UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 ______________
  
 FORM 10-K
 
 ______________
 (Mark One)
  þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the fiscal year ended March 31, 2011
  OR
  o
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  o   No  þ
  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 o   No  þ
  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  þ   No  o
  Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  o   No  o
  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.   þ
  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 definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):
  Large accelerated filer  o

Accelerated filer  oNon-accelerated filer  o  (Do not check if a smaller reporting company)

Smaller reporting company  þ
  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  o   No  þ
  The approximate aggregate book value of the voting and non-voting common equity held by non-affiliates of the Registrant as of September 30, 2010 was $(29,047,000), 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).  The Partnership had originally acquired interests in twenty Local Partnerships.  During the year ended March 31, 2011, the Partnership sold its limited partnership interests in one Local Partnership.  As of March 31, 2011, the Partnership has sold its limited partnership interests in four Local Partnerships.  As of March 31, 2011, approximately $35,051,000 (including approximately $873,000 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 during the 15-year period commencing at the beginning of the Credit Period (“Compliance Period”).  Through December 31, 2009, only Mansion Court Phase II Venture was required to recapture $489,362 of low-income housing tax credits.  As of December 31, 2009, all the Local Partnerships had completed their Credit Periods.  However, each Local Partnership must continue to comply with the Tax Credit requirements until the end of the Compliance Period in order to avoid recapture of the Tax Credits.  The Compliance Periods will continue through December 31, 2014 with respect to the Properties depending upon when the Compliance Period commenced.
  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).  During the year ended March 31, 2011, the Partnership recorded approximately $1,878,000 as an aggregate loss on impairment of assets or reduction to estimated fair value.  Through March 31, 2011, the Partnership has recorded approximately $30,350,000 as an aggregate loss on impairment of assets or reduction to estimated fair value.
      - 2 -
    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, has not been the only factor in determining whether there is an impairment and generally has not had 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, and it is unlikely that the Partnership will meet objectives 2 and 3, also as noted 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 31% 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.
  Sale of Underlying Local Partnerships
  The Partnership is in the process of developing a plan to dispose of all of its investments.  It is anticipated that this process will continue to take a number of years.  During the year ended March 31, 2011, the Partnership sold its limited partnership interests in one Local Partnership.  As of March 31, 2011, the Partnership has sold its limited partnership interests in four Local Partnerships.  There can be no assurance as to when the Partnership will dispose of its remaining investments or the amount of proceeds which may be received.  However, based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, it is unlikely that the proceeds from such sales received by the Partnership will be sufficient to return to the limited partners their original investment.
  On December 31, 2010, the Partnership sold its limited partnership interest in Jefferis Square Housing Partnership L.P. (“Jefferis”) to an affiliate of the Local General Partner for a sales price of $25,000.  The Partnership received approximately $2,000 after the repayment of other liabilities of approximately $23,000.  The sale resulted in a gain of approximately $4,832,000, resulting from the write-off of the deficit basis in the Local Partnership of approximately $4,830,000 at the date of the sale and the $2,000 cash received from the sale, which was recorded during the quarter ended December 31, 2010.  An adjustment to the gain of approximately $196,000 was recorded during the quarter ended March 31, 2011, resulting in an overall gain of $5,028,000.  In addition, the sale resulted in a non-cash contribution to the Local Partnership from the General Partner of approximately $12,500 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.
  On March 31, 2010, the Partnership sold its limited partnership interest in Livingston Manor Urban Renewal Associates, L.P. (“Livingston Manor”) to an affiliate of the Local General Partner for a sales price of $20,000.  The Partnership received approximately $7,000 after the repayment of other liabilities of approximately $13,000.  The sale resulted in a loss of approximately $1,870,000, resulting from the write-off of the basis in the Local Partnership of approximately $1,877,000 at the date of the sale and the $7,000 cash received from the sale which was recorded during the year ended March 31, 2010.  An adjustment to the loss of approximately $42,000 was recorded during the quarter ended June 30, 2010, resulting in an overall loss of approximately $1,912,000.  In addition, the sale resulted in a non-cash contribution to the Local Partnership from the Local General Partner of approximately $324,000 as a result of the write-off of fees owed by the Local Partnership to the Local General Partner.
  On August 26, 2009, the Partnership sold its limited partnership interest in Pacific-East L.P. (“Eastern Parkway”) to an affiliate of the Local General Partner for a sales price of $250,000.  The Partnership received approximately $191,000 after the repayment of other liabilities of approximately $59,000.  The sale resulted in a gain of approximately $638,000, resulting from the write-off of the deficit basis in the Local Partnership of approximately $388,000 at the date of the sale and the $191,000 cash received from the sale, which was recorded during the quarter ended September 30, 2009.  An adjustment to the gain of approximately $(120,000) was recorded during the quarter ended March 31, 2010, resulting in an overall gain of $518,000.  The sale also resulted in a write-off of operating advances of approximately $1,016,000 owed to the Partnership which are eliminated in consolidation.  In addition, the sale resulted in a non-cash contribution to the Local Partnership from the General Partner of approximately $2,500 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.
  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”).
      - 3 -
    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.
  Not applicable.
  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.  The Partnership had originally acquired interests in twenty Local Partnerships, all of which have been consolidated for accounting purposes.  During the year ended March 31, 2011, the Partnership has sold its limited partnership interests in one Local Partnership.  As of March 31, 2011, the Partnership has sold its limited partnership interests in four local partnerships.  There can be no assurance as to when the Partnership will dispose of its remaining investments or the amount of proceeds which may be received.  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.
  Local Partnership Schedule
  % of Units Occupied at May 1,Name and Location

(Number of Units)

Date Acquired

2011

2010

2009

2008

2007Edward Hotel Limited PartnershipLos Angeles, CA (47)

November 1994

94
%

87
%

96
%

94
%

87
%Pacific-East L.P.Brooklyn, NY (39)

December 1994

(b
)

(b
)

89
%

92
%

92
%Overtown Development Group, Ltd.Miami, FL (65)

December 1994

95
%

71
%

78
%

78
%

85
%Sumpter Commons Associates, L.P.Brooklyn, NY (21)

April 1995

100
%

100
%

100
%

100
%

100
%Park Housing Limited PartnershipHartford, CT  (30)

May 1995

77
%

40
%

83
%

80
%

90
%Livingston Manor Urban Renewal Associates, L.P.New Brunswick, NJ (50)

June 1995

(b
)

(b
)

98
%

100
%

100
%Jefferis Square Housing Partnership L.P.Chester, PA (36)

June 1995

(c
)

100
%

97
%

94
%

100
%2301 First Avenue Limited PartnershipNew York, NY (92)

August 1995

(a
)

(a
)

(a
)

98
%

99
%Lewis Street L.P.Buffalo, NY (32)

October 1995

90
%

94
%

97
%

97
%

88
%Savannah Park Housing Limited PartnershipWashington, DC  (64)

October 1995

83
%

84
%

86
%

94
%

97
%
       - 4 -
     Local Partnership Schedule
  % of Units Occupied at May 1,Name and Location

(Number of Units)

Date Acquired

2011

2010

2009

2008

2007
  Brannon Group, L.C.Leisure City, FL (80)

December 1995

100
%

97
%

90
%

93
%

98
%Mansion Court Phase II VenturePhiladelphia, PA (19)

