UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 ______________
 
 FORM
10-K
 
 ______________
 (Mark
One)
 
 x
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For
the fiscal year ended March 31, 2008
 
 OR
 
 [  ]
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 Commission
File Number 0-24650
 
 INDEPENDENCE
TAX CREDIT PLUS L.P. III
 (Exact
name of registrant as specified in its charter)
 
 Delaware
            
            13-3746339(State
      or other jurisdiction of incorporation or organization)
            
            (I.R.S.
      Employer Identification No.)625
      Madison Avenue, New York, New York
            
            10022(Address
      of principal executive offices)
            
            (Zip
      Code)
 
 Registrant’s
telephone number, including area code (212) 317-5700
 
 Securities
registered pursuant to Section 12(b) of the Act:
 
 None
 
 Securities
registered pursuant to Section 12(g) of the Act:
 
 Limited Partnership Interests and
Beneficial Assignment Certificates
 
 (Title of Class)
 
 Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.  Yes  [  ]   Nox
 
 Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.  Yes [  ]   Nox
 
 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.  Yes  x   No  [  ]
 
 Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this
chapter) is not contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.x
 
 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 “large
accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act.  (Check one):
 
 Large accelerated
filer  [  ]                                          Accelerated
filer  [  ]                                  Non-accelerated
filerx                                   Smaller reporting
company  [  ]
 
 Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the
Act).  Yes  [  ]   Nox
 
 The approximate aggregate book value of
the voting and non-voting common equity held by non-affiliates of the Registrant
as of September 30, 2007 was $3,060,000, based on Limited Partner equity as of
such date.
 
 DOCUMENTS
INCORPORATED BY REFERENCE
 
 None
 
 
  
  PART
I
 
 
 Item
1.  Business
 
 General
 
 Independence
Tax Credit Plus L.P. III (the “Partnership”) is a limited partnership which was
formed under the laws of the State of Delaware on December 23, 1993. The general
partner of the Partnership is Related Independence Associates III L.P., a
Delaware limited partnership (the “General Partner”).  The general
partner of the General Partner is Related Independence Associates III Inc., a
Delaware corporation (“RIAI III”).  The ultimate parent of the General
Partner is Centerline Holding Company (“Centerline”).
 
 On June
7, 1994, the Partnership commenced a public offering (the “Offering”) of
Beneficial Assignment Certificates (“BACs”) representing assignments of limited
partnership interests in the Partnership (“Limited Partnership Interests”),
managed by Related Equities Corporation (the “Dealer Manager”), pursuant to a
prospectus dated June 7, 1994 (the “Prospectus”).
 
 As of the
termination of the offering on May 9, 1995, the Partnership had received
$43,440,000 of gross proceeds of the Offering (the “Gross Proceeds”) from 2,810
investors (“BACs holders”). (See Item 8, “Financial Statements and Supplementary
Data,” Note 1).
 
 The
Partnership’s business is to invest in other partnerships (“Local Partnerships,”
“subsidiaries” or “subsidiary partnerships”) owning leveraged apartment
complexes (“Apartment Complexes” or “Properties”) that are eligible for the
low-income housing tax credit (“Tax Credit”) enacted in the Tax Reform Act of
1986, some of which may also be eligible for the historic rehabilitation tax
credit (“Historic Tax Credit”).  The Partnership’s investment in each
Local Partnership represents from 98.99% to 99.98%, other than two Local
Partnerships.  The Partnership’s investment in New Zion represents
42.39% of the partnership interests in the Local Partnership (the other 57.59%
of limited partnership interests is owned by affiliates of the Partnership, with
the same management).  The Partnership’s investment in Brannon Group
represents 53.85% of the partnership interests in the Local Partnership (the
other 46.14% of limited partnership interests is owned by affiliates of the
Partnership, with the same management).  As of March 31, 2008, the
Partnership had acquired interests in twenty Local Partnerships.  As
of March 31, 2008, approximately $35,051,000 (including approximately $2,953,000
classified as a loan repayable from sale/refinancing proceeds in accordance with
the contribution agreement with one Local Partnership and including acquisition
fees of approximately $2,510,000) of the net proceeds of the Offering has been
invested in Local Partnerships, of which approximately $120,000 remains to be
contributed to the Local Partnerships for payment by them to the original
sellers of the Properties (including approximately $115,000 being held in
escrow), as certain benchmarks such as occupancy levels must be attained prior
to the release of such funds. The Partnership does not intend to acquire
interests in additional Local Partnerships.
 
 Investment
Objectives/General Incentives
 
 The
Partnership was formed to invest in low-income Apartment Complexes that are
eligible for the Tax Credit enacted in the Tax Reform Act of 1986. Some
Apartment Complexes may also be eligible for Historic Tax Credits (“Historic
Complexes” or “Properties”). The investment objectives of the Partnership are
described below.
 
 1.
Entitle qualified BACs holders to Tax Credits over the period of the
Partnership’s entitlement to claim Tax Credits (for each Property, generally ten
years from the date of investment or, if later, the date the Property is leased
to qualified tenants; referred to herein as the “Credit Period”) with respect to
each Apartment Complex.
 
 2.
Preserve and protect the Partnership’s capital.
 
 3.
Participate in any capital appreciation in the value of the Properties and
provide distributions of sale or refinancing proceeds upon the disposition of
the Properties.
 
 4.
Allocate passive losses to individual BACs holders to offset passive income that
they may realize from rental real estate investments and other passive
activities, and allocate passive losses to corporate BACs holders to offset
business income.
 
 One of
the Partnership’s objectives is to entitle qualified BACs holders to Tax Credits
over the Credit Period. Each of the Local Partnerships in which the Partnership
has acquired an interest has been allocated by the relevant state credit
agencies the authority to recognize Tax Credits during the Credit Period
provided that the Local Partnership satisfies the rent restriction, minimum
set-aside and other requirements for recognition of the Tax Credits at all times
during such period. Once a Local Partnership has become eligible to recognize
Tax Credits, it may lose such eligibility and suffer an event of “recapture” if
its Property fails to remain in compliance with the Tax Credit requirements.
None of the Local Partnerships in which the Partnership has acquired an interest
has suffered an event of recapture.
 
 Tax
Credits with respect to a given Apartment Complex are available for a ten-year
period that commences when the property is leased to qualified tenants. However,
the annual Tax Credits available in the year in which the Apartment Complex is
leased to qualified tenants must be prorated based upon the months remaining in
the year. The amount of the annual Tax Credits not available in the first year
will be available in the eleventh year. Internal Revenue Code Section 42
regulates the use of the Apartment Complexes as to occupancy, eligibility, and
unit gross rent, among other requirements. Each Apartment Complex must meet the
provisions of these regulations during each of fifteen consecutive years (the
“Compliance Period”) in order to remain qualified to receive the credits.
Certain Apartment Complexes have extended compliance periods of up to fifty
years. The Partnership generated $1,999,760, $3,164,434 and $4,614,216 in Tax
Credits during the years ending December 31, 2007, 2006 and 2005,
respectively.
 
 Tax
Credits are attached to a Local Partnership for the ten-year Credit Period and
are transferable with the Property during the entirety of such ten-year
period.  If trends in the real estate market warranted the sale of a
Property, the remaining Tax Credits would transfer to the new owner, thereby
adding value to the Property on the market.  However, such value
declines each year and is not included in the financial statement carrying
amount.  The Credit Periods have expired and are scheduled to continue
to expire at various times from December 31, 2004 through December 31, 2009 with
respect to the Local Partnerships depending upon when the Credit Period
commenced.
 
 - 2
-
  A loss on
impairment of assets is recorded when management estimates amounts recoverable
through future operations and sale of the Property on an undiscounted basis are
below depreciated cost.  At that time the Property investments
themselves are reduced to estimated fair value (generally using the discounted
cash flow valuation method).  Through March 31, 2008, the Partnership
has recorded approximately $1,403,000 as a loss on impairment of assets or
reduction to estimated fair value for one Local Partnership.
 
 While the
value of the remaining Tax Credits are a factor in calculating fair value, the
expiration of the Credit Period, in and of itself, is not the only factor in
determining whether there is an impairment and generally does not have any
adverse impact on the fair value of the Local Partnerships.
 
 There can
be no assurance that the Partnership will achieve its investment objectives as
described above.
 
 The
Partnership is subject to the risks incident to potential losses arising from
the management and ownership of improved real estate. The Partnership can also
be affected by poor economic conditions generally; however, no more than 35% of
the Properties are located in any single state. There are also substantial risks
associated with owning interests in properties, as does the Partnership, which
receive government assistance, for example the possibility that Congress may not
appropriate funds to enable the Department of Housing and Urban Development
(“HUD”) to make rental assistance payments. HUD also restricts annual cash
distributions to partners based on operating results and a percentage of the
owner’s equity contribution. The Partnership cannot sell or substantially
liquidate its investments in subsidiary partnerships during the period that the
subsidy agreements are in existence without HUD’s approval. Furthermore, there
may not be market demand for apartments at full market rents when the rental
assistance contracts expire.
 
 Segments
 
 The
Partnership operates in one segment, which is the investment in multi-family
residential property.  Financial information about this segment is set
forth in Item 8 hereto.
 
 Competition
 
 The real
estate business is highly competitive and substantially all of the Properties
acquired by the Partnership are expected to have active competition from similar
properties in their respective vicinities. In addition, various other limited
partnerships have, in the past, and may, in the future, be formed by the General
Partner and/or its affiliates to engage in businesses which may be competitive
with the Partnership.
 
 Employees
 
 The
Partnership does not have any direct employees. All services are performed for
the Partnership by the General Partner and its affiliates. The General Partner
receives compensation in connection with such activities as set forth in Items
11 and 13. In addition, the Partnership reimburses the General Partner and
certain of its affiliates for expenses incurred in connection with the
performance by their employees of services for the Partnership in accordance
with the Partnership’s Amended and Restated Agreement of Limited Partnership
(the “Partnership Agreement”).
 
 Item
1A.  Risk Factors
 
 The
Partnership’s investment as a limited partner in the Local Partnerships is
subject to the risks of potential losses arising from management and ownership
of improved real estate. The Partnership’s investments also could be adversely
affected by poor economic conditions generally, which could increase vacancy
levels and rental payment defaults, and by increased operating expenses, any or
all of which could threaten the financing viability of one or more of the Local
Partnerships.
 
 There
also are substantial risks associated with the operation of Apartment Complexes
receiving government assistance. These include governmental regulations
concerning tenant eligibility, which may make it more difficult to rent
apartments in the Apartment Complexes; difficulties in obtaining government
approval for rent increases; limitations on the percentage of income which low
and moderate-income tenants may pay as rent; the possibility that Congress may
not appropriate funds to enable HUD to make the rental assistance payments it
has contracted to make; and that when the rental assistance contracts expire,
there may not be market demand for apartments at full market rents in a Local
Partnership’s Apartment Complex.
 
 Item
1B.  Unresolved Staff Comments
 
 None
 
 Item
2.  Properties
 
 The
Partnership is subject to the risks incidental to potential losses arising from
the management and ownership of improved real estate.  The Partnership
can also be affected by poor economic conditions.  As of March 31,
2008, the Partnership had acquired an interest in twenty Local Partnerships, all
of which have been consolidated for accounting purposes. Except for the interest
in New Zion Apartments, L.P. (“New Zion”) and the Brannon Group, L.C. (“Brannon
Group”), the Partnership’s investment in each Local Partnership represents
98.99% or 99.98% of the partnership interests in the Local Partnership. The
Partnership’s investment in New Zion represents 42.39% of the partnership
interests in the Local Partnership (the other 57.59% of limited partnership
interests is owned by affiliates of the Partnership, with the same
management).  The Partnership’s investment in Brannon Group represents
53.85% of the partnership interests in the Local Partnership (the other 46.14%
of limited partnership interests is owned by affiliates of the Partnership, with
the same management).  Set forth below is a schedule of the Local
Partnerships including certain information concerning their respective Apartment
Complexes (the “Local Partnership Schedule”). Further information concerning
these Local Partnerships and their Properties, including any encumbrances
affecting the Properties, may be found in Schedule III to the financial
statements which are included herein.
  - 3
-
  Local Partnership
Schedule
 
 Name
      and Location
                (Number
      of Units)
              
              %
      of Units Occupied at May 1,Date
      Acquired
              
              2008
              
              2007
              
              
              2006
              
              
              2005
              
              
              2004Edward
      Hotel Limited PartnershipLos
      Angeles, CA (47)
              
              November
      1994
              
              94
              %
              
              87
              %
              
              
              93
              %
              
              
              94
              %
              
              
              96
              %Pacific-East
      L.P.Brooklyn,
      NY (39)
              
              December
      1994
              
              92
              %
              
              92
              %
              
              
              92
              %
              
              
              100
              %
              
              
              100
              %Overtown
      Development Group, Ltd.Miami,
      FL (65)
              
              December
      1994
              
              78
              %
              
              85
              %
              
              
              97
              %
              
              
              83
              %
              
              
              72
              %Sumpter
      Commons Associates, L.P.Brooklyn,
      NY (21)
              
              April
      1995
              
              100
              %
              
              100
              %
              
              
              100
              %
              
              
              100
              %
              
              
              100
              %Park
      Housing Limited PartnershipHartford,
      CT  (30)
              
              May
      1995
              
              80
              %
              
              90
              %
              
              
              97
              %
              
              
              97
              %
              
              
              97
              %Livingston
      Manor Urban Renewal Associates, L.P.New
      Brunswick, NJ (50)
              
              June
      1995
              
              100
              %
              
              100
              %
              
              
              100
              %
              
              
              96
              %
              
              
              100
              %Jefferis
      Square Housing Partnership L.P.Chester,
      PA (36)
              
              June
      1995
              
              94
              %
              
              100
              %
              
              
              100
              %
              
              
              97
              %
              
              
              100
              %2301
      First Avenue Limited PartnershipNew
      York, NY (92)
              
              August
      1995
              
              98
              %
              
              99
              %
              
              
              97
              %
              
              
              100
              %
              
              
              98
              %Lewis
      Street L.P.Buffalo,
      NY (32)
              
              October
      1995
              
              97
              %
              
              88
              %
              
              
              100
              %
              
              
              88
              %
              
              
              84
              %Savannah
      Park Housing Limited PartnershipWashington,
      DC  (64)
              
              October
      1995
              
              94
              %
              
              97
              %
              
              
              97
              %
              
              
              95
              %
              
              
              89
              %Brannon
      Group, L.C.Leisure
      City, FL (80)
              
              December
      1995
              
              93
              %
              
              98
              %
              
              
              94
              %
              
              
              94
              %
              
              
              96
              %Mansion
      Court Phase II VenturePhiladelphia,
      PA (19)
              
              December
      1995
              
              42
              %
              
              53
              %
              
              
              74
              %
              
              
              79
              %
              
              
              100
              %Primm
      Place Partners, L.P.St.
      Louis, MI (128)
              
              December
      1995
              
              97
              %
              
              98
              %
              
              
              97
              %
              
              
              95
              %
              
              
              99
              %BK-9-A
      Partners L.P.Brooklyn,
      NY (23)
              
              December
      1995
              
              96
              %
              
              100
              %
              
              
              96
              %
              
              
              100
              %
              
              
              100
              %BK-10K
      Partners L.P.Brooklyn,
      NY (21)
              
              December
      1995
              
              100
              %
              
              100
              %
              
              
              100
              %
              
              
              96
              %
              
              
              100
              %Aspen-Olive
      AssociatesPhiladelphia,
      PA (22)
              
              October
      1996
              
              95
              %
              
              95
              %
              
              
              100
              %
              
              
              100
              %
              
              
              100
              %West
      Mill Creek Associates III L.P.Philadelphia,
      PA (72)
              
              January
      1997
              
              96
              %
              
              100
              %
              
              
              99
              %
              
              
              99
              %
              
              
              99
              %Universal
      Court AssociatesPhiladelphia,
      PA (32)
              
              April
      1997
              
              100
              %
              
              100
              %
              
              
              100
              %
              
              
              100
              %
              
              
              88
              %New
      Zion ApartmentsShreveport,
      LA (100)
              
              November
      1997
              
              99
              %
              
              100
              %
              
              
              100
              %
              
              
              94
              %
              
              
              96
              %Dreitzer
      HouseNew
      York, NY (32)
              
              December
      1997
              
              100
              %
              
              99
              %
              
              
              100
              %
              
              
              95
              %
              
              
              100
              %
  All
leases are generally for periods not greater than one to two years and no tenant
occupies more than 10% of the total rentable square footage in any single
Apartment Complex.
 
 - 4
-
  Commercial
tenants (to which average rental per square foot applies) comprise less than 5%
of the rental revenues of the Partnership. Maximum rents for the residential
units are determined annually by HUD and reflect increases/decreases in consumer
price indices in various geographic areas. Market conditions, however, determine
the amount of rent actually charged.
 
 Management
continuously reviews the physical state of the Properties and suggests to the
respective general partners of the Local Partnerships (“Local General Partners”)
budget improvements which are generally funded from cash flow from operations or
release of replacement reserve escrows to the extent available.
 
 Management
continuously reviews the insurance coverage of the Properties and believes such
coverage is adequate.
 
 See Item
1, Business, above for the general competitive conditions to which the
Properties described above are subject.
 
 Real
estate taxes are calculated using rates and assessed valuations determined by
the township or city in which the Property is located. Such taxes have
approximated 1% of the aggregate cost of the Properties as shown in Schedule III
to the financial statements included herein.
 
 In
connection with investments in development-stage Apartment Complexes, the
General Partner generally required that the Local General Partners provide
completion guarantees and/or undertake to repurchase the Partnership’s interest
in the Local Partnership if construction or rehabilitation was not completed
substantially on time or on budget (“Development Deficit Guarantees”). The
Development Deficit Guarantees generally also required the Local General Partner
to provide any funds necessary to cover net operating deficits of the Local
Partnership until such time as the Apartment Complex had achieved break-even
operations. The General Partner generally required that the Local General
Partners undertake an obligation to fund operating deficits of the Local
Partnership (up to a stated maximum amount) during a limited period of time
(typically three to five years) following the achievement of break-even
operations (“Operating Deficit Guarantees”).  As of March 31, 2008,
the gross amount of the Operating Deficit Guarantees aggregate approximately
$5,487,000, all of which have expired.  Management does not expect
that expiration to have a material impact on liquidity, based on prior years’
fundings. Amounts funded under such agreements are treated as noninterest
bearing loans, which will be paid only out of 50% of available cash flow or out
of available net sale or refinancing proceeds. In some instances, the Local
General Partners were required to undertake an obligation to comply with a
Rent-Up Guaranty Agreement, whereby the Local General Partner agreed to pay
liquidated damages if predetermined occupancy rates were not achieved. These
payments would have been made without right of repayment. In cases where the
General Partner deemed it appropriate, the obligations of a Local General
Partner under the Development Deficit, Operating Deficit and/or Rent-Up
Guarantees were secured by letters of credit and/or cash escrow
deposits.
 
