UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





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





FOR
THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008 or





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





Commission
File Number:  333-108057





COMMONWEALTH
INCOME & GROWTH FUND V


(Exact
name of registrant as specified in its charter)





Pennsylvania
            65-1189593(State
      or other jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification Number)





Brandywine
Bldg. One, Suite 200


2 Christy
Drive


Chadds
Ford, PA 19317


(Address,
including zip code, of principal executive offices)





(610)
594-9600


(Registrant’s
telephone number including area code)





Indicate
by check mark whether the registrant (i) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (ii) has been subject to such filing requirements for
the past 90 days: YES  TNO   ̈





Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See definition of "accelerated filer,
“large accelerated filer" and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):


Large
      accelerated filer  ̈
              Accelerated
      filer  ̈Non-accelerated
      filer  ̈
              Smaller
      reporting company T(Do
      not check if a smaller reporting company.)




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange
Act).      YES   ̈NO T












1








FORM
10-Q


SEPTEMBER
30, 2008





TABLE OF CONTENTS





PART
      IItem 1.
              Financial Statements
              3Item 2.
              Management's Discussion and Analysis of Financial Condition
      and Results of Operations
              11Item 3.
              Quantitative and Qualitative Disclosures About Market
      Risk
              14Item 4T.
              Controls and Procedures
              15PART
      IIItem 1.
              Legal Proceedings
              15Item 1 A.
              Risk Factors
              15Item 2.
              Unregistered Sales of Equity Securities and Use of
      Proceeds
              15Item 3.
              Defaults Upon Senior Securities
              15Item 4.
              Submission of Matters to a Vote of Securities
      Holders
              15Item 5.
              Other Information
              15Item 6.
              Exhibits
              16








2








Part
I. FINANCIAL INFORMATION


Item
1. Financial Statements





Commonwealth
      Income & Growth Fund VCondensed
      Balance SheetsSeptember
      30,
                  
                  
                  December
      31,2008
                  
                  
                  2007(unaudited)AssetsCash
      and cash equivalents
                  
                  $
                  3,659,160
                  
                  
                  $
                  4,114,953Lease
      income receivable, net of reserves of $73,600 and $42,800 as
      ofSeptember
      30, 2008 and December 31, 2007
                  
                  
                  135,197
                  
                  
                  
                  211,207Other
      receivable, Commonwealth Capital Corp.
                  
                  
                  368,997
                  
                  
                  
                  55,740Other
      receivable, General Partner
                  
                  
                  18,516
                  
                  
                  
                  -Other
      receivable, affiliated limited partnerships
                  
                  
                  300
                  
                  
                  
                  1,903Prepaid
      expenses
                  
                  
                  6,016
                  
                  
                  
                  1,7454,188,186
                  
                  
                  
                  4,385,548Computer
      equipment, at cost
                  
                  
                  21,259,701
                  
                  
                  
                  21,299,239Accumulated
      depreciation
                  
                  
                  (11,365,872
                  )
                  
                  
                  (7,919,040
                  )9,893,829
                  
                  
                  
                  13,380,199Equipment
      acquisition costs and deferred expenses, net of
accumulatedamortization of $633,924 and $284,601 at September 30,2008
      and December 31, 2007
                  
                  
                  275,808
                  
                  
                  
                  463,248Prepaid
      acquisition fees, General Partner
                  
                  
                  219,470
                  
                  
                  
                  247,936495,278
                  
                  
                  
                  711,184Total
      assets
                  
                  $
                  14,577,293
                  
                  
                  $
                  18,476,931Liabilities
      and Partners' CapitalLiabilitiesAccounts
      payable
                  
                  $
                  11,515
                  
                  
                  $
                  292,491Accounts
      payable, General Partner
                  
                  
                  19,919
                  
                  
                  
                  9,734Other
      accrued expenses
                  
                  
                  12,208
                  
                  
                  
                  2,182Unearned
      lease income
                  
                  
                  145,278
                  
                  
                  
                  157,032Notes
      payable
                  
                  
                  1,930,616
                  
                  
                  
                  3,134,218Total
      liabilities
                  
                  
                  2,119,536
                  
                  
                  
                  3,595,657Partners'
      CapitalGeneral
      partner
                  
                  
                  1,000
                  
                  
                  
                  1,000Limited
      partners
                  
                  
                  12,456,757
                  
                  
                  
                  14,880,274Total
      Partners' Capital
                  
                  
                  12,457,757
                  
                  
                  
                  14,881,274Total
      Liabilities and Partners' Capital
                  
                  $
                  14,577,293
                  
                  
                  $
                  18,476,931





see
accompanying notes to condensed financial statements





3


Table of
Contents


Commonwealth
      Income & Growth Fund VCondensed
      Statements of Operations(unaudited)Three
      months Ended
                  
                  
                  Nine
      months EndedSeptember
      30,
                  
                  
                  September
      30,2008
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2007RevenueLease
                  