December 1995

5
%

42
%

42
%

42
%

53
%Primm Place Partners, L.P.St. Louis, MI (128)

December 1995

98
%

97
%

95
%

97
%

98
%BK-9-A Partners L.P.Brooklyn, NY (23)

December 1995

96
%

100
%

100
%

96
%

100
%BK-10K Partners L.P.Brooklyn, NY (21)

December 1995

100
%

100
%

100
%

100
%

100
%Aspen-Olive AssociatesPhiladelphia, PA (22)

October 1996

95
%

100
%

100
%

95
%

95
%West Mill Creek Associates III L.P.Philadelphia, PA (72)

January 1997

100
%

94
%

97
%

96
%

100
%Universal Court AssociatesPhiladelphia, PA (32)

April 1997

91
%

91
%

100
%

100
%

100
%New Zion ApartmentsShreveport, LA (100)

November 1997

99
%

99
%

98
%

99
%

100
%Dreitzer HouseNew York, NY (32)

December 1997

100
%

100
%

100
%

100
%

99
%(a)The Partnership’s limited partnership interest was sold during the fiscal year ended March 31, 2009 (see Note 10 in Item 8).

(b)The Partnership’s limited partnership interest was sold during the fiscal year ended March 31, 2010 (see Note 10 in Item 8).

(c)The Partnership’s limited partnership interest was sold during the fiscal year ended March 31, 2011 (see Note 10 in Item 8).
   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.
  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, 2011, the gross amount of the Operating Deficit Guarantees aggregate approximately $5,487,000, of which approximately $3,931,000 have expired.  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.
      - 5 -
    Tax Credits with respect to a given Apartment Complex were available for a ten-year period that commenced when the property was leased to qualified tenants.  However, the annual Tax Credits available in the year in which the Apartment Complex was leased was prorated based upon the number of months remaining in the year. The amount of the annual Tax Credit not available in the first year was 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 was allocated Tax Credits beginning in the month following the month in which it acquired its interest and Tax Credits allocated in any prior period were not available to the Partnership.
  Item 3.  Legal Proceedings.
  None.
  Item 4.  (Removed and Reserved).
      - 6 -
    PART II
   Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
  As of March 31, 2011, 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 25, 2011, the Partnership has approximately 2,533 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, 2011.  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.
  The Partnership relies on a 2% safe harbor established by an Internal Revenue Service (“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.
  Item 6.  Selected Financial Data.
  Not applicable.
      - 7 -
    Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.
  Liquidity and Capital Resources
  The Partnership had originally invested approximately $35,051,000 (including approximately $873,000 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, 2011, the Partnership did not make any advances to the Local Partnerships.
  The Partnership is in the process of developing a plan to dispose of all of its investments.  During the year ended March 31, 2011, the Partnership sold its limited partnership interests in one Local Partnership.  As of March 31, 2011, the Partnership has sold its limited partnership interests in four Local Partnerships.  There can be no assurance as to when the Partnership will dispose of its remaining investments or the amount of proceeds which may be received.  However, based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, it is unlikely that the proceeds from such sales received by the Partnership will be sufficient to return to the limited partners their original investments.  All gains and losses on sales are included in discontinued operations.
  Short-term
  During the year ended March 31, 2010, the Partnership’s primary sources of funds included:  (i) working capital reserves; (ii) interest earned on the working capital reserves; (iii) cash distributions from operations of the Local Partnerships; and (iv) sales proceeds and distributions.  Such funds are available to meet the obligations of the Partnership.  The Partnership does not anticipate providing cash distributions to BACs holders in circumstances other than refinancing or sales.  Cash distributions received from the Local Partnerships, as well as the working capital reserves referred to above, will be used towards the future operating expenses of the Partnership.  During the years ended March 31, 2011 and 2010, the amounts received from operations of the Local Partnerships were approximately $91,000 and $46,000, respectively.  Additionally, during the years ended March 31, 2011 and 2010, the Partnership received approximately $0 and $197,000, respectively, in net proceeds from the sale of Local Partnerships’ limited partnership interest.  The Partnership does not anticipate being able to make distributions sufficient to return to BACs holders their original capital contributions.
  For the year ended March 31, 2011, cash and cash equivalents of the Partnership and its consolidated Local Partnerships decreased ($315,000).  This decrease was due to repayment of mortgage notes ($320,000), costs related to sale of properties ($26,000), purchase of property and equipment ($106,000) and a decrease in capitalization of consolidated subsidiaries attributable to noncontrolling interests ($104,000), which exceeded net cash provided by operating activities ($155,000), proceeds from sale of properties ($25,000), a net increase in due to local general partners and affiliates relating to investing and financing activities ($25,000), and a decrease in cash held in escrow relating to investing activities ($37,000).  Included in the adjustments to reconcile the net income to net cash provided by operating activities is depreciation and amortization in the amount of approximately ($830,000), gain on sale of properties of approximately $4,985,000 and loss on impairment of fixed assets of approximately ($1,878,000).
  Total expenses for the year ended March 31, 2011 and 2010, respectively, excluding depreciation and amortization, interest, general and administrative – related parties and loss on impairment of fixed assets, totaled $4,901,452 and $4,838,572, respectively.
  Accounts payable as of March 31, 2011 and 2010 were $1,018,576 and $955,138, 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.  Accrued interest as of March 31, 2011 and 2010 was $9,248,146 and $11,409,657, 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.
  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.  In addition, assuming the General Partner continues to defer the payment of fees as discussed below and in Note 8 to the Financial Statements in Item 8, the Partnership believes it 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.
  The Partnership has an unconsolidated working capital reserve of approximately $882,000 at March 31, 2011.
  Long-term
  Partnership management fees owed to the General Partner amounting to approximately $3,520,000 and $3,845,000 were accrued and unpaid as of March 31, 2011 and 2010, respectively, and are included in the line item Due to general partner and affiliates in the consolidated balance sheets.  During the year ended March 31, 2011, management deemed the unpaid partnership management fees that were related to the property sold during the year ended March 31, 2011, uncollectible and as a result, wrote them off in the amount of approximately $575,000, resulting in a non-cash General Partner contribution of the same amount.  Unpaid partnership management fees for any year are to be deferred without interest and will be payable out of sales or refinancing proceeds only to the extent of available funds after payments on all Partnership liabilities have been made other than to those owed to the General Partner and its affiliates, and after the Limited Partners have received a 10% return on their capital contributions.
      - 8 -
    All other payables included in Due to general partner and affiliates are expected to be paid, if at all, from working capital reserves.  See Note 12 in Item 8 for further discussion of amounts due to the General Partner and its affiliates.  The General Partner does not anticipate advancing going forward any operating funds to any of the Local Partnerships in which the Partnership has invested.  Even if a situation arose where the General Partner and its affiliates needed to but were not able to make operating advances in the future due to lack of funds, the only impact on the Partnership would be that it would lose its investment in that particular Local Partnership.  The Partnership’s ability to continue its operations would not be affected.
  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 may result in recapture of Tax Credits if the investment is lost before the expiration of the Compliance Period.  Through December 31, 2009, only Mansion Court Phase II Venture (“Mansion Court”) was required to recapture $489,362 of low-income housing Tax Credits.
  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, other than Mansion Court, had their Tax Credits fully in place.  As of December 31, 2009, the Credit Periods had expired and the Partnership has met its objective of generating Tax Credits for qualified BACs holders.  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 from operations as of March 31, 2011 to make future payments under its debt agreements and other contractual obligations.
  Contractual Obligations



Payment Due by PeriodTotal

Less than

1 Year

1 – 3

Years

3 -5

Years

More than

5 YearsMortgage notes payable (a)

$
30,836,027

$
2,762,616

$
4,083,141

$
4,369,528

$
19,620,742Land lease obligations (b)


757,988


21,252


42,504


42,504


651,728Total

$
31,594,015

$
2,783,868

$
4,125,645

$
4,412,032

$
20,272,470(a)  The mortgage and construction notes, which are collateralized by land and buildings, are payable in aggregate monthly installments of approximately $71,000 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 12d.
 