 Tax
Credits with respect to a given Apartment Complex are available for a ten-year
period that commences when the property is leased to qualified tenants. However,
the annual Tax Credits available in the year in which the Apartment Complex is
leased must be prorated based upon the number of months remaining in the year.
The amount of the annual Tax Credit not available in the first year will be
available in the eleventh year. In certain cases, the Partnership acquired its
interest in a Local Partnership after the Local Partnership had placed its
Apartment Complex in service. In these cases, the Partnership may be allocated
Tax Credits only beginning in the month following the month in which it acquired
its interest and Tax Credits allocated in any prior period are not available to
the Partnership.
 
 Item
3.  Legal Proceedings
 
 None
 
 Item
4.  Submission of Matters to a Vote of Security Holders
 
 None
  - 5
-
  PART
II
 
 
 Item
      5.   Market for Registrant’s Common Equity, Related Security
      Holder Matters and Issuer Purchases of Equity
  Securities
 
 As of
March 31, 2008, the Partnership had issued and outstanding 43,440 Limited
Partnership Interests, each representing a $1,000 capital contribution to the
Partnership, or an aggregate capital contribution of $43,440,000.  All
of the issued and outstanding Limited Partnership Interests have been issued to
Independence Assignor Inc. (the “Assignor Limited Partner”), which has in turn
issued 43,440 BACs to the purchasers thereof for an aggregate purchase price of
$43,440,000. Each BAC represents all of the economic and virtually all of the
ownership rights attributable to a Limited Partnership Interest held by the
Assignor Limited Partner. BACs may be converted into Limited Partnership
Interests at no cost to the holder (other than the payment of transfer costs not
to exceed $100), but Limited Partnership Interests so acquired are not
thereafter convertible into BACs.
 
 Neither
the BACs nor the Limited Partnership Interests are traded on any established
trading market.  The Partnership does not intend to include the BACs
for quotation on NASDAQ or for listing on any national or regional stock
exchange or any other established securities market. The Revenue Act of 1987
contained provisions which have an adverse impact on investors in “publicly
traded partnerships.”  Accordingly, the General Partner has imposed
limited restrictions on the transferability of the BACs and the Limited
Partnership Interests in secondary market transactions. Implementation of the
restrictions should prevent a public trading market from developing and may
adversely affect the ability of an investor to liquidate his or her investment
quickly. It is expected that these procedures will remain in effect until such
time, if ever, as further revision of the Revenue Act of 1987 may permit the
Partnership to lessen the scope of the restrictions.
 
 As of May
28, 2008, the Partnership has approximately 2,552 registered holders of an
aggregate of 43,440 BACs.
 
 All of
the Partnership’s general partnership interests, representing an aggregate
capital contribution of $1,000, are held by the General Partner.
 
 There are
no material legal restrictions in the Partnership Agreement on the ability of
the Partnership to make distributions. However, the Partnership has made no
distributions to the BACs holders as of March 31, 2008.  The
Partnership does not anticipate providing cash distributions to its BACs holders
other than from net refinancing or sales proceeds.
 
 Transfer
Procedures
 The
Partnership from time to time receives requests by unit holders and others to
transfer BACs and/or Limited Partnership Interests.  Such requests may
occur in connection with tender offers for the Partnership’s
units.  Such requests implicate the Partnership’s policies and
procedures concerning transfers generally and tender offers in particular, which
were adopted by the Partnership pursuant to the terms of its Partnership
Agreement, to ensure compliance with applicable law, avoid adverse tax
consequences for the Partnership and its investors, and preserve the
Partnership’s advantageous tax status.
 
 In prior
years, the Partnership relied on the 5% safe harbor established by Internal
Revenue Service (“IRS”) regulations to avoid being characterized as a
“publicly-traded partnership” that is taxed as a corporation.  The 5%
safe harbor, however, expired and is no longer available as of December 31,
2005.  Accordingly, the Partnership now relies on a 2% safe harbor
established by another IRS regulation to avoid being characterized as a
“publicly-traded partnership” that is taxed as a corporation.
 
 A brief
summary of certain of the Partnership’s key policies, practices and requirements
with respect to transfers and tender offers is as follows:
 
 ·
            No
      transfer (whether for substitution, assignment or otherwise) is effective
      or binding on the Partnership unless and until it is approved by the
      General Partner.
 
 ·
            No
      transfer will be approved unless the transferor and transferee submit
      complete and properly executed forms of the Partnership’s own transfer
      documentation.  The Partnership does not accept forms of
      transfer documentation other than its own and does not accept signatures
      made by power of attorney in lieu of original signatures by each of the
      transferors and transferees.
 
 ·
            The
      Partnership will not approve transfers that in the cumulative aggregate
      for any tax year exceed the IRS 2% safe harbor, unless a financially
      responsible person provides the Partnership and its partners with (i) an
      indemnity (in form and substance in all ways acceptable to the General
      Partner) for all liability (including, without limitation, any adverse tax
      consequences) arising from or relating to exceeding the 2% safe harbor and
      (ii) a legal opinion (in form and substance in all ways acceptable to the
      General Partner) that there will be no adverse tax consequences to the
      Partnership and its partners from exceeding the 2% safe
      harbor.
 
 ·
            In
      order to avoid the undesirable situation of one or more tender offers
      consuming the entire safe harbor limitation early in the tax year and
      leaving the Partnership’s remaining investors with no liquidity
      opportunity for the rest of that tax year, the Partnership restricts the
      cumulative aggregate total of transfers made pursuant to all tender offers
      to 1.5% of its outstanding units in each tax year, unless a financially
      responsible person conducting such tender offer provides the Partnership
      with an acceptable indemnity and legal opinion of the type described
      above.  At the end of each tax year, the General Partner, in its
      discretion, may allow the cumulative total number of transfers (including
      those by tender offer) to reach the 2% safe harbor
  limit.
 
 ·
            The
      Partnership requires that all tender offers for its units be conducted in
      accordance with all applicable law including, without limitation, the
      federal securities laws.
 
 The
foregoing is solely a summary of the Partnership’s policies, requirements and
practices with respect to transfers and tender offers.  More complete
information, including a copy of the Partnership’s transfer documentation
package, may be obtained from the Partnership.
 
 - 6
-
 
 Item
6.  Selected Financial Data
 
 The
information set forth below presents selected financial data of the Partnership.
Additional financial information is set forth in the audited financial
statements in Item 8 hereof.
 
 OPERATIONS
            
            Years
      Ended March 31,2008
            
            
            2007
            
            
            2006
            
            
            2005
            
            
            2004Revenues
            
            $
            7,958,668
            
            
            $
            7,434,044
            
            
            $
            7,238,487
            
            
            $
            7,021,653
            
            
            $
            6,719,811Operating
      expenses
            
            
            (11,290,357
            )
            
            
            (12,361,897
            )
            
            
            (11,004,640
            )
            
            
            (10,353,250
            )
            
            
            (10,014,054
            )Net
      loss before minority interest
            
            
            (3,331,689
            )
            
            
            (4,927,853
            )
            
            
            (3,766,153
            )
            
            
            (3,331,597
            )
            
            
            (3,294,243
            )Minority
      interest in loss of subsidiary partnerships
            
            
            211,726
            
            
            
            246,896
            
            
            
            294,378
            
            
            
            92,458
            
            
            
            281,138Net
      loss
            
            $
            (3,119,963
            )
            
            $
            (4,680,957
            )
            
            $
            (3,471,775
            )
            
            $
            (3,239,139
            )
            
            $
            (3,013,105
            )Net
      loss per weighted average BAC
            
            $
            (71.10
            )
            
            $
            (106.68
            )
            
            $
            (79.12
            )
            
            $
            (73.82
            )
            
            $
            (68.67
            )FINANCIAL
      POSITION
            
            March
      31,2008
            
            
            2007
            
            
            2006
            
            
            2005
            
            
            2004Total
      assets
            
            $
            63,509,359
            
            
            $
            65,211,163
            
            
            $
            69,137,318
            
            
            $
            71,114,696
            
            
            $
            73,610,412Total
      liabilities
            
            $
            62,305,845
            
            
            $
            60,631,085
            
            
            $
            59,556,355
            
            
            $
            56,498,597
            
            
            $
            55,499,430Minority
      interest
            
            $
            172,601
            
            
            $
            429,202
            
            
            $
            749,130
            
            
            $
            2,312,491
            
            
            $
            2,568,235Total
      partners’ capital
            
            $
            1,030,913
            
            
            $
            4,150,876
            
            
            $
            8,831,833
            
            
            $
            12,303,608
            
            
            $
            15,542,747
 
 
 During
the year ended March 31, 2008, total assets decreased primarily due to
depreciation.  During the year ended March 31, 2007, total assets
decreased primarily due to depreciation and loss on impairment of
property.  During the years ended March 31, 2006, 2005 and 2004,
respectively, total assets decreased primarily due to depreciation.
 
 Cash
Distributions
 
 The
Partnership has made no distributions to the BACs holders as of March 31,
2008.
 
  - 7
-
  Item
7.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations
 
 Liquidity and Capital
Resources
 
 The
Partnership received $43,440,000 in gross proceeds for BACs pursuant to the
Offering resulting in net proceeds available for investment of approximately
$35,000,000 after volume discounts, payment of sales commissions, acquisition
fees and expenses, organization and offering expenses and establishment of a
working capital reserve.
 
 As of
March 31, 2008, the Partnership has invested approximately $35,051,000
(including approximately $2,953,000 classified as loans repayable from
sale/refinancing proceeds in accordance with the contribution agreement with one
Local Partnership and not including acquisition fees of approximately
$2,510,000) of the net proceeds of its Offering in twenty Local Partnerships of
which approximately $120,000 remains to be contributed to the Local Partnerships
for payment by them to the original sellers of the Properties (not including
approximately $115,000 being held in escrow) as certain benchmarks, such as
occupancy level, must be attained prior to the release of the funds. The
Partnership does not intend to acquire additional Properties. During the year
ended March 31, 2008, the Partnership did not make any advances to the Local
Partnerships.  Although the Partnership will not be acquiring
additional Properties, the Partnership may be required to fund potential
purchase price adjustments based on tax credit adjustor clauses.
 
 Short-term
 
 The
Partnership’s primary source of funds is rental revenues, which are fully
utilized at the Property level.
 
 For the
year ended March 31, 2008, cash and cash equivalents of the Partnership and its
twenty consolidated Local Partnerships increased approximately
($443,000).  This increase was due to net cash provided by operating
activities ($1,052,000), which exceeded an increase in cash held in escrow
relating to investing activities ($11,000) a net decrease in due to local
general partners and affiliates relating to investing and financing activities
($359,000), purchases of property and equipment ($132,000), a net repayment of
mortgage notes ($61,000) and a decrease in capitalization of consolidated
subsidiaries attributable to minority interest ($45,000).  Included in
the adjustment to reconcile the net loss to cash provided by operating
activities is depreciation and amortization in the amount of approximately
$(2,610,000).
 
 During
the year ended March 31, 2008, the Partnership received approximately $84,000 in
distributions from operations of the Local Partnerships.  Management
anticipates receiving distributions from operations in the future, although not
to a level sufficient to permit providing cash distributions to the BACs
holders. These distributions will be set aside as working capital reserves and
although likely not sufficient to cover all Partnership expenses, will be used
to meet the operating expenses of the Partnership.
 
 A working
capital reserve was previously established from the Partnership’s funds
available for investment, which includes amounts which may be required for
potential purchase price adjustments based on tax credit adjustor clauses. At
March 31, 2008, approximately $43,000 of this reserve remained
unused.
 
 In
connection with investments in development-stage Apartment Complexes, the
General Partner generally required that the Local General Partners provide
completion guarantees and/or undertake to repurchase the Partnership’s interest
in the Local Partnership if construction or rehabilitation was not completed
substantially on time or on budget (“Development Deficit Guarantees”). The
Development Deficit Guarantees generally also required the Local General Partner
to provide any funds necessary to cover net operating deficits of the Local
Partnership until such time as the Apartment Complex had achieved break-even
operations. The General Partner generally required that the Local General
Partners undertake an obligation to fund operating deficits of the Local
Partnership (up to a stated maximum amount) during a limited period of time
(typically three to five years) following the achievement of break-even
operations (“Operating Deficit Guarantees”).  As of March 31, 2008,
the gross amount of the Operating Deficit Guarantees aggregate approximately
$5,487,000, all of which have expired.  Management does not expect
that expiration to have a material impact on liquidity, based on prior years’
fundings. Amounts funded under such agreements are treated as noninterest
bearing loans, which will be paid only out of 50% of available cash flow or out
of available net sale or refinancing proceeds. In some instances, the Local
General Partners were required to undertake an obligation to comply with a
Rent-Up Guaranty Agreement, whereby the Local General Partner agreed to pay
liquidated damages if predetermined occupancy rates were not achieved. These
payments would have been made without right of repayment. In cases where the
General Partner deemed it appropriate, the obligations of a Local General
Partner under the Development Deficit, Operating Deficit and/or Rent-Up
Guarantees were secured by letters of credit and/or cash escrow
deposits.
 
 The
Operating Deficit Guaranty Agreements were negotiated to protect the
Partnership’s interest in the Local Partnerships and to provide incentive to the
Local General Partners to generate positive cash flow.
 
 Total
expenses for the year ended March 31, 2008, 2007 and 2006, respectively,
excluding depreciation and amortization, interest, general and administrative –
related parties and loss on impairment of fixed assets, totaled $5,843,577 and
$5,616,460.
 
 Accounts
payable as of March 31, 2008 and 2007 were $894,007 and $606,118
respectively.  Accounts payable are short term liabilities which are
expected to be paid from operating cash flows, working capital balances at the
Local Partnership level, Local General Partner advances and in certain
circumstances advances from the Partnership.  Because the provisions
of the secondary loans defer the payment of accrued interest of the respective
Local Partnerships, the Partnership believes it (and the applicable Local
Partnerships) has sufficient liquidity and ability to generate cash and to meet
existing and known or reasonably likely future cash requirements over both the
short and long term.
 
 Accrued
interest as of March 31, 2008 and 2007 was $9,665,774 and $8,592,177
respectively.  Such amount represents the accrued interest on all
mortgage loans, which include primary and secondary loans. Certain secondary
loans have provisions such that interest is accrued but not payable until a
future date. The Partnership anticipates the payment of accrued interest on the
secondary loans (which make up the majority of the accrued interest payable
amount and which have been accumulating since the Partnership’s investment in
the respective Local Partnership) will be made from future refinancings or sales
proceeds of the respective Local Partnerships. In addition, each Local
Partnership’s mortgage notes are collateralized by the land and buildings of the
respective Local Partnership, and are without further recourse to the
Partnership.
  - 8
-
  Partnership
management fees owed to the General Partner amounting to approximately
$3,586,000 and $3,233,000 were accrued and unpaid as of March 31, 2008 and 2007,
respectively. Without the General Partner’s continued accrual without payment of
certain fees and expense reimbursements, the Partnership will not be in a
position to meet its obligations. The General Partner has continued allowing the
accrual without payment of these amounts but is under no obligation to continue
to do so.
 
 Long-term
 
 For
discussion of contingencies affecting certain subsidiary partnerships, see
Results of Operations of Certain Local Partnerships, below. Since the maximum
loss the Partnership would be liable for is its net investment in the respective
subsidiary partnerships, the resolution of the existing contingencies is not
anticipated to impact future results of operations, liquidity or financial
condition in a material way. However, the Partnership’s loss of its investment
in a Local Partnership will eliminate the ability to generate future Tax Credits
from such Local Partnership and may also result in recapture of Tax Credits if
the investment is lost before the expiration of the Compliance
Period.
 
 Except as
described above, management is not aware of any trends or events, commitments or
uncertainties, which have not otherwise been disclosed that will or are likely
to impact liquidity in a material way. Management believes the only impact would
be for laws that have not yet been adopted. The portfolio is diversified by the
location of the Properties around the United States so that if one area of the
country is experiencing downturns in the economy, the remaining Properties in
the portfolio may be experiencing upswings. However, the geographic
diversification of the portfolio may not protect against a general downturn in
the national economy. The Partnership has invested the proceeds of its Offering
in twenty Local Partnerships, all of which have their Tax Credits fully in
place.  Tax Credits are attached to a Property for a period of ten
years, and are transferable with the Property during the remainder of the
ten-year period. If trends in the real estate market warranted the sale of a
Property, the remaining Tax Credits would transfer to the new owner, thereby
adding value to the Property on the market. However, such value declines each
year and is not included in the financial statement carrying
amount.  The Credit Periods have expired with respect to certain Local
Partnerships, and, with respect to the others, are scheduled to expire at
various times through December 31, 2009 depending upon when the Credit Period
commenced.  The Compliance Periods will continue through December 31,
2014 with respect to the Properties depending upon when the Credit Period
commenced.
 
 Tabular Disclosure of
Contractual Obligations
 
 The
following table summarizes the Partnership’s commitments as of March 31, 2008 to
make future payments under its debt agreements and other contractual
obligations.
 
 Total
            
            
            Less
      than
              1
      Year
            
            
            1 –
      3
              Years
            
            
            3
      -5
              Years
            
            
            More
      than
              5
      YearsMortgage
      notes payable (a)
            
            $
            43,468,564
            
            
            $
            594,415
            
            
            $
            4,250,650
            
            
            $
            3,807,893
            
            
            $
            34,815,606Land
      lease obligations (b)
            
            
            821,744
            
            
            
            21,252
            
            
            
            42,504
            
            
            
            42,504
            
            
            
            715,484Total
            
            $
            44,290,308
            
            
            $
            615,667
            
            
            $
            4,293,154
            
            
            $
            3,850,397
            
            
            $
            35,531,090
 
 (a)
            The
      mortgage and construction notes, which are collateralized by land and
      buildings, are payable in aggregate monthly installments of approximately
      $100,000 including principal and interest at rates varying from 0% to 10%
      per annum, through the year 2046. Each subsidiary partnership’s mortgage
      note payable is collateralized by the land and buildings of the respective
      subsidiary partnership, the assignment of each certain subsidiary
      partnership’s rents and leases, and is without further
      recourse.
 
 (b)
            One
      of the subsidiary partnerships is leasing the land on which its apartment
      complex is located for a term of 50 years, which commenced in August 1996,
      with monthly rent payments of $1,449.  Additional rent of $322
      per month, up to $100,000, will be paid during the final term to reimburse
      the District of Columbia Department of Housing and Community Development
      for site improvement costs.  See Item 8, “Financial Statements
      and Supplementary Data”, Note 11a.
 
 Off Balance Sheet
Arrangements
 
 The
Partnership has no off-balance sheet arrangements.
 
 Critical Accounting
Policies
 
 In
preparing the consolidated financial statements, management has made estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods.  Actual results could differ
from those estimates. Set forth below is a summary of the accounting policies
that management believes are critical to the preparation of the consolidated
financial statements. The summary should be read in conjunction with the more
complete discussion of the Partnership’s accounting policies included in Item 8,
Note 2 to the consolidated financial statements in this annual report on Form
10-K.
 
