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

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# FORM 10-Q

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# (Mark One)

# QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE ACT OF 1934

# For the quarterly period ended September 30, 2001

# OR

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

# For the transition period from     
                 to

# Commission file number            0-19244

# Krupp Government Income Trust

# Massachusetts
(State or other jurisdiction of incorporation or organization)

# 04-3089272
(IRS employer identification no.)

# One Beacon Street, Boston, Massachusetts
(Address of principal executive offices)

# 02108(Zip Code)

# (617) 523-0066
(Registrant's telephone number, including area code)

Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.

# Part I.  FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

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This Form 10-Q contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual
results could differ materially from those projected in the forward-looking
statements as a result of a number of factors, including those identified
herein.

`KRUPP GOVERNMENT INCOME TRUST

                                 BALANCE SHEETS


                                     ASSETS
                                                                              September 30,           December 31,
                                                                                   2001                    2000
                                                                            -------------------    --------------------
Participating Insured Mortgage Investments
 ("PIMIs") (Note 2)
 Insured Mortgages                                                          $        50,894,741    $         59,752,085
 Additional Loans, net of impairment provision of $2,162,618                          6,426,341               8,350,990
Participating Insured Mortgages ("PIMs") (Note 2)                                    46,538,991              46,892,234
Mortgage-Backed Securities and insured
 mortgage loan ("MBS") (Note 3)                                                      15,505,372              16,536,498
                                                                            -------------------    --------------------

           Total mortgage investments                                               119,365,445             131,531,807

Cash and cash equivalents                                                             6,539,481               5,359,041
Interest receivable and other assets                                                    774,366               1,082,412
Prepaid acquisition fees and expenses, net
 of accumulated amortization of $7,405,684
 and $6,841,714, respectively                                                           927,777               1,491,747
Prepaid participation servicing fees, net of
 accumulated amortization of $2,320,540 and
 $2,112,209, respectively                                                               457,209                 665,540
                                                                            -------------------    --------------------

           Total assets                                                     $       128,064,278    $        140,130,547
                                                                            ===================    ====================

                                          LIABILITIES AND SHAREHOLDERS' EQUITY

Deferred income on Additional Loans (Note 2)                                $         3,108,638    $          3,550,485
Other liabilities                                                                       319,749                  20,980
                                                                            -------------------    --------------------

           Total liabilities                                                          3,428,387               3,571,465
                                                                            -------------------    --------------------

Shareholders' equity (Note 4) Common stock, no par value; 17,510,000 Shares
   authorized; 15,053,135 Shares
   issued and outstanding                                                           123,983,793             136,114,206

Accumulated comprehensive income                                                        652,098                 444,876
                                                                            -------------------    --------------------

           Total Shareholders' equity                                               124,635,891             136,559,082
                                                                            -------------------    --------------------

           Total liabilities and Shareholders' equity                       $       128,064,278    $        140,130,547
                                                                            ===================    ====================




                                         The accompanying notes are an integral
                                            part of the financial statements.`

`KRUPP GOVERNMENT INCOME TRUST

                                      STATEMENTS OF INCOME AND COMPREHENSIVE INCOME


                                                   For the Three Months              For the Nine Months
                                                    Ended September 30,               Ended September 30,
                                            -------------------------------       ----------------------------

                                                2001              2000                 2001           2000
                                            ------------      -------------       ------------    ------------


Revenues:
   Interest income - PIMs and PIMIs:
    Basic interest                          $  1,913,349      $  2,022,988        $  6,032,783    $  6,067,815
         Additional Loan interest (Note 5)       320,218           141,088             692,095         423,589
         Participation interest (Note 5)       3,431,594           111,787           3,683,444         257,517
   Interest income - MBS                         308,148           342,105             951,691       1,041,779
   Interest income - cash and
    cash equivalents                              86,153            79,316             226,332         224,355
                                            ------------      ------------        ------------    ------------