  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, 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.  The Partnership complies with ASC 360, Property, Plant and Equipment.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) when the Property is considered to be impaired and the depreciation cost exceeds estimated fair value.
      - 9 -
    During the year ended March 31, 2010, the Partnership recorded approximately $1,878,000 as a loss on impairment of assets or reduction to estimated fair value.  Through March 31, 2010, the Partnership has recorded approximately $30,350,000 as an aggregate loss on impairment of assets or reduction to estimated fair value.
  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.  There are no Local Partnerships whose assets are classified as property and equipment as held for sale as of March 31, 2011.
  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 (see Note 2e in Item 8).
  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.
  Recent Accounting Pronouncements
  In May 2011,the Financial Accounting Standard Board (“FASB”) issued under Topic 820,Fair Value Measurements and Disclosures, ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”.The amendments in this ASU result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs.  Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements.  For many of the requirements, the FASB does not intend for amendments in this ASU to result in a change in the application of the requirements in Topic 820.  The amendments in this ASU are to be applied prospectively.  For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011.  The adoption of this accounting standard will not have a material effect on the Partnership’s 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, 2011 and 2010 (the 2010 and 2009 Fiscal Years) excluding the results of its discontinued operation which are not reflected in the following discussion (see Item 8, Note 13).
  The net income (loss) for the 2010 and 2009 Fiscal Years aggregated $1,071,859 and $(31,515,292), 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 were recognized in the 11th through 13th years.  As of December 31, 2009, Credit Periods had expired for all properties.
  2010 vs. 2009
  Rental income increased by approximately 3% for the 2010 Fiscal Year as compared to the 2009 Fiscal Year, primarily due to an increase in rental rates and tenant assistance payments at several Local Partnerships, offset by a decrease in rental subsidy income at one Local Partnership and a decrease in rental income at a second Local Partnership.
  Other income decreased approximately $39,000 for the 2010 Fiscal Year as compared to the 2009 Fiscal Year, primarily due to insurance proceeds received in the prior year resulting from a water pipe damage at one Local Partnership, a decrease in interest income due to lower reserve balances at a second Local Partnership and a decrease in late charges at a third Local Partnership, partially offset by a real estate tax refund received by a fourth Local Partnership.
  Total expenses excluding general and administrative-related parties, depreciation and amortization and loss on impairment of fixed assets remained consistent with a decrease of less than 1% for the 2010 Fiscal Year as compared to the 2009 Fiscal Year.
  General and administrative – related party expenses decreased approximately $100,000 for the 2010 Fiscal Year as compared to the 2009 Fiscal Year, primarily due to a decrease in partnership management fees and other expense reimbursement allocations at the Partnership level due to sale of properties.
  Depreciation and amortization expense decreased approximately $1,217,000 for the 2010 Fiscal Year as compared to the 2009 Fiscal Year, primarily due to the reduction in carrying amounts relating to impairment of assets recorded during the 2009 Fiscal Year at twelve Local Partnerships.
      - 10 -
    Loss on impairment of fixed assets amounted to approximately $1,878,000 and $23,880,000 for the 2010 and 2009 Fiscal Year, respectively.  See Note 4 in Item 8 for detailed discussion on impairments.
  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 2010, Mansion Court has sustained operating losses and has not generated sufficient cash flow from operations to meet its obligations.  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 continues to explore 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, 2011 and 2010 was reduced to zero as a result of prior years’ losses and the noncontrolling interests balance was $(166,000) and $(164,000), respectively.  Mansion Court’s net loss after noncontrolling interests amounted to approximately $250,000 and $65,000 for the 2010 and 2009 Fiscal Years, respectively.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
  During the year ended March 31, 2011, in accordance with ASC 360, Property, Plant and Equipment,the Partnership deemed the building of Mansion Court impaired and wrote it down to its fair value of zero, which resulted in a loss on impairment of approximately $194,000.  Fair value was obtained from an assessment made by management after indications that the carrying value of the assets were not recoverable, evidenced by a history of net operating losses over the past few years.
  Brannon Group, L.C. (“Keys”)
 The financial statements for Keys have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of Keys as a going concern.  Keys has obligations that matured on March 31, 2011 in the amount of $1,246,798.  If Keys is unable to raise sufficient funds to meet these obligations, it would raise substantial doubt about its ability to continue as a going concern.  Keys’ management has obtained an extension and is currently working with the lender to refinance its obligations.
 The Partnership’s investment in Keys at March 31, 2011 and 2010 was reduced to zero as a result of prior years’ losses and the noncontrolling interests balance was approximately $(2,543,000) and $(2,307,000), respectively.  Keys’ net income (loss) after noncontrolling interests amounted to approximately $75,000 and $(2,333,000) for the 2010 and 2009 Fiscal Years, respectively.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
  During the year ended March 31, 2010, in accordance with ASC 360,Property, Plant and Equipment,the Partnership deemed the building of Keys impaired and wrote it down to its estimated fair value which resulted in a loss of impairment of approximately $4,382,000.  Fair value was obtained from an assessment made by the management after indications that the carrying value of the assets was not recoverable.
  Subsidiary Partnerships – Gain on Extinguishment of Debt
  During the year ended March 31, 2010, BK-10K Partners L.P. (“Knickerbocker”) recognized a gain on extinguishment of debt on its New York City Department of Housing Preservation and Development (“HPD”) Third Mortgage, which had a balance of $172,373 and a construction period interest rate of 0.25% per annum, and subsequent rate of 0%.  No regular payments of principal were required under the HPD mortgage.  The terms included provisions that the HPD mortgage would be canceled and extinguished if Knickerbocker did not default on its first and second mortgages during the first fifteen years of their terms, which Knickerbocker complied with in 2009.
  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 Data.Sequential

PageConsolidated Financial StatementsReport of Independent Registered Public Accounting Firm

13Consolidated Balance Sheets at March 31, 2011 and 2010

39Consolidated Statements of Operations for the Years Ended March 31, 2011 and 2010

40Consolidated Statements of Changes in Partners’ Capital (Deficit) for the Years Ended March 31, 2011 and 2010

41Consolidated Statements of Cash Flows for the Years Ended March 31, 2011 and 2010