                  $
                  1,623,117
                  
                  
                  $
                  1,716,760
                  
                  
                  $
                  5,190,395
                  
                  
                  $
                  4,832,494Interest
      and other
                  
                  
                  23,593
                  
                  
                  
                  56,993
                  
                  
                  
                  73,388
                  
                  
                  
                  178,282Gain
      on sale of computer equipment
                  
                  
                  2,709
                  
                  
                  
                  -
                  
                  
                  
                  84,982
                  
                  
                  
                  -Total
      revenue
                  
                  
                  1,649,419
                  
                  
                  
                  1,773,753
                  
                  
                  
                  5,348,765
                  
                  
                  
                  5,010,776ExpensesOperating
                  
                  
                  327,542
                  
                  
                  
                  277,359
                  
                  
                  
                  1,123,480
                  
                  
                  
                  933,343Equipment
      management fee-
                    General
      Partner
                  
                  
                  81,156
                  
                  
                  
                  85,838
                  
                  
                  
                  259,520
                  
                  
                  
                  241,625Interest
                  
                  
                  32,326
                  
                  
                  
                  41,977
                  
                  
                  
                  114,822
                  
                  
                  
                  110,715Depreciation
                  
                  
                  1,330,147
                  
                  
                  
                  1,350,370
                  
                  
                  
                  4,088,315
                  
                  
                  
                  3,690,465Amortization
      of equipment acquisition
                    costs
      and deferred expenses
                  
                  
                  76,089
                  
                  
                  
                  74,848
                  
                  
                  
                  232,861
                  
                  
                  
                  208,108Bad
      debt expense
                  
                  
                  30,818
                  
                  
                  
                  38,461
                  
                  
                  
                  30,818
                  
                  
                  
                  38,461Loss
      on sale of computer equipment
                  
                  
                  -
                  
                  
                  
                  4,854
                  
                  
                  
                  -
                  
                  
                  
                  4,892Total
      expenses
                  
                  
                  1,878,078
                  
                  
                  
                  1,873,707
                  
                  
                  
                  5,849,816
                  
                  
                  
                  5,227,609Net
      (loss)
                  
                  $
                  (228,659
                  )
                  
                  $
                  (99,954
                  )
                  
                  $
                  (501,051
                  )
                  
                  $
                  (216,833
                  )Net
      (loss) allocated to limited partners
                  
                  $
                  (234,897
                  )
                  
                  $
                  (106,204
                  )
                  
                  $
                  (519,789
                  )
                  
                  $
                  (235,579
                  )Net
      (loss) per equivalent limited partnership unit
                  
                  $
                  (0.19
                  )
                  
                  $
                  (0.08
                  )
                  
                  $
                  (0.42
                  )
                  
                  $
                  (0.19
                  )Weighted
      average number of equivalent limited partnership units outstanding during
      the period
                  
                  
                  1,248,010
                  
                  
                  
                  1,249,951
                  
                  
                  
                  1,249,082
                  
                  
                  
                  1,249,951





see
accompanying notes to condensed financial statements








4


Table of
Contents








Commonwealth
      Income & Growth Fund VCondensed
      Statements of Partners’ CapitalFor
      the Nine Months ended September 30, 2008(unaudited)General
                                                                                      
                                                                                      
                                                                                      LimitedPartner
                                                                                      
                                                                                      
                                                                                      Partner
                                                                                      
                                                                                      
                                                                                      General
                                                                                      
                                                                                      
                                                                                      LimitedUnits
                                                                                      
                                                                                      
                                                                                      Units
                                                                                      
                                                                                      
                                                                                      Partner
                                                                                      
                                                                                      
                                                                                      Partners
                                                                                      
                                                                                      
                                                                                      TotalBalance,
      January 1, 2008
                                                                                      
                                                                                      
                                                                                      50
                                                                                      
                                                                                      
                                                                                      
                                                                                      1,249,951
                                                                                      
                                                                                      
                                                                                      $
                                                                                      1,000
                                                                                      
                                                                                      
                                                                                      $
                                                                                      14,880,274
                                                                                      
                                                                                      
                                                                                      $
                                                                                      14,881,274Net
      income (loss)
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      18,738
                                                                                      
                                                                                      
                                                                                      
                                                                                      (519,789
                                                                                      )
                                                                                      
                                                                                      
                                                                                      (501,051
                                                                                      )Redemptions
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      (3,824
                                                                                      )
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      (49,119
                                                                                      )
                                                                                      
                                                                                      
                                                                                      (49,119
                                                                                      )Distributions
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      (18,738
                                                                                      )
                                                                                      
                                                                                      
                                                                                      (1,854,609
                                                                                      )
                                                                                      
                                                                                      
                                                                                      (1,873,347
                                                                                      )Balance,
      September  30, 2008
                                                                                      