         Total revenues                        6,059,462         2,697,284          11,586,345       8,015,055
                                            ------------      ------------        ------------    ------------

Expenses:
   Asset management fee to an affiliate          229,205           252,854             722,874         755,747
   Expense reimbursements to affiliates           65,532            66,906             177,572         189,653
   Amortization of prepaid
    fees and expenses                            257,433           257,434             772,301         772,302
   General and administrative                    146,756           134,083             367,496         319,019
                                            ------------      ------------        ------------    ------------

         Total expenses                          698,926           711,277           2,040,243       2,036,721
                                            ------------      ------------        ------------    ------------

Net income                                     5,360,536         1,986,007           9,546,102       5,978,334

Other comprehensive income:

   Net change in unrealized
      gain on MBS                                136,497            29,573             207,222         (13,244)
                                            ------------      ------------        ------------    ------------

Total comprehensive income                  $   5,497,033     $  2,015,580        $  9,753,324    $  5,965,090
                                            =============     ============        ============    ============

Basic earnings per Share                    $        .35      $        .13        $        .63    $       .40
                                            ============      ============        ============    ============

Weighted average Shares outstanding                  15,053,135                            15,053,135
                                                    ============                          ============



                     The accompanying notes are an integral
                        part of the financial statements.`

`KRUPP GOVERNMENT INCOME TRUST

                            STATEMENTS OF CASH FLOWS


                                                                                      For the Nine Months
                                                                                      Ended September 30,
                                                                               -----------------------------------

                                                                                     2001                2000
                                                                               ---------------      --------------
Operating activities:
   Net income                                                                   $    9,546,102      $    5,978,334
   Adjustments to reconcile net income to
    net cash provided by operating activities:
      Amortization of premiums and (discounts)                                             438              (2,469)
      Amortization of prepaid fees and expenses                                        772,301             772,302
      Changes in assets and liabilities:
         Decrease in interest receivable and other assets                              308,046             377,805
         Decrease in deferred income on Additional Loans                              (441,847)           (141,100)
         Increase (decrease) in other liabilities                                      298,769              (6,256)
                                                                                --------------      --------------

         Net cash provided by operating activities                                  10,483,809           6,978,616
                                                                                --------------      --------------

Investing activities:
      Principal collections on MBS                                                   1,237,910             875,638
      Principal collections on PIMs and Insured Mortgages                            9,210,587             606,408
      Principal collections on Additional Loans                                      1,924,649               -
                                                                                --------------      --------------

         Net cash provided by investing activities                                  12,373,146           1,482,046
                                                                                --------------      --------------

Financing activity:
      Dividends                                                                    (21,676,515)         (7,677,100)
                                                                                --------------      --------------

Net increase in cash and cash equivalents                                            1,180,440             783,562

Cash and cash equivalents, beginning of period                                       5,359,041           4,627,499
                                                                                --------------      --------------

Cash and cash equivalents, end of period                                        $    6,539,481      $    5,411,061
                                                                                ==============      ==============

Non Cash activities:
   Increase (decrease) in Fair Value of MBS                                     $      207,222      $      (13,244)
                                                                                ==============      ==============





                     The accompanying notes are an integral
                        part of the financial statements.`

`KRUPP GOVERNMENT INCOME TRUST

                          NOTES TO FINANCIAL STATEMENTS



1.    Accounting Policies

Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have been condensed or omitted in this report on Form 10-Q pursuant to the Rules
and  Regulations  of the  Securities and Exchange  Commission.  However,  in the
opinion of Berkshire  Mortgage  Advisors  Limited  Partnership  (the "Advisor"),
which is the  advisor  to Krupp  Government  Income  Trust  (the  "Trust"),  the
disclosures  contained  in this  report  are  adequate  to make the  information
presented not misleading.  See Notes to Financial Statements in the Trust's Form
10-K for the year ended December 31, 2000 for additional information relevant to
significant accounting policies followed by the Trust.