42Notes to Consolidated Financial Statements

43
        - 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, 2011 and 2010, and the related consolidated statements of operations, changes in partners' capital (deficit), and cash flows for the years ended March 31, 2011 and 2010 (the 2010 and 2009 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 fifteen (2010 Fiscal Year) and seventeen (2009 Fiscal Year) subsidiary partnerships whose income (losses) aggregated $2,857,967 and $(4,927,774) for the years ended March 31, 2011 and 2010, respectively, and whose assets constituted 63% and 61% of the Partnership's assets at March 31, 2011 and 2010, presented in the accompanying consolidated financial statements.  The financial statements for fourteen (2010 Fiscal Year) and sixteen (2009 Fiscal Year) of 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.  The financial statement for one (2010 and 2009 Fiscal Years) of these subsidiary partnerships is unaudited.
  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, 2011 and 2010, and the results of their operations and their cash flows for the years ended March 31, 2011 and 2010, in conformity with U.S. generally accepted accounting principles.
  As discussed in Note 12(b), the consolidated financial statements include the financial statements of two subsidiary partnerships with significant uncertainties.  The financial statements of these subsidiary partnerships were prepared assuming that they will continue as going concerns.  These two subsidiary partnerships’ net losses aggregated $413,927 (2010 Fiscal Year) and $4,959,477 (2009 Fiscal Year) and their assets aggregated $1,715,468 at March 31, 2011 and $1,938,832 at March 31, 2010.  Management’s plan in regard to this matter is also described in Note 12(b).  The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
  
  
  /s/TRIEN ROSENBERG
 WEINBERG CIULLO & FAZZARI LLP
  New York, New York
 June 27, 2011
  
    - 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, 2010 and 2009, 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 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 also includes examining, on the 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 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, 2010 and 2009, 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
 Los Angeles, California
 February 28, 2011
       - 14 -
  
 [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., as of August 26, 2009 (immediately after sale of limited partner interest) and the related statements of operations, partners' equity (deficit) and cash flows for the period January 1, 2009 through August 26, 2009 (immediately after sale of limited partner interest).  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 Pacific-East, L.P., as of August 26, 2009 (immediately after sale of limited partner interest), and the results of its operations and its cash flows for the period then ended, in conformity with accounting principles generally accepted in the United States of America.
 
 
 /s/ Reznick Group, P.C.
 Atlanta, Georgia
 January 26, 2010
 
 
 
 
 
 
 
 - 15 -
 
 
 [SMITH, BUZZI & ASSOCIATES, LLC. 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, 2010 and 2009, 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 materiel-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 provides 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, 2010 and 2009, 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, Buzzi & Associates, LLC.
 Miami, Florida
 February 24, 2011
 
 
 
 
 
 
 
 
 - 16 -
 
 
 [D. F. O’BRIEN & CO. 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, 2010, 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, 2010, 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/ D. F. O’Brien & Co.
 Totowa, New Jersey
 February 28, 2011
 
 
 
 
 
 
 
 - 17 -
 
 
 [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, 2009, 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, 2009, 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 23, 2010
 
 
 
 
 
 - 18 -
 
 
 [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 March 9, 2010, and the related statements of operations, changes in partners’ equity (deficit) and cash flows for the period January 1, 2010 through March 9, 2010 (date of investor transfer).  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 Livingston Manor Urban Renewal Associates, L.P. as of March 9, 2010, and the results of its operations, the changes in partners’ equity (deficit) and its cash flows for the period January 1, 2010 through March 9, 2010 (date of investor transfer), in conformity with accounting principles generally accepted in the United States of America.
 
 
 /s/ Reznick Group, P.C.
 Baltimore, Maryland
 September 22, 2010
 
 
 
 
 
 
 - 19 -
 
 
 [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, 2009, 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 Livingston Manor Urban Renewal Associates, L.P. as of December 31, 2009, 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 23, 2010
 
 
 
 
 
 
 - 20 -
 
 
 [REZNICK GROUP, P.C. LETTERHEAD]
 
 REPORT OF INDEPENDENT REGISTERED 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, 2010, 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, 2010, 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.
 
 Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole.  The 2010 supplemental information on pages 18 and 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 10, 2011
 
 
 
 
 
 
 - 21 -
 
 
 [REZNICK GROUP, P.C. LETTERHEAD]
 
 REPORT OF INDEPENDENT REGISTERED 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, 2009, 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, 2009, 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.
 
 Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole.  The 2009 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 basic financial statements taken as a whole.
 
 
 /s/ Reznick Group, P.C.
 Baltimore, Maryland
 March 23, 2010
 
 
 
 
 
 
 - 22 -
 
 
 [TOSKI, SCHAEFER & CO., P.C. LETTERHEAD]
 
 INDEPENDENT AUDITORS’ REPORT
 
 The Partners
 Lewis Street Limited Partnership:
 
 We have audited the accompanying balance sheets of Lewis Street Limited Partnership as of December 31, 2010 and 2009 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, 2010 and 2009 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 11, 2011
 
 
 
 
 
 
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 [ROMANO & MITCHELL, CHARTERED CERTIFIED PUBLIC ACCOUNTANTS/MANAGEMENT CONSULTANTS LETTERHEAD]
 
 INDEPENDENT AUDITOR’S 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, 2010 and 2009 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, 2010 and 2009 based on criteria established in Internal Control-Integrated Framework 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 24, 2011.  Our responsibility is to express an opinion on 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 included 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 record, 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, 2010 and 2009, and the results of its operations and its cash flows for the years 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, 2010 and 2009, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
 
 
 /s/ Romano & Mitchell, Chartered Certified Public Accountants
 Bethesda, Maryland
 February 24, 2011
 
 
 
 
 
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 [NOVOGRADAC & COMPANY LLP CERTIFIED PUBLIC ACCOUNTANTS LETTERHEAD]
 
 REPORT OF INDEPENDENT AUDITORS
 
 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, 2010 and 2009, and the related statements of operations, members' deficit 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 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, 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.
 
 The accompanying financial statements have been prepared assuming the Company will continue as a going concern.  As discussed in Note 2 to the financial, statements, the Company has obligations maturing on March 31, 2011 in the amount of $1,246,798.  If the Company is unable to raise sufficient funds to meet these obligations, it would raise doubt about the ability of the Company to continue as a going concern.  Management's plans regarding these matters are also described in Note 4.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Brannon Group, L.C. as of December 31, 2010 and 2009, 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 audits 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 15, 2011
 
 
 
 
 
 
 - 25 -
 
 
 [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, 2010, 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 the 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, 2010 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.
 
 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 conducted for the purpose of forming an opinion on the basic financial statements taken as a whole.  The supplemental information on pages 18 and 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 15, 2011
 
 
 
 
 
 
 - 26 -
 
 
 [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, 2009, 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 the 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, 2009 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.
 