 Property and
Equipment
 
 Property
and equipment to be held and used are carried at cost which includes the
purchase price, acquisition fees and expenses, and any other costs incurred in
acquiring the Properties. The cost of property and equipment is depreciated over
their estimated useful lives using accelerated and straight-line methods.
Expenditures for repairs and maintenance are charged to expense as incurred;
major renewals and betterments are capitalized. At the time property and
equipment are retired or otherwise disposed of, the cost and accumulated
depreciation are eliminated from the assets and accumulated depreciation
accounts and the profit or loss on such disposition is reflected in earnings.
The Partnership complies with Statement of Financial Accounting Standards
(“SFAS”) No. 144 “Accounting for the Impairment or Disposal of Long-Lived
Assets”.  A loss on impairment of assets is recorded when management
estimates amounts recoverable through future operations and sale of the Property
on an undiscounted basis are below depreciated cost. At that time Property
investments themselves are reduced to estimated fair value (generally using
discounted cash flows).
 
 - 9
-
  Through
March 31, 2008, the Partnership has recorded approximately $1,403,000 as a loss
on impairment of assets or reduction to estimated fair value for one Local
Partnership.
 
 At the
time management commits to a plan to dispose of assets, said assets are adjusted
to the lower of carrying amount or fair value less costs to sell. These assets
are classified as property and equipment-held for sale and are not depreciated.
Through March 31, 2008, the Partnership has not recorded or classified any
property and equipment as held for sale.
 
 Revenue
Recognition
 
 Rental
income is earned primarily under standard residential operating leases and is
typically due the first day of each month, but can vary by Property due to the
terms of the tenant leases. Rental income is recognized when earned and charged
to tenants’ accounts receivable if not received by the due date. Rental payments
received in advance of the due date are deferred until earned. Rental subsidies
are recognized as rental income during the month in which it is
earned.
 
 Other
revenues are recorded when earned and consist of the following
items:  Interest income earned on cash and cash equivalent balances
and cash held in escrow balances, income from forfeited security deposits, late
charges, laundry and vending income and other rental related items.
 
 Other
revenues include the following amounts at both the Partnership and Local
Partnership level:
 
 Years
      Ended March 31,2008
            
            
            2007
            
            
            2006Interest
            
            $
            179,747
            
            
            $
            149,881
            
            
            $
            118,270Other
            
            
            219,498
            
            
            
            155,401
            
            
            
            170,101Total
      other revenue
            
            $
            399,245
            
            
            $
            305,282
            
            
            $
            288,371
 
 Income
Taxes
 
 The
Partnership is not required to provide for, or pay, any federal income taxes.
Net income or loss generated by the Partnership is passed through to the
partners and is required to be reported by them. The Partnership may be subject
to state and local taxes in jurisdictions in which it operates. For income tax
purposes, the Partnership has a fiscal year ending December 31.
  New Accounting
Pronouncements
 
 In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements,
which established a framework for measuring the fair value of assets and
liabilities as required by numerous other accounting pronouncements, and expands
disclosure requirements for the fair values of certain assets and
liabilities.  This statement is effective for the Partnership’s year
ending March 31, 2009.  The provisions of this statement will not have
a material impact on the consolidated financial statements.
 
 In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities. This statement was issued with the
intent to provide an alternative measurement treatment for certain financial
assets and liabilities. The alternative measurement would permit fair value to
be used for both initial and subsequent measurement, with changes in fair value
recognized in earning as those changes occur.  This “Fair Value
Option” would be available on a contract by contract basis.  This
statement is effective for the Partnerships’ year ending March 31,
2009.  The provisions of this statement will not have a material
impact on the consolidated financial statements.
 
 
 In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements.  This statement was issued
with the intent to improve the relevance, comparability and transparency of the
financial information that a reporting entity provides in its consolidated
financial statements for those entities that have outstanding noncontrolling
interest in one or more subsidiaries.  The effective date for this
provision is for fiscal year ends beginning after December 15,
2008.  The Partnership is currently evaluating the impact of the
provisions of this statement on the consolidated financial
statements.
 
 Results of
Operations
 
 The
following is a summary of the results of operations of the Partnership for the
years ended March 31, 2008, 2007 and 2006 (the 2007, 2006 and 2005 Fiscal
Years).
 
 The net
loss for the 2007, 2006 and 2005 Fiscal Years aggregated $3,119,963, $4,680,957
and $3,471,775 respectively.
 
 The
Partnership and BACs holders began recognizing Tax Credits with respect to a
Property when the Credit Period for such Property commenced. Because of the time
required for the acquisition, completion and rent-up of Properties, the amount
of Tax Credits per BAC gradually increased over the first three years of the
Partnership.  Tax Credits not recognized in the first three years will
be recognized in the 11th through 13th years.  The Partnership
generated $1,999,760, $3,164,434 and $5,580,448 Tax Credits during the 2007,
2006 and 2005, tax years, respectively.
 
 - 10
-
  2007 vs.
2006
 
 Rental
income increased by approximately 6% for the 2007 Fiscal Year as compared to the
2006 Fiscal Year, primarily due to an adjustment in the current year for the
underaccrual of subsidiary receivable in the prior year at one Local Partnership
and  rental rate increases at the Local Partnerships.
 
 Other
income increased approximately $94,000 for the 2007 Fiscal Year as compared to
the 2006 Fiscal Year, primarily due to insurance claim proceeds received at one
Local Partnership, water and sewer refunds received at a second Local
Partnership and an increase in interest income at a third Local
Partnership.
 
 Total
expenses, excluding general and administrative-related parties and loss on
impairment of fixed assets, remained fairly consistent with an increase of 2%
for the 2007 Fiscal Year as compared to the 2006 Fiscal Year.
 
 General
and administrative-related parties expense increased approximately $151,000 for
the 2007 Fiscal Year compared to the 2006 Fiscal Year, primarily due to an
increase in expense reimbursements at the Partnership level and an increase in
property management fees due to a change in the managing agent from an
unaffiliated third party to an affiliate at one Local Partnership.
 
 2006 vs.
2005
 
 Rental
income increased approximately 3% for the 2006 Fiscal Year compared to the 2005
Fiscal Year, primarily due to increases in occupancies at three Local
Partnerships and rental rate increases at the other Local
Partnerships.
 
 Total
expenses, excluding general and administrative-related parties expense and loss
on impairment of fixed assets remained consistent with a decrease of less than
1% for the 2006 Fiscal Year as compared to the 2005 Fiscal Year.
 
 General
and administrative-related parties expense decreased approximately $106,000 for
the 2006 Fiscal Year compared to the 2005 Fiscal Year, primarily due to a
decrease in expense reimbursements at the Partnership level and a supervisory
and incentive property management fee incurred to an affiliate in the prior year
at one Local Partnership.
  Results of Operations of
Certain Local Partnerships
 
 Subsidiary Partnerships –
Going Concerns and Uncertainties
 
 Mansion Court Phase II
Venture (“Mansion Court”)
 The
financial statements for Mansion Court have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplates continuation of Mansion Court as a going concern.  In
prior years and in 2007, the Mansion Court has sustained operating losses and
has not generated sufficient cash flow from operations to meet its obligations,
particularly related party payables.  The Local General Partner has
provided funding in the past years; however, there is no obligation to do
so.  Mansion Court also has experienced a high number of vacancies due
to deteriorating conditions in the area.  Management of Mansion Court
is exploring options to mitigate increased crime and deteriorating neighborhood
conditions.  These options include assistance from local government
housing agencies and could include transfer of ownership.
 
 The
Partnership’s investment in Mansion Court at March 31, 2008 and 2007 was reduced
to zero as a result of prior years’ losses and the minority interest balance was
$0 at each date.  Mansion Court’s net loss after minority interest
amounted to approximately $83,000, $1,556,000 and $91,000 for the 2007, 2006 and
2005 Fiscal Years.  The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
 Other
 The
Partnership’s investment as a limited partner in the Local Partnerships is
subject to the risks of potential losses arising from management and ownership
of improved real estate. The Partnership’s investments also could be adversely
affected by poor economic conditions generally, which could increase vacancy
levels and rental payment defaults, and increase operating expenses, any or all
of which could threaten the financing viability of one or more of the Local
Partnerships.
 
 There
also are substantial risks associated with the operation of Apartment Complexes
receiving government assistance. These include governmental regulations
concerning tenant eligibility, which may make it more difficult to rent
apartments in the Apartment Complexes; difficulties in obtaining government
approval for rent increases; limitations on the percentage of income which low
and moderate-income tenants may pay as rent; the possibility that Congress may
not appropriate funds to enable HUD to make the rental assistance payments it
has contracted to make; and that when the rental assistance contracts expire
there may not be market demand for apartments at full market rents in a Local
Partnership’s Apartment Complex.
 
 The Local
Partnerships are impacted by inflation in several ways. Inflation allows for
increases in rental rates generally to reflect the impact of higher operating
and replacement costs. Inflation also affects the Local Partnerships adversely
by increasing operating costs, for example, for such items as fuel, utilities
and labor.
 
 Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
 
 Mortgage
notes are payable in aggregate monthly installments including principal and
interest at rates varying from 0% to 10% per annum.  The Partnership
does not believe there is a material risk associated with the various interest
rates associated with the mortgage notes as the majority of the Local
Partnership mortgage notes have fixed rates.  The Partnership
currently discloses in Item 8, Note 3 of the Notes to Consolidated Financial
Statements, the fair value of the mortgage notes payable.  The
Partnership does not have any other market risk sensitive
instruments.
 
  - 11
-
  
 Item
      8.
            Financial
      Statements and Supplementary DataSequential
              PageConsolidated
      Financial StatementsReport
      of Independent Registered Public Accounting Firm
            
            13Consolidated
      Balance Sheets at March 31, 2008 and 2007
            
            50Consolidated
      Statements of Operations for the Years Ended March 31, 2008, 2007 and
      2006
            
            51Consolidated
      Statements of Changes in Partners’ Capital (Deficit) for the Years Ended
      March 31, 2008, 2007 and 2006
            
            52Consolidated
      Statements of Cash Flows for the Years Ended March 31, 2008, 2007 and
      2006
            
            53Notes
      to Consolidated Financial Statements
            
            54
 
 
  - 12
-
  REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners of
 Independence
Tax Credit Plus L.P. III and Subsidiaries
 (a
Delaware limited partnership)
 
 We have
audited the consolidated balance sheets of Independence Tax Credit Plus L.P. III
and Subsidiaries (a Delaware limited partnership) as of March 31, 2008 and 2007,
and the related consolidated statements of operations, changes in partners'
capital (deficit), and cash flows for the years ended March 31, 2008, 2007 and
2006 (the 2007, 2006 and 2005 Fiscal Years, respectively).  These
financial statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.  We did not audit the
financial statements for seventeen (2007 Fiscal Year), eighteen (2006 Fiscal
Year) and four (2005 Fiscal Year) subsidiary partnerships whose losses
aggregated $2,069,413, $3,812,500 and $750,146 for the years ended March 31,
2008, 2007 and 2006, respectively, and whose assets constituted 80% and 82% of
the Partnership's assets at March 31, 2008 and 2007, presented in the
accompanying consolidated financial statements.  The financial
statements for these subsidiary partnerships were audited by other auditors
whose reports thereon have been furnished to us and our opinion expressed
herein, insofar as it relates to the amounts included for these subsidiary
partnerships, is based solely upon the reports of the other
auditors.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, based upon our audits, and the reports of the other auditors referred
to above, the consolidated financial statements referred to in the first
paragraph present fairly, in all material respects, the financial position of
Independence Tax Credit Plus L.P. III and Subsidiaries at March 31, 2008 and
2007, and the results of their operations and their cash flows for the years
ended March 31, 2008, 2007 and 2006, in conformity with U.S. generally accepted
accounting principles.
 
 /s/TRIEN
ROSENBERG ROSENBERG
 WEINBERG
CIULLO & FAZZARI LLP
 
 New York,
New York
 June 18,
2008
 
  - 13
-
  [HOLTHOUSE
CARLIN & VAN TRIGT LLP LETTERHEAD]
 
 Independent
Auditors' Report
 
 To the
Partners of the
 Edward
Hotel Limited Partnership:
 
 We have
audited the accompanying balance sheets of Edward Hotel Limited Partnership (a
California limited partnership) as of December 31, 2007 and 2006, and the
related statements of operations, changes in partners' deficit and cash flows
for the years then ended.  These financial statements are the
responsibility of the Partnership's management.  Our responsibility is
to express an opinion on these financial statements based on our
audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Edward Hotel Limited Partnership as
of December 31, 2007 and 2006, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
 
 
 /s/
Holthouse Carlin & Van Trigt LLP
 Santa
Monica, California
 February
28, 2008
  - 14
-
  [HOLTHOUSE
CARLIN & VAN TRIGT LLP LETTERHEAD]
 
 INDEPENDENT AUDITORS'
REPORT
 
 To the
Partners of the
 Edward
Hotel Limited Partnership:
 
 We have
audited the accompanying balance sheets of Edward Hotel Limited Partnership (a
California limited partnership) as of December 31, 2006 and 2005, and the
related statements of operations, changes in partners' deficit and cash flows
for the years then ended.  These financial statements are the
responsibility of the Partnership's management.  Our responsibility is
to express an opinion on these financial statements based on our
audits.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Edward Hotel Limited Partnership as
of December 31, 2006 and 2005, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
 
 Our
audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole.  The information included in
the accompanying Schedule I is presented for purposes of additional analysis and
is not a required part of the basic financial statements.  Such
information has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
 
 /s/
Holthouse Carlin & Van Trigt LLP
 Santa
Monica, California
 February
21, 2007
  - 15
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 INDEPENDENT
AUDITORS’ REPORT
 
 To the
Partners
 Pacific-East
L.P.
 
 We have
audited the accompanying balance sheet of Pacific-East L.P. for the year ended
December 31, 2007, and the related statements of operations, partners' deficit
and cash flows for the year then ended.  These financial statements
are the responsibility of the Partnership's management.  Our
responsibility is to express an opinion on these financial statements based on
our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor we were engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Pacific-East L.P. as of December
31, 2007, and the results of its operations, and its cash flows for the year
then ended, in conformity with accounting principles generally accepted in the
United States of America.
 
 /s/
Reznick Group, P.C.
 Atlanta,
Georgia
 March 28,
2008
  - 16
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Pacific-East
L.P.
 
 We have
audited the accompanying balance sheets of Pacific-East L.P. as of December 31,
2006, and the related statements of operations, partners' equity (deficit) and
cash flows for the year then ended.  These financial statements are
the responsibility of the Partnership's management.  Our
responsibility is to express an opinion on these financial statements based on
our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor we were engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Pacific-East L.P. as of December
31, 2006, and the results of its operations, and its cash flows for the years
then ended, in conformity with accounting principles generally accepted in the
United States of America.
 
 /s/
Reznick Group, P.C.
 Atlanta,
Georgia
 April 9,
2007
  - 17
-
  [SMITH,
ORTIZ, GOMEZ AND BUZZI, P.A.  LETTERHEAD]
 
 INDEPENDENT AUDITORS'
REPORT
 
 The
Partners
 Overtown
Development Group, Ltd.
 (A
Limited Partnership):
 
 We have
audited the accompanying balance sheets of Overtown Development Group, Ltd. (A
Limited Partnership) as of December 31, 2007 and 2006, and the related statement
of operations, changes in partners' capital, and cash flows for the years then
ended.  These financial statements are the responsibility of Overtown
Development Group, Ltd. management.  Our responsibility is to express
an opinion on these financial statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor we were engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.
 
 In our
opinion, based on our audits, the financial statements referred to above present
fairly, in all material respects, the financial position of Overtown Development
Group, Ltd. as of December 31, 2007 and 2006, and the results of its operations
changes in partners’ equity and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.
 
 /s/
Smith, Ortiz, Gomez and Buzzi, P.A.
 Miami,
Florida
 January
24, 2008
 
 
  - 18
-
  [SMITH,
ORTIZ, GOMEZ AND BUZZI, P.A.  LETTERHEAD]
 
 INDEPENDENT AUDITORS'
REPORT
 
 The
Partners
 Overtown
Development Group, Ltd.
 (A
Limited Partnership):
 
 We have
audited the accompanying balance sheets of Overtown Development Group, Ltd. (A
Limited Partnership) as of December 31, 2006 and 2005, and the related statement
of operations, changes in partners' capital, and cash flows for the years then
ended.  These financial statements are the responsibility of Overtown
Development Group, Ltd. management.  Our responsibility is to express
an opinion on these financial statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor we were engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.
 
 In our
opinion, based on our audits, the financial statements referred to above present
fairly, in all material respects, the financial position of Overtown Development
Group, Ltd. as of December 31, 2006 and 2005, and the results of its operations
changes in partners’ equity and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.
 
 /s/
Smith, Ortiz, Gomez and Buzzi, P.A.
 Miami,
Florida
 January
26, 2007
 
 
  - 19
-
  [LAWLOR
& O'BRIEN, CERTIFIED PUBLIC ACCOUNTANTS LETTERHEAD]
 
 INDEPENDENT AUDITORS'
REPORT
 
 To the
Partners
 Sumpter
Commons Associates, L.P.
 
 We have
audited the accompanying balance sheet of Sumpter Commons Associates, L.P. as of
December 31, 2007, and the related statements of operations, changes in
partners' (deficit), and cash flows for the year then ended.  These
financial statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Sumpter Commons Associates, L.P. as
of December 31, 2007, and the results of its operations, changes in partners'
(deficit), and cash flows for the year then ended in conformity with generally
accepted accounting principles in the United States of America.
 
 
 /s/
Lawlor & O’Brien, Certified Public Accountants
 Totowa,
New Jersey
 February
27, 2008
  - 20
-
  [LAWLOR
& O'BRIEN, CERTIFIED PUBLIC ACCOUNTANTS LETTERHEAD]
 
 INDEPENDENT
AUDITORS' REPORT
 
 To the
Partners
 Sumpter
Commons Associates, L.P.
 
 We have
audited the accompanying balance sheet of Sumpter Commons Associates, L.P. as of
December 31, 2006, and the related statements of operations, changes in
partners' (deficit), and cash flows for the year then ended.  These
financial statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Sumpter Commons Associates, L.P. as
of December 31, 2006, and the results of its operations, changes in partners'
(deficit), and cash flows for the year then ended in conformity with generally
accepted accounting principles in the United States of America.
 
 
 /s/
Lawlor & O’Brien, Certified Public Accountants
 Totowa,
New Jersey
 February
27, 2007
  - 21
-
  [KOSTIN,
RUFFKESS & COMPANY, LLC LETTERHEAD]
 
 To The
Partners
 Park
Housing Limited Partnership
 
 INDEPENDENT AUDITORS'
REPORT
 
 We have
audited the accompanying balance sheet of Park Housing Limited Partnership as of
December 31, 2006, and the related statements of operations and changes in
partners' capital, and cash flows for the year then ended.  These
financial statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Park Housing Limited Partnership as
of December 31, 2006, and the results of its operations and cash flows for the
year then ended, in accordance with accounting principles generally accepted in
the United States of America.
 
 
 /s/
Kostin, Ruffkess & Company, LLC
 Farmington,
Connecticut
 February
28, 2007
  - 22
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Livingston
Manor Urban Renewal Associates, L.P.
 
 We have
audited the accompanying balance sheet of Livingston Manor Urban Renewal
Associates, L.P. as of December 31, 2007, and the related statements of
operations, changes in partners' equity (deficit) and cash flows for the year
then ended.  These financial statements are the responsibility of the
partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Livingston Manor Urban Renewal
Associates, L.P. as of December 31, 2007, and the results of its operations,
changes in partners' equity (deficit) and its cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.
 