In the opinion of the Advisor of the Trust, the accompanying unaudited financial
statements  reflect  all  adjustments   (consisting  of  only  normal  recurring
accruals)  necessary  to present  fairly the  Trust's  financial  position as of
September  30,  2001,  the results of  operations  for the three and nine months
ended  September  30, 2001 and 2000 and its cash flows for the nine months ended
September 30, 2001 and 2000.

The results of operations for the three and nine months ended September 30, 2001
are not necessarily indicative of the results which may be expected for the full
year.  See  Management's  Discussion  and  Analysis of Financial  Condition  and
Results of Operations included in this report.

2.    PIMs and PIMIs

At September 30, 2001, the Trust's PIMs and PIMIs,  including  Additional Loans,
had a fair value of $108,132,536 and gross  unrealized gains of $4,272,463.  The
PIMs and PIMIs had maturities  ranging from 2002 to 2034. At September 30, 2001,
there are no insured  mortgage  loans  within  the  Trust's  portfolio  that are
delinquent of principal or interest.

Lifestyles and Mountain View have been adversely  affected by their  competitive
rental housing markets. The Advisor recorded an impairment provision against the
Additional  Loans in 1998 of $1,130,346 and $984,000 for Lifestyles and Mountain
View,  respectively and an additional  provision of $48,272 for Mountain View in
1999. Based on the Advisor's analysis of the property operations  underlying the
PIMIs, the Trust continues to maintain these provisions.

The  payoff  of the  Seasons  PIMI was the  result  of a sale of the  underlying
property by the borrower,  Maryland  Associates  Limited  Partnership  ("MALP"),
which is an affiliate of the Adviser, to an affiliate of MALP's general partner.
Because the sale of the underlying property was to an affiliate, the Independent
Trustees of the Trust were required to approve the  transaction,  which they did
based  upon a number  of  factors,  including  an  appraisal  of the  underlying
property  prepared by an  independent  third party MAI  appraiser.  The purchase
price paid by the affiliate for the underlying property was $1.6 million greater
than the value indicated by such appraisal.

On July 23, 2001,  the Trust  received a prepayment of The Seasons  Subordinated
Promissory  Note and the  Seasons  Additional  Loan  Note.  The  Trust  received
$1,924,649 of Additional Loan principal,  $180,916 of surplus cash,  $847,450 of
Preferred Interest,  $1,052,455 of contingent interest, $69,129 of Base Interest
on the Additional  Loan and $1,299,562  which  represents the Trust's portion of
the residual split.  The Trust received  $8,567,890  representing  the principal
proceeds on the first  mortgage  note on July 26, 2001.  In addition,  the Trust
recognized  $180,633  of  Additional  Loan  interest  that had  been  previously
received  and recorded in deferred  income on  additional  loans.  On August 17,
2001,  the Advisor paid a special  dividend of $0.93 per share from the proceeds
of the Seasons PIMI prepayment.

3.    MBS

At  September  30, 2001,  the Trust's MBS  portfolio  had an  amortized  cost of
$10,001,833 and unrealized  gains of $652,098,  and the Trust's insured mortgage
loan had an amortized cost of $4,851,441.  The portfolio had maturities  ranging
from 2008 to 2035.


                                    Continued`

`KRUPP GOVERNMENT INCOME TRUST

                    NOTES TO FINANCIAL STATEMENTS, Continued



4.    Changes in Shareholders' Equity

      A summary of changes in shareholders' equity for the nine months ended
September 30, 2001 is as follows:

                                          Total                                  Accumulated
                                         Common               Retained          Comprehensive          Shareholders'
                                          Stock               Earnings             Income                 Equity
                                      --------------        -------------        ------------     -------------------

Balance at December 31, 2000          $  136,114,206        $      -             $    444,876     $       136,559,082

Net income                                   -                  9,546,102             -                     9,546,102

Dividends                                (21,676,515)         (12,130,413)         (9,546,102)                -

Change in unrealized gain on MBS             -                     -                  207,222                 207,222
                                      --------------        -------------        ------------        ----------------

Balance at September 30, 2001         $  123,983,793        $      -             $    652,098        $    124,635,891
                                      ==============        =============        ============        ================





5.    Related Party Transactions

The Trust received  $69,129 and $86,609 of Additional  Loan Interest  during the
three months ended September 30, 2001 and 2000, respectively,  from an affiliate
of the Advisor. The Trust also received participation interest of $3,380,383 and
$105,743  from an  affiliate  of the  Advisor  during  the  three  months  ended
September 30, 2001 and 2000, respectively.