                                                                                      
                                                                                      50
                                                                                      
                                                                                      
                                                                                      
                                                                                      1,246,127
                                                                                      
                                                                                      
                                                                                      $
                                                                                      1,000
                                                                                      
                                                                                      
                                                                                      $
                                                                                      12,456,757
                                                                                      
                                                                                      
                                                                                      $
                                                                                      12,457,757





see
accompanying notes to condensed financial statements








5


Table of
Contents





Commonwealth
      Income & Growth Fund VCondensed
      Statements of Cash FlowNine
      Months EndedSeptember
      30,2008
                  
                  
                  2007(unaudited)Net
      cash provided by operating activities
                  
                  $
                  1,708,949
                  
                  
                  $
                  2,587,890Capital
      expenditures
                  
                  
                  (770,973
                  )
                  
                  
                  (3,563,021
                  )Prepaid
      acquisition fees
                  
                  
                  28,466
                  
                  
                  
                  129,060Net
      proceeds from the sale of computer equipment
                  
                  
                  545,652
                  
                  
                  
                  4,715Equipment
      acquisition fees- General Partner
                  
                  
                  (42,505
                  )
                  
                  
                  (231,319
                  )Net
      cash (used in) investing activities
                  
                  
                  (239,360
                  )
                  
                  
                  (3,660,565
                  )Redemptions
                  
                  
                  (49,119
                  )
                  
                  
                  -Distributions
      to partners
                  
                  
                  (1,873,347
                  )
                  
                  
                  (1,874,520
                  )Debt
      Placement fees paid to General Partner
                  
                  
                  (2,916
                  )
                  
                  
                  (22,200
                  )Net
      cash (used in) financing activities
                  
                  
                  (1,925,382
                  )
                  
                  
                  (1,896,720
                  )Net
      (decrease) in cash and cash equivalents
                  
                  
                  (455,793
                  )
                  
                  
                  (2,969,395
                  )Cash
      and cash equivalents, beginning of period
                  
                  
                  4,114,953
                  
                  
                  
                  7,071,792Cash
      and cash equivalents, end of period
                  
                  $
                  3,659,160
                  
                  
                  $
                  4,102,397




see
accompanying notes to condensed financial statements





6


Table of
Contents


NOTES
TO CONDENSED FINANCIAL STATEMENTS





1.
Business





Commonwealth
Income & Growth Fund V (the “Partnership”) is a limited partnership
organized in the Commonwealth of Pennsylvania on May 19, 2003.  The
Partnership offered for sale up to 1,250,000 units of the limited partnership at
the purchase price of $20 per unit (the “Offering”).  The Partnership
reached the minimum amount in escrow and commenced operations on March 14,
2005.  As of February 24, 2006, the Partnership was fully
subscribed.





The
Partnership used the proceeds of the Offering to acquire, own and lease various
types of information technology equipment and other similar capital equipment,
which is leased primarily to U.S. corporations and
institutions.  Commonwealth Capital Corp. (“CCC”), on behalf of the
Partnership and other affiliated partnerships, acquires computer equipment
subject to associated debt obligations and lease agreements and allocates a
participation in the cost, debt and lease revenue to the Partnership and other
affiliated partnerships based on certain risk factors.  Approximately
ten years after the commencement of operations, the Partnership intends to sell
or otherwise dispose of all of its computer equipment, make final distributions
to partners and to dissolve.  Unless sooner terminated, the
Partnership will continue until December 31, 2015.





The
Partnership’s General Partner is Commonwealth Income & Growth Fund, Inc.
(the “General Partner”), a Pennsylvania corporation which is an indirect wholly
owned subsidiary of CCC.  CCC is a member of the Investment Program
Association (IPA), Financial Planning Association (FPA), and the Equipment
Leasing and Finance Association (ELFA).





2.
Summary of Significant Accounting Policies





Recent
Accounting Pronouncements





Management’s
assessment of the following accounting pronouncements has changed since
disclosed in its Form 10K for December 31, 2007





In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (“SFAS 162”). SFAS 162 identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States. SFAS 162 is effective 60 days following the Securities and
Exchange Commission’s approval of the Public Company Accounting Oversight Board
amendments to Audit Section 411, The Meaning of Present Fairly in Conformity
with Generally Accepted Accounting Principles. The Partnership is currently
evaluating the potential impact, if any, of the adoption of SFAS 162 on its
financial statements.





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Liabilities, including an amendment of FASB Statement No.
115” (“SFAS No. 159”). SFAS No. 159 permits entities to choose, at specified
election dates, to measure many financial instruments and certain other items at
fair value that are not currently required to be measured at fair value.
Unrealized gains and losses will be reported on items for which the fair value
option has been elected in earnings at each subsequent reporting date. SFAS No.
159 is effective for fiscal years beginning after November 15, 2007. Early
adoption is permitted as of the beginning of a fiscal year that begins on or
before November 15, 2007, provided the entity also elects to apply the
provisions of SFAS No. 157 “Fair Value Measurements”.  As of January 1,
2008 the Partnership adopted SFAS No.159. The Partnership has not elected the
fair value option for any assets or liabilities.