 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 10.  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 and 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 24, 2010
 
 
 
 
 
 
 - 27 -
 
 
 [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, 2010, 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, 2010, 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 5, 2011
 
 
 
 
 
 
 - 28 -
 
 
 [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, 2009, 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, 2009, 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
 April 28, 2010
 
 
 
 
 
 
 - 29 -
 
 
 [RAINES AND FISCHER LLP CERTIFIED PUBLIC ACCOUNTANTS 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, 2010, 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, 2010, 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
 March 28, 2011
 
 
 
 
 
 
 
 - 30 -
 
 
 [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, 2009, 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, 2009, 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
 April 28, 2010
 
 
 
 
 
 
 
 - 31 -
 
 
 
 [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, 2010, 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 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 Aspen-Olive Associates as of December 31, 2010 and the results of its operations, the changes in partners' equity (deficit) and 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 supplemental information on pages 18 and 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 9, 2011
 
 
 
 
 
 
 
 
 
 - 32 -
 
 
 [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, 2009, 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 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 Aspen-Olive Associates as of December 31, 2009 and the results of its operations, the changes in partners' equity (deficit) and 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 2009 supplemental information on pages 17 and 18 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 23, 2010
 
 
 
 
 
 
 
 
 
 
 
 - 33 -
 
 
 [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, 2010, and the related statements of operations, change 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 Universal Court Associates as of December 31, 2010, 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.
 
 Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole.  The 2010 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 basic financial statements taken as a whole.
 
 
 /s/ Reznick Group, P.C.
 Baltimore, Maryland
 March 9, 2011
 
 
 
 
 
 
 
 
 
 
 
 
 - 34 -
 
 
 
 [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, 2009, and the related statements of operations, change 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 Universal Court Associates as of December 31, 2009, 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.
 
 Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole.  The 2009 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 basic financial statements taken as a whole.
 
 
 /s/ Reznick Group, P.C.
 Baltimore, Maryland
 March 24, 2010
 
 
 
 
 
 
 
 
 
 
 - 35 -
 
 
 
 [REZNICK GROUP, P.C. LETTERHEAD]
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the Partners
 New Zion Apartments Limited Partnership
 
 We have audited the accompanying balance sheet of New Zion Apartments Limited Partnership, HUD Project No. LA48E000011, as of December 31, 2010, 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) 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, 2010, and the results of its operations, the changes in partners' equity (deficit), and 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 March 22, 2011 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 22, 2011, 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 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 24 through 36 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 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.
 Taxpayer Identification Number:
 52-1088612
 Baltimore, Maryland
 March 22, 2011
 Lead Auditor:  Scott H. Szeliga, CPA
 
 
 
 
 
 
 
 
 
 
 
 
 - 36 -
 
 
 
 
 [REZNICK GROUP, P.C. LETTERHEAD]
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the Partners
 New Zion Apartments Limited Partnership
 
 We have audited the accompanying balance sheet of New Zion Apartments Limited Partnership, HUD Project No.  LA48E000011, as of December 31, 2009, 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 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 New Zion Apartments Limited Partnership as of December 31, 2009, 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.
 
 In accordance with Government Auditing Standards, we have also issued a report, dated March 4, 2010 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 GovernmentAuditing Standards, we have also issued an opinion dated March 4, 2010, 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 23 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 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.
 Taxpayer Identification Number:
 52-1088612
 Baltimore, Maryland
 March 4, 2010
 Lead Auditor:  Scott H.  Szeliga, CPA
 
 
 
 
 
 
 
 
 
 
 
 
 - 37 -
 
 
 
 
 [O’CONNOR DAVIES MUNNS & DOBBINS, LLP ACCOUNTANTS AND CONSULTANTS LETTERHEAD]
 
 Report of Independent Registered Public Accounting Firm
 
 To The Partners
 Dreitzer Limited Partnership
 
 We have audited the accompanying balance sheets of Dreitzer Limited Partnership as of December 31, 2010 and 2009, and the related statements of operations, partners' equity (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 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 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 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 Dreitzer Limited Partnership as of December 31, 2010 and 2009, 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/ O’Connor Davies Munn & Dobbins, LLP
 New York, New York
 February 15, 2011
 
      - 38 -
  
 
 INDEPENDENCE TAX CREDIT PLUS L.P. III
 AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 
 
 
 
 ASSETS
 
 
 March 31,2011

2010Property and equipment – at cost, less accumulated depreciation (Notes 2 and 4)

$
11,596,805

$
14,210,626Cash and cash equivalents (Notes 2 and 12)


1,854,271


2,168,916Cash held in escrow (Note 5)


4,688,130


4,709,839Deferred costs, less accumulated amortization (Notes 2 and 6)


366,667


430,299Other assets


749,674


858,666Total assets

$
19,255,547

$
22,378,346LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT)Liabilities:Mortgage notes payable (Note 7)

$
30,836,027

$
33,056,050Accounts payable


1,018,576


955,138Accrued interest payable


9,248,146


11,409,657Security deposits payable


359,273


372,137Due to local general partners and affiliates (Note 8)


2,079,679


2,074,690Due to general partner and affiliates (Note 8)


5,434,965


5,786,301Total liabilities


48,976,666


53,653,973Commitments and contingencies (Notes 7, 8 and 12)Partners’ capital (deficit):Limited partners (43,440 BACs issued and outstanding) (Note 1)


(26,875,523
)

(28,126,901
)General Partner


326,474


(273,217
)Independence Tax Credit Plus L.P. III total


(26,549,049
)

(28,400,118
)Noncontrolling interests (Note 2)


(3,172,070
)

(2,875,509
)Total partners’ capital (deficit)


(29,721,119
)

(31,275,627
)Total liabilities and partners’ capital (deficit)

$
19,255,547

$
22,378,346See accompanying notes to consolidated financial statements.
 
 
 
 
 
 
 - 39 -
 
 
 INDEPENDENCE TAX CREDIT PLUS L.P. III
 AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
 
 Years Ended March 31,2011

2010*Operations:RevenuesRental income

$
5,849,649

$
5,694,673Other


256,372


295,005Gain on extinguishment of debt (Note 12)


-


172,373Total revenues


6,106,021


6,162,051ExpensesGeneral and administrative


2,271,724


2,149,155General and administrative-related parties (Note 8)


725,698


825,807Repairs and maintenance


1,128,763


1,176,151Operating and other


862,889


836,020Real estate taxes


253,684


279,043Insurance


384,392


408,953Financial, primarily interest


1,373,413


1,397,025Depreciation and amortization


713,555


1,930,256Loss on impairment of fixed assets (Note 4)


1,877,504


23,880,423Total expenses


9,591,622


32,882,833Loss from operations


(3,485,601
)

(26,720,782
)Income (loss) from discontinued operations


4,557,460


(4,794,510
)Net income (loss)


1,071,859


(31,515,292
)Net loss attributable to noncontrolling interests from operations


224,652


2,700,926Net (income) loss attributable to noncontrolling interests from discontinued operations


(32,493
)

790,047Net loss attributable to noncontrolling interests


192,159


3,490,973Net income (loss) attributable to Independence Tax Credit Plus L.P. III

$
1,264,018

$
(28,024,319
)Loss from operations – limited partners


(3,228,339
)

(23,779,658
)Income (loss) from discontinued operations – limited partners


4,479,717


(3,964,418
)Net income (loss) – limited partners

$
1,251,378

$
(27,744,076
)Number of BACs outstanding


43,440


43,440Loss from operations per BAC

$
(74.31
)
$
(547.42
)Income (loss) from discontinued operation per BAC


103.12


(91.26
)Income (loss) per BAC

$
28.81

$
(638.68
)*   Reclassified for comparative purposes.



