FLOW INFORMATION:
      Cash paid for interest                                             $    25,072    $       ---
                                                                         ===========    ===========
      Cash paid for taxes                                                $     5,624    $       ---
                                                                         ===========    ===========
</TABLE>

                See accompanying notes to financial statements.

                                       5
<PAGE>
                          CAPITAL ALLIANCE INCOME TRUST
                         A REAL ESTATE INVESTMENT TRUST

                   Notes to Consolidated Financial Statements
                                   (Unaudited)

1.   Organization
     ------------

     References to the "Company" refer to Capital Alliance Income Trust Ltd., A
     Real Estate Investment Trust (the "Trust"), a Delaware corporation, and
     Capital Alliance Funding Corporation ("CAFC"), collectively. The Trust was
     formed December 12, 1995 as a mortgage investment trust, which invests
     primarily in loans secured by deeds of trust on one-to-four unit
     residential properties as the loan's primary collateral. On April 11, 1997
     the Trust formed a non-qualified REIT subsidiary, CAFC, to conduct a
     mortgage banking business.


     Capital Alliance Advisors, Inc. (the "Manager") originates, services, and
     sells the Company's loans.

2.   Summary of significant accounting policies and nature of operations
     -------------------------------------------------------------------

     These financial statements should be read in conjunction with the financial
     statements and notes thereto for the year ended December 31, 2005 filed
     pursuant to 15d-2 on Form 10-KSB with the Securities and Exchange
     Commission.

     Basis of presentation. The financial information herein is unaudited;
     however, such information reflects all adjustments (consisting of normal,
     recurring adjustments) which are, in the opinion of management, necessary
     for a fair statement of results for the interim period. The results of
     operations for the three months ended March 31, 2006, are not necessarily
     indicative of the results to be expected for the full year. These financial
     statements should be read in conjunction with the Company's audited
     financial statements and the notes thereto included in the Company's Form
     10-KSB filed for the year ending December 31, 2005.

     Income taxes. The Trust intends at all times to qualify as a real estate
     investment trust ("REIT") for federal income tax purposes, under Sections
     856 through 860 of the Internal Revenue Code of 1986, as amended and
     applicable Treasury Regulations. Therefore, the Trust generally will not be
     subject to federal corporate income taxes if the Trust distributes at least
     90% of its taxable income to its stockholders. To qualify as a REIT, the
     Trust must elect to be so treated and must meet on a continuing basis
     certain requirements relating to the Trust's organization, sources of
     income, nature of assets, and distribution of income to stockholders. The
     Trust must maintain certain records and request certain information from
     its stockholders designed to disclose actual ownership of its stock.

     In addition the Trust must satisfy certain gross income requirements
     annually and certain asset tests at the close of each quarter of its
     taxable year. If the Trust fails to qualify for taxation as a REIT in any
     taxable year, and the relief provisions do not apply, the Trust will be
     subject to tax on its taxable income at regular corporate rates.
     Distributions to stockholders in any year in which the Trust fails to
     qualify will not be deductible by the Trust nor will they be required to be
     made. Unless entitled to relief under specific statutory provisions, the
     Trust will also be disqualified from taxation as a REIT for the four
     taxable years following the year during which qualification was lost. Based
     on the Trust's belief that it has operated in a manner so as to allow it to
     be taxed as a REIT since inception, no provision for federal income taxes
     has been made in the financial statements.

     Revenue recognition. Interest income is recorded on the accrual basis of
     accounting in accordance with the terms of the loans. When the payment of
     principal or interest is 90 or more days past due, management reviews the
     likelihood that the loan will be repaid. For these delinquent loans,
     management continues to record interest income and establishes a loan loss
     reserve as necessary to protect against losses in the loan portfolio
     including accrued interest. However, if the mortgage's collateral is
     considered insufficient to satisfy the outstanding balance, after estimated
     foreclosure and selling costs, interest is not accrued. The Trust's loan
     origination income is deferred and recognized over the life of the loan.
     The Trust's loan origination income is recognized at origination. The
     Trust's service release premium is recognized at the time of the mortgage's
     sale into the secondary market.

                                       6
<PAGE>
                          CAPITAL ALLIANCE INCOME TRUST
                         A REAL ESTATE INVESTMENT TRUST

                   Notes to Consolidated Financial Statements
                                   (Unaudited)

2.   Summary of significant accounting policies and nature of operations
     -------------------------------------------------------------------
     (continued)
     -----------

     Stock options. During the three months ended March 31, 2006 and the twelve
     months ended December 31, 2005 no awards were issued to the Manager or its
     employees. Therefore, there was no disclosure necessary pursuant to FASB
     Statement No. 123 (revised 2004) ("FAS 123(R)"), "Share-Based Payment,"
     which is a revision of FASB Statement No. 123 ("FAS 123"), "Accounting for
     Stock-Based Compensation."

     Reclassifications. Certain 2005 amounts may have been reclassified to
     conform to the 2006 presentation. Such reclassifications had no effect on
     previously reported net income or earnings per share.

     Recent accounting pronouncements. In March 2005, the FASB issued FASB
     Interpretation No.47, "Accounting for Conditional Asset Retirement
     Obligations" ("FIN 47"). FIN 47 clarifies the term conditional asset
     retirement obligations as used in FASB Statement No. 143, "Accounting for
     Asset Retirement Obligations". The Company's adoption of FIN 47 did not
     have a material impact on the consolidated financial statements.