The Trust received  $155,738 and $173,544 of Additional Loan Interest during the
nine months ended September 30, 2001 and 2000, respectively,  from affiliates of
the Advisor.  The Trust also received  participation  interest of $3,431,133 and
$174,505 from an affiliate of the Advisor during the nine months ended September
30, 2001 and 2000, respectively.`

`Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS`

-------

Certain  statements in this
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations  and  elsewhere  in this  quarterly  report on Form  10-Q  constitute
"forward-looking   statements"   within  the  meaning  of  the  Federal  Private
Securities  Litigation  Reform  Act of 1995.  These  forward-looking  statements
involve known and unknown risks, uncertainties and other factors which may cause
the  Trust's  actual  results,  performance  or  achievements  to be  materially
different  from any future  results,  performance or  achievements  expressed or
implied by these forward-looking statements.  These factors include, among other
things, federal, state or local regulations; adverse changes in general economic
or local conditions; the inability of the borrower to meet financial obligations
on additional  loans;  pre-payments  of  mortgages;  failure of borrowers to pay
participation  interests due to poor operating results at properties  underlying
the mortgages;  uninsured losses and potential conflicts of interest between the
Trust and its Affiliates, including the Advisor.

Liquidity and Capital Resources

At September 30, 2001, the
Trust had liquidity  consisting of cash and cash  equivalents,  of approximately
$6.5 million as well as the cash inflows provided by PIMs,  PIMIs, MBS, cash and
cash  equivalents.  The Trust  may also  receive  additional  cash flow from the
participation  features of its PIMs and PIMIs. The Trust  anticipates that these
sources will be adequate to provide the Trust with sufficient  liquidity to meet
its obligations, including providing dividends to its investors.

The most significant demand
on  the  Trust's  liquidity  is  quarterly  dividends,   paid  to  investors  of
approximately $2.6 million, and special dividends. Funds for dividends come from
interest income received on PIMs,  PIMIs,  MBS, cash and cash equivalents net of
operating  expenses and the principal  collections  received on PIMs,  PIMIs and
MBS.  The portion of dividends  funded from  principal  collections  reduces the
capital  resources of the Trust. As the capital resources of the Trust decrease,
the  total  cash  flows to the  Trust  will also  decrease  which may  result in
periodic adjustments to the dividends paid to the investors.

The Advisor  periodically
reviews the dividend rate to determine  whether an adjustment is necessary based
on projected  future cash flows. The current dividend rate is $.17 per Share per
quarter. The Trustees, based on the Advisor's  recommendations,  generally set a
dividend  rate  that  provides  for level  quarterly  dividends.  To the  extent
quarterly dividends do not fully utilize the cash available for distribution and
cash balances  increase,  the Advisor may adjust the dividend rate or distribute
such funds through a special dividend.

The Trust's PIMIs funded
the construction or significant  rehabilitation  of multifamily  housing,  which
requires time to achieve stabilized  operations  following the completion of the
work.  With this in mind, the Trust required those borrowers to escrow a portion
of the Additional  Loan proceeds in reserves so funds would be available for the
PIMI Additional Loan payments during the construction and lease-up  periods.  As
these reserves  become  depleted,  full payment of the Additional  Loan interest
becomes  primarily  dependent  on  whether  the  underlying  property  generates
sufficient operating cash flow to make such payments.