 
 /s/
Reznick Group, P.C.
 Baltimore,
Maryland
 March 25,
2008
  - 23
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Livingston
Manor Urban Renewal Associates, L.P.
 
 We have
audited the accompanying balance sheet of Livingston Manor Urban Renewal
Associates, L.P. as of December 31, 2006, and the related statements of
operations, changes in partners' equity (deficit) and cash flows for the year
then ended.  These financial statements are the responsibility of the
partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Livingston Manor Urban Renewal
Associates, L.P. as of December 31, 2006, and the results of its operations,
changes in partners' equity (deficit) and its cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.
 
 /s/
Reznick Group, P.C.
 Baltimore,
Maryland
 March 28,
2007
  - 24
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Jefferis
Square Housing Partnership, L.P.
 
 We have
audited the accompanying balance sheet of Jefferis Square Housing Partnership,
L.P. as of December 31, 2007, and the related statements of operations, changes
in partners' equity (deficit) and cash flows for the year then
ended.  These financial statements are the responsibility of the
partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Jefferis Square Housing
Partnership, L.P. as of December 31, 2007, and the results of its operations,
the changes in partners' equity (deficit) and its cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.
 
 /s/
Reznick Group, P.C.
 Baltimore,
Maryland
 March 21,
2008
  - 25
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Jefferis
Square Housing Partnership, L.P.
 
 We have
audited the accompanying balance sheet of Jefferis Square Housing Partnership,
L.P. as of December 31, 2006, and the related statements of operations, changes
in partners' equity (deficit) and cash flows for the year then
ended.  These financial statements are the responsibility of the
partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Jefferis Square Housing
Partnership, L.P. as of December 31, 2006, and the results of its operations,
the changes in partners' equity (deficit) and its cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.
 
 /s/
Reznick Group, P.C.
 Baltimore,
Maryland
 March 29,
2007
  - 26
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 INDEPENDENT
AUDITORS’ REPORT
 
 To the
Partners
 2301
First Avenue Limited Partnership
 
 We have
audited the accompanying balance sheet of 2301 First Avenue Limited Partnership,
for the year ended December 31, 2007, and the related statements of operations,
changes in partners' equity (deficit) and cash flows for the year then
ended.  These financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor we were engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of 2301 First Avenue Limited
Partnership, as of December 31, 2007, and the results of its operations and its
cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
 
 
 /s/
Reznick Group, P.C.
 Atlanta,
Georgia
 March 20,
2008
  - 27
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 2301
First Avenue Limited Partnership
 
 We have
audited the accompanying balance sheet of 2301 First Avenue Limited Partnership,
for the year ended December 31, 2006, and the related statements of operations,
changes in partners' equity (deficit) and cash flows for the year then
ended.  These financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor we were engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of 2301 First Avenue Limited
Partnership, as of December 31, 2006, and the results of its operations and its
cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
 
 /s/
Reznick Group, P.C.
 Atlanta,
Georgia
 March 7,
2007
  - 28
-
  [TOSKI,
SCHAEFER & CO., P.C.  LETTERHEAD]
 
 INDEPENDENT
AUDITOR'S REPORT
 
 The
Partners
 Lewis
Street Limited Partnership:
 
 We have
audited the accompanying balance sheets of Lewis Street Limited Partnership as
of December 31, 2006 and 2005 and the related statements of operations,
partners' equity and cash flows for the years then ended.  These
financial statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Lewis Street Limited Partnership as
of December 31, 2006 and 2005 and the results of its operations, changes in
partners' equity and cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of
America.
 
 Our
audits were made for the purpose of forming an opinion on the basic financial
statements taken as a whole.  The accompanying supplemental
information is presented for purposes of additional analysis and is not a
required part of the basic financial statements.  Such information has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a
whole.
 
 /s/
Toski, Schaefer & Co., P.C.
 Williamsville,
New York
 February
2, 2007
  - 29
-
  [TOSKI,
SCHAEFER & CO., P.C.  LETTERHEAD]
 
 INDEPENDENT
AUDITOR'S REPORT
 
 The
Partners
 Lewis
Street Limited Partnership:
 
 We have
audited the accompanying balance sheets of Lewis Street Limited Partnership as
of December 31, 2007 and 2006 and the related statements of operations,
partners' equity and cash flows for the years then ended.  These
financial statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Lewis Street Limited Partnership as
of December 31, 2007 and 2006 and the results of its operations, changes in
partners' equity and cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of
America.
 
 Our
audits were made for the purpose of forming an opinion on the basic financial
statements taken as a whole.  The accompanying supplemental
information is presented for purposes of additional analysis and is not a
required part of the basic financial statements.  Such information has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a
whole.
 
 /s/
Toski, Schaefer & Co., P.C.
 Williamsville,
New York
 February
23, 2008
  - 30
-
  [ROMANO
& MITCHELL, CHARTERED CERTIFIED PUBLIC ACCOUNTANTS/MANAGEMENT CONSULTANTS
LETTERHEAD]
 
 INDEPENDENT AUDITORS'
REPORT
 
 To the
Partners
 Savannah
Park Housing Limited Partnership
 Washington,
D.C.
 
 We have
audited the accompanying balance sheets of Savannah Park Housing Limited
Partnership as of December 31, 2007 and 2006, and the related statements of
operations, partners' capital and cash flows for the years then
ended.  We also have audited Savannah Park Housing Limited
Partnership’s internal control over financial reporting as of December 31, 2007,
based on criteria established in Internal Control-IntegratedFramework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).  The Partnership’s management is
responsible for these financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting, included in management’s report on
internal control over financial reporting dated February 28,
2008.  Our responsibility is to express an opinion of these financial
statements and an opinion on the Partnership’s internal control over financial
reporting based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material
respects.  Our audits of the financial statements included examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation.  Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exits, and testing and
evaluating the design and operating effectiveness of internal control based on
the assessed risk.  Our audits also include performing other
procedures as we considered necessary in the circumstances.  We
believe that our audits provide a reasonable basis for our
opinions.
 
 An
organization’s internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.  An organization’s
internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the organization; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the organization are being made only in accordance with
authorizations of management and owners of the organization; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the organization’s assets that could have a
material effect on the financial statements.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Savannah Park Housing Limited
Partnership as of December 31, 2007 and 2006, and the results of its and its
cash flows for the year then ended, in conformity with U.S. generally accepted
accounting principles.  Also in our opinion, Savannah Park Housing
Limited Partnership maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2007, based on criteria
established in Internal
Control-Integrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
 
 /s/
Romano & Mitchell, Chartered Certified Public Accountants
 Bethesda,
Maryland
 February
28, 2008
  - 31
-
  [NOVOGRADAC
& COMPANY LLP CERTIFIED PUBLIC ACCOUNTANTS LETTERHEAD]
 
 INDEPENDENT
AUDITORS' REPORT
 
 To the
Members of
 Brannon
Group, L.C.
 
 We have
audited the accompanying balance sheets of Brannon Group, L.C., a Florida
limited liability company, as of December 31, 2007 and 2006 and the related
statements of operations, members’ equity (deficit) and cash flows for the year
then ended.  These financial statements are the responsibility of the
Company’s management.  Our responsibility is to express an opinion on
these financial statements based on our audits.
 
 We
conducted our audits in accordance with generally accepted auditing standards as
established by the Auditing Standards Board (United States) and in accordance
with the standards of the Public Company Accounting Oversight Board (United
States).  Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement.  The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial
reporting.  Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting.  Accordingly, we express no such opinion.  An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Brannon Group, L.C. at December 31,
2007 and 2006 and the results of its operations and its cash flows for the years
then ended in conformity with accounting principles generally accepted in the
United States of America.
 
 Our
audits were made for the purpose of forming an opinion on the basic financial
statements taken as a whole.  The accompanying supplemental schedules
are presented for purposes of additional analysis and are not a required part of
the financial statements of Brannon Group, L.C.  Such information has
been subjected to the auditing procedures applied in the audit of the financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.
 
 /s/
Novogradac & Company LLP
 San
Francisco, California
 March 21,
2008
  - 32
-
  [NOVOGRADAC
& COMPANY LLP CERTIFIED PUBLIC ACCOUNTANTS LETTERHEAD]
 
 INDEPENDENT
AUDITORS' REPORT
 
 To the
Members of
 Brannon
Group, L.C.
 
 We have
audited the accompanying balance sheet of Brannon Group, L.C., a Florida limited
liability company, as of December 31, 2006 and the related statements of
operations, members’ equity (deficit) and cash flows for the year then
ended.  These financial statements are the responsibility of the
Company’s management.  Our responsibility is to express an opinion on
these financial statements based on our audit.  The financial
statements of Brannon Group, L.C. as of December 31, 2005, were audited by other
auditors whose report dated March 18, 2006, expressed an unqualified opinion on
those statements.
 
 We
conducted our audit in accordance with generally accepted auditing standards as
established by the Auditing Standards Board (United States) and in accordance
with the standards of the Public Company Accounting Oversight Board (United
States).  Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement.  The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting.  Accordingly, we express no such opinion.  An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provides a reasonable basis
for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Brannon Group, L.C. at December 31,
2006 and the results of its operations and its cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.
 
 Our audit
was made for the purpose of forming an opinion on the basic financial statements
taken as a whole.  The accompanying supplemental schedules are
presented for purposes of additional analysis and are not a required part of the
financial statements of Brannon Group, L.C.  Such information has been
subjected to the auditing procedures applied in the audit of the financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.
 
 /s/
Novogradac & Company LLP
 San
Francisco, California
 March 25,
2007
  - 33
-
  [Goldstein
Schechter Price Lucas Horwitz & Co., PA LETTERHEAD]
 
 Independent
Auditor’s Report
 
 To the
Members of Brannon Group, L.C.
 
 We have
audited the accompanying balance sheets of Brannon Group, L.C. (a Limited
Liability Company) as of December 31, 2005 and 2004, and the related statements
of operations, members’ equity and cash flows for the years then
ended.  These financial statements are the responsibility of the
Company’s management.  Our responsibility is to express an opinion on
these financial statements based on our audits.
 
 We
conducted our audits in accordance the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting.  Accordingly, we express no
such opinion.  An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe our audits provide a reasonable basis for
our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company at December 31, 2005
and 2004, and the results of its operations, changes in members’ deficit and its
cash flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
 
 
 /s/
Goldstein Schechter Price Lucas Horwitz & Co., P.A.
 Coral
Gables, FL
 March 18,
2006
  - 34
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Mansion
Court Phase II Venture
 
 We have
audited the accompanying balance sheet of Mansion Court Phase II Venture as of
December 31, 2007, and the related statement of operations, changes in partners'
equity (deficit) and cash flows for the year then ended.  These
financial statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by Partnership’s management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Mansion Court Phase II Venture as
of December 31, 2007 and the results of its operations, the changes in partner’
equity (deficit) and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of
America.
 
 The
accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern.  The project has
sustained operating losses over the years and has not generated sufficient cash
flow from operations to meet its obligations.  Furthermore, the
Partnership has a net deficiency in partners’ equity.  Those
conditions raise substantial doubt about its ability to continue as a going
concern.  Management’s plans in regard to these matters are also
described in note 11.  The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
 
 Our audit
was made for the purpose of forming an opinion on the basic financial statements
taken as a whole.  The supplemental information on pages 18 through 19
is presented for purposes of additional analysis and is not a required part of
the basic financial statements.  Such information has been subjected
to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
 
 
 /s/
Reznick Group, P.C.
 Baltimore,
Maryland
 March 29,
2008
  - 35
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Mansion
Court Phase II Venture
 
 We have
audited the accompanying balance sheet of Mansion Court Phase II Venture as of
December 31, 2006, and the related statement of operations, changes in partners'
equity (deficit) and cash flows for the year then ended.  These
financial statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by Partnership’s management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Mansion Court Phase II Venture as
of December 31, 2006 and the results of its operations, the changes in partner’
equity (deficit) and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of
America.
 
 /s/
Reznick Group, P.C.
 Baltimore,
Maryland
 March 29,
2007
  - 36
-
  [RUBINBROWN
LLP LETTERHEAD]
 
 Report of
Independent Registered Public Accounting Firm
 
 To the
Partners
 Primm
Place Partners, L.P.
 St.
Louis, Missouri
 
 We have
audited the accompanying balance sheet of Primm Place Partners, L.P., Project
No. MT95-650, a limited partnership, as of December 31, 2005 and 2004, and the
related statements of profit and loss, partners' equity and cash flows for the
years then ended.  These financial statements are the responsibility
of the Partnership's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Primm Place Partners, L.P. as of
December 31, 2005 and 2004, and the results of its operation, changes in
partners’ equity and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of
America.
 
 Our audit
was conducted for the purpose of forming an opinion on the basic financial
statements taken as a whole.  The accompanying supplementary
information shown on pages 18 to 20 is presented for purposes of additional
analysis and is not a required part of the basic financial
statements.  Such information has been subjected to the auditing
procedures applied in the audit of the financial statements and, in our opinion,
is fairly stated in all material respects in relation to the financial
statements taken as a whole.
 
 /s/
Rubin, Brown, Gornstein & Co. LLP
 St.
Louis, Missouri
 February
7, 2006
  - 37
-
  [RAINES
AND FISCHER LLP CERTIFIED PUBLIC ACCOUNTANTS LETTERHEAD]
 
 INDEPENDENT AUDITORS'
REPORT
 
 To the
Partners of BK-9-A Partners, L.P.:
 
 We have
audited the accompanying balance sheet of BK-9-A Partners, L.P. (A New York
Limited Partnership) as of December 31, 2007, and the related statements of
operations, changes in partners' capital (deficit), and cash flows for the year
then ended.  These financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  We were
not engaged to perform an audit of the Partnership’s internal control over
financial reporting.  An audit includes consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of BK-9-A Partners, L.P. (A New York
Limited Partnership) as of December 31, 2007, and the results of its operations
and its cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.
 
 
 /s/
Raines & Fischer LLP
 New York,
New York
 May 1,
2008
  - 38
-
  [RAINES
AND FISCHER LLP LETTERHEAD]
 
 INDEPENDENT AUDITORS'
REPORT
 
 To the
Partners of BK-9-A Partners, L.P.:
 
 We have
audited the accompanying balance sheet of BK-9-A Partners, L.P. (A New York
Limited Partnership) as of December 31, 2006, and the related statements of
operations, changes in partners' capital (deficit), and cash flows for the year
then ended.  These financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  We were
not engaged to perform an audit of the Partnership’s internal control over
financial reporting.  An audit includes consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of BK-9-A Partners, L.P. (A New York
Limited Partnership) as of December 31, 2006, and the results of its operations
and its cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.
 
 /s/
Raines & Fischer LLP
 New York,
New York
 February
27, 2007
  - 39
-
  [RAINES
AND FISCHER LLP LETTERHEAD]
 
 INDEPENDENT AUDITORS'
REPORT
 
 To the
Partners of BK-10K Partners, L.P.:
 
 We have
audited the accompanying balance sheet of BK-10K Partners, L.P. (A New York
Limited Partnership) as of December 31, 2007, and the related statements of
operations, changes in partners' capital (deficit), and cash flows for the year
then ended.  These financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  We were
not engaged to perform an audit of the Partnership’s internal control over
financial reporting.  An audit includes consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of BK-10K Partners, L.P. (A New York
Limited Partnership) as of December 31, 2007, and the results of its operations
and its cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.
 
 /s/
Raines & Fischer LLP
 New York,
New York
 May 1,
2008
  - 40
-
  [RAINES
AND FISCHER LLP LETTERHEAD]
 
 INDEPENDENT AUDITORS'
REPORT
 
 To the
Partners of BK-10K Partners, L.P.:
 
 We have
audited the accompanying balance sheet of BK-10K Partners, L.P. (A New York
Limited Partnership) as of December 31, 2006, and the related statements of
operations, changes in partners' capital (deficit), and cash flows for the year
then ended.  These financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  We were
not engaged to perform an audit of the Partnership’s internal control over
financial reporting.  An audit includes consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of BK-10K Partners, L.P. (A New York
Limited Partnership) as of December 31, 2006, and the results of its operations
and its cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.
 
 /s/
Raines & Fischer LLP
 New York,
New York
 February
26, 2007
  - 41
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Aspen-Olive
Associates
 
 We have
audited the accompanying balance sheet of Aspen-Olive Associates as of December
31, 2007, and the related statements of operations, changes in partners' equity
(deficit) and cash flows for the year then ended.  These financial
statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
partnership is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the
Partnership’s internal control over financial reporting.  Accordingly,
we express no such opinion.  An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provide a reasonable basis
for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Aspen-Olive Associates as of
December 31, 2007 and the results of its operations, the changes in partner’
equity (deficit) and cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of
America.
 
 Our
audits were made for the purpose of forming an opinion on the basic financial
statements taken as a whole.  The 2007 supplemental information on
pages 18 through 19 is presented for purposes of additional analysis and is not
a required part of the basic financial statements.  Such information
has been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a
whole.
 
 
 /s/
Reznick Group, P.C.
 Baltimore,
Maryland
 March 25,
2008
  - 42
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Aspen-Olive
Associates
 
 We have
audited the accompanying balance sheet of Aspen-Olive Associates as of December
31, 2006, and the related statement of operations, changes in partners' equity
(deficit) and cash flows for the year then ended.  These financial
statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
partnership is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the
Partnership’s internal control over financial reporting.  Accordingly,
we express no such opinion.  An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provide a reasonable basis
for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Aspen-Olive Associates as of
December 31, 2006, and the results of its operations, the changes in partner’
equity (deficit) and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of
America.
 
 /s/
Reznick Group, P.C.
 Baltimore,
Maryland
 March 28,
2007
  - 43
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Universal
Court Associates
 
 We have
audited the accompanying balance sheet of Universal Court Associates as of
December 31, 2007, and the related statements of operations, changes in
partners' equity (deficit) and cash flows for the year then
ended.  These financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Universal Court Associates as of
December 31, 2007, and the results of its operations, the changes in partner’
equity (deficit) and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of
America.
 
 Our audit
was made for the purpose of forming an opinion on the basic financial statements
taken as a whole.  The 2007 supplemental information on pages 19 and
20 is presented for purposes of additional analysis and is not a required part
of the basic financial statements.  Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basis financial statements taken as a whole.
 
 
 /s/
Reznick Group, P.C.
 Baltimore,
Maryland
 March 21,
2008
  - 44
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Universal
Court Associates
 
 We have
audited the accompanying balance sheet of Universal Court Associates as of
December 31, 2006, and the related statement of operations, changes in partners'
equity (deficit) and cash flows for the year then ended.  These
financial statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Universal Court Associates as of
December 31, 2006, and the results of its operations, the changes in partner’
equity (deficit) and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of
America.
 