         In May 2005, the FASB issued FASB No.154, "Accounting Changes and Error
     Corrections" ("FAS154"), which replaces APB Opinion No.20, "Accounting
     Changes" and FASB No.3 "Reporting Accounting Changes in Interim Financials
     Statements". This Standard retained accounting guidance related to changes
     in estimates, changes in reporting entity and error corrections. However,
     changes in accounting principles must be accounted for retrospectively by
     modifying the financial statements of prior periods unless it is
     impracticable to do so. FAS 154 is effective for accounting changes made in
     fiscal years beginning after December 15, 2005. The Company does not
     believe adoption of FAS 154 will have a material impact on its financial
     condition or results of operations.

3.   Mortgage notes receivable
     -------------------------

     Reconciliation of the mortgage notes receivable balances follows:

<TABLE>
<CAPTION>
                                              Three months ended    Twelve months ended
                                              ------------------    -------------------
                                               March 31, 2006       December 31, 2005
                                               --------------       -----------------
<S>                                             <C>                     <C>
     Balance, beginning of period               $ 26,443,616            $ 19,053,474
     Additions during period:
         Originations                             19,317,620              65,213,362
         CAFC adjustment                                 ---               4,674,462
     Deductions during period:
         Collections of principal                (6,972,235)            (14,207,241)
         Repayments                                  (6,074)             (3,302,412)
         Sales                                  (16,451,409)            (44,253,688)
         Foreclosures, net of reserve                    ---               (734,341)
         Write off of uncollectible loans                ---                    ---
                                                ------------            ------------

     Balance, end of period                     $ 22,331,518            $ 26,443,616
                                                ============            ============
</TABLE>

     Mortgage notes receivable are stated at the principal outstanding. Interest
     on the mortgages is due monthly and principal is usually due as a balloon
     payment at loan maturity.


                                       7
<PAGE>
                          CAPITAL ALLIANCE INCOME TRUST
                         A REAL ESTATE INVESTMENT TRUST

                   Notes to Consolidated Financial Statements
                                   (Unaudited)

4.   Allowance for loan losses
     -------------------------

     The allowance for loan losses is based on the fair value of the related
     collateral, since all loans subject to this measurement are collateral
     dependent. Management believes a $405,000 and $390,000 allowance for loan
     losses are adequate to protect against potential losses inherent in all
     receivables as of March 31, 2006 and December 31, 2005, respectively.
     Actual losses may differ from the estimate.

     A reconciliation of the allowance for loan losses follows:

<TABLE>
<CAPTION>
                                                 Three months ended     Twelve months ended
                                                   March 31, 2006        December 31, 2005
                                                   --------------        -----------------
<S>                                                 <C>                     <C>
     Balance, beginning of period                   $  390,000              $  175,000
     CAFC adjustment                                       ---                  40,000
     Provision for loan loss                            20,000                 469,483
     Write off of uncollectible loans                   (5,000)               (294,483)
     Disposal costs of uncollectible loans
                                                    ----------              ----------
                                                           ---                     ---
     Balance, end of period                         $  405,000              $  390,000
                                                    ==========              ==========
</TABLE>


5.   Real estate owned
     -----------------

     As of December 31, 2005, the Company owned one property. During the three
     months ended March 31, 2006, the company neither foreclosed on nor sold any
     property. As of March 31, 2006, the Trust had one property.

     A reconciliation of the real estate owned account shows its cash and
     non-cash activities follows:

<TABLE>
<CAPTION>
                                                            Three months ended     Twelve months ended
                                                              March 31, 2006        December 31, 2005
                                                              --------------        -----------------
<S>                                                            <C>                     <C>
     Balance, beginning of period                              $  1,978,350            $    680,000
     Additions
     Foreclosed mortgage notes, net of reserve (non-cash)               ---                 988,758
     Assumption of senior debt                                          ---                 962,127
     Repayment of senior debt                                           ---                (551,992)
     Accrued interest capitalized (non-cash)                            ---                     ---
     Gain (loss) on sale or writedown (non-cash)                   (239,850)                (54,669)
                                                               ------------            ------------
                                                                  1,738,500               2,024,294
     Less: Proceeds from sale of real estate owned
     (net of closing costs )                                                                (45,944)
                                                               ------------            ------------
                                                                        ---
     Balance, end of period                                    $  1,738,500            $  1,978,350
                                                               ============            ============
</TABLE>

6.   Related party transactions
     --------------------------

     The Manager, which is owned by several of the directors and their
     affiliates, contracted with the Trust to provide management and advisory
     services and receives fees for these services from the Trust. The Manager
     is also entitled to reimbursement by the Trust for direct expenses and
     administrative services at cost and for clerical and administrative
     services based on relative utilization of facilities and personnel. The
     Manager is also reimbursed by the Trust for direct expenses and
     administrative services.