See accompanying notes to consolidated financial statements.
      - 40 -
   
 INDEPENDENCE TAX CREDIT PLUS L.P. III
 AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (DEFICIT)
 
 
 
 
 Total

Limited

Partners

General

Partner

Noncontrolling

InterestsPartners’ capital (deficit) – April 1, 2009


(78,477
)

(382,825
)

(102,649
)

406,997Net loss


(31,515,292
)

(27,744,076
)

(280,243
)

(3,490,973
)Distributions


(115,736
)

-


-


(115,736
)Contributions – write-off of partnership management fees related to the sold properties (Note 8)


107,175


-


107,175


-Contributions – write-off of related party debt (Note 10)


326,703


-


2,500


324,203Partners’ capital (deficit) – March 31, 2010


(31,275,627
)

(28,126,901
)

(273,217
)

(2,875,509
)Net income (loss)


1,071,859


1,251,378


12,640


(192,159
)Distributions


(104,402
)

-


-


(104,402
)Contributions – write-off of partnership management fees related to the sold properties (Note 8)


574,551


-


574,551


-Contributions – write-off of related party debt (Note 10)


12,500


-


12,500


-Partners’ capital (deficit) – March 31, 2011

$
(29,721,119
)
$
(26,875,523
)
$
326,474

$
(3,172,070
)
 
 See accompanying notes to consolidated financial statements.
      - 41 -
   
 INDEPENDENCE TAX CREDIT PLUS L.P. III
 AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 
 
 Years Ended March 31,2010


2009Cash flows from operating activities:Net income (loss )

$
1,071,859


$
(31,515,292
)Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:(Gain) loss on sale of properties


(4,985,357
)


1,351,902Gain on extinguishment of debt


-



(172,373
)Depreciation and amortization


829,947



2,330,446Loss on impairment of fixed assets


1,877,504



26,632,368(Increase) decrease in assets:Cash held in escrow


(95,253
)


(110,344
)Other assets


94,738



314,227Increase (decrease) in liabilities:Accounts payable


25,774



(25,397
)Accrued interest


1,087,034



1,064,165Security deposit payable


5,128



(1,013
)Due to local general partners and affiliates


(14,901
)


94,302Due to general partner and affiliates


258,215



(444,846
)Total adjustments


(917,171
)


31,033,437Net cash provided by (used in) operating activities


154,688



(481,855
)Cash flows from investing activities:Acquisition of property and equipment


(105,582
)


(149,386
)Proceeds from sale of properties


25,000



270,000Costs related to sale of properties


(25,840
)


(72,385
)Decrease in cash held in escrow


36,624



259,783Increase in due to local general partners and affiliates


22,890



14,808Net cash (used in) provided by investing activities


(46,908
)


322,820Cash flows from financing activities:Principal payments of mortgage notes


(320,023
)


(456,500
)Increase (decrease) in due to local general partners and affiliates


2,000



(20,000
)Decrease in capitalization of consolidated subsidiaries attributable to noncontrolling interests


(104,402
)


(115,736
)Net cash used in financing activities


(422,425
)


(592,236
)Net decrease in cash and cash equivalents


(314,645
)


(751,271
)Cash and cash equivalents at beginning of year


2,168,916



2,920,187Cash and cash equivalents at end of year

$
1,854,271


$
2,168,916Supplemental disclosure of cash flows information:Cash paid during the year for interest

$
545,467


$
620,457Summarized below are the components of the gain on sale of properties:(Proceeds from) cost of sale of properties – net

$
840


$
(197,615
)Decrease in property and equipment, net of accumulated depreciation


70,215



6,536,710Decrease in deferred costs


5,369



7,812Decrease in cash held in escrow


14,254



295,549Decrease in other assets


80,338



20,022Increase in accounts payable and other liabilities


37,664



78,353Decrease in accrued interest payable


(3,248,545
)


(356,854
)Decrease in security deposit payable


(17,992
)


(51,091
)Decrease in mortgage note payable


(1,900,000
)


(4,973,485
)Decrease in due to Local General Partners and affiliates


(5,000
)


(324,203
)Decrease in due to general partner and affiliates


(35,000
)


(10,000
)Capital contribution – General Partners


12,500



2,500Increase in capitalization of consolidated subsidiaries attributable to noncontrolling interests


-



324,204Supplemental disclosures of non-cash investing and financing activities:Contribution from write-off of partnership management fees related to sold properties

$
574,551


$
107,175
 
 See accompanying notes to consolidated financial statements.
 
 
 
 
 
 - 42 -
 
 
 INDEPENDENCE TAX CREDIT PLUS L.P. III
 AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2011
   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.
  The Partnership had originally acquired interests in twenty subsidiary partnerships.  During the year ended March 31, 2011, the Partnership sold its limited partnership interests in one Local Partnership.  Through March 31, 2011, the Partnership has sold its limited partnership interests in four Local Partnerships.  There can be no assurance as to when the Partnership will dispose of its remaining investments or the amount of proceeds which may be received.
  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 seventeen and nineteen subsidiary partnerships in which the Partnership is a limited partner for the years ended March 31, 2011 and 2010, respectively, (the 2010 and 2009 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.
  In accordance with FASB Accounting Standards Codification (“ASC”) Topic 810, Noncontrolling Interests in Consolidated Financial Statements(“ASC 810”), loss attributable to noncontrolling interests amounted to approximately $192,000 and $3,491,000 for the year ended March 31, 2011 and 2010, respectively.  The Partnership’s investment in each subsidiary is equal to the respective subsidiary’s partners’ equity less noncontrolling interest capital, if any.
  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).
      - 43 -
 INDEPENDENCE TAX CREDIT PLUS L.P. III
 AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2011
   During the year ended March 31, 2011, the Partnership recorded approximately $1,878,000 as a loss on impairment of assets or reduction to estimated fair value.  Through March 31, 2011, the Partnership has recorded approximately $30,350,000 as an aggregate loss on impairment of assets or reduction to estimated fair value for several Local Partnerships.
  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.  There are no Local Partnerships whose assets are classified as property and equipment as held for sale as of March 31, 2011.
  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 from operations include the following amounts at both the Partnership and Local Partnership level:
  Years Ended March 31,2011


2010*Interest

$
94,636


$
135,755Other


161,736



159,250Total other revenue

$
256,372


$
295,005
 
  Other revenues from discontinued operation include the following amounts at both the Partnership and Local Partnership level:
  Years Ended March 31,2011