 /s/
Reznick Group, P.C.
 Baltimore,
Maryland
 March 29,
2007
  - 45
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 INDEPENDENT
AUDITORS’ REPORT
 
 To the
Partners
 New Zion
Apartments Limited Partnership
 Shreveport,
Louisiana
 
 We have
audited the accompanying balance sheet of New Zion Apartments Limited
Partnership, HUD Project No. LA48E000011, as of December 31, 2007, and the
related statements of income, partners' equity (deficit) and cash flows for the
year then ended.  These financial statements are the responsibility of
the Partnership's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States) and the standards applicable to
financial audits contained in Government Auditing Standards issued by
the Comptroller General of the United States.  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
partnership is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the
Partnership’s internal control over financial reporting.  Accordingly,
we express no such opinion.  An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provides a reasonable basis
for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of New Zion Apartments Limited
Partnership as of December 31, 2007, and the results of its operations, changes
in equity (deficit), and its cash flows for the year then ended in conformity
with accounting principles generally accepted in the United States of
America.
 
 In
accordance with Government Auditing Standards, we have
also issued a report, dated April 10, 2008 on our consideration of New Zion
Apartments Limited Partnership’s internal control over financial
reporting.  The purpose of that report is to describe the scope of our
testing of internal control over financial reporting and the results of that
testing and not to provide an opinion on the internal control over financial
reporting.  In accordance with Government Auditing Standards, we have
also issued an opinion dated April 10, 2008 on New Zion Apartments Limited
Partnership’s compliance with certain provisions of laws, regulations,
contracts, and grant agreements, and other matters that could have a direct and
material effect on a major HUD-assisted program.  Those reports are an
integral part of an audit performed in accordance with Government Auditing Standards and should
be considered in assessing the results of our audit.
 
 Our audit
was conducted for the purpose of forming an opinion on the basic financial
statements taken as a whole.  The accompanying supplemental
information on pages 22 through 35 is presented for purposes of additional
analysis and is not a required part of the basic financial statements of the
Partnership.  Such information has been subjected to the audit
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
 
 /s/
Reznick Group, P.C.
 Taxpayer
Identification Number:
 52-1088612
 Baltimore,
Maryland
 April 10,
2008
 Lead
Auditor:  Mary E. Norwood, CPA
  - 46
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 INDEPENDENT
AUDITORS’ REPORT
 
 To the
Partners
 New Zion
Apartments Limited Partnership
 Shreveport,
Louisiana
 
 We have
audited the accompanying balance sheet of New Zion Apartments Limited
Partnership, HUD Project No. LA48E000011, at December 31, 2006, and the related
statement of income, partners' capital and cash flows for the year then
ended.  These financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an opinion
on these financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States) and the standards applicable to
financial audits contained in Government Auditing Standards issued by
the Comptroller General of the United States.  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
partnership is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the
Partnership’s internal control over financial reporting.  Accordingly,
we express no such opinion.  An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provides a reasonable basis
for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of New Zion Apartments Limited
Partnership as of December 31, 2006, and the results of its operations, changes
in capital, and its cash flows for the year then ended in conformity with U.S.
generally accepted accounting principles.
 
 In
accordance with Government Auditing Standards, we have
also issued a report, dated March 12, 2007 on our consideration of New Zion
Apartments Limited Partnership’s internal control over financial
reporting.  The purpose of that report is to describe the scope of our
testing of internal control over financial reporting and the results of that
testing and not to provide an opinion on the internal control over financial
reporting.  In accordance with Government Auditing Standards, we have
also issued an opinion dated March 12, 2007 on New Zion Apartments Limited
Partnership’s compliance with certain provisions of laws, regulations,
contracts, and grant agreements, and other matters that could have a direct and
material effect on a major HUD-assisted program.  Those reports are an
integral part of an audit performed in accordance with Government Auditing Standards and should
be considered in assessing the results of our audit.
 
 Our audit
was conducted for the purpose of forming an opinion on the basic financial
statements taken as a whole.  The accompanying supplementary
information on pages 22 through 33 is presented for purposes of additional
analysis and is not a required part of the basic financial statements of the
Partnership.  Such information has been subjected to the audit
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
 
 /s/
Reznick Group, P.C.
 Taxpayer
Identification Number:
 72-0506596
 Atlanta,
Georgia
 March 12,
2007
 
 Lead
Auditor:  Joshua D. Northcutt, CPA
  - 47
-
  [O’CONNOR
DAVIES MUNNS & DOBBINS, LLP ACCOUNTANTS AND CONSULTANTS
LETTERHEAD]
 
 INDEPENDENT
AUDITORS’ REPORT
 
 To the
Partners of
 Dreitzer
Limited Partnership
 
 We have
audited the accompanying balance sheet of Dreitzer Limited Partnership as of
December 31, 2007, and the related statements of operations, partners' equity
and cash flows for the year then ended.  These financial statements
are the responsibility of the Partnership's management.  Our
responsibility is to express an opinion on these financial statements based on
our audit.  The financial statements of Dreitzer Limited Partnership
as of December 31, 2006, were audited by other auditors whose report dated March
29, 2007, expressed an unqualified opinion on those statements.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Dreitzer Limited Partnership’s internal control over financial
reporting.  Accordingly, we express no such opinion.  An
audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation.  We believe that our audit
provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Dreitzer Limited Partnership as of
December 31, 2007, and the results of its operations, and its cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United States of America.
 
 
 /s/
O’Connor Davies Munn & Dobbins, LLP
 New York,
New York
 February
12, 2008
  - 48
-
  [REZNICK
GROUP, P.C. LETTERHEAD]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Partners
 Dreitzer
Limited Partnership
 
 We have
audited the accompanying balance sheet of Dreitzer Limited Partnership as of
December 31, 2006, and the related statement of operations, changes in partners'
equity (deficit) and cash flows for the year then ended.  These
financial statements are the responsibility of the Partnership's
management.  Our responsibility is to express an opinion on these
financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
partnership has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the partnership’s internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audit provides a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Dreitzer Limited Partnership as of
December 31, 2006, and the results of its operations, and its cash flows for the
year then ended, in conformity with accounting principles generally accepted in
the United States of America.
 
 Our audit
was conducted for the purpose of forming an opinion on the basic financial
statements taken as a whole.  The accompanying supplementary
information on page 19 is presented for purposes of additional analysis and is
not a required part of the basic financial statements of the
Partnership.  Such information has been subjected to the audit
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated, in all material respects, in relation to the basic
financial statements taken as a whole.
 
 /s/
Reznick Group, P.C.
 Atlanta,
Georgia
 March 29,
2007
  - 49
-
  
 INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 
 
 
 
 ASSETS
 
 
 March
      31,2008
            
            
            2007Property
      and equipment - at cost, less accumulated depreciation (Notes 2 and
      4)
            
            $
            55,068,077
            
            
            $
            57,470,569Cash
      and cash equivalents (Notes 2 and 10)
            
            
            1,129,466
            
            
            
            686,353Cash
      held in escrow (Note 5)
            
            
            5,684,885
            
            
            
            5,496,614Deferred
      costs, less accumulated amortization (Notes 2 and 6)
            
            
            687,005
            
            
            
            762,580Other
      assets
            
            
            939,926
            
            
            
            795,047Total
      assets
            
            $
            63,509,359
            
            
            $
            65,211,163LIABILITIES
      AND PARTNERS’ CAPITAL (DEFICIT)Liabilities:Mortgage
      notes payable (Note 7)
            
            $
            43,468,564
            
            
            $
            43,529,500Accounts
      payable
            
            
            894,007
            
            
            
            606,118Accrued
      interest payable
            
            
            9,665,774
            
            
            
            8,592,177Security
      deposits payable
            
            
            517,574
            
            
            
            495,940Due
      to local general partners and affiliates (Note 8)
            
            
            1,657,112
            
            
            
            1,976,765Due
      to general partner and affiliates (Note 8)
            
            
            6,102,814
            
            
            
            5,430,585Total
      liabilities
            
            
            62,305,845
            
            
            
            60,631,085Minority
      interest (Note 2)
            
            
            172,601
            
            
            
            429,202Commitments
      and contingencies (Notes 7, 8 and 10)Partners’
      capital (deficit):Limited
      partners (43,440 BACs issued and outstanding) (Note 1)
            
            
            1,406,733
            
            
            
            4,495,496General
      Partner
            
            
            (375,820
            )
            
            
            (344,620
            )Total
      partners’ capital (deficit)
            
            
            1,030,913
            
            
            
            4,150,876Total
      liabilities and partners’ capital (deficit)
            
            $
            63,509,359
            
            
            $
            65,211,163See
      accompanying notes to consolidated financial
  statements.
 
  - 50
-
  INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 
 
 
 
 Years
      Ended March 31,2008
            
            
            2007*
            
            
            2006*RevenuesRental
      income
            
            $
            7,559,423
            
            
            $
            7,128,762
            
            
            $
            6,950,116Other
      income
            
            
            399,245
            
            
            
            305,282
            
            
            
            288,3717,958,668
            
            
            
            7,434,044
            
            
            
            7,238,487ExpensesGeneral
      and administrative
            
            
            2,025,715
            
            
            
            1,977,391
            
            
            
            1,989,980General
      and administrative-related parties (Note 8)
            
            
            983,376
            
            
            
            832,674
            
            
            
            945,649Repairs
      and maintenance
            
            
            1,776,830
            
            
            
            1,662,034
            
            
            
            1,670,321Operating
            
            
            1,126,009
            
            
            
            1,069,984
            
            
            
            1,020,552Real
      estate taxes
            
            
            347,953
            
            
            
            358,083
            
            
            
            336,201Insurance
            
            
            567,070
            
            
            
            538,762
            
            
            
            533,452Financial,
      principally interest
            
            
            1,852,945
            
            
            
            1,830,713
            
            
            
            1,825,894Depreciation
      and amortization
            
            
            2,610,459
            
            
            
            2,689,496
            
            
            
            2,682,591Loss
      on impairment of property (Note 4)
            
            
            0
            
            
            
            1,402,760
            
            
            
            0Total
      expenses
            
            
            11,290,357
            
            
            
            12,361,897
            
            
            
            11,004,640Net
      loss before minority interest
            
            
            (3,331,689
            )
            
            
            (4,927,853
            )
            
            
            (3,766,153
            )Minority
      interest in loss of subsidiary partnerships
            
            
            211,726
            
            
            
            246,896
            
            
            
            294,378Net
      loss
            
            $
            (3,119,963
            )
            
            $
            (4,680,957
            )
            
            $
            (3,471,775
            )Net
      loss - Limited Partners
            
            $
            (3,088,763
            )
            
            $
            (4,634,147
            )
            
            $
            (3,437,057
            )Number
      of BACs outstanding
            
            
            43,440
            
            
            
            43,440
            
            
            
            43,440Net
      loss per BAC
            
            $
            (71.10
            )
            
            $
            (106.68
            )
            
            $
            (79.12
            )See
      accompanying notes to consolidated financial
  statements.
 
 *
Reclassified for comparative purposes.
  - 51
-
  INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (DEFICIT)
 
 
 
 
 Total
            
            
            Limited
              Partners
            
            
            General
              PartnerPartners’
      capital (deficit) – April 1, 2005
            
            $
            12,303,608
            
            
            $
            12,566,700
            
            
            $
            (263,092
            )Net
      loss
            
            
            (3,471,775
            )
            
            
            (3,437,057
            )
            
            
            (34,718
            )Partners’
      capital (deficit) – March 31, 2006
            
            
            8,831,833
            
            
            
            9,129,643
            
            
            
            (297,810
            )Net
      loss
            
            
            (4,680,957
            )
            
            
            (4,634,147
            )
            
            
            (46,810
            )Partners’
      capital (deficit) – March 31, 2007
            
            
            4,150,876
            
            
            
            4,495,496
            
            
            
            (344,620
            )Net
      loss
            
            
            (3,119,963
            )
            
            
            (3,088,763
            )
            
            
            (31,200
            )Partners’
      capital (deficit) – March 31, 2008
            
            $
            1,030,913
            
            
            $
            1,406,733
            
            
            $
            (375,820
            )See
      accompanying notes to consolidated financial
  statements.
 
  - 52
-
  INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
 
 
 
 
 Years
      Ended March 31,2008
            
            
            2007
            
            
            2006Cash
      flows from operating activities:Net
      loss
            
            $
            (3,119,963
            )
            
            $
            (4,680,957
            )
            
            $
            (3,471,775
            )Adjustments
      to reconcile net loss to net cash provided byoperating
      activities:Depreciation
      and amortization
            
            
            2,610,459
            
            
            
            2,689,496
            
            
            
            2,682,591Loss
      on impairment of fixed assets
            
            
            0
            
            
            
            1,402,760
            
            
            
            0Minority
      interest in loss of subsidiary partnerships
            
            
            (211,726
            )
            
            
            (246,896
            )
            
            
            (294,378
            )(Increase)
      decrease in assets:Cash
      held in escrow
            
            
            (176,965
            )
            
            
            160,715
            
            
            
            (272,282
            )Other
      assets
            
            
            (144,879
            )
            
            
            (164,269
            )
            
            
            69,175Increase
      (decrease) in liabilities:Accounts
      payable
            
            
            287,889
            
            
            
            (39,099
            )
            
            
            15,591Accrued
      interest
            
            
            1,073,597
            
            
            
            1,006,524
            
            
            
            999,505Security
      deposit payable
            
            
            21,634
            
            
            
            30,414
            
            
            
            39,976Due
      to local general partners and affiliates
            
            
            39,796
            
            
            
            169,206
            
            
            
            8,874Due
      to general partners and affiliates
            
            
            672,229
            
            
            
            603,433
            
            
            
            271,405Total
      adjustments
            
            
            4,172,034
            
            
            
            5,612,284
            
            
            
            3,520,457Net
      cash provided by operating activities
            
            
            1,052,071
            
            
            
            931,327
            
            
            
            48,682Cash
      flows from investing activities:Acquisition
      of property and equipment
            
            
            (132,392
            )
            
            
            (363,622
            )
            
            
            (138,170
            )(Increase)
      decrease in cash held in escrow
            
            
            (11,306
            )
            
            
            83,634
            
            
            
            (15,014
            )(Decrease)
      increase in due to local general partners and affiliates
            
            
            (116,207
            )
            
            
            (58,517
            )
            
            
            52,741Net
      cash used in investing activities
            
            
            (259,905
            )
            
            
            (338,505
            )
            
            
            (100,443
            )Cash
      flows from financing activities:Principal
      payments of mortgage notes
            
            
            (610,936
            )
            
            
            (479,276
            )
            
            
            (3,452,420
            )Proceeds
      from mortgage notes
            
            
            550,000
            
            
            
            0
            
            
            
            5,120,086(Decrease)
      increase in due to local general partners and affiliates
            
            
            (243,242
            )
            
            
            26,526
            
            
            
            2,000Increase
      in deferred costs
            
            
            0
            
            
            
            0
            
            
            
            (238,457
            )Decrease
      in capitalization of consolidated subsidiaries attributable tominority
      interest
            
            
            (44,875
            )
            
            
            (73,032
            )
            
            
            (1,268,983
            )Net
      cash (used in) provided by financing activities
            
            
            (349,053
            )
            
            
            (525,782
            )
            
            
            162,226Net
      increase in cash and cash equivalents
            
            
            443,113
            
            
            
            67,040
            
            
            
            110,465Cash
      and cash equivalents at beginning of year
            
            
            686,353
            
            
            
            619,313
            
            
            
            508,848Cash
      and cash equivalents at end of year
            
            $
            1,129,466
            
            
            $
            686,353
            
            
            $
            619,313Supplemental
      disclosure of cash flows information:Cash
      paid during the year for interest
            
            $
            818,878
            
            
            $
            824,189
            
            
            $
            658,864Supplemental
      disclosure of non-cash investing and financing activities:Decrease
      in property and equipment due to decrease in due to localgeneral
      partners and affiliates
            
            $
            0
            
            
            $
            184,481
            
            
            $
            0
 
  - 53
-
  INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31,
2008
 
 
 NOTE 1 -
General
 
 Independence
Tax Credit Plus L.P. III (the “Partnership”) is a limited partnership which was
formed under the laws of the State of Delaware on December 23, 1993. The general
partner of the Partnership is Related Independence Associates III L.P., a
Delaware limited partnership (the “General Partner”). The general partner of the
General Partner is Related Independence Associates III Inc., a Delaware
corporation (“RIAI III”).  The ultimate parent of the General Partner
is Centerline Holding Company (“Centerline).
 
 The
Partnership’s business is to invest in other partnerships (“Local Partnerships,”
“subsidiaries” or “subsidiary partnerships”) owning leveraged apartment
complexes (“Apartment Complexes” or “Properties”) that are eligible for the
low-income housing tax credit (“Tax Credit”) under Section 42 of the Internal
Revenue Code, some of which may also be eligible for the historic rehabilitation
tax credit.
 
 As of
March 31, 2008, the Partnership held a limited partnership interest in twenty
subsidiary partnerships.
 
 The
Partnership was authorized to issue a total of 100,000 ($100,000,000) Beneficial
Assignment Certificates (“BACs”) which were registered with the Securities and
Exchange Commission for sale to the public. Each BAC represents all of the
economic and virtually all of the ownership rights attributable to a limited
partnership interest in the Partnership. As of the termination of the offering
on May 9, 1995, the Partnership had received $43,440,000 of gross proceeds of
its offering (the “Gross Proceeds”) from 2,810 investors (“BACs
holders”).
 
 The terms
of the Partnership’s Amended and Restated Agreement of Limited Partnership (the
“Partnership Agreement”) provide, among other things, that net profits or losses
and distributions of cash flow are, in general, allocated 99% to the limited
partners and BACs holders and 1% to the general partner.
 
 
 NOTE 2 -
Summary of Significant Accounting Policies
 
 a) 
Basis of Accounting
 
 For
financial reporting purposes the Partnership’s fiscal year ends on March 31. All
subsidiaries have fiscal years ending December 31. Accounts of the subsidiaries
have been adjusted for intercompany transactions from January 1 through March
31. The Partnership’s fiscal year ends March 31 in order to allow adequate time
for the subsidiaries’ financial statements to be prepared and consolidated. The
books and records of the Partnership are maintained on the accrual basis of
accounting, in accordance with accounting principles generally accepted in the
United States of America (“GAAP”).
 
 b)
 Basis of Consolidation
 
 The
consolidated financial statements include the accounts of the Partnership and
twenty subsidiary partnerships in which the Partnership is a limited partner for
the years ended March 31, 2008, 2007 and 2006, respectively, (the 2007, 2006 and
2005 Fiscal Years). Through the rights of the Partnership and/or an affiliate of
the General Partner, which affiliate has a contractual obligation to act on
behalf of the Partnership, to remove the general partners of the subsidiary
local partnerships (“Local General Partners”) and to approve certain major
operating and financial decisions, the Partnership has a controlling financial
interest in the subsidiary partnerships. All intercompany accounts and
transactions with the subsidiary partnerships have been eliminated in
consolidation.
 
 Increases
(decreases) in the capitalization of consolidated subsidiaries attributable to
minority interest arise from cash contributions and cash distributions to the
minority interest partners.
 