7


Table of
Contents




In
September 2006, the FASB issued Statement of Financial Accounting Standards 157,
“Fair Value Measurements” (“SFAS 157”), which provides guidance on measuring the
fair value of assets and liabilities. SFAS 157 applies to other accounting
pronouncements that require or permit assets or liabilities to be measured at
fair value but does not expand the use of fair value to any new circumstances.
This standard also requires additional disclosures in both annual and quarterly
reports. SFAS 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007 and will be adopted by the Partnership in the
first quarter of its fiscal year 2008.   In February 2008, the FASB issued
two Staff Positions on SFAS 157: (1) FASB Staff Position No. FAS 157-1 (FAS
157-1), “Application of FASB Statement No. 157 to FASB Statement No. 13 and
Other Accounting Pronouncements That Address Fair Value Measurements for
Purposes of Lease Classification or Measurement Under Statement 13,” and (2)
FASB Staff Position No. FAS 157-2 (FAS 157-2), “Effective Date of FASB Statement
No 157.” FAS 157-1 excludes FASB Statement No. 13, Accounting for Leases, as
well as other accounting pronouncements that address fair value measurements on
lease classification or measurement under Statement 13, from SFAS 157’s scope.
FAS157-2 partially defers Statement 157’s effective date.  As of January 1,
2008 the Partnership partially adopted SFAS No. 157 for all financial assets.
 Adoption of this pronouncement did not impact the financial statements of
the Partnership at September 30, 2008.  In October 2008, the FASB issued
FSP SFAS 157-3 "Determining the Fair Value of a Financial Asset When the Market
for That Asset is Not Active" ("FSP SFAS 157-3"), which is effective upon
issuance for all financial statements that have not been issued. FSP SFAS 157-3
clarifies the application of SFAS 157, in a market that is not active. The
Partnership is currently evaluating the potential impact, if any, of the
adoption of FSP SFAS 157-3 on its financial statements.





Basis
of Presentation





The
financial information presented as of any date other than December 31, 2007 has
been prepared from the books and records without audit.  Financial
information as of December 31, 2007 has been derived from the audited financial
statements of the Partnership, but does not include all disclosures required by
generally accepted accounting principles to be included in audited financial
statements.  In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
financial information for the periods indicated, have been
included.  For further information regarding the Partnership’s
accounting policies, refer to the financial statements and related notes
included in the Partnership’s annual report on Form 10-K for the year ended
December 31, 2007.  Operating results for the nine months ended
September 30, 2008 are not necessarily indicative of financial results that may
be expected for the full year ended December 31, 2008.





Long-Lived
Assets





The
Partnership evaluates its long-lived assets when events or circumstances
indicate that the value of the asset may not be recoverable.  The
Partnership determines whether an impairment exists by estimating the
undiscounted cash flows to be generated by each asset.  If the
estimated undiscounted cash flows are less than the carrying value of the asset,
then an impairment exists.  The amount of the impairment is determined
based on the difference between the carrying value and the fair
value.  Fair value is determined based on estimated discounted cash
flows to be generated by the asset.  The Partnership determined that
no impairment existed as of September 30, 2008.  The Partnership
recorded impairment charges of approximately $41,000 (included in depreciation
expense) for the period ended September 30, 2007.





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





Net
Income (Loss) Per Equivalent Limited Partnership Unit





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





3.
Computer Equipment





The
Partnership is the lessor of equipment under operating leases with periods
ranging from 11 to 36 months.  In general, associated costs such as
repairs and maintenance, insurance and property taxes are paid by the
lessee.





Through
September 30, 2008, the Partnership has only entered into operating
leases.  Lease revenue is recognized on the monthly straight-line
basis in accordance with the terms of the operating lease
agreements.  The company’s leases do not contain any step-rent
provisions or escalation clauses nor are lease revenues adjusted based on any
index.





8


Table of
Contents




Remarketing
fees are paid to the leasing companies from which the Partnership purchases
leases.  These are fees that are earned by the leasing companies when
the initial terms of the lease have been met and the equipment is re-leased or
sold.  The General Partner believes that this strategy adds value
since it entices the leasing company to "stay with the lease" for potential
extensions, remarketing or sale of equipment.  This strategy
potentially minimizes any conflicts the leasing company may have with a
potential new lease and will potentially assist in maximizing overall portfolio
performance.  The remarketing fee is tied into lease performance
thresholds and is factored in the negotiation of the fee.  Remarketing
fees incurred in connection with lease extensions are accounted for as operating
costs.  Remarketing fees incurred in connection with the sale of
computer equipment are included in our gain or loss calculations.  For
the nine months ended September 30, 2008 and 2007 remarketing fees were incurred
in the amount of approximately $51,000 and $1,000, respectively.For the nine months
ended September 30, 2008 and 2007, remarketing fees were paid in the amount of
approximately $22,000 and $0, respectively.