     The Manager receives a management fee equal to one-twelfth (1/12) of 1%
     annually of the book value of mortgages, mortgage-related investments and
     real property ("Gross Mortgage Assets") of the Trust plus one-twelfth
     (1/12) of one-half percent (1/2%) of the book value of the non-mortgage
     assets of the Trust computed at the end of each month. The management fee
     also includes reimbursement for the direct costs of overseeing the
     administration and disposition of real estate owned by the Company. The
     Trust paid the Manager $51,636 and $58,180 in

                                       8
<PAGE>
                          CAPITAL ALLIANCE INCOME TRUST
                         A REAL ESTATE INVESTMENT TRUST

                   Notes to Consolidated Financial Statements
                                   (Unaudited)

6.   Related party transactions (continued)
     --------------------------------------

     management fees for the three month period ended March 31, 2006 and 2005,
     respectively. Within the financial statements, the management fees are
     included in the Management fees to related parties.

     The Manager also earns a REO management fee for managing and servicing the
     properties that the Company has obtained through foreclosure of mortgage
     notes held. The fee for these services is $500 per month for each property.
     The Trust paid the Manager $1,500 and $1,500 in REO management fees for the
     three month period ended March 31, 2006 and 2005, respectively. Within the
     financial statements, REO management fees are included in the Management
     fees to related parties.

     The Manager earns an administrative fee up to 25 basis points on mortgages
     funded for the benefit of the Trust. The Trust expensed $28,220 and $26,773
     for theses costs as of March 31, 2006 and March 31, 2005, respectively.
     These fees are reported as part of the management fees.

     The Manager's incentive compensation for each fiscal quarter, equals 25% of
     the net income of the Trust in excess of an annualized return on common
     equity for such quarter equal to the ten year U.S. Treasury Rate plus
     2.00%, provided that the payment of such incentive compensation does not
     reduce the Trust's annualized return on common equity for such quarter to
     less than the ten year U.S. Treasury Rate after the preferred dividend has
     been paid. The incentive compensation for the three month period ended
     March 31, 2006 and 2005 was $0 and $0, respectively. Within the financial
     statements, incentive compensation awards are included in the Management
     fees to related parties.

     The Manager receives a loan origination and servicing fee equal to
     one-twelfth (1/12) of 2% annually of the Gross Mortgage Assets of the Trust
     computed at the end of each month. During 2005, the Trust capitalized 32.5%
     of this fee as loan origination costs and amortized them over the average
     life of the portfolio. The remaining 67.5% of the fee is expensed as the
     portion attributed for servicing. As of March 31, 2006, the Trust
     capitalized 32.5% of this fee as origination costs and amortized them over
     the average life of the portfolio. The remaining 67.5% of the fee was
     expensed as the portion attributed for servicing. For the three month
     period ended March 31, 2006 and 2005, the Trust expensed loan origination
     and servicing fees of $139,502and $121,983, respectively.

     On occasion, the Company and its affiliates had related receivables and
     payables arising from ordinary business transactions. As of March 31, 2006,
     the Company had a net payable of $22,728 from the Manager, and a net
     payable of $412,115 from CRF. As of December 31, 2005, the company had a
     payable of $6,859 to the Manager and $336,465 to CRF. No interest is
     charged on these inter-company accounts.

7.   Preferred, common and treasury stock
     ------------------------------------

     The Preferred Shareholders are entitled to a dividend preference in an
     amount equal to an annualized return on the adjusted net capital
     contribution of Preferred Shares at each dividend record date during such
     year (or, if the Directors do not set a record date, as of the first day of
     the month). The annualized return is the lesser of: (a) 10.25%, (b) 1.50 %
     over the Prime Rate (determined on a not less than quarterly basis) or (c)
     the rate set by the Board of Directors. The preferred dividend preference
     is non-cumulative. After declaring dividends for a given year to the
     Preferred Shareholders in the amount of the dividend preference, no further
     dividends may be declared on the Preferred Shares for the subject year,
     until the dividends declared on each Common Share for that year equals the
     dividend preference for each Preferred Share for such year. Any additional
     dividends generally will be allocated such that the amounts of dividends
     per share to the Preferred Shareholders and Common Shareholders for the
     subject year are equal. The Preferred Shareholder's additional dividends,
     if any, are non-cumulative.

     Preferred Shareholders are entitled to receive all liquidating
     distributions until they have received an amount equal to their aggregate
     adjusted net capital contribution. Thereafter, Common Shareholders are
     entitled to all liquidation distributions until the aggregate adjusted net
     capital contributions of all Common Shares has been reduced to zero.

                                       9
<PAGE>
                         CAPITAL ALLIANCE INCOME TRUST
                         A REAL ESTATE INVESTMENT TRUST

                   Notes to Consolidated Financial Statements
                                   (Unaudited)

7.   Preferred, common and treasury stock (continued)
     ------------------------------------------------

     Any subsequent liquidating distributions will be allocated among Common
     Shareholders and Preferred Shareholders pro rata.

     The Preferred Shares are redeemable by a shareholder, subject to the
     consent of the Board of Directors, annually on June 30 ("Redemption Date")
     for written redemption requests received by May 15 of such year. Preferred
     Shares requesting redemption shall cease to be entitled to distribution,
     voting rights and other benefits as of May 30 prior to the Redemption Date.
     However, if the Board of Directors postpones or delays action on Preferred
     Shares redemption request beyond June 30, the date for the suspension of
     such shareholders rights and benefits shall be delayed proportionately. The
     Board of Directors may in its sole discretion deny, delay, postpone or
     consent to any or all requests for redemption. The redemption amount to be
     paid for redemption of such Preferred Shares is the adjusted net capital
     contribution plus unpaid declared and accrued dividends, divided by the
     aggregate net capital contributions plus declared and accrued but unpaid
     dividends attributable to all Preferred Shares outstanding, multiplied by
     the net asset value of the Trust attributable to the Preferred Shares which
     shall be that percentage of the Trust's net asset value that the aggregate
     adjusted net capital contributions of all Preferred Shares bears to the
     adjusted net capital contributions of all Shares outstanding.