In addition to providing
guaranteed  or insured  monthly  principal  and interest  payments,  the Trust's
investments  in PIMs and PIMIs also may provide  additional  income  through the
interest on the  Additional  Loan portion of the PIMIs as well as  participation
income based on operating  cash flow and an increase in the value  realized upon
the sale or refinance of the underlying properties.  However, these payments are
neither guaranteed nor insured and depend upon the successful  operations of the
underlying properties.

The payoff of the Seasons
PIMI  was a result  of the  sale of the  underlying  property  by the  borrower,
Maryland Associates Limited Partnership  ("MALP"),  which is an affiliate of the
Adviser,  to an affiliate  of MALP's  general  partner.  Because the sale of the
underlying property was to an affiliate,  the Independent  Trustees of the Trust
were required to approve the transaction,  which they did based upon a number of
factors,  including  an  appraisal  of the  underlying  property  prepared by an
independent third party MAI appraiser.  The purchase price paid by the affiliate
for the underlying property was $1.6 million greater than the value indicated by
such appraisal.

On July 23, 2001, the Trust
received  a  prepayment  of the  Seasons  Subordinated  Promissory  Note and the
Seasons  Additional Loan Note. The Trust received  $1,924,649 of Additional Loan
principal,  $180,916 of surplus cash, $847,450 of preferred interest, $1,052,455
of  contingent  interest,  $69,129 of Base Interest on the  Additional  Loan and
$1,299,562 which represents the Trust's portion of the residual split. The Trust
received  $8,567,890  representing the principal  proceeds on the first mortgage
note on July 26, 2001. In addition,  the Trust recognized $180,633 of Additional
Loan interest that had been previously  received and recorded in deferred income
on additional  loans. On August 17, 2001, the Advisor paid a special dividend of
$0.93 per share from the proceeds of the Seasons PIMI prepayment.

The Trust received both
installments  of Additional Loan interest due in 2001 from the Red Run PIMI. Two
other PIMI  investments,  Mountain View and Windward Lakes operate under workout
agreements with the Trust that require Additional Loan interest payments only if
Surplus  Cash,  as defined by HUD, is  generated  through  property  operations.
Neither of these properties  generated  Surplus Cash for the year ended December
31,  2000;  consequently,   the  Trust  did  not  receive  any  Additional  Loan
interest.

The  Trust  received
participation  interest based on cash flow generated by property operations from
four of its  investments  during  the nine  months  ended  September  30,  2001.
Waterford Townhomes paid $60,502, Red Run paid $72,841, The Seasons paid $50,750
and Lifestyles paid $118,968.

Three  properties operate
under workout  agreements  with the Trust.  Windward  Lakes'  operating  results
deteriorated  during 1995 and 1996, and in early 1997 the  independent  Trustees
approved a workout with the borrower of the Windward Lakes PIMI, an affiliate of
the  Advisor  of the  Trust.  In the  workout,  the Trust  agreed to reduce  the
effective  basic interest rate on the insured first mortgage by 2% per annum for
1997 and 1% per annum  for 1998,  1999 and  2000.  The  borrower  made an equity
contribution of $133,036 to the property and agreed to cap the annual management
fee paid to an affiliate at 3% of revenues. The Trust's participation in current
operations is 50% of any Surplus Cash as determined  under HUD  guidelines,  and
the  Additional  Loan interest is payable out of its share of Surplus Cash.  Any
unpaid  Additional Loan interest accrues at 7.5% per annum. When the property is
sold or  refinanced,  the Trust will receive 50% of any net  proceeds  remaining
after repayment of the insured mortgage,  the Additional Loan, the interest rate
relief, accrued and unpaid Additional Loan interest and the Borrower's equity up
to the point  that the Trust  has  received  a  cumulative,  non-compounded  10%
preferred return on its investment in the PIMI.