The
Partnership’s share of the computer equipment in which it participates with
other partnerships at September 30, 2008 and December 31, 2007 was approximately
$9,149,000 and $8,381,000, respectively, which is included in the Partnership’s
fixed assets on its balance sheet.  The total cost of the equipment
shared by the Partnership with other partnerships at September 30, 2008 and
December 31, 2007 was approximately $21,355,000 and $17,371,000,
respectively.  The Partnership’s share of the outstanding debt
associated with this equipment at September 30, 2008 and December 31, 2007 was
$1,202,000 and $1,683,000, respectively.  The total outstanding debt
associated with this equipment at September 30, 2008 and December 31, 2007 was
$3,012,000 and $3,187,000, respectively.





The
following is a schedule of future minimum rentals on noncancellable operating
leases at September 30, 2008:





AmountTtThree
      months ending December 31, 2008
                                  
                                  $
                                  1,534,466Year
      ended December 31, 2009
                                  
                                  
                                  3,178,972Year
      ended December 31, 2010
                                  
                                  
                                  539,617Year
      ended December 31, 2011
                                  
                                  
                                  68,655$
                                  5,321,710





4.
Related Party Transactions





Receivables/Payables





As of
September 30, 2008, the Partnership’s related party receivables and payables are
short term, unsecured, and non-interest bearing.





Reimbursable
Expenses





The
General Partner and its affiliates are entitled to reimbursement by the
Partnership for the cost of supplies and services obtained and used by the
General Partner in connection with the administration and operation of the
Partnership from third parties unaffiliated with the General
Partner.  In addition, the General Partner and its affiliates are
entitled to reimbursement for certain expenses incurred by the General Partner
and its affiliates in connection with the administration and operation of the
Partnership.  During the nine months ended September 30, 2008 and
2007, the Partnership recorded approximately $1,068,000 and $925,000,
respectively, for reimbursement of expenses to the General Partner.





Equipment
Acquisition Fee





The
General Partner is entitled to be paid an equipment acquisition fee of 4% of the
purchase price of each item of equipment purchased as compensation for the
negotiation of the acquisition of the equipment and lease thereof or sale under
a conditional sales contract.  For the nine months ended September 30,
2008 and 2007, equipment acquisition fees of approximately $42,000 and $231,000,
respectively, were earned bythe
General Partner.





Debt
Placement Fee





As
compensation for arranging term debt to finance the acquisition of equipment by
the Partnership, the General Partner is paid a fee equal to 1% of such
indebtedness; provided, however, that such fee shall be reduced to the extent
the Partnership incurs such fees to third parties, unaffiliated with the General
Partner or the lender, with respect to such indebtedness and no such fee will be
paid with respect to borrowings from the General Partner or its
affiliates.  For the nine months ended September 30, 2008 and 2007
debt placement fees of approximately $3,000 and $22,000, respectively, were
earned by the General Partner.





9


Table
of Contents




Equipment
Management Fee





The
General Partner is entitled to be paid a monthly fee equal to the lesser of (i)
the fees which would be charged by an independent third party for similar
services for similar equipment or (ii) the sum of (a) two percent of (1) the
gross lease revenues attributable to equipment which is subject to full payout
net leases which contain net lease provisions plus (2) the purchase price paid
on conditional sales contracts as received by the Partnership and (b) 5% of the
gross lease revenues attributable to equipment which is subject to operating and
capital leases.  For the nine months ended September 30, 2008 and
2007, equipment management fees of approximately $260,000 and $242,000,
respectively, were earned by the General Partner.





Equipment
Liquidation Fee





With
respect to each item of equipment sold by the General Partner (other than in
connection with a conditional sales contract), a fee equal to the lesser of (i)
50% of the competitive equipment sale commission or (ii) three percent of the
sales price for such equipment is payable to the General Partner.  The
payment of such fee is subordinated to the receipt by the limited partners of
the net disposition proceeds from such sale in accordance with the Partnership
Agreement.  Such fee will be reduced to the extent any liquidation or
resale fees are paid to unaffiliated parties.  For the nine months
ended September 30, 2008 and 2007, equipment liquidation fees of approximately
$18,000 and $200, respectively, were earned by the General Partner.