     The Trust has the power to redeem or prohibit the transfer of a sufficient
     number of Common and/or Preferred Shares or the exercise of warrants and/or
     options and to prohibit the transfer of shares to persons that would result
     in a violation of the Trust's shareholding requirements. The Bylaws provide
     that only with the explicit approval of the Trust's Board of Directors may
     a shareholder own more than 9.8% of the total outstanding shares.


8.   Earnings per share
     ------------------

     The following table represents a reconciliation of the numerators and
     denominators of the basic and diluted earnings per common share for the
     three months ended March 31, 2006 and 2005:

                                                         2006             2005
                                                         ----             ----
     Numerator:
     Net income (loss)                               $ (377,492)       $ 17,355

     Preferred dividends                                    ---         (93,077)
                                                            ---        --------
     Numerator for basic and diluted earnings per
     share income (loss) available to common         $ (377,492)       $ 75,722
                                                     ==========        ========
     Denominator:
         Basic weighted average shares                  384,215         438,343

         Dilutive effect of options                         ---             ---
                                                            ---             ---
         Diluted weighted average shares                384,215         438,343
                                                     ==========         =======
     Basic earnings per common share                 $(0.98)            $(0.17)
                                                     =======            =======
     Diluted earnings per common share               $(0.98)            $(0.17)
                                                     =======            =======


                                       10
<PAGE>
                                     PART I
                                     ITEM 2.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OR
                                PLAN OF OPERATION


Certain statements contained herein are not based on historical information and
certain statements contained in future filings by the Trust with the SEC, in the
Trust's press releases or in the Trust's public and stockholder communications
may not be based on historical facts and are "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements may be identified by reference to a future period or
periods, or by the use of forward-looking terms such as "may", "will", "expect",
"anticipate", or similar terms. Actual results could materially differ from
those in the forward-looking statements due to a variety of factors.

Preparation of the Company's consolidated financial statements is based upon the
operating results of the Trust and CAFC. Management's discussion and analysis of
the results of operations for the three months ended March 31, 2006 and 2005
follows:

OVERVIEW

 In May of 1997, the Trust registered its common shares with the Securities and
Exchange Commission under the Securities Act of 1933. On September 30, 1998, the
initial public offering of Common Shares was completed. Since October 1, 1998,
the common shares have been listed on the American Stock Exchange with the
exchange symbol of "CAA".

Prior to year end 2004, Management identified CAFC as an asset held for sale
within the meaning of Financial Accounting Standard No.144 ("FAS 144"). On
November 11, 2004, CAFC's common shareholder notified the Trust of its intention
to retire 100% of CAFC's preferred stock. Subsequently, the offer to purchase
CAFC's preferred shares was withdrawn and CAFC's common shares were acquired by
the Trust on December 30, 2005. During the first quarter of 2006, the Trust
announced its intent to cease mortgage loan originations by CAFC and to monetize
CAFC's loan inventory. Any loans not sold will into the secondary mortgage
market will be transferred to the Trust or sold to an affiliated company at
their estimated fair market value.

Management believes that discontinuing CAFC's operations will provide numerous
benefits. These benefits include: restoring the Trust to its original intent as
an investor in non-conforming mortgages; reducing a source of volatility in the
Trust's reported net income; reducing the cost of annual audits and quarterly
reviews; reducing the costs of Sarbanes Oxley compliance; reducing the number of
related party transactions; simplifying the process of cost allocation; and
accelerating the compilation and reporting of operating results. The costs of
disposing of the Trust's investment in CAFC include: the loss of CAFC's
potential profitability; less control over the mortgage investment supply chain;
and potential restrictions on the Trust's access to CAFC's funding agreement.

The recent interest rate environment has profoundly reduced the profitability of
CAIT. The rise in short term rates has continued to increase the cost of
carrying a mortgage portfolio. Additionally, the non-conforming residential
mortgage market has continued to attract better financed competitors willing to
offer higher LTV (loan-to-value) loans or more competitive pricing. These
developments have exerted downward pressure on CAIT's investment yield and
investment spread. Management is addressing this deterioration in yield and
spread by emphasizing our ability to timely close transactions in order to
deflect price competition and by continuing to seek more competitive portfolio
financing.

CRITICAL ACCOUNTING POLICIES

The accounting and reporting policies of the Company are in accordance with
accounting principles generally accepted in the United States of America. The
Company's significant accounting policies are described in the notes to the
consolidated financial statements. Certain accounting policies require
management to make significant estimates and assumptions, which have a material
impact on the carrying value of certain assets and liabilities, and the Company
considers these to be critical accounting policies. The estimates and
assumptions used are based on historical experience and other factors, which
management believes to be reasonable under the circumstances. Actual results
could differ significantly from these estimates and assumptions, which could
have a material impact on the carrying value of assets and liabilities at the
balance sheet dates and results of operations for the reporting periods.

                                       11
<PAGE>
The following are critical accounting policies that require the most significant
estimates and assumptions that are particularly susceptible to a significant
change in the preparation of the financial statements and are not presented in
their relative order of importance.