Lifestyles  operating
results deteriorated during 1995, and the Trust approved a two-year workout that
effectively  reduced the interest rate on the insured  mortgage by 1%. When that
workout ended in 1997, the property was not able to generate sufficient revenues
to maintain the property and service the original  interest rate.  Consequently,
the borrower on the  Lifestyles  PIMI  defaulted on its May 1, 1998 debt service
payment on the insured  first  mortgage.  The Trust agreed to a new workout that
runs through  2007.  Under its terms,  the Trust agreed to reduce the  effective
interest rate on the insured first mortgage by 1.75%  retroactively  for 1998 to
clear the default, by 1.75% for 1999, and by 1.5% each year thereafter until the
property  is  sold  or   refinanced.   An  affiliate  of  the  Advisor   refunds
approximately .25% per annum to the Trust related to the interest reduction. The
borrower made a $550,000 equity contribution,  which has been escrowed,  for the
exclusive  purpose  of  correcting  deferred   maintenance  and  making  capital
improvements  to the property.  The escrow has been used up for paint,  building
repairs,  parking lot repairs, a new fitness facility,  clubhouse remodeling and
landscaping.  Any Surplus Cash that is generated by property  operations will be
split evenly  between the Trust and the  borrower.  When the property is sold or
refinanced,  the first  $1,100,000 of any proceeds  remaining  after the insured
mortgage is paid off will be split 50% / 50% between the Trust and the borrower;
the next  $1,690,220  of proceeds  will be split 75% to the Trust and 25% to the
borrower; and any remaining proceeds will be split 50% / 50%. The borrower's new
equity and the  reduction in the  effective  interest  rate on the insured first
mortgage  will  provide  funds for  repairs  and  improvements  that should help
reposition  Lifestyles so it can compete more  effectively for new residents and
rental rates. As a result of the factors  described  above, the Trust determined
that the Additional Loan  collateralized  by the Lifestyles  asset was impaired,
and recorded a valuation  allowance of $1,130,346 in the fourth  quarter of 1998
and continues to maintain that allowance.

Mountain  View  has
experienced  problems  similar to Lifestyles with respect to competitive  market
conditions.  In June 1999, the Trust approved a second workout that runs through
2004. Under its terms, the Trust agreed to reduce the effective interest rate on
the  insured  first  mortgage  by 1.25%  retroactively  for  1999 and each  year
thereafter  until  the  property  is  sold  or  refinanced,  and to  change  the
participation  terms.  The workout  eliminated  the  preferred  return  feature,
forgave $288,580 of previous accruals of Additional Loan interest related to the
first workout,  and changed the Trust's  participation in Surplus Cash generated
by the  property.  The Trust will  receive 75% of the first  $130,667 of Surplus
Cash and 50% of any remaining  Surplus Cash on an annual basis to pay Additional
Loan interest.  Unpaid  Additional  Loan interest  related to the second workout
will  accrue  and be  payable if there are  sufficient  proceeds  from a sale or
refinancing of the property.  In addition,  the borrower  repaid $153,600 of the
Additional  Loan and  funded  approximately  $54,000 to a reserve  for  property
improvements. As a result of the factors described above, the Advisor determined
that the Additional Loan  collateralized by the Mountain View asset was impaired
and has recorded a valuation  allowance of $1,032,272  and continues to maintain
that allowance.

During the third quarter,
the borrower on the Red Run PIMI had  notified  the Advisor of its  intention to
refinance  the  property.  This  transaction  would require a payoff of both the
Insured Mortgage and the Additional Loan as well as all other amounts that would
be due to the Trust under the PIMI loan documents. An independent appraisal firm
will  appraise  the  property's  value to  determine  whether  there  has been a
sufficient increase in value for the Trust to earn any participation interest in
excess of its Preferred Return. Currently the borrower's expectation is that the
transaction  will occur late in the fourth quarter or early in the first quarter
of 2002.