5.
Notes Payable





Notes
payable consisted of the following:


September
      30,
                                                              2008
                                                            
                                                            
                                                            December
      31,
                                                              2007Installment
      notes payable to banks; interest ranging from 4.65% to 6.30%, due in
      monthly installments ranging
                                                              from
      $1,095 to $14,239, including interest, with final payments from February
      through September 2008.
                                                            
                                                            $
                                                            -
                                                            
                                                            
                                                            $
                                                            275,143Installment
      notes payable to banks; interest ranging from 5.25% to 6.20% due in
      monthly installments ranging
                                                              from
      $6,588 to $134,671, including interest, with final payments from January
      through October 2009.
                                                            
                                                            
                                                            1,346,617
                                                            
                                                            
                                                            
                                                            2,337,462Installment
      notes payable to banks; interest ranging from 5.40% to 5.85%, due in
      monthly installments ranging
                                                              from
      $23,643 to $31,661, including interest, with final payments from January
      2010 through July 2010.
                                                            
                                                            
                                                            373,440
                                                            
                                                            
                                                            
                                                            521,613Installment
      note payable to bank; interest of 5.75%, due in monthly installment of
      $22,756, including interest,
                                                              with
      final payment in January 2011.
                                                            
                                                            
                                                            210,559
                                                            
                                                            
                                                            
                                                            -$
                                                            1,930,616
                                                            
                                                            
                                                            $
                                                            3,134,218





These
notes are secured by specific computer equipment and are nonrecourse liabilities
of the Partnership.  Aggregate maturities of notes payable for each of
the periods subsequent to September 30, 2008 are as follows:





AmountThree
      months ending December 31, 2008
                                      
                                      $
                                      427,099Year
      ended December 31, 2009
                                      
                                      
                                      1,278,705Year
      ended December 31, 2010
                                      
                                      
                                      202,378Year
      ended December 31, 2011
                                      
                                      
                                      22,434$
                                      1,930,616







10


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6.
Supplemental Cash Flow Information





Other
noncash activities included in the determination of net loss are as
follows:





Nine
      months ended September 30,
                                              
                                              2008
                                              
                                              
                                              2007Lease
      income, net of interest expense on notes payable realized as a result of
      direct payment of principal by lessee to bank
                                              
                                              $
                                              1,495,243
                                              
                                              
                                              $
                                              1,265,975





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





Noncash investing and financing
activities include the following:





Nine
      months ended September 30,
                                            
                                            2008
                                            
                                            
                                            2007Debt
      assumed in connection with purchase of computer equipment
                                            
                                            $
                                            291,642
                                            
                                            
                                            $
                                            2,219,952Equipment
      acquisition fees earned by General Partner upon purchase of equipment from
      prepaid acquisition fees
                                            
                                            $
                                            42,505
                                            
                                            
                                            $
                                            231,319Equipment
      acquisition fees earned by General Partner upon purchase of equipment from
      prepaid acquisition fees
                                            
                                            $
                                            42,505
                                            
                                            
                                            $
                                            231,319





Item
2: Management’s Discussion and Analysis of Financial Condition and Results of Operations





FORWARD
LOOKING STATEMENTS





Certain
statements within this Quarterly Report on Form 10-Q may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 (“PSLRA”). These statements are being made
pursuant to the PSLRA, with the intention of obtaining the benefits of the “safe
harbor” provisions of the PSLRA, and, other than as required by law, we assume
no obligation to update or supplement such statements. Forward-looking
statements are those that do not relate solely to historical fact. They include,
but are not limited to, any statement that may predict, forecast, indicate or
imply future results, performance, achievements or events. You can identify
these statements by the use of words such as “may,” “will,” “could,”
“anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict” or “project”
and variations of these words or comparable words or phrases of similar meaning.
These forward-looking statements reflect our current beliefs and expectations
with respect to future events and are based on assumptions and are subject to
risks and uncertainties and other factors outside our control that may cause
actual results to differ materially from those projected.





CRITICAL
ACCOUNTING POLICIES





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





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




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COMPUTER
EQUIPMENT




Commonwealth
Capital Corp., on behalf of the Partnership and other affiliated partnerships,
acquires computer equipment subject to associated debt obligations and lease
revenue and allocates a participation in the cost, debt and lease revenue to the
various affiliated partnerships based on certain risk factors. Depreciation on
computer equipment for financial statement purposes is based on the
straight-line method estimated generally over useful lives of three or four
years.





REVENUE
RECOGNITION





Through
September 30, 2008, the Partnership has only entered into operating
leases.  Lease revenue is recognized on a monthly straight-line basis
which is generally in accordance with the terms of the operating lease
agreement. The Partnership’s leases do not contain any step-rent provisions or
escalation clauses nor are lease revenues adjusted based on any
index.





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





LONG-LIVED
ASSETS





The
Partnership evaluates its long-lived assets when events or circumstances
indicate that the value of the asset may not be recoverable.  The
Partnership determines whether an impairment exists by estimating the
undiscounted cash flows to be generated by each asset.  If the
estimated undiscounted cash flows are less than the carrying value of the asset,
an impairment exists.  The amount of the impairment is determined
based on the difference between the carrying value and the fair
value.  Fair value is determined based on estimated discounted cash
flows to be generated by the asset.  The Partnership determined that
no impairment existed as of September 30, 2008.  The Partnership
recorded impairment charges of approximately $41,000 (included in depreciation
expense) for the period ended September 30, 2007.