Revenue recognition. Interest income accrues as it is earned. Loans may be
placed on a nonaccrual status when any portion of the principal or interest is
three scheduled payments past due or earlier when concern exists as to the
ultimate collectibility of principal or interest. Nonaccrual status loans are
returned to an accrual status when principal and interest become current and are
anticipated to be fully collectible.

Allowance for loan losses. A provision for loan losses in based on management's
evaluation of an amount that is adequate to absorb losses inherent in the
existing loan portfolio. The evaluation, which includes a review of all loans on
which full collection may not be reasonably assumed, considers among other
matters, general economic conditions, the fair market value or the estimated net
realizable value of the underlying collateral, past loan loss experience, trends
in loan delinquency and other factors that warrant recognition in providing for
an adequate loan loss allowance.

Real estate owned. Real estate owned represents property acquired in foreclosure
of mortgage notes receivable. The real estate is carried at the lower of the
value of the mortgage note receivable less selling costs on the real estate or
fair market value. Certain estimates and assumptions are required in determining
the cost to sell or in estimating the fair market value of the real estate.

Stock option. The Trust has issued stock options to certain employees of the
Manager and to its Directors. The stock options issued are accounted for using
the intrinsic-value method. Because the options were issued with exercise prices
no less than the market price of the Trust's common stock on the dates of grant
and because other key terms are fixed, use of the intrinsic-value method results
in the Trust not recognizing compensation expense for these options. If the
terms of these options were changed, variable accounting might need to be used,
and the Trust might then need to begin recognizing compensation expense for the
options.

Assets held for disposal. CAFC is identified as an asset held for disposal.
Substantial disposal of CAFC's assets is expected during the second quarter of
2006. CAFC's assets, primarily mortgage notes receivable, are to be monetized,
transferred to the trust or sold to an affiliate company at their fair market
value.

Operating Strategy.
-------------------

As a portfolio lender the company will primarily invest in California
non-conforming mortgage loans on one-to-four unit residential properties
primarily secured by first and second deeds of trust. Management believes that
this segment of the mortgage market is inadequately served and that there is a
large demand for non-conforming mortgage loans with a complete spectrum of
credit grades. Portfolio loan underwriting guidelines limit the maximum
potential loan-to-value ("LTV") to 75%. The 75% restriction includes the effect
of any potential negative amortization.

CAFC's operations were discontinued in the first quarter of 2006. Substantial
disposal of CAFC's assets is expected in the first half of 2006.

Loan Origination and Loan Servicing. Since the discontinuance of loan
originations by CAFC, the Manager is originating portfolio loans for the Company
in the name of Capital Alliance Income Trust. The Manager is also originating
sellable loans through CAFC for its own account (at the Manager's own expense
and for the Manager's own benefit), until the Manager secures licenses, permits
and warehouse facilities in its name to conduct a mortgage banking operation.
The Manager intends to indemnify the Company from any liabilities that may arise
from its mortgage banking operations conducted through CAFC.

Mortgage loan origination consists of establishing a relationship with a
borrower or his broker, obtaining and reviewing documentation concerning the
credit rating and net worth of borrowers, inspecting and appraising properties
that are proposed as the collateral for a home equity loan, processing such
information and underwriting and funding the mortgage loan .

Mortgage loan servicing consists of collecting payments from borrowers, making
required advances, accounting for principal and interest payments, holding
borrowed proceeds in escrow until fulfillment of mortgage loan requirements,
contacting delinquent borrowers, supervising foreclosures and property
dispositions in the event of unremedied defaults

                                       12
<PAGE>
and performing other administrative duties. The Company does not acquire or
maintain a loan's servicing rights, unless the mortgage loan is owned by the
Company. All or a portion of the aforementioned servicing responsibilities may
be subcontracted by the Manager.

Commitments and Contingencies. As of March 31, 2006, the Company's loan
portfolio included 58 loans totaling $22,331,518 of which eight loans totaling
$2,644,486 representing 12% of the loan portfolio were delinquent over two
payments. In assessing the collectibility of these delinquent mortgage loans,
management has established a loan loss reserve of $405,000, if it is necessary
to foreclose upon the mortgage loans.

As of March 31, 2005, the Company's loan portfolio included 83 loans totaling
$24,213,329 of which 11 loans totaling $2,960,512 representing 12% of the loan
portfolio were delinquent over two payments. In assessing the collectibility of
these delinquent mortgage loans, management has established a loan loss reserve
of $232,891, if it is necessary to foreclose upon the mortgage loans.

In assessing the delinquent mortgage loans, management estimates a net gain will
be recognized, if it is necessary to foreclose on the delinquent mortgage loans.
Estimates are based on an anticipated sales price of the foreclosed property
that includes a discount from the latest appraised value of the property, less
the sum of pre-existing liens, costs of disposition, the face amount of the
mortgage loan and accrued interest receivable.

The Trust generally issues loan commitments only on a conditional basis and
generally funds such loans promptly upon removal of any conditions. Accordingly,
the Trust did not have any commitments to fund loans as of March 31, 2006 and
March 31, 2005.

On December 14, 2005 the Trust unconditionally guaranteed CAFC's sale of
mortgage loans to Lehman Brothers Bank. During the first quarter of 2006, two
loans for $2,500,000 were sold to Lehman Bothers Bank pursuant to this
guarantee. During 2005, no loans were sold to Lehman Brothers Bank pursuant to
this guarantee.