2010*Interest

$
232


$
3,526Other


11,155



10,927Total other revenue

$
11,387


$
14,453
 
 *
Reclassified for comparative purposes.
   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 (See Note 9).
  The Partnership’s management have analyzed the Partnership’s tax positions and concluded that no liability for unrecognized tax benefits should be recorded for positions taken on returns filed for open tax years.  As of and during the year ended March 31, 2011, the Partnership did not have a liability for any unrecognized tax benefits or related interest and penalties.  Such related interest and penalties, if any, would be included in general and administrative expense.
  The Partnership relies on, among other things, a 2% safe harbor established by an Internal Revenue Service (“IRS”) regulation to avoid being characterized as a “publicly-traded partnership” that is taxed as a corporation.
  In the normal course of business the Partnership or one of its subsidiaries is subject to examination by federal, state and local jurisdictions in which it operates where applicable.  At March 31, 2011, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2007 forward.
  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.
      - 44 -
 INDEPENDENCE TAX CREDIT PLUS L.P. III
 AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2011
 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)
Recent Accounting Pronouncements
  In May 2011,the FASB issued under Topic 820,Fair Value Measurements and Disclosures, ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”.The amendments in this ASU result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs.  Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements.  For many of the requirements, the Board does not intend for amendments in this ASU to result in a change in the application of the requirements in Topic 820.  The amendments in this ASU are to be applied prospectively.  For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011.  The adoption of this accounting standard will not have a material effect on the Partnership’s consolidated financial statements.
   NOTE 3 – Fair Value of Financial Instruments
  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 and Cash Held in Escrow
 The carrying amount approximates fair value.
  Mortgage Notes Payable
 The Partnership adopted FASB ASC 820 – “Fair Value Measurements” for financial assets and liabilities.  ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.  ASC 820 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances.
  As permitted, the Partnership chose not to elect the fair value option as prescribed by ASC 825 – “Financial Instruments” – Including an Amendment of ASC 320 – “Investments – Debt and Equity Securities”, for our financial assets and liabilities that had not been previously carried at fair value.  Therefore, the Partnership did not elect to fair value any additional items under ASC 825.
  The estimated fair value of financial instruments has been determined using available market information or other appropriate valuation methodologies.  However, considerable judgment is required in interpreting market data to develop estimates of fair value.  Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.  The following are financial instruments for which the Partnership’s estimate of fair value differs from the carrying amounts:
  At March 31, 2011

At March 31, 2010Carrying 
Amount

Fair Value

Carrying 
Amount

Fair ValueLIABILITIES:Mortgage notes

$
30,836,027


$
15,030,431


$
33,056,050


$
13,900,141
 
  For the mortgage notes, fair value is calculated using present value cash flow models based on a discount rate.  It was determined that the Tender Option Bond market, through which these bonds have been securitized in the past, continued to see a dramatic slowdown with limited liquidity and significantly reduced transaction levels.  To assist in valuing these notes, the Partnership held separate discussions with various third party investment banks who are leaders in the municipal bond business.  The discussions produced assumptions that were based on market conditions as well as the credit quality of the underlying property partnerships, which held the mortgage notes, to determine what discount rates to utilize.
      - 45 -
 INDEPENDENCE TAX CREDIT PLUS L.P. III
 AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2011
   NOTE 4 – Property and Equipment
  The components of property and equipment and their estimated useful lives from operations are as follows:
 
 March 31,

Estimated

Useful Lives

(Years)2011

2010Land

$
653,477

$
967,824

-Building and improvements


33,566,625


36,831,478

20-40Furniture and fixtures


1,243,386


1,319,076

5-1235,463,488


39,118,378Less: Accumulated depreciation


(23,866,683
)

(24,907,752
)$
11,596,805

$
14,210,626
 
 
 Depreciation expense for the years ended March 31, 2011 and 2010 amounted to $656,954 and $1,870,661, respectively.
  During the years ended March 31, 2011 and 2010, there was a decrease in accumulated depreciation in the amount of $1,786,295 and $4,667,301, respectively, which related to discontinued assets.  In addition, during the years ended March 31, 2011 and 2010, there was a decrease in accumulated depreciation in the amount of $26,458 and $1,520,941, respectively, related to impairments.
  Depreciation expenses for the discontinued property and equipment for the years ended March 31, 2011 and 2010 amounted to $114,730 and $394,604, respectively.
  Impairments
  During the year ended March 31, 2010, the Partnership performed a fair value analysis on all of its remaining investments due to the current deteriorating market conditions in the real estate industry.  Impairment of assets is a two-step process.  First, management estimated amounts recoverable trough future operations and sale of the Property on an undiscounted basis.  If such estimates were below depreciated cost, Property investments themselves were reduced to estimated fair value (generally using the discounted cash flow valuation method).  Each Local Partnership must continue to comply with its Tax Credit requirements until the end of the Compliance Period in order to avoid recapture of the Tax Credits.  Therefore, a 5-year cash flow projection was used, as this period is indicative of the average holding period left of the remaining investments.  A net operating income projection was prepared to calculate a residual value at the end of the 5-year period.  Based on this analysis, the Partnership deemed the properties of the below Local Partnerships impaired and wrote them down to their estimated fair value which resulted in $1,877,504 and $26,632,368 of losses on impairment for the year ended March 31, 2011 and 2010, respectively.
  Impairments from operations recorded for the year ended March 31, 2011 were as follows:
 Aspen-Olive Associates

$
113,301Lewis Street L.P.


134,127Edward Hotel Limited Partnership


278,600Mansion Court Phase II Venture


194,168Dreitzer House


57,371Savannah Park Housing Limited Partnership


144,508Universal Court Associates


143,893West Mill Creek Associates III LP


811,536$
1,877,504
 
     - 46 -
 INDEPENDENCE TAX CREDIT PLUS L.P. III
 AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2011
   Impairments from operations recorded for the year ended March 31, 2010 were as follows:
 
 Overtown Development Group, Ltd.

$
915,000Aspen-Olive Associates


2,119,000Dreitzer House


4,146,000Edward Hotel Limited Partnership


1,553,952West Mill Creek Associates III LP


2,371,000Lewis Street L.P.


1,307,471Park Housing Limited Partnership


1,165,000Sumpter Commons Associates, L.P.


491,000Brannon Group, L.C.


4,382,000Savannah Park Housing Limited Partnership


2,192,000Universal Court Associates


3,238,000$
23,880,423
 
 
 Impairments from discontinued operations recorded for the year ended March 31, 2010 were as follows:
 
 Jefferis Square Housing Partnership L.P.

$
2,751,945
 
 
 NOTE 5 – Cash Held in Escrow
  Cash held in escrow consists of the following:
  March 31,2011


2010Purchase price payments*

$
115,345


$
115,345Real estate taxes, insurance and other


3,174,223



3,116,942Reserve for replacements


1,130,796



1,199,487Tenant security deposits


267,766



278,065$
4,688,130


$
4,709,839*   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,

Period2011

2010Financing costs

$
979,620

$
1,009,556

*Less: Accumulated amortization


(612,953
)

(579,257
)$
366,667

$
430,299*   Over the life of the related mortgages.
 