LIQUIDITY
AND CAPITAL RESOURCES





The
Partnership’s primary source of capital for the nine months ended September 30,
2008 and 2007 was cash provided by operating activities of approximately
$1,709,000 and $2,588,000, respectively.  The primary uses of cash for the
nine months ended September 30, 2008 and 2007 were for capital expenditures for
new equipment of approximately $771,000 and $3,563,000 and for payment of
distributions to partners of approximately $1,873,000 and $1,875,000
respectively.





The
Partnership intends to invest approximately $1,800,000 in additional equipment
for the remainder of 2008.  The acquisition of this equipment will be
funded by debt financing and cash flows from lease rental payments.





For the
nine months ended September 30, 2008, the Partnership generated cash flows from
operating activities in the amount of approximately $1,709,000 and includes a
net loss of approximately $501,000, and depreciation and amortization expenses
of approximately $4,321,000.  Other non-cash activities included in
the determination of net loss include direct payments of lease income by lessees
to banks of approximately $1,495,000.





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For the
nine months ended September 30, 2007, the Partnership generated cash flows from
operating activities in the amount of approximately $2,588,000, which includes a
net loss of approximately $217,000, and depreciation and amortization expenses
of approximately $3,899,000.  Other non-cash activities included in
the determination of net loss include direct payments of lease income by lessees
to banks of approximately $1,266,000.





The
Partnership's investment strategy of acquiring computer equipment and leasing it
under “triple-net leases” to operators who generally meet specified financial
standards minimizes the Partnership's operating expenses.  As of
September 30, 2008, the Partnership had future minimum rentals on non-cancelable
operating leases of approximately $1,534,000 for the balance of the year ending
December 31, 2008 and approximately $3,788,000 thereafter.  As of
September 30, 2008, the outstanding debt was approximately $1,931,000 with
interest rates ranging from 5.25% to 6.20%, and will be payable through January
2011.





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





RESULTS
OF OPERATIONS




Three months ended September
30, 2008 compared to Three months ended September 30,
2007





For the
three months ended September 30, 2008, the Partnership recognized revenue of
approximately $1,649,000 and expenses of approximately $1,878,000, resulting in
a net loss of approximately $229,000.  For the three months ended
September 30, 2007, the Partnership recognized revenue of approximately
$1,774,000 and expenses of approximately $1,874,000, resulting in a net loss of
approximately $100,000.





Lease
income decreased by 5% to approximately $1,623,000 for the three months ended
September 30, 2008, from approximately $1,717,000 for the three months ended
September 30, 2007.  This decrease was primarily due to more lease
agreements ending versus new lease agreements being acquired during the three
months ended September 30, 2008.




Operating
expenses, excluding depreciation, primarily consist of accounting, legal,
outside service fees and reimbursement of expenses to CCC for administration and
operation of the Partnership.  The expenses increased by 18% to
approximately $328,000 for the three months ended September 30, 2008, from
$277,000 for the three months ended September 30, 2007.  This increase
is primarily attributable to an increase in remarketing, legal, administrative
and other LP expenses and is partially offset by decreases in bad debt,
insurance and information technology related expenses for the three months ended
September 30, 2008.





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The
equipment management fee is approximately 5% of the gross lease revenue
attributable to equipment that is subject to operating leases. The equipment
management fee decreased 5% to approximately $81,000 for the three months ended
September 30, 2008, from approximately $86,000 for the three months ended
September 30, 2007, which is consistent with the decrease in lease
income.





Depreciation
and amortization expenses consist of depreciation on computer equipment and
amortization of equipment acquisition fees. These expenses decreased 1% to
approximately $1,406,000 for the three months ended September 30, 2008, from
$1,425,000 for the three months ended September 30, 2007. This decrease was due
to equipment and acquisition fees being depreciated and amortized, as
applicable, with no offset from new equipment purchases.




Nine months ended September
30, 2008 compared to Nine months ended September 30,
2007





For the
nine months ended September 30, 2008, the Partnership recogized revenue of
approximately $5,349,000, and expenses of approximately $5,850,000 resulting in
a net loss of approximately $501,000.  For the nine months ended
September 30, 2007, the Partnership recognized revenue of approximately
$5,011,000, and expenses of approximately $5,228,000, resulting in a net loss of
approximately $217,000.





Lease
income increased 7% to $5,190,000 for the nine months ended September 30, 2008,
from $4,832,000, for the nine months ended September 30, 2007, primarily due to
the purchase of equipment that is subject to lease agreements during the nine
months ended September 30, 2008.