As of March 31. 2006, the following table summarizes the Company's outstanding
repayment obligations:

<TABLE>
<CAPTION>
     Maximum Other                                         Amount of Commitment Expiration Per Period
      Commercial                     Total     -----------------------------------------------------------------
     Commitments (a)                Amounts       Less than          1 - 3             4 - 5           After 5
  as of March 31, 2006             Committed       1 year            years             years            years
----------------------------------------------------------------------------------------------------------------
<S>                              <C>                  <C>         <C>                    <C>              <C>
Lines of Credit (b)              $12,357,382          0           $12,357,382            0                0

Standby Repurchase                   (c)              0                0                 0                0
Obligations

Total Commercial
Commitments                      $12,357,382          0           $12,357,382            0                0
</TABLE>

(a)  Commercial commitments are funding commitments that could potentially
     require registrant performance in the event of demands by third parties or
     contingent events, such as under lines of credit extended or under
     guarantees of debt.

(b)  The Mortgage Investment Business outstanding obligations as of March 31,
     2006 due in 1-3 years were $12,357,382

(c)  The Mortgage Conduit Business has an unquantified ongoing liability with
     respect to normal warranties and representations which includes fraud in
     the origination process or early default on loans sold into the secondary
     mortgage market.

RESULTS OF OPERATIONS

The historical information presented herein is not necessarily indicative of
future operations.

Three months ended March 31, 2006 and 2005. Revenues for the first quarter
increased to $860,407 as compared to $846,839 for the same period in the prior
year. The increase in revenue, during the first three months of 2006 was due to
an increase in interest income of $28,000 and service release premium of
$44,597.

                                       13
<PAGE>
Expenses for the three months ended March 31, 2006 increased to $953,435 as
compared to $798,139 for the same period in the prior year. The increase in
expenses during the first three months of 2006 was primarily due to increased
interest expenses of $119,363 and increased loan origination costs of $23,792.

LIQUIDITY AND CAPITAL RESOURCES

The Company has access to a $25,000,000 funding facility. The funding facility
matures on June 30, 2007. The Trust has a $7,000,000 term facility scheduled to
mature November 14, 2007. The term facility has a one year extension option.
Management believes that the cash flow from operations, the payment of mortgage
notes receivable, existing financing facilities, additional lines of credit or
increased lines of credit anticipated to be acquired during 2006, and if
necessary, the limited sale of investment mortgages will be sufficient to meet
the liquidity needs of the Company for the next twelve months.

Three months ended March 31, 2006 and 2005. As of January 1, 2006 and 2005, the
Trust had $1,626,247 and $155,462 of cash and cash equivalents, respectively.
During the three month period ended March 31, 2006, cash and cash equivalents
increased by $523,280. During the three month period ended March 31, 2005, cash
and cash equivalents increased by $168,954, respectively. After taking into
effect the various transactions discussed below, cash and cash equivalents at
March 31, 2006 and 2005 were $2,149,527 and $324,416.

The following summarizes the changes in net cash provided by operating
activities, net cash used for investing activities, and net cash provided by
financing activities.

Net cash used in operating activities during the three months ended March 31,
2006 and 2005 was $752,108 and $101,491, respectively. During the first three
months of 2006, net income used $377,490, an increase in accounts receivable
used $590,496, and an increase in other liabilities provided 121,071. During the
first three months of 2005, net income provided $17,355, an increase in accounts
receivable used $340,097, and an increase in other liabilities provided
$151,221.

Net cash provided by and used in investing activities for the three months ended
March 31, 2006 and 2005 was $4,198,776 and $424,600, respectively. During the
first three months of 2005, a net decrease in mortgage notes receivable provided
$4,112,098. During the first three months of 2005, a net increase in mortgage
notes receivable used $833,485.

Net cash used in and provided by financing activities during the three months
ended March 31, 2006 and 2005 was $2,923,388 and $695,045, respectively. During
the first three months of 2006, net payments of bank loans used cash of
$2,769,161 while treasury stock purchases reduced cash by $154,227. During the
first three months of 2005, borrowings provided cash of $1,029,000 while
dividends reduced cash by $136,851 and treasury stock purchases reduced cash by
$197,104.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Market risk. Market risk is the exposure to loss resulting from changes in
interest rates, credit spreads, foreign exchange rates, commodity prices, and
equity prices. The primary market risks to which the Company is exposed are
interest rate risk and credit risk.

Interest risk. Interest rate risk is highly sensitive to many factors, including
governmental, monetary and tax policies, domestic and international economic and
political considerations and other factors beyond the control of the Company.
Changes in the general level of the U.S. Treasury yield curve can have
significant effects on the market value of the Company's portfolio. The majority
of the Company's assets are fixed-rate loans with a spread to U.S. Treasuries.
The Trust's loans are valued on the March 31, 2006 and December 31, 2005 balance
sheet at the lower of cost or market.