Whether  the operating
performance at any of the properties  mentioned  above provide  sufficient  cash
flow from operations to pay either the Additional Loan interest or participation
income  will  depend on  factors  over  which the Trust has little or no control
over.  Should the properties be unable to generate  sufficient  cash flow to pay
the Additional  Loan interest,  it would reduce the Trust's  distributable  cash
flow and could affect the value of the Additional Loan collateral.

There  are contractual
restrictions on the repayment of the PIMs and PIMIs. During the first five years
of the investment,  borrowers are prohibited  from repayment.  During the second
five years,  the PIM borrowers  can prepay the insured first  mortgage by paying
the greater of a prepayment  premium or the participation due at the time of the
prepayment.  Similarly, the PIMI borrowers can prepay the insured first mortgage
and the  Additional  Loan by satisfying  the Preferred  Return  obligation.  The
participation  features and Additional Loans are neither insured nor guaranteed.
If the  prepayment  of the PIM or  PIMI  results  from  the  foreclosure  on the
underlying  property or an insurance claim, the Trust would probably not receive
any   participation   income  or  any   amounts   due   under   the   Additional
Loan.

The Trust has the option to
call certain PIMs and all the PIMIs by accelerating  their maturity if the loans
are not prepaid by the tenth year after  permanent  funding.  The  Advisor  will
determine  the  merits of  exercising  the call  option for each PIM and PIMI as
economic conditions  warrant.  Such factors as the condition of the asset, local
market  conditions,  the interest rate environment and available  financing will
have an impact on these decisions.

Results of Operations

Net income of the Trust
increased for the three and nine months ended  September 30, 2001 as compared to
the same  periods in 2000 due to  increases  in  Additional  Loan  interest  and
Participation  interest income.  This is partially offset by a decrease in Basic
interest  income on PIMs and  PIMIs and MBS  interest  income.  Additional  Loan
interest increased primarily due to the recognition of deferred revenue from the
Season's PIMI payoff and an increase in the 2001 amortization of deferred income
on the Red Run  PIMI.  Participation  interest  increased  primarily  due to the
collection of  participation  interest from the Season's  payoff (see discussion
above).  The reduction in basic interest on PIMs and PIMIs  decreased due to the
payoff of The Season's  PIMI in the third quarter of 2001.  MBS interest  income
decreased due to principal payments reducing the asset base.

`Item 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK`

-------

Assessment of Credit Risk

The Trust's investments in
insured  mortgages and MBS are  guaranteed or insured by Fannie Mae, the Federal
Home  Loan  Mortgage  Corporation  (FHLMC),  the  Government  National  Mortgage
Association (GNMA) and the Department of Housing and Urban Development (HUD) and
therefore the certainty of their cash flows and the risk of material loss of the
amounts invested depends on the creditworthiness of these entities.

Fannie Mae is a federally
chartered private corporation that guarantees  obligations  originated under its
programs. FHLMC is a federally chartered corporation that guarantees obligations
originated  under its programs and is  wholly-owned  by the twelve  Federal Home
Loan Banks.  These obligations are not guaranteed by the U.S.  Government or the
Federal Home Loan Bank Board.  GNMA  guarantees  the full and timely  payment of
principal  and basic  interest on the  securities  it issues,  which  represents
interest  in pooled  mortgages  insured by HUD.  Obligations  insured by HUD, an
agency of the U.S.  Government,  are  backed by the full faith and credit of the
U.S. Government.

The  Trust's  Additional
Loans have similar risks as those associated with higher risk debt  instruments,
including:  reliance  on the  owner's  operating  skills,  ability  to  maintain
occupancy levels, control operating expenses, ability to maintain the properties
and obtain  adequate  insurance  coverage.  Operations  also may be  effected by
adverse changes in general economic  conditions,  adverse local conditions,  and
changes in governmental  regulations,  real estate zoning laws, or tax laws, and
other   circumstances   over   which   the   Trust   may  have   little   or  no
control.