Operating
expenses, excluding depreciation, primarily consist of accounting, legal,
outside service fees and reimbursement of expenses to CCC, a related party, for
administration and operation of the Partnership.  The expenses
increased by 20% to approximately $1,123,000 for the nine months ended September
30, 2008, from $933,000 for the nine months ended September 30,
2007.  This increase is primarily attributable to an increase in
remarketing, legal, administrative, tax and other LP expenses and is partially
offset by decreases in bad debt, insurance and information technology related
expenses for the nine months ended September 30, 2008.





The
equipment management fee is approximately 5% of the gross lease revenue
attributable to equipment that is subject to operating leases. The equipment
management fee increased to 7% to approximately $260,000 for the nine months
ended September 30, 2008, from $242,000 for the nine months ended September 30,
2007, which is consistent with the increase in lease income.





Depreciation
and amortization expenses consist of depreciation on computer equipment and
amortization of equipment acquisition fees. These expenses increased 11% to
approximately $4,321,000 for the nine months ended September 30, 2008, from
$3,899,000 for the nine months ended September 30, 2007. This increase was due
to the acquisition of new equipment attributable to the purchase of new
leases.




Item
3.Quantitative and
Qualitative Disclosures About Market Risk


N/A





14


Table of Contents




Item
4T.  Controls and Procedures





Our
management, under the supervision and with the participation of the principal
executive officer and principal financial offer, have evaluated the
effectiveness of our controls and procedures related to our reporting and
disclosure obligations as of September 30, 2008 which is the end of the period
covered by this Quarterly Report on Form 10-Q.  Based on that
evaluation, the principal executive officer and principal financial officer have
concluded that our disclosure controls and procedures are effective to provide
that (a) material information relating to us, including our consolidated
affiliates is made known to these officers by us and our consolidated
affiliates’ other employees, particularly material information related to the
period for which this periodic report is being prepared; and (b) this
information is recorded, processed, summarized, evaluated and reported, as
applicable, within the time periods specified in the rules and forms promulgated
by the Securities and Exchange Commission.  There have been no
significant changes in the General Partner’s internal controls or in other
factors that could significantly affect our disclosure controls and procedures
in the third quarter of 2008 or subsequent to the date of the
evaluation.





Part
II:   OTHER INFORMATION





Item
1.                                Legal
Proceedings





In April
2007, our lessee Quick Loan Funding, Inc. began defaulting on its lease
payments.  From April 2007 through the first quarter of 2008 we attempted
several times to collect payment of outstanding lease payments and to recover
the equipment from this lessee. On April 2, 2008, we filed suit in the Superior
Court of Orange County, California (Docket No. 30-2008-00104785) against Quick
Loan Funding, Inc. and its owner, Daniel Sadek, to recover the unpaid lease
payments, late fees and the equipment. In July 2008, we recovered a portion of
the equipment leased to Quick Loan Funding, and we are continuing to pursue all
available means to recover the remainder of the equipment and the outstanding
amounts owed to us.  On September 24, 2008 we obtained a judgment against
Quick Loan Funding for all amounts owed to us. We are currently in the process
of executing this judgment against any available assets of Quick Loan Funding.
  While we believe Quick Loan Funding is currently insolvent, to our
knowledge no proceedings in bankruptcy have been initiated. We believe, based on
our physical inspection of Quick Loan’s physical assets during our repossession
efforts, that Quick Loan Funding may have sufficient assets to cover our
judgment lien against it.  To date, the Partnership has recorded a reserve
against all outstanding rentals in the amount of approximately
$43,000.  The Partnership determined that impairment in the amount of
approximately $15,000 existed as of September 30, 2008.  Prior to the
first quarter of 2008, the Partnership had impaired these assets by
approximately $18,000.




Item
      1A.
            Risk FactorsN/AItem
      2.
            Unregistered Sales of Equity Securitiesand Use of
      ProceedsN/AItem
      3.
            Defaults upon Senior SecuritiesN/AItem
      4
            Submission of Matters to a Vote of SecuritiesHoldersN/AItem
      5.
            Other InformationN/A   15
 Table of
Contents
  Item
      6.
            Exhibits







31.1 THE RULE 15d-14(a) CERTIFICATION OF PRINCIPAL
EXECUTIVE OFFICER


31.2THE RULE 15d-14(a) CERTIFICATION OF PRINCIPAL
FINANCIAL OFFICER


32.1SECTION 1350 CERTIFICATION OF PRINCIPAL EXECUTIVE
OFFICER


32.2SECTION 1350 CERTIFICATION OF PRINCIPAL FINANCIAL
OFFICER





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.





COMMONWEALTH
      INCOME & GROWTH FUND VBY:
      COMMONWEALTH INCOME & GROWTH FUND, INC., General
    PartnerNovember 14, 2008
                By:/s/ Kimberly A.
      Springsteen-AbbottDate
                Kimberly
      A. Springsteen-AbbottChief
      Executive OfficerBy
      :/s/ Lynn A.
    FranceschinaLynn
      A. FranceschinaExecutive
      Vice President, Chief Operating Officer