As U.S. Treasury securities are priced to a lower yield and/or the spread to
U.S. Treasuries used to price the Company's assets are decreased, the market
value of the Company's portfolio may increase. Conversely, as U.S. Treasury
securities are priced to a higher yield and/or the spread to U.S. Treasuries
used to price the Company's assets is increased, the market value of the
Company's portfolio may decline. Changes in the level of the U.S. Treasury yield
curve can also affect, among other things, the prepayment assumptions used to
value certain of the Trust's loans. In addition, changes in the general level of
the United States Prime Rate or one month LIBOR can affect the Trust's net
interest income. The

                                       14
<PAGE>
Company's borrowings are floating rate based on a spread over the daily Prime
Rate or one month LIBOR. As these rates increases or decreases, the Company's
interest expense will move in the same direction.

On account of the relatively short adjusted weighted average maturity of the
Company's portfolio loans (26 months), a variety of financial instruments
available to limit the effects of interest rate fluctuations on its operations
have not been utilized. The use of these types of derivatives (such as interest
rate swaps, caps, floors and other interest rate exchange contracts) to hedge
interest-earnings assets and/or interest-bearing liabilities carry risks,
including the risk that the net losses on a hedge position may exceed the amount
invested in such instruments. As the level of variable rate mortgage financing
of the portfolio increases or the weighted average maturity of the portfolio
increases, the Trust may utilize a variety of financial instruments to limit the
effects of interest rate fluctuations.

Credit risk. Credit risk is the exposure to loss from loan defaults and
foreclosures. Default and foreclosure rates are subject to a wide variety of
factors, including, but not limited to, property values, supply/demand factors,
construction trends, consumer behavior, regional economics, interest rates, the
strength of the American economy and other factors beyond the control of the
Company.

All loans are subject to a certain probability of default and foreclosure. An
increase in default rates will reduce the book value of the Company's assets and
the Company's earnings and cash flow available to fund operations and pay
dividends.

The Company manages credit risk through the underwriting process, limiting loans
at the time of funding to 75% of the collateral's appraised value, establishing
loss assumptions and carefully monitoring loan performance. Nevertheless, the
Company assumes that a certain portion of its loans will default and adjusts the
allowance for loan losses based on that assumption.

Asset and liability management. Asset and liability management is concerned with
the timing and magnitude of the maturity of assets and liabilities. In general,
management's strategy is to approximately match the term of the Trust's
liabilities to the portfolio's adjusted weighted average maturity (26 months).

The majority of the Company's assets pay a fixed coupon and the income from such
assets are relatively unaffected by interest rate changes. The Company's
borrowings are currently under a variable rate line of credit that resets
monthly. Given this relationship between assets and liabilities, the Company's
interest rate sensitivity gap is highly negative. This implies that a period of
falling short term interest rates will tend to increase the Company's net
interest income, while a period of rising short term rates will tend to reduce
the Trust's net interest income.

CAFC's remaining assets are a fluctuating mix of fixed and variable rate
mortgages. At origination, the disposition of these loans is identified and
their secondary market sales pricing is usually predetermined. Given this
relationship, CAFC's interest rate sensitivity is neutral if the anticipated
secondary market purchase occurs.


                                     PART I
                                     ITEM 3.

                             CONTROLS AND PROCEDURES

(A) Evaluation of Disclosure Controls and Procedures. The Chief Executive
Officer and the Chief Financial Officer of the Trust have, based on their
evaluation of the Company's disclosure controls and procedures within 90 days of
the filing date of this report, evaluated the effectiveness of such controls and
procedures. Based on such evaluations, they have concluded that the Trust's
disclosure controls and procedures have effectively operated to ensure that all
material information relating to the Company and its operations and financial
condition has been made known to them by other officers and employees within the
Company and its Manager on a timely basis.

(B) Changes in Internal Controls. There have been no significant changes in the
Company's internal controls or in other factors that could significantly affect
those controls subsequent to the date of their evaluation. Accordingly, no
corrective actions with regard to such controls or procedures have been
required.

                                       15
<PAGE>
                                     PART II

                                OTHER INFORMATION

ITEM 1            LEGAL PROCEEDINGS

CAFC was named as defendant in a case filed in the Superior Court, Alameda
County, State of California on December 7, 2004. Plaintiff alleged that CAFC
made a fraudulent loan to him by cross collateralizing two separate properties.
The cross collateralization was necessary to grant the borrower the desired
loan, since there was insufficient equity in the primary property used as
collateral for the loan. Two complaints have been filed and dismissed by the
court. The Plaintiff has represented himself. After CAFC was allowed by the
court to foreclose on the primary collateral and the borrowing was paid in full,
Plaintiff, upon the Court's insistence, obtained counsel and has filed an
amended complaint, which is pending.

ITEM 2     CHANGES IN SECURITIES

       9,500 common shares and 8,520 preferred shares were purchased for
       treasury stock during the three month period ended March 31, 2006.

ITEM 3     DEFAULTS UPON SENIOR SECURITIES

       None.

ITEM 4     SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

       None

ITEM 5     OTHER INFORMATION

       None.