The Trust included in cash
and cash equivalents approximately $6.0 million of Agency paper, which is issued
by Government Sponsored Enterprises with a credit rating equal to the top rating
category of a nationally recognized statistical rating organization.</FONT></P>

Interest Rate Risk

The Trust's primary market
risk exposure is to interest rate risk,  which can be defined as the exposure of
the  Trusts  net income,  comprehensive  income or financial  condition to
adverse  movements in interest  rates.  At September 30, 2001, the  Trusts
PIMs, PIMIs and MBS comprise the majority of the Trusts  assets.  As such,
decreases in interest rates may  accelerate  the prepayment of the  Trusts
investments.  The Trust does not utilize any derivatives or other instruments to
manage this risk as the Trust plans to hold all of its  investments  to expected
maturity.</FONT></P>

The  Trust  monitors
prepayments and considers prepayment trends, as well as dividend requirements of
the Trust,  when setting regular  dividend  policy.  For MBS, the fund forecasts
prepayments  based on trends in similar  securities  as reported by  statistical
reporting entities such as Bloomberg. For PIMs and PIMIs, the Trust incorporates
prepayment  assumptions into planning as individual  properties notify the Trust
of the intent to prepay or as they mature.</FONT></P>

`KRUPP GOVERNMENT INCOME TRUST

                           PART II - OTHER INFORMATION



Item 1.       Legal Proceedings
              Response:  None

Item 2.       Changes in Securities
              Response:  None

Item 3.       Defaults upon Senior Securities
              Response:  None

Item 4.       Submission of Matters to a Vote of Security Holders
              Response:  None

Item 5.       Other Information
              Response:  None

Item 6.       Exhibits and Reports on Form 8-K
              Response:  None`

`SIGNATURE



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



                                    Krupp Government Income Trust
                                    -----------------------------
                                             (Registrant)



                                    BY:    / s / Robert A. Barrows
                                    --------------------------------------------

                                    Robert A. Barrows
                                    Treasurer and Chief Accounting Officer
                                    of Krupp Government Income Trust














DATE: November 2, 2001`

`Unaudited amounts in thousands, except per Share amounts


                                                                          Nine Months                Inception
                                                                             Ended                    Through
                                                                            9/30/01                   9/30/01
                                                                           -----------              ------------
      Distributable Cash Flow (a):
      ---------------------------

      Net income                                                           $      9,548             $    142,765
      Items not requiring or providing the
       use of operating funds:

        Provision for impaired mortgage loan                                         -                     2,163
        Amortization of prepaid fees and
         expenses and organization costs                                            771                   16,629
        Additional Loan Interest Deferred                                          (443)                   3,108
                                                                           ------------             ------------

        Total Distributable Cash Flow ("DCF")                                     9,876                  164,665
                                                                           ------------             ------------

      DCF per Share based on Shares
       outstanding at September 30, 2001 (15,053,135)                      $        .66             $      10.94  (d)
                                                                           ============             ============

      Dividends:

       Total dividends to Shareholders                                     $     21,677 (b)         $    301,407  (c)
                                                                           ============             ============
       Average dividend per Share based
        on Shares outstanding at
        September 30, 2001                                                 $       1.44 (b)         $      20.02  (c)(d)
                                                                           ============             ============


         (a)  Distributable Cash Flow consists of income before provision for
                impaired mortgage loans, amortization of prepaid fees and
                expenses and organization costs and includes deferred interest
                on Additional Loans. The Trust believes Distributable Cash Flow
                is an appropriate supplemental measure of operating performance,
                however, it should not be considered as a substitute for net
                income as an indication of operating performance or cash flows
                as a measure of liquidity.
         (b)  Represents all dividends paid through September 2001 except the
                February 2001 dividend and includes an estimate of the
                November 2001 dividend.
         (c)  Includes as estimate of the November 2001 dividend.
         (d)  Shareholders average per Share return of capital on a cash basis
                as of September 2001 is $9.08 [$20.02 - $10.94]. Return of
                capital represents that portion of the dividends which is not
                funded from DCF such as principal collections received from MBS
                and PIMs.`