 Losses
attributable to minority interest which exceed the minority interests’
investment in a subsidiary have been charged to the Partnership. Such losses
aggregated approximately $6,000, $34,000 and $21,000 for the years ended March
31, 2008, 2007 and 2006, respectively. The Partnership’s investment in each
subsidiary is equal to the respective subsidiary’s partners’ equity less
minority interest capital, if any. In consolidation, all subsidiary partnership
losses are included in the Partnership’s capital account except for losses
allocated to minority interest capital.
 
 c) 
Cash and Cash Equivalents
 
 Cash and
cash equivalents include cash on hand, cash in banks, and investments in
short-term highly liquid investments purchased with original maturities of three
months or less.
 
 d) 
Property and Equipment
 
 Property
and equipment to be held and used are carried at cost which includes the
purchase price, acquisition fees and expenses, construction period interest and
any other costs incurred in acquiring the properties. The cost of property and
equipment is depreciated over their estimated useful lives using accelerated and
straight-line methods. Expenditures for repairs and maintenance are charged to
expense as incurred; major renewals and betterments are capitalized. At the time
property and equipment are retired or otherwise disposed of, the cost and
accumulated depreciation are eliminated from the assets and accumulated
depreciation accounts and the profit or loss on such disposition is reflected in
earnings. A loss on impairment of assets is recorded when management estimates
amounts recoverable through future operations and sale of the property on an
undiscounted basis are below depreciated cost. At that time, property
investments themselves are reduced to estimated fair value (generally using
discounted cash flows).
 
 - 54
-
 INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31,
2008
 
 At the
time management commits to a plan to dispose of assets, said assets are adjusted
to the lower of carrying amount or fair value less costs to sell. These assets
are classified as property and equipment-held for sale and are not depreciated.
Through March 31, 2008, the Partnership has not recorded or classified any
property and equipment as held for sale.
 
 e)
 Revenue Recognition
 
 Rental
income is earned primarily under standard residential operating leases and is
typically due the first day of each month, but can vary by property due to the
terms of the tenant leases. Rental income is recognized when earned and charged
to tenants’ accounts receivable if not received by the due date. Rental payments
received in advance of the due date are deferred until earned. Rental subsidies
are recognized as rental income during the month in which it is
earned.
 
 Other
revenues are recorded when earned and consist of the following
items:  Interest income earned on cash and cash equivalent balances
and cash held in escrow balances, income from forfeited security deposits, late
charges, laundry and vending income and other rental related items.
 
 Other
revenues include the following amounts at both the Partnership and Local
Partnership level:
 
 Years
      Ended March 31,2008
            
            
            2007
            
            2006Interest
            
            $
            179,747
            
            
            $
            149,881
            
            $
            118,270Other
            
            
            219,498
            
            
            
            155,401
            
            
            170,101Total
      other revenue
            
            $
            399,245
            
            
            $
            305,282
            
            $
            288,371
  
 f) 
Income Taxes
 
 The
Partnership is not required to provide for, or pay, any federal income taxes.
Net income or loss generated by the Partnership is passed through to the
partners and is required to be reported by them. The Partnership may be subject
to state and local taxes in jurisdictions in which it operates. For income tax
purposes, the Partnership has a fiscal year ending December 31 (Note
9).
  g)
 Loss Contingencies
 
 The
Partnership records loss contingencies as a charge to income when information
becomes available which indicates that it is probable that an asset has been
impaired or a liability has been incurred as of the date of the financial
statements and the amount of loss can be reasonably estimated.
 
 h) 
Use of Estimates
 
 The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
 
 i) 
New Accounting Pronouncements
 
 In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements,
which established a framework for measuring the fair value of assets and
liabilities as required by numerous other accounting pronouncements, and expands
disclosure requirements for the fair values of certain assets and
liabilities.  This statement is effective for the Partnership’s year
ending March 31, 2009.  The provisions of this statement will not have
a material impact on the consolidated financial statements.
 
 In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities. This statement was issued with the
intent to provide an alternative measurement treatment for certain financial
assets and liabilities. The alternative measurement would permit fair value to
be used for both initial and subsequent measurement, with changes in fair value
recognized in earning as those changes occur.  This “Fair Value
Option” would be available on a contract by contract basis.  This
statement is effective for the Partnerships’ year ending March 31,
2009.  The provisions of this statement will not have a material
impact on the consolidated financial statements.
 
 
 In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements.  This statement was issued
with the intent to improve the relevance, comparability and transparency of the
financial information that a reporting entity provides in its consolidated
financial statements for those entities that have outstanding noncontrolling
interest in one or more subsidiaries.  The effective date for this
provision is for fiscal year ends beginning after December 15,
2008.  The Partnership is currently evaluating the impact of the
provisions of this statement on the consolidated financial
statements.
 
 
 - 55
-
 INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31,
2008
 
 The
following methods and assumptions were used to estimate the fair value of each
class of financial instruments (all of which are held for nontrading purposes)
for which it is practicable to estimate that value:
 
 Cash and Cash Equivalents,
Investments Available-for-Sale and Cash Held in Escrow
 The
carrying amount approximates fair value.
 
 Mortgage Notes
Payable
 The fair
value of mortgage notes payable is estimated, where practicable, based on the
borrowing rate currently available for similar loans.
 
 The
estimated fair values of the Partnership’s mortgage notes payable and
construction loans payable are as follows:
 
 March
      31, 2008
            
            
            March
      31, 2007Carrying
              Amount
            
            
            Fair
      Value
            
            
            Carrying
              Amount
            
            
            Fair
      ValueMortgage
      notes payable for which it is:Practicable
      to estimate fair value
            
            $
            16,923,739
            
            
            $
            16,155,510
            
            
            $
            13,217,202
            
            
            $
            12,194,421Not
      practicable
            
            
            26,544,825
            
            
            
            *
            
            
            
            30,312,298
            
            
            
            **  * Management
      believes it is not practical to estimate the fair value of the mortgage
      notes payable because mortgage programs with similar characteristics are
      not currently available to the Local
  Partnerships.
 
 
 Management
believes it is not practical to estimate the fair value of due to local and
general partners and affiliates because market information on such unique loans
are not currently available to the Local Partnerships.
 
 The
carrying amount of other financial instruments that require such disclosure
approximates fair value.
 
 
 NOTE 4 -
Property and Equipment
 
 The
components of property and equipment and their estimated useful lives are as
follows:
 
 March
      31,
            
            Estimated
              Useful
      Lives
              (Years)2008
            
            
            2007Land
            
            $
            1,166,583
            
            
            $
            1,166,583
            
            -Building
      and improvements
            
            
            81,802,719
            
            
            
            81,876,119
            
            20-40Furniture
      and fixtures
            
            
            1,490,968
            
            
            
            1,375,560
            
            5-1284,460,270
            
            
            
            84,418,262Less:
      Accumulated depreciation
            
            
            (29,392,193
            )
            
            
            (26,947,693
            )$
            55,068,077
            
            
            $
            57,470,569
 
 
 Included
in property and equipment is $2,509,717 of acquisition fees paid to the General
Partner and $1,178,468 of acquisition expenses as of March 31, 2008 and 2007,
respectively. In addition, as of March 31, 2008 and 2007, building and
improvements include $1,106,837 of capitalized interest.
 
 In
connection with the rehabilitation of the properties, the subsidiary
partnerships have incurred developer’s fees of $8,980,181 to the Local General
Partners and their affiliates as of March 31, 2008 and 2007.  Such
fees have been included in the cost of property and equipment.
 
 Depreciation
expense for the years ended March 31, 2008, 2007 and 2006 amounted to
$2,534,884, $2,612,983, and $2,574,993, respectively.  Additionally,
$90,384 of accumulated depreciation was written-off during the year ended March
31, 2008.
 
 During
the year ended March 31, 2007, in accordance with Statement of Financial
Accounting Standards No. 144 (“SFAS No. 144”) “Accounting for the Impairment of
Disposal of Long-Lived Assets”, the Partnership deemed the building of Mansion
Court Phase II Venture impaired and wrote it down to its fair value which
resulted in a loss on impairment of approximately $1,403,000 (consisting of
approximately $1,976,000 of fixed assets and approximately $573,000 of
accumulated depreciation).  Fair value was obtained from an appraisal
after indications that the carrying value of the assets was not recoverable
evidenced by a history of negative net operating income over the past few
years.  Therefore, the property was written down to its appraised
value of approximately $549,000.
 
 
 - 56
-
 INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31,
2008
 
 Cash held
in escrow consists of the following:
 
 March
      31,2008
            
            
            2007Purchase
      price payments*
            
            $
            115,345
            
            
            $
            130,418Real
      estate taxes, insurance and other
            
            
            3,359,417
            
            
            
            3,193,913Reserve
      for replacements
            
            
            1,789,542
            
            
            
            1,763,163Tenant
      security deposits
            
            
            420,581
            
            
            
            409,120$
            5,684,885
            
            
            $
            5,496,614*  
      Represents amounts to be paid to seller upon meeting specified rental
      achievement criteria.
 
 
 NOTE 6 -
Deferred Costs
 
 The
components of deferred costs and their periods of amortization are as
follows:
 
 March
      31,
            
            Period2008
            
            
            2007Financing
      costs
            
            $
            1,335,101
            
            
            $
            1,335,101
            
            *Less:
      Accumulated amortization
            
            
            (648,096
            )
            
            
            (572,521
            )$
            687,005
            
            
            $
            762,580*   Over
      the life of the related mortgages.
 
 
 Amortization
expense for the years ended March 31, 2008, 2007 and 2006 amounted to $75,575,
$76,513 and $107,598, respectively.
 
 
 NOTE 7 -
Mortgage Notes Payable
 
 The
mortgage notes, which are collateralized by land and buildings, are payable in
aggregate monthly installments of approximately $100,000 including principal and
interest at rates varying from 0% to 10% per annum, through the year 2046. Each
subsidiary partnership’s mortgage note payable is collateralized by the land and
buildings of the respective subsidiary partnership, the assignment of each
certain subsidiary partnership’s rents and leases, and is without further
recourse.
 
 Annual
principal payment requirements by the subsidiary partnerships for each of the
next five years and thereafter, are as follows:
 
 December
      31,
            
            Amount2008
            
            $
            594,4152009
            
            
            639,7482010
            
            
            3,610,9022011
            
            
            1,732,7662012
            
            
            2,075,127Thereafter
            
            
            34,815,606$
            43,468,564
 
 
 Accrued
interest payable as of March 31, 2008 and 2007 was approximately $ 9,666,000 and
$8,592,000, respectively.  Interest accrues on all mortgage loans,
which include primary and secondary loans.  Certain secondary loans
have provisions such that interest is accrued but not payable until a future
date.  The Partnership anticipates the payment of accrued interest on
the secondary loans (which make up the majority of the accrued interest payable
amount and which have been accumulating since the Partnership’s investment in
the respective Local Partnership) will be made from future refinancings or sales
proceeds from the respective Local Partnerships.
 
 - 57
-
 INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31,
2008
 
 
 NOTE 8 -
Related Party Transactions
 
 An
affiliate of the General Partner has a .01% interest as a special limited
partner in each of the Local Partnerships.
 
 Pursuant
to the Partnership Agreement and the partnership agreements of the Local
Partnerships (“Local Partnership Agreements”), the General Partner and its
affiliates receive their pro rata shares of profits, losses and tax
credits.
 
 A) 
Guarantees
 
 In
connection with investments in development-stage Apartment Complexes, the
General Partner generally required that the Local General Partners provide
completion guarantees and/or undertake to repurchase the Partnership’s interest
in the Local Partnership if construction or rehabilitation was not completed
substantially on time or on budget (“Development Deficit Guarantees”). The
Development Deficit Guarantees generally also required the Local General Partner
to provide any funds necessary to cover net operating deficits of the Local
Partnership until such time as the Apartment Complex had achieved break-even
operations. The General Partner generally required that the Local General
Partners undertake an obligation to fund operating deficits of the Local
Partnership (up to a stated maximum amount) during a limited period of time
(typically three to five years) following the achievement of break-even
operations (“Operating Deficit Guarantees”).  As of March 31, 2008,
the gross amount of the Operating Deficit Guarantees aggregate approximately
$5,487,000, all of which have expired.  Management does not expect
that expiration to have a material impact on liquidity, based on prior years’
fundings. Amounts funded under such agreements are treated as noninterest
bearing loans, which will be paid only out of 50% of available cash flow or out
of available net sale or refinancing proceeds. In some instances, the Local
General Partners were required to undertake an obligation to comply with a
Rent-Up Guaranty Agreement, whereby the Local General Partner agreed to pay
liquidated damages if predetermined occupancy rates were not achieved. These
payments would have been made without right of repayment. In cases where the
General Partner deemed it appropriate, the obligations of a Local General
Partner under the Development Deficit, Operating Deficit and/or Rent-Up
Guarantees were secured by letters of credit and/or cash escrow
deposits.
 
 B) 
Other Related Party Expenses
 
 The
General Partner and its affiliates perform services for the Partnership. The
costs incurred to the General Partner and other related parties for the years
ended March 31, 2008, 2007 and 2006 were as follows:
 
 Years
      Ended March 31,2008
            
            
            2007*
            
            
            2006*Partnership
      management fees (a)
            
            $
            353,261
            
            
            $
            341,984
            
            
            $
            351,400Expense
      reimbursement (b)
            
            
            224,923
            
            
            
            140,388
            
            
            
            233,499Local
      administrative fees (d)
            
            
            79,656
            
            
            
            70,456
            
            
            
            77,320Total
      general and administrative-General Partner
            
            
            657,840
            
            
            
            552,828
            
            
            
            662,219Property
      management fees incurred to affiliates of the subsidiary partnerships’
      general partners (c)
            
            
            325,536
            
            
            
            279,846
            
            
            
            283,430Total
      general and administrative-related parties
            
            $
            983,376
            
            
            $
            832,674
            
            
            $
            945,649* Reclassified
      for comparative purposes.
 
 
 (a) The
General Partner is entitled to receive a partnership management fee, after
payment of all Partnership expenses, which together with the annual local
administrative fees will not exceed a maximum of 0.5% per annum of invested
assets (as defined in the Partnership Agreement), for administering the affairs
of the Partnership. Subject to the foregoing limitation, the partnership
management fee will be determined by the General Partner in its sole discretion
based upon its review of the Partnership’s investments. Unpaid partnership
management fees for any year will be accrued without interest and will be
payable only to the extent of available funds after the Partnership has made
distributions to the limited partners of sale or refinancing proceeds equal to
their original capital contributions plus a 10% priority return thereon (to the
extent not theretofore paid out of cash flow). Partnership management fees owed
to the General Partner amounting to approximately $3,586,000 and $3,233,000 were
accrued and unpaid as of March 31, 2008 and 2007, respectively. Without the
General Partner’s continued accrual without payment the Partnership will not be
in a position to meet its obligations.  The General Partner has
continued allowing the accrual without payment of these amounts but is under no
obligation to continue to do so.
 
 - 58
-
 INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31,
2008
 
 (c)
Property management fees incurred by Local Partnerships amounted to $507,998,
$505,392 and $498,034 for the years ended March 31, 2008, 2007 and 2006,
respectively.  Of these fees, $325,536, $279,846 and $283,430 were
incurred to affiliates of the subsidiary partnerships’ general
partners.
 
 (d)
Independence SLP III L.P., a limited partner of the subsidiary partnerships, is
entitled to receive a local administrative fee of up to $5,000 per year from
each subsidiary partnership.
 
 C) 
Due to Local General Partners and Affiliates
 
 Due to
local general partners and affiliates consists of the following:
 
 March
      31,2008
            
            
            2007Operating
      advances
            
            $
            103,064
            
            
            $
            126,817Development
      fee payable
            
            
            1,146,083
            
            
            
            1,254,234Other
      capitalized costs
            
            
            16,335
            
            
            
            16,335Construction
      costs payable
            
            
            146,487
            
            
            
            154,543General
      Partner loan payable
            
            
            3,292
            
            
            
            246,534Management
      and other operating fees
            
            
            241,851
            
            
            
            178,302$
            1,657,112
            
            
            $
            1,976,765
 
 D)
Advances from Partnership to Local Partnerships
 
 As of
March 31, 2008, the Partnership has advanced certain Local Partnership operating
loans (non-interest bearing) amounting to approximately
$2,976,000.  Such advances are eliminated in
consolidation.  The following table summarizes these
advances:
 
 March
      31,2008
            
            
            2007New
      Zion
            
            $
            2,655
            
            
            $
            2,655Knickerbocker
      Avenue
            
            
            454,441
            
            
            
            454,441Lafayette
      Avenue
            
            
            416,094
            
            
            
            416,094Eastern
      Parkway
            
            
            1,016,321
            
            
            
            1,016,3212301
      First Avenue
            
            
            1,080,628
            
            
            
            1,080,628Sumpter
      Commons
            
            
            5,575
            
            
            
            10,580$
            2,975,714
            
            
            $
            2,980,719
 
 
 - 59
-
 INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31,
2008
 
 A
reconciliation of the financial statement net loss to the taxable net loss for
the Partnership and its consolidated subsidiaries follows:
 
 Years
      Ended December 31,2007
            
            
            2006
            
            
            2005Financial
      statement net loss
            
            $
            (3,119,963
            )
            
            $
            (4,680,957
            )
            
            $
            (3,471,775
            )Differences
      between depreciation and amortization expense records forfinancial
      reporting purposes and the accelerated costs recovery systemutilized
      for income tax purposes
            
            
            (513,901
            )
            
            
            (153,314
            )
            
            
            (169,991
            )Differences
      resulting from parent company having a different fiscal yearfor
      income tax and financial reporting purposes
            
            
            (2,498
            )
            
            
            (20,730
            )
            
            
            27,039Loss
      on impairment of property for financial reporting purposes not deductible
      for tax purposes
            
            
            0
            
            
            
            1,402,760
            
            
            
            0Other,
      including accruals for financial reporting not deductible for taxpurposes
      until paid
            
            
            979,408
            
            
            
            361,011
            
            
            
            (227,594
            )Net
      loss as shown on the income tax return for the calendar year
      ended
            
            $
            (2,656,954
            )
            
            $
            (3,091,230
            )
            
            $
            (3,842,321
            )
 
 
 NOTE 10 –
Selected Quarterly Financial Data (Unaudited)
 
 The
following table summarizes the Partnership’s quarterly results of operations for
the years ended March 31, 2008 and 2007.
 