ITEM 6     EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits
         --------

         Exhibit No.
         3.1    Charter Certificate of Incorporation and Amendment No. 1(1)
         3.2    Bylaws of the Registrant(1)
         3.3    Certificate of Amendment of Certificate of Incorporation(5)
         4.1    Form of Stock Certificate of Common Shares of the Registrant(2)
         10.1   Form of Management Agreement between the Registrant and Capital
                Alliance Advisors, Inc.(1)
         10.2   Form of Indemnity Agreement between the Registrant and its
                Directors and Officers(1)
         10.3   Form of Loan Origination and Loan Servicing Agreement between
                the Registrant and Capital Alliance Advisors, Inc.(1)
         23.4   Consent of Landels Ripley & Diamond, LLP(4)
         23.5   Consent of Novogradac & Company LLP(4)
         24.1   Power of Attorney of Thomas B. Swartz(1)
         24.2   Power of Attorney of Dennis R. Konczal(1)
         24.4   Power of Attorney of Stanley C. Brooks(1)
         24.5   Power of Attorney of Harvey Blomberg(1)
         24.7   Power of Attorney of Richard J. Wrensen(6)
         24.8   Power of Attorney of Donald R. Looper(7)

(1)      These exhibits were previously contained in Registrant's Registration
         Statement filed on Form S-11 with the Commission on September 9, 1996,
         and are incorporated by reference herein.

                                       16
<PAGE>
(2)      These exhibits were previously contained in Amendment No. 1 to the
         Registrant's Registration Statement filed on Form S-11 with the
         Commission on January 15, 1997, and are incorporated by reference
         herein.

(3)      This exhibit was previously contained in Amendment No. 2 to the
         Registrant's Registration Statement filed on Form S-11 with the
         Commission on February 6, 1997 and is incorporated by reference herein.

(4)      These exhibits were previously contained in Post-Effective Amendment
         No. 3 to the Registrant's Registration Statement filed on Form S-11
         with the Commission on December 10, 1997, and are incorporated by
         reference herein.

 (5)     These exhibits were previously contained in Form 10-Q for the period
         ending June 30, 1997 filed with the Commission on August 14, 1997, and
         are incorporated by reference herein.

(6)      This exhibit was previously contained in Form 10-K for the period
         ending December 31, 1998 filed with the Commission on April 10, 1999,
         and is incorporated by reference herein.

(7)      This exhibit was previously contained in From 10-KSB for the period
         ending December 31, 2002 filed with the Commission on April 15, 2003,
         and is incorporated by reference herein.

(b)      Reports on Form 8-K.
         --------------------

         Form 8-K was filed on:

          o    March 31, 2006 due to the press release of March 31, 2005
               regarding discontinuance of mortgage banking operations and
               deferral of first quarter dividend


                                       17
<PAGE>
                                   SIGNATURES


 Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.


                       CAPITAL ALLIANCE INCOME TRUST LTD.,
                         A Real Estate Investment Trust


Dated:  June 16, 2006

                         /s/ Thomas B. Swartz
                         --------------------
                         Thomas B. Swartz
                         Chairman and Chief Executive Officer

                         /s/ Richard J. Wrensen
                         --- ------------------
                         Richard J. Wrensen
                         Chief Financial Officer and Executive Vice President






                                       18
<PAGE>
                                  CERTIFICATION


     CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
     SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Capital Alliance Income Trust
     Ltd. (the "Company") on Form 10-QSB for the period ending March 31, 2006 as
     filed with the Securities and Exchange Commission on the date hereof (the
     "Report"), I, Thomas B. Swartz, Chief Executive Officer of the Company,
     Richard J. Wrensen, Chief Financial Officer of the Company, and I, Dennis
     R, Konczal, President and Chief Operating Officer of the Company, certify,
     pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
     Sarbanes-Oxley Act of 2002, that:

          (1) The Report fully compiles with the requirements of section 13(a)
          or 15(d) of the Securities Exchange Act of 1934; and

          (2) The information contained in the Report fairly presents, in all
          material respects, the financial condition and result of operations of
          the Company.



Date:  June 16, 2006

                           /s/ Thomas B. Swartz
                           --------------------
                           Thomas B. Swartz
                           Chairman and Chief Executive Officer

                           /s/ Richard J. Wrensen
                           ----------------------
                           Richard J. Wrensen
                           Chief Financial Officer and Executive Vice President



                                       19
<PAGE>
                                  CERTIFICATION
               OF FORM 10Q OF CAPITAL ALLIANCE INCOME TRUST LTD.,
                     A REAL ESTATE INVESTMENT TRUST FOR THE
                          PERIOD ENDING MARCH 31, 2006

Under Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934

The undersigned each individually certifies that:

1.   I have reviewed this Form 10-QSB, dated June 16, 2006 of Capital Alliance
     Income Trust, Ltd., A Real Estate Investment Trust:

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flow of the registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officers are responsible for establishing
     and maintaining disclosure controls and procedures (as defined in Exchange
     Act Rules 13a-14 and 15d-14) for the registrant and we have:

     o    designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, is made known to us
          by others within those entities, particularly during the period in
          which this report in being prepared;
     o    evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date); and
     o    presented in this report our conclusions about the effectiveness of
          the disclosure controls and procedures based on our evaluation as of
          the Evaluation Date;

5.   The registrant's other certifying officers have disclosed, based on our
     most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors:

     o    all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and
     o    any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers have indicated in this quarterly
     report, whether there were significant changes in internal controls or in
     other factors that could significantly affect internal controls subsequent
     to the date of our most recent evaluation, including any corrective actions
     with regard to significant deficiencies and material weaknesses.

Date: June 16, 2006
                          /s/ Thomas B. Swartz
                          --------------------
                          Thomas B. Swartz
                          Chairman and Chief Executive Officer

                          /s/ Richard J. Wrensen
                          ----------------------
                          Richard J. Wrensen
                          Chief Financial Officer and Executive Vice President


                                       20