 OPERATIONS
            
            Quarter
      EndedJune
      30,
              2007
            
            
            September
      30, 2007
            
            
            December
      31, 2007
            
            
            March
      31, 2008Revenues
            
            $
            1,996,187
            
            
            $
            1,954,440
            
            
            $
            1,998,986
            
            
            $
            2,009,055Operating
      expenses
            
            
            (2,697,261
            )
            
            
            (2,820,126
            )
            
            
            (2,725,078
            )
            
            
            (3,047,892
            )Loss
      before minority interest
            
            
            (701,074
            )
            
            
            (865,686
            )
            
            
            (726,092
            )
            
            
            (1,038,837
            )Minority
      interest in loss of subsidiaries
            
            
            226,029
            
            
            
            (108,956
            )
            
            
            35,453
            
            
            
            59,200Net
      loss
            
            $
            (475,045
            )
            
            $
            (974,642
            )
            
            $
            (690,639
            )
            
            $
            (979,637
            )Net
      loss per weighted average BAC
            
            $
            (10.83
            )
            
            $
            (22.21
            )
            
            $
            (15.74
            )
            
            $
            (22.32
            )OPERATIONS
            
            Quarter
      EndedJune
      30,
              2006
            
            
            September
      30, 2006
            
            
            December
      31, 2006
            
            
            March
      31, 2007Revenues
            
            $
            1,809,387
            
            
            $
            1,869,778
            
            
            $
            1,889,328
            
            
            $
            1,865,551Operating
      expenses
            
            
            (2,629,423
            )
            
            
            (2,660,999
            )
            
            
            (2,640,388
            )
            
            
            (4,431,087
            )Loss
      before minority interest
            
            
            (820,036
            )
            
            
            (791,221
            )
            
            
            (751,060
            )
            
            
            (2,565,536
            )Minority
      interest in loss of subsidiaries
            
            
            68,382
            
            
            
            64,973
            
            
            
            57,550
            
            
            
            55,991Net
      loss
            
            $
            (751,654
            )
            
            $
            (726,248
            )
            
            $
            (693,510
            )
            
            $
            (2,509,545
            )Net
      loss per weighted average BAC
            
            $
            (17.13
            )
            
            $
            (16.55
            )
            
            $
            (15.81
            )
            
            $
            (57.19
            )
 
 
 - 60
-
 INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31,
2008
 
 a)  Subsidiary Partnerships
– Going Concerns and Uncertainties
 
 Mansion Court Phase II
Venture (“Mansion Court”)
 The
financial statements for Mansion Court have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplates continuation of Mansion Court as a going concern.  In
prior years and in 2007, the Mansion Court has sustained operating losses and
has not generated sufficient cash flow from operations to meet its obligations,
particularly related party payables.  The Local General Partner has
provided funding in the past years; however, there is no obligation to do
so.  Mansion Court also has experienced a high number of vacancies due
to deteriorating conditions in the area.  Management of Mansion Court
is exploring options to mitigate increased crime and deteriorating neighborhood
conditions.  These options include assistance from local government
housing agencies and could include transfer of ownership.
 
 The
Partnership’s investment in Mansion Court at March 31, 2008 and 2007 was reduced
to zero as a result of prior years’ losses and the minority interest balance was
$0 at each date.  Mansion Court’s net loss after minority interest
amounted to approximately $83,000, $1,556,000 and $91,000 for the 2007, 2006 and
2005 Fiscal Years.  The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
 b)  Leases
 
 Savanah
Park Housing Limited Partnership is leasing the land on which its apartment
complex is located for a term of 50 years, which commenced in August 1996, with
monthly rent payments of $1,449. Estimated future minimum payments due under the
terms of the lease are as follows:
 
 December
      31,
            
            Amount2008
            
            $
            21,2522009
            
            
            21,2522010
            
            
            21,2522011
            
            
            21,2522012
            
            
            21,252Thereafter
            
            
            715,484$
            821,744
 
 
 As of
December 31, 2007, the lease agreement was current.  For the years
ended December 31, 2007 and 2006, $21,252 and $38,962, respectively, have been
paid under the terms of the lease and $0 and $0, respectively, remained
payable.
 
 c)  Uninsured
Cash and Cash Equivalents
 
 The
Partnership maintains its cash and cash equivalents in various
banks.  The accounts at each bank are guaranteed by the Federal
Deposit Insurance Corporation up to $100,000. Uninsured cash and cash
equivalents approximated $646,000 at March 31, 2008.
 
 d)  Cash
Distributions
 
 Cash
distributions from the Local Partnerships to the Partnership are restricted by
the provisions of the respective Local Partnership Agreements and/or HUD based
on operating results and a percentage of the owner’s equity
contribution.  Such cash distributions are typically made from surplus
cash flow.
 
 e)  Other
 
 The
Partnership and BACs holders began to recognize Tax Credits with respect to a
property when the credit period for such Property (generally ten years from the
date of investment or, if later, the date the property is leased to qualified
tenants) commenced. Because of the time required for the acquisition, completion
and rent-up of Properties, the amount of Tax Credits per BAC gradually increased
over the first three years of the Partnership.  Tax Credits not
recognized in the first three years will be recognized in the 11th through 13th
years.  The Partnership generated $1,999,760, $3,164,434 and
$4,614,216 Tax Credits during the 2007, 2006 and 2005 tax years,
respectively.
 
 The
Partnership is subject to the risks incident to potential losses arising from
the management and ownership of improved real estate. The Partnership can also
be affected by poor economic conditions generally; however, no more than 35% of
the Properties are located in any single state. There are also substantial risks
associated with owning interests in properties, as does the Partnership, which
receive government assistance, for example the possibility that Congress may not
appropriate funds to enable the Department of Housing and Urban Development
(“HUD”) to make rental assistance payments. HUD also restricts annual cash
distributions to partners based on operating results and a percentage of the
owner’s equity contribution. The Partnership cannot sell or substantially
liquidate its investments in subsidiary partnerships during the period that the
subsidy agreements are in existence without HUD’s approval. Furthermore, there
may not be market demand for apartments at full market rents when the rental
assistance contracts expire.
  - 61
-
  Item
9.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
 
 None
 
 Item
9A(T).  Controls and Procedures
  (a)Evaluation of Disclosure
Controls and Procedures.The Chief Executive Officer and Chief
Financial Officer of Related Independence Associates III, L.P., the general
partner of the Partnership, have evaluated the effectiveness of the
Partnership’s disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (“Exchange Act”) as of the end of the period covered by this
report.  Based on such evaluation, such officers have concluded that,
as of the end of such period, the Partnership’s disclosure controls and
procedures are effective.
 
 (b)  Management’s Report on
Internal Control over Financial Reporting.Our management is
responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act
Rules 13a-15(f) and 15d-15(f).  In evaluating the Partnership’s
internal control over financial reporting, management has adopted the framework
in Internal Control-Integrated Framework issued by the Committee of Sponsoring
organizations of the Treadway Commission (the “COSO
Framework”).  Under the supervision and with the participation of our
management, including the Chief Executive Officer and Chief Financial Officer of
the General Partner, the Partnership conducted an evaluation of the
effectiveness of its internal control over financial reporting as of the end of
the period covered by this report.  The Partnership’s internal control
over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external reporting purposes in accordance with
generally accepted accounting principles.  Internal control over
financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of
the  Partnership; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the Partnership are being made only in accordance
with authorizations of management and directors of the Partnership; and
(3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the Partnership’s assets
that could have a material effect on the financial
statements.  However, because of inherent limitations, internal
control over financial reporting may not prevent or detect
misstatements.  Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
 
 Based on
management’s evaluation under the COSO Framework, it has concluded that the
Partnership’s internal control over financial reporting, was, as of the end of
the period covered by this report, (1) effective at the Partnership level, in
that they provide reasonable assurance that information required to be disclosed
by the Partnership in the reports it files or submits under the Securities
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms and (2) ineffective at the
subsidiary level due to certain deficiencies noted in the audit reports for such
subsidiaries.  Management will attempt to cause the Local General
Partner’s to remedy such deficiencies; however, the General Partner does not
have control over the internal controls at the subsidiary
level.  Management believes they have sufficient controls at the
Partnership level to mitigate these deficiencies, and such deficiencies do not
have a material impact on the consolidated financial statements.
 
 This
annual report does not include an attestation report of the Partnership’s
registered public accounting firm regarding internal control over financial
reporting. The Partnership’s of internal control over financial reporting was
not subject to attestation by the Partnership’s registered public accounting
firm pursuant to temporary rules of the Securities and Exchange Commission that
permit the Partnership to provide only this report.
 
 (c)  Changes in Internal Controls over Financial
Reporting.Except as noted in (b) above, during the year ended
March 31, 2008, there were no changes in the Partnership’s internal control over
financial reporting that have materially affected, or are reasonably likely to
materially affect, the Partnership’s internal control over financial
reporting.
 
 Item
9B.  Other Information
 
 Not
applicable.
  - 62
-
  
 PART
      III
 
 
 Item 10.
Directors, Executive Officers and Corporate Governance
 
 The
Partnership has no directors or executive officers. The general partner of the
Partnership is Related Independence Associates III L.P., a Delaware limited
partnership (the “General Partner”). The general partner of the General Partner
is Related Independence Associates III Inc., a Delaware corporation (“RIAI
III”).  The Partnership’s affairs are managed and controlled by the
General Partner.  The Partnership has not adopted a separate code of
ethics because the Partnership has no directors or executive
officers.  The ultimate parent of the General Partner, Centerline
Holding Company (“Centerline”), has adopted a code of ethics (see http://www.centerline.com).
 
 Certain
information concerning the directors and executive officers of RIAI III is set
forth below.
 
 Name
            
            PositionRobert
      L. Levy
            
            Chief
      Financial OfficerAndrew
      J. Weil
            
            President
      and Chief Executive OfficerMarc
      D. Schnitzer
            
            Senior
      Vice President
 
 
 ROBERT L.
LEVY, 42, is the Chief Financial Officer of Centerline.  Mr. Levy is
also the Chief Financial Officer of American Mortgage Acceptance Company
(“AMAC”), a publicly traded real estate investment trust managed by an affiliate
of Centerline.  Mr. Levy is responsible for overseeing the Corporate
Finance, Capital Markets, Accounting, Budgeting, Tax and Treasury
departments.  Mr. Levy joined Centerline’s predecessor in November of
2001 as the Director of Capital Markets.  From 1998 through 2001, Mr.
Levy was a Vice President in the Real Estate Equity Research and Investment
Banking Departments at Robertson Stephens, an investment banking firm in San
Francisco.  Prior to 1998, Mr. Levy was employed by Prudential
Securities in the Real Estate Equity Research Group and at Prudential Realty
Group, the real estate investment arm of the Prudential Insurance
Company.  He received his Masters in Business Administration from the
Leonard N. Stern School of Business at New York University and his Bachelor of
Arts from Northwestern University.
 
 ANDREW J.
WEIL, 37, is an Executive Managing Director of Centerline, and is the Head of
the Affordable Housing Group.  Mr. Weil is responsible for overseeing
the day to day operations of the Affordable Housing Group, including the
acquisition of properties with Low-Income Housing Tax Credits and the
origination and structuring of institutional funds.  Prior to joining
Centerline’s predecessor in January 1994, Mr. Weil was a Financial Analyst for
the Heights Management Company, where he specialized in the analysis of
potential investments and property management.  Mr. Weil received a
Bachelor of Science degree in Economics with a concentration in Finance from the
Wharton School of the University of Pennsylvania.
 
 MARC D.
SCHNITZER, 47, is the Executive Officer of Centerline.  He is
responsible both for financial restructurings of real estate properties and
directing Centerline’s acquisitions of properties generating Tax Credits.
Mr. Schnitzer received a Masters of Business Administration from The
Wharton School of the University of Pennsylvania in December 1987 before joining
Centerline in January 1988. From 1983 to January 1986, he was a financial
analyst for the First Boston Corporation in New York. Mr. Schnitzer
graduated summa cum laude with a Bachelor of Science in Business Administration
from the School of Management at Boston University in May
1983.  Mr. Schnitzer also serves on the Board of Trustees of
Centerline and AMAC.
 
 Item
11.  Executive Compensation
 
 The
Partnership has no officers or directors. The Partnership does not pay or accrue
any fees, salaries or other forms of compensation to directors or officers of
the General Partner for their services.  However, under the terms of
the Partnership Agreement, the Partnership has entered into certain arrangements
with the General Partner and its affiliates, which provide for compensation to
be paid to the General Partner and its affiliates. Such arrangements include
(but are not limited to) agreements to pay nonrecurring acquisition fees, a
nonaccountable acquisition expense allowance, an accountable expense
reimbursement and subordinated disposition fees to the General Partner and/or
its affiliates. In addition, the General Partner is entitled to a subordinated
interest in cash from sales or refinancings and a 1% interest in net income, net
loss, distributions of adjusted cash from operations and cash from sales or
refinancings. Certain directors and officers of the General Partner receive
compensation from the General Partner and its affiliates for services performed
for various affiliated entities which may include services performed for the
Partnership. The maximum annual partnership management fee paid to the General
Partner is 0.5% of invested assets.  See Note 8 in Item 8 above, which
is incorporated herein by reference.
 
 Tabular
information concerning salaries, bonuses and other types of compensation payable
to executive officers has not been included in this annual report. As noted
above, the Partnership has no executive officers. The levels of compensation
payable to the General Partner and/or its affiliates is limited by the terms of
the Partnership Agreement and may not be increased therefrom on a discretionary
basis.
 
 - 63
-
 Item
12.  Security Ownership of Certain Beneficial Owners and Management
and Related Security Holder Matters
 
 Title
      of Class
            
            Name
      and Address of
              Beneficial
      Ownership
            
            Amount
      and Nature of
              Beneficial
      Ownership
            
            Percentage
              of
      ClassGeneral
      Partnership Interest in the Partnership
            
            Related
      Independence Associates III L.P.
              625
      Madison Avenue
              New
      York, NY 10022
            
            $1,000
      capital contribution – directly owned
            
            100%
 
 
 Independence
SLP III L.P., a limited partnership whose general partner is the general partner
of the General Partner of the Partnership and which acts as the special limited
partner of each Local Partnership, holds a .01% limited partnership interest in
each Local Partnership. See Note 8 to the Financial Statements in Item 8 above,
which information is incorporated herein by reference thereto. The following
table sets forth the number of BACs beneficially owned, as of May 18, 2008, by
(i) each BACs holder known to the Partnership to be a beneficial owner of more
than 5% of the BACs, (ii) each executive officer of the general partner of the
General Partner and (iii) the executive officers of the general partner of the
General Partner as a group. Unless otherwise noted, all BACs are owned directly
with sole voting and dispositive powers.
 
 Except as
set forth below, no person is known by the Partnership to be the beneficial
owner of more than five percent of the Limited Partnership Interests in the
Partnership and/or BACs, and neither the General Partner nor any officer of the
General Partner beneficially owns any Limited Partnership Interests in the
Partnership or BACs.
 
 Amount
      and Nature ofName of Beneficial Owner
(1)
            
            Beneficial Ownership
            
            Percent of ClassLehigh
      Tax Credit Partners, Inc.
            
            3,242.94
      (2) (3)
            
            7.5%J.
      Michael Fried
            
            3,242.94
      (2) (3)
            
            7.5%Alan
      P. Hirmes
            
            3,242.94
      (2) (3)
            
            7.5%Stuart
      J. Boesky
            
            3,242.94
      (2) (3)
            
            7.5%Stephen
      M. Ross
            
            3,242.94
      (2) (3)
            
            7.5%Marc
      D. Schnitzer
            
            3,242.94
      (2) (3)
            
            7.5%Denise
      L. Kiley
            
            3,242.94
      (2) (3)
            
            7.5%Robert
      L. Levy
            
            -
            
            -Andrew
      J. Weil
            
            -
            
            -All
      directors and executive officers of the general partner of the Related
      General Partner as a group (nine persons)
            
            3,242.94
      (2) (3)
            
            7.5%
 
 (1) 
The address for each of the persons in the table is 625 Madison Avenue, New
York, New York 10022.
 
 (2) 
As set forth in Schedule 13D filed by Lehigh Tax Credit Partners III L.L.C.
(“Lehigh III”) and Lehigh Tax Credit Partners, Inc. (the “Managing Member”) on
January 25, 1999 with the Securities and Exchange Commission (the “Commission”)
and pursuant to a letter agreement dated October 6, 1998 among the Partnership,
Lehigh III and the General Partner (the “Standstill Agreement”), Lehigh III
agreed that, prior to October 6, 2008 (the “Standstill Expiration Date”), it
would not and it would cause certain affiliates not to (i) seek to propose to
enter into, directly or indirectly, any merger, consolidation, business
combination, sale or acquisition of assets, liquidation, dissolution or other
similar transaction involving the Partnership, (ii) form, join or otherwise
participate in a “group” (within the meaning of Section 13 (d)(3) of the Act)
with respect to any voting securities of the Partnership, except that those
affiliates bound by the Standstill Agreement will not be deemed to have violated
it and formed a “group” solely by acting in accordance with the Standstill
Agreement, (iii) disclose in writing to any third party intention, plan or
arrangement inconsistent with the terms of the Standstill Agreement, or (iv)
loan money to, advise, assist or encourage any person in connection with any
action inconsistent with the terms of the Standstill
Agreement.  Lehigh III also agreed to vote its BACs in the same manner
as a majority of all voting BACs holders; provided, however, Lehigh III was
entitled to vote its BACs as it determined with regard to any proposal (i) to
remove the General Partner as a general partner of the Partnership or (ii)
concerning the reduction of any fees, profits, distributions or allocations for
the benefit of the General Partner or its affiliates.  The address of
each of the Partnership, Lehigh III and the General Partner is 625 Madison
Avenue, New York, New York 10022.
 
 (3)
 Each of Messrs. Ross and Schnitzer serves as a executive officer of the
Managing Member and owns an equity interest therein.  J. Michael
Fried, Alan P. Hirmes, Denise L. Kiley and Stuart J. Boesky each own only an
economic interest.
 
 - 64
-
  Item 13.
Certain Relationships and Related Transactions
 
 The
Partnership has and will continue to have certain relationships with the General
Partner and its affiliates, as discussed in Item 11 and also Note 8 in Item 8
above, which are incorporated herein by reference thereto. However, there have
been no direct financial transactions between the Partnership and the officers
of the General Partner.
 
 Item 14.
Principal Accountant Fees and Services
 
 Audit
Fees
 The
aggregate fees billed by Trien Rosenberg Rosenberg Weinberg Ciullo and Fazzari
LLP and its affiliates for professional services rendered for the audit of the
Partnership’s annual financial statements for the years ended March 31, 2008 and
2007 and for the reviews of the financial statements included in the
Partnership’s quarterly reports on Form 10-Q for those years were $54,700 and
$52,700, respectively.
 
 Audit Related
Fees
 None
 
 Tax Fees
 The
aggregate fees billed by Weiser LLP and its affiliates for professional services
rendered for the preparation of the Partnership’s annual tax returns were $950
and $8,900 for the years ended December 31, 2007 and 2006.
 
 All Other
Fees
 None
 
 The
Partnership is not required to have, and does not have, a standalone audit
committee.
 
  - 65
-
  PART
IV
  
 Item
      15.
              Exhibits
      and Financial Statement SchedulesSequential
                Page(a)
      1.
              Financial
      StatementsReport
      of Independent Registered Public Accounting Firm
              
              13Consolidated
      Balance Sheets at March 31, 2008 and 2007
              
              50Consolidated
      Statements of Operations for the Years Ended March 31, 2008, 2007 and
      2006
              
              51Consolidated
      Statements of Changes in Partners’ Capital (Deficit) for the Years Ended
      March 31, 2008, 2007 and 2006
              
              52Consolidated
      Statements of Cash Flows for the Years Ended March 31, 2008, 2007 and
      2006
              
              53Notes
      to Consolidated Financial Statements
              
              54(a)
      2.
              Consolidated Financial
      Statement SchedulesReport
      of Independent Registered Public Accounting Firm
              
              73Schedule
      I - Condensed Financial Information of Registrant
              
              74Schedule
      III - Real Estate and Accumulated Depreciation
              
              77All
      other schedules have been omitted because they are not required or because
      the required information is contained in the financial statements or notes
      thereto.(a)
      3.
              Exhibits(3A)
              Agreement
      of Limited Partnership of Independence Tax Credit Plus L.P. III as adopted
      on December 23, 1993*(3B)
              Form
      of Amended and Restated Agreement of Limited Partnership of Independence
      Tax Credit Plus L.P. III, attached to the Prospectus as Exhibit
      A**(3C)
              Certificate
      of Limited Partnership of Independence Tax Credit Plus L.P. III as filed
      on December 23, 1993*(10A)
              Form
      of Subscription Agreement attached to the Prospectus as Exhibit
      B**(10B)
              Escrow
      Agreement between Independence Tax Credit Plus L.P. III and Bankers Trust
      Company*(10C)
              Form
      of Purchase and Sales Agreement pertaining to the Partnership’s
      acquisition of Local Partnership Interests*(10D)
              Form
      of Amended and Restated Agreement of Limited Partnership of Local
      Partnerships*(21)
              Subsidiaries
      of the Registrant
              
              67(31.1)
              Certification
      Pursuant to Rule 13a-14(a) or Rule 15d-14(a)
              
              70(31.2)
              Certification
      Pursuant to Rule 13a-14(a) or Rule 15d-14(a)
              
              71(32.1)
              Certification
      Pursuant to Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Title 18
      of the United States Code (18 U.S.C. 1350).
              
              72*Incorporated
      herein as an exhibit by reference to exhibits filed with Post-Effective
      Amendment No. 4 to the Registration Statement on Form S-11 {Registration
      No. 33-37704}**Incorporated
      herein as an exhibit by reference to exhibits filed with Post-Effective
      Amendment No. 8 to the Registration Statement on Form S-11 {Registration
      No. 33-37704}
 - 66
-
  
 Subsidiaries of the
      Registrant (Exhibit 21)
            
            Jurisdiction
              of
      OrganizationEdward
      Hotel Limited Partnership
            
            CAPacific-East
      L.P.
            
            NYOvertown
      Development Group, Ltd.
            
            FLSumpter
      Commons Associates, L.P.
            
            NYPark
      Housing Limited Partnership
            
            CTLivingston
      Manor Urban Renewal Associates, L.P.
            
            NJJefferis
      Square Housing Partnership, L.P.
            
            PA2301
      First Avenue Limited Partnership
            
            NYLewis
      Street Limited Partnership
            
            NYSavannah
      Park Housing Limited Partnership
            
            DCBrannon
      Group, L.C.
            
            FLMansion
      Court Phase II Venture
            
            PAPrimm
      Place Partners, L.P.
            
            MIBK-9-A
      Partners L.P.
            
            NYBK-10K
      Partners L.P.
            
            NYAspen-Olive
      Associates
            
            PAWest
      Mill Creek Associates, III L.P.
            
            PAUniversal
      Court Associates
            
            PANew
      Zion Apartments
            
            LADreitzer
      House
            
            NY
 
  - 67
-
   SIGNATURES
 
 
 
 Pursuant
to the requirements of Section 13 or 15(d) 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.
 
 
 
 INDEPENDENCE TAX CREDIT PLUS
L.P. III
 (Registrant)
 
 
 
 By:
            RELATED
      INDEPENDENCE ASSOCIATES III L.P.,General
      PartnerBy:
            RELATED
      INDEPENDENCE ASSOCIATES III INC.,General
      PartnerDate:
            June 20,
      2008
            
            
            
            By:
            /s/ Robert L.
      LevyRobert
      L. LevyChief
      Financial Officer, Principal Accounting Officer and
    DirectorDate:
            June 20,
      2008
            
            
            
            By:
            /s/ Andrew J.
      WeilAndrew
      J. WeilPresident
      and Chief Executive Officer
 
  - 68
-
  Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:
 
 
 
 Signature
            
            Title
            
            Date/s/ Robert L.
      Levy
              Robert
      L. Levy
            
            Chief
      Financial Officer, Principal Accounting Officer and Director of
      Related Independence Associates III Inc.
            
            June 20,
      2008/s/ Andrew J.
      Weil
              Andrew
      J. Weil
            
            President
      (Chief Executive Officer) of Related Independence Associates III
      Inc.
            
            June 20,
      2008
 
 
  - 69
-
  REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 
 To the
Partners of
 Independence
Tax Credit Plus L.P. III and Subsidiaries
 (A
Delaware Limited Partnership)
 
 
 In
connection with our audits of the consolidated financial statements of
Independence Tax Credit Plus L.P. III and Subsidiaries (A Delaware Limited
Partnership) included in the Form 10-K as presented in our opinion dated
June  18, 2008 on page 13, and based on the reports of other
auditors, we have also audited supporting Schedule I for the 2007, 2006 and 2005
Fiscal Years and Schedule III as of March 31, 2008.  In our opinion,
and based on the reports of the other auditors, these consolidated schedules
present fairly, when read in conjunction with the related consolidated financial
statements, the financial data required to be set forth therein.
 
 
 /s/TRIEN
ROSENBERG ROSENBERG
 WEINBERG
CIULLO & FAZZARI LLP
 
 New York,
New York
 June 18,
2008
  - 73
-
  INDEPENDENCE
TAX CREDIT PLUS L.P. III
 SCHEDULE
I
 CONDENSED
FINANCIAL INFORMATION OF REGISTRANT
 (Not
Including Consolidated Subsidiary Partnerships)
 
 
 CONDENSED
BALANCE SHEETS
 
 
 
 
 ASSETS
 
 
 March
      31,2008
            
            2007Cash
      and cash equivalents
            
            $
            47,821
            
            $
            14,460Investment
      in subsidiary partnerships
            
            
            10,520,517
            
            
            12,158,076Cash
      held in escrow
            
            
            115,345
            
            
            130,418Other
      assets
            
            
            281
            
            
            0Total
      assets
            
            $
            10,683,964
            
            $
            12,302,954LIABILITIES
      AND PARTNERS’ CAPITALDue
      to general partner and affiliates
            
            $
            5,224,613
            
            $
            4,599,173Other
      liabilities
            
            
            4,549
            
            
            12,885Total
      liabilities
            
            
            5,229,162
            
            
            4,612,058Partners’
      capital
            
            
            5,454,802
            
            
            7,690,896Total
      liabilities and partners’ capital
            
            $
            10,683,964
            
            $
            12,302,954
 
 
 Investment
in subsidiary partnerships is recorded in accordance with the equity method of
accounting, wherein the investments are not reduced below zero. Accordingly,
partners’ capital on the consolidated balance sheets will differ from partners’
capital shown above.
 
  - 74
-
  INDEPENDENCE
TAX CREDIT PLUS L.P. III
 SCHEDULE
I
 CONDENSED
FINANCIAL INFORMATION OF REGISTRANT
 (Not
Including Consolidated Subsidiary Partnerships)
 
 
 CONDENSED
STATEMENTS OF OPERATIONS
 
 
 
 
 Years
      Ended March 31,2008
            
            2007
            
            2006RevenuesOther
      income
            
            $
            1,121
            
            $
            727
            
            $
            2,024ExpensesAdministrative
      and management
            
            
            90,189
            
            
            133,176
            
            
            107,043Administrative
      and management - related parties
            
            
            578,184
            
            
            482,372
            
            
            584,899Total
      expenses
            
            
            668,373
            
            
            615,548
            
            
            691,942Losses
      from operations
            
            
            (667,252
            )
            
            (614,821
            )
            
            (689,918
            )Equity
      in loss of subsidiary partnerships
            
            
            (1,568,842
            )
            
            (2,829,807
            )
            
            (2,262,425
            )Distribution
      income from subsidiary partnerships
            
            
            0
            
            
            0
            
            
            7,359Net
      loss
            
            $
            (2,236,094
            )
            $
            (3,444,628
            )
            $
            (2,944,984
            )
 
  - 75
-
  INDEPENDENCE
TAX CREDIT PLUS L.P. III
 SCHEDULE
I
 CONDENSED
FINANCIAL INFORMATION OF REGISTRANT
 INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
 
 
 CONDENSED
STATEMENTS OF CASH FLOWS
 
 
 
 
 Years
      Ended March 31,2008
            
            
            2007
            
            
            2006Cash
      flows from operating activities:Net
      loss
            
            $
            (2,236,094
            )
            
            $
            (3,444,628
            )
            
            $
            (2,944,984
            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Equity
      in loss of subsidiary partnerships
            
            
            1,568,842
            
            
            
            2,829,807
            
            
            
            2,262,425Distribution
      income from subsidiary partnerships
            
            
            0
            
            
            
            0
            
            
            
            (7,359
            )Decrease
      (increase) in other assets
            
            
            (281
            )
            
            
            44
            
            
            
            (44
            )Increase
      (decrease) in liabilities:Due
      to general partners and affiliates
            
            
            625,440
            
            
            
            527,371
            
            
            
            222,947Other
      liabilities
            
            
            (8,336
            )
            
            
            (3,509
            )
            
            
            7,150Total
      adjustments
            
            
            2,185,665
            
            
            
            3,353,713
            
            
            
            2,485,119Net
      cash used in operating activities
            
            
            (50,429
            )
            
            
            (90,915
            )
            
            
            (459,865
            )Cash
      flows from investing activities:Investment
      in subsidiary partnerships
            
            
            (15,073
            )
            
            
            0
            
            
            
            0Distributions
      from subsidiary partnerships
            
            
            83,790
            
            
            
            69,181
            
            
            
            470,314Decrease
      in cash held in escrow
            
            
            15,073
            
            
            
            0
            
            
            
            0Net
      cash provided by investing activities
            
            
            83,790
            
            
            
            69,181
            
            
            
            470,314Net
      increase (decrease) in cash and cash equivalents
            
            
            33,361
            
            
            
            (21,734
            )
            
            
            10,449Cash
      and cash equivalents, beginning of year
            
            
            14,460
            
            
            
            36,194
            
            
            
            25,745Cash
      and cash equivalents, end of year
            
            $
            47,821
            
            
            $
            14,460
            
            
            $
            36,194
 
  - 76
-
  INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 SCHEDULE
III
 REAL
ESTATE AND ACCUMULATED DEPRECIATION
 Partnership
Property Pledged as Collateral
 MARCH 31,
2008
 
 
  Description
              
              Encumbrances
              
              Initial
      Cost to Partnership
              
              Cost
      Capitalized
                Subsequent
      to
                Acquisition:
                Improvements
              
              Gross
      Amount at which Carried at Close of Period
              
              Accumulated
                Depreciation
              
              Year
      of
                Construction/
                Renovation
              
              Date
                Acquired
              
              Life
      on which
                Depreciation
      in
                Latest
      Income
                Statements
      are
                Computed(a)(b)Land
              
              Buildings
      and
                Improvements
              Land
              
              Buildings
      and
                Improvements
              
              TotalApartment
      ComplexesEdward
      Hotel Limited PartnershipLos
      Angeles, CA
              
              $
              (2,399,459
              )
              $
              275,000
              
              $
              591,240
              
              $
              2,583,269
              
              $
              281,123
              
              $
              3,168,386
              
              $
              3,449,509
              
              $
              1,346,736
              
              1994-95
              
              Nov.
      1994
              
              27.5
              yearsPacific
      East, L.P.Brooklyn,
      NY
              
              
              (1,950,245
              )
              
              1,950
              
              
              3,125,584
              
              
              194,715
              
              
              8,075
              
              
              3,314,174
              
              
              3,322,249
              
              
              1,672,630
              
              1994-95
              
              Dec.
      1994
              
              27.5
              yearsOvertown
      Development Group, Ltd.Miami,
      FL
              
              
              (1,407,348
              )
              
              52,284
              
              
              2,627,099
              
              
              212,721
              
              
              58,408
              
              
              2,833,696
              
              
              2,892,104
              
              
              953,725
              
              1994-95
              
              Dec.
      1994
              
              40
              yearsSumpter
      Commons Associates, L.P.
              
              
              (1,182,890
              )
              
              500
              
              
              1,862,916
              
              
              50,963
              
              
              3,673
              
              
              1,910,706
              
              
              1,914,379
              
              
              856,518
              
              1995-96
              
              Apr.
      1995
              
              27.5
              yearsPark
      Housing Limited Partnership
              
              
              (816,570
              )
              
              5,000
              
              
              2,343,351
              
              
              80,949
              
              
              8,173
              
              
              2,421,127
              
              
              2,429,300
              
              
              1,004,011
              
              1995-96
              
              May
      1995
              
              27.5
              yearsLivingston
      Manor Urban Renewal Associates, L.P.
              
              
              (3,080,000
              )
              
              119,988
              
              
              7,047,532
              
              
              638,048
              
              
              123,161
              
              
              7,682,407
              
              
              7,805,568
              
              
              2,362,840
              
              1995-96
              
              June
      1995
              
              15-40
              yearsJefferis
      Square Housing Partnership, L.P.
              
              
              (1,900,000
              )
              
              55,158
              
              
              0
              
              
              4,553,296
              
              
              39,347
              
              
              4,569,107
              
              
              4,608,454
              
              
              1,436,011
              
              1995-96
              
              June
      1995
              
              20 -
      40
              years2301
      First Avenue Limited Partnership
              
              
              (4,465,759
              )
              
              64,350
              
              
              5,818,269
              
              
              113,351
              
              
              67,523
              
              
              5,928,447
              
              
              5,995,970
              
              
              2,853,343
              
              1995-96
              
              Aug.
      1995
              
              27.5
              yearsLewis
      Street Limited Partnership
              
              
              (1,600,000
              )
              
              7,000
              
              
              0
              
              
              2886,150
              
              
              10,173
              
              
              2,882,977
              
              
              2,893,150
              
              
              1,207,727
              
              1995-96
              
              Oct.
      1995
              
              27.5
              yearsSavannah
      Park Housing Limited Partnership
              
              
              (662,395
              )
              
              0
              
              
              2,049,888
              
              
              2,156,980
              
              
              3,173
              
              
              4,203,695
              
              
              4,206,868
              
              
              1,408,326
              
              1995-96
              
              Oct.
      1995
              
              27.5
              yearsBrannon
      Group, L.C.
              
              
              (4,342,264
              )
              
              380,000
              
              
              2,598,402
              
              
              5,517,662
              
              
              383,173
              
              
              8,112,891
              
              
              8,496,064
              
              
              2,164,519
              
              1995-96
              
              Dec.
      1995
              
              40
              yearsIndependence
      Tax Credit Fund L.P.(Mansion
      Court Phase II Venture and Aspen Olive Associates
      Consolidated)
              
              
              (2,510,527
              )
              
              1,732
              
              
              339,661
              
              
              4,305,011
              
              
              5,123
              
              
              4,641,281
              
              
              4,646,404
              
              
              1,302,782
              
              1995-96
              
              Dec.
      1995
              
              20 -
      40
              yearsPrimm
      Place Partners, L.P.
              
              
              (4,668,436
              )
              
              168,258
              
              
              0
              
              
              6,960,006
              
              
              67,577
              
              
              7,060,687
              
              
              7,128,264
              
              
              1,959,085
              
              1995-96
              
              Dec.
      1995
              
              10 -
      40
              yearsBK-9-A
      Partners L.P.
              
              
              (1,971,693
              )
              
              0
              
              
              1,517,313
              
              
              56,847
              
              
              3,173
              
              
              1,570,987
              
              
              1,574,160
              
              
              508,067
              
              1995-96
              
              Dec.
      1995
              
              40
              yearsBK-10K
      Partners L.P.
              
              
              (949,972
              )
              
              11,000
              
              
              1,637,762
              
              
              97,915
              
              
              14,176
              
              
              1,732,501
              
              
              1,746,677
              
              
              555,479
              
              1995-96
              
              Dec.
      1995
              
              40
              yearsWestmill
      Creek Associates III L.P.
              
              
              (2,826,715
              )
              
              37,031
              
              
              6,922,563
              
              
              46,017
              
              
              37,649
              
              
              6,967,962
              
              
              7,005,611
              
              
              3,232,487
              
              1997-98
              
              Dec.
      1996
              
              27.5
              yearsUniversal
      Court Associates
              
              
              (1,650,000
              )
              
              31,024
              
              
              279,220
              
              
              4,543,919
              
              
              31,642
              
              
              4,822,521
              
              
              4,854,163
              
              
              1,224,829
              
              1997-98
              
              Apr.
      1997
              
              20-40
              yearsNew
      Zion Apartments
              
              
              (809,291
              )
              
              20,000
              
              
              2,688,770
              
              
              12,362
              
              
              20,618
              
              
              2,700,514
              
              
              2,721,132
              
              
              1,119,926
              
              1997-98
              
              Nov.
      1997
              
              15 -
      27.5
              yearsDreitzer
      House
              
              
              (4,275,000
              )
              
              5
              
              
              0
              
              
              6,770,239
              
              
              623
              
              
              6,769,621
              
              
              6,770,244
              
              
              2,223,151
              
              1997-99
              
              Dec.
      1997
              
              27.5
              years$
              (43,468,564
              )
              $
              1,230,280
              
              $
              41,449,570
              
              $
              41,780,420
              
              $
              1,166,583
              
              $
              83,293,687
              
              $
              84,460,270
              
              $
              29,392,193(a)  Depreciation
      is computed using primarily the straight-line method over the estimated
      useful lives determined by the Partnership date of
      acquisition.
                (b)  Personal
      property is depreciated primarily by the straight-line method over the
      estimated useful lives of 5 - 12
years.
 
  - 77
-
  INDEPENDENCE
TAX CREDIT PLUS L.P. III
 AND
SUBSIDIARIES
 SCHEDULE
III
 REAL
ESTATE AND ACCUMULATED DEPRECIATION
 Partnership
Property Pledged as Collateral
 MARCH 31,
2008
 (continued)
  Cost
      of Property and Equipment
            
            Accumulated
      DepreciationYear
      Ended March 31,2008
            
            2007
            
            2006
            
            2008
            
            2007
            
            2006Balance
      at beginning of period
            
            $
            84,418,262
            
            $
            86,214,620
            
            $
            86,076,450
            
            $
            26,947,693
            
            $
            24,907,449
            
            $
            22,332,456Additions
      during period:Improvements
            
            
            140,557
            
            
            179,141
            
            
            138,170Depreciation
      expense
            
            
            
            
            
            
            
            
            
            
            
            2,534,884
            
            
            2,612,983
            
            
            2,574,993Reductions
      during period:Dispositions
      and impairment loss
            
            
            (98,549
            )
            
            (1,975,499
            )
            
            0
            
            
            (90,384
            )
            
            (572,739
            )
            
            0Balance
      at close of period
            
            $
            84,460,270
            
            $
            84,418,262
            
            $
            86,214,620
            
            $
            29,392,193
            
            $
            26,947,693
            
            $
            24,907,449At
      the time the local partnerships were acquired by Independence Tax Credit
      Plus III Limited Partnership, the entire purchase price paid by
      Independence Tax Credit Plus III Limited Partnership was pushed down to
      the local partnerships as property and equipment with an offsetting credit
      to capital. Since the projects were in the construction phase at the time
      of acquisition, the capital accounts were insignificant at the time of
      purchase. Therefore, there are no material differences between the
      original cost basis for tax and GAAP.
 
 
  - 78
-