  Amortization expense for the years ended March 31, 2011 and 2010 amounted to $56,601 and $59,594, respectively.
  Amortization expense from discontinued operations for the years ended March 31, 2010 and 2010 amounted to $1,662 and $5,586, respectively.
  During the 2010 and 2009 Fiscal Years, there was a decrease in deferred costs and accumulated amortization in the amount of $29,936 and $98,245, respectively, which related to discontinued assets.
      - 47 -
 INDEPENDENCE TAX CREDIT PLUS L.P. III
 AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2011
     NOTE 7 – Mortgage Notes Payable
  The mortgage notes, which are collateralized by land and buildings, are payable in aggregate monthly installments of approximately $71,000 including principal and interest at rates varying from 0% to 9.5% 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,

Amount2011

$
2,762,6162012


2,364,3342013


1,718,8072014


252,6712015


4,116,857Thereafter


19,620,742$
30,836,027
 
  Accrued interest payable as of March 31, 2011 and 2010 was approximately $9,248,000 and $11,410,000, 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.
  The mortgage agreements require monthly deposits to replacement reserves of approximately $13,000 and monthly deposits to escrow accounts for real estate taxes, hazard and mortgage insurance and other (see Note 5).
  During the year ended March 31, 2010, BK-10K Partners L.P. (“Knickerbocker”) recognized a gain on extinguishment of debt on its New York City Department of Housing Preservation and Development (“HPD”) Third Mortgage, which had a balance of $172,373 and a construction period interest rate of 0.25% per annum, and subsequent rate of 0%.  No regular payments of principal were required under the HPD mortgage.  The terms included provisions that the HPD mortgage would be canceled and extinguished if Knickerbocker did not default on its first and second mortgages during the first fifteen years of their terms, which Knickerbocker complied with in 2009.
   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, 2011, the gross amount of the Operating Deficit Guarantees aggregate approximately $5,487,000, of which approximately $3,931,000 have expired.  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.
      - 48 -
 INDEPENDENCE TAX CREDIT PLUS L.P. III
 AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2011
   B)  Other Related Party Expenses
  The General Partner and its affiliates perform services for the Partnership. The costs incurred to the General Partner from operations and other related parties from operations for the years ended March 31, 2011 and 2010 were as follows:
  Years Ended March 31,2011



2010
*Partnership management fees (a)

$
249,443


$
316,457Expense reimbursement (b)


193,281



213,801Local administrative fees (c)


49,750



64,855Total general and administrative-General Partner


492,474



595,113Property management fees incurred to affiliates of the subsidiary partnerships’ general partners


233,224



230,694Total general and administrative-related parties

$
725,698


$
825,807
 
  Expenses incurred to related parties from discontinued operation for the years ended March 31, 2011 and 2010 were as follows:
  Years Ended March 31,2011



2010
*Local administrative fees (c)

$
2,500


$
7,500Total general and administrative – General Partner


2,500



7,500Property management fees incurred to affiliates of the subsidiary partnerships’ general partners


32,163



48,109Total general and administrative-related parties

$
34,663


$
55,609
 
 *
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 are to be deferred without interest and will be payable out of sales or refinancing proceeds only to the extent of available funds after payments on all Partnership liabilities have been made other than to those owed to the General Partner and its affiliates, and after the Limited Partners have received a 10% return on their capital contributions.  Partnership management fees owed to the General Partner amounting to approximately $3,520,000 and $3,845,000 were accrued and unpaid as of March 31, 2011 and 2010, respectively, and are included in the line item Due to general partner and affiliates in the consolidated balance sheets.  Current year partnership management fees may be paid out of operating reserves or refinancing and sales proceeds.  As such the General Partner cannot demand payment of the deferred fees except as noted above.  During the year ended March 31, 2011, management deemed the unpaid partnership management fees that were related to the property sold during the year ended March 31, 2011 uncollectible and as a result, wrote them off in the amount of approximately $575,000, resulting in a non-cash General Partner contribution of the same amount.
  (b)
The Partnership reimburses the General Partner and its affiliates for actual Partnership operating expenses incurred by the General Partner and its affiliates on the Partnership’s behalf. The amount of reimbursement from the Partnership is limited by the provisions of the Partnership Agreement. Another affiliate of the General Partner performs asset monitoring for the Partnership. These services include site visits and evaluations of the subsidiary partnerships’ performance.  Expense reimbursements and asset monitoring fees owed to the General Partners and its affiliates amounting to approximately $860,000 and $864,000 were accrued and unpaid as of March 31, 2011 and 2010, respectively.  The General Partner does not intend to demand payment of the deferred payables beyond the Partnership’s ability to pay them.The Partnership anticipates that these will be paid from working capital reserves or future sales proceeds.
  (c)
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.  Local administrative fee owed to Independence SLP III L.P. amounting to $561,000 and $582,000 were accrued and unpaid as of March 31, 2011 and 2010, respectively.  These fees have been deferred in certain cases and the Partnership anticipates that they will be paid from working capital reserves or future sales proceeds.
      - 49 -
 INDEPENDENCE TAX CREDIT PLUS L.P. III
 AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2011
   As of March 31, 2011 and March 31, 2010, the Partnership owed the General Partner and its affiliates approximately $86,000 and $85,000, respectively, for expenditures paid on its behalf and voluntary operating advances made by the General Partner and its affiliates to fund operations of the Partnership.  Payment of these operating advances have been deferred and may be paid out of operating reserves or refinancing and sales proceeds.  The General Partner does not intend to demand payment of the deferred advances beyond the Partnership’s ability pay them.
  As of March 31, 2010, the Partnership owed $9,000 to the Special Limited Partner for the fees it received from one Local Partnership on its behalf.  As of March 31, 2011 and 2010, the amounts payable totaling approximately $408,000 and $401,000, respectively, represent loans made to the subsidiary partnerships by the affiliates of the General Partner.
  C)  Due to Local General Partners and Affiliates
  Due to local general partners and affiliates from operating liabilities consists of the following:
  March 31,2011


2010Operating advances

$
649,651


$
704,044Development fee payable


834,964



817,074Other capitalized costs


16,335



16,335Construction costs payable


146,487



146,487General Partner loan payable


204,008



202,008Management and other operating fees


228,234



188,742$
2,079,679


$
2,074,690
 
  D)  Advances from Partnership to Local Partnerships
  As of March 31, 2011, the Partnership has advanced certain Local Partnership operating loans (non-interest bearing) amounting to approximately $878,000 primarily in conjunction with the Local Partnership’s contribution agreements.  Such advances are eliminated in consolidation and are included in the line item Due to local general partners and affiliates.  The following table summarizes these advances:
  March 31,2011


2010New Zion

$
2,655


$
2,655Knickerbocker Avenue


454,441



454,441Lafayette Avenue


416,094



416,094Sumpter Commons


5,075



5,075$
878,265


$
878,265
 
  NOTE 9 – Taxable Net Loss
  Our adoption of FASB interpretation (“FIN”) No. 48 did not have a material impact on the consolidated financial statements and does not impact our financial position at March 31, 2011.
  A reconciliation of the financial statement net loss to the taxable net loss for the Partnership and its consolidated subsidiaries follows:
       - 50 -
 INDEPENDENCE TAX CREDIT PLUS L.P. III
 AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2011
 Years Ended March 31,2011


2010Financial statement net income (loss)

$
1,264,018


$
(28,024,319
)Differences between depreciation and amortization expense records for financial reporting purposes and the accelerated costs recovery system utilized for income tax purposes


(1,681,605
)


(466,514
)Differences resulting from parent company having a different fiscal year for income tax and financial reporting purposes


63,078



(30,466
)Difference between gain on sale of property recorded for financial statement and income tax reporting purposes


(1,814,909
)


1,661,213Loss on impairment of property for financial reporting purposes not deductible for tax purposes


1,877,504



26,632,368Write-off of Partnership management fees included in income for tax purposes


574,551



107,175Other, including accruals for financial reporting not deductible for tax purposes until paid and losses allocated to minority interests for tax purposes


579,692



(2,517,058
)Net income (loss) as shown on the income tax return for the calendar year ended

$
862,329


$
(2,637,601
)
 
  No provision for income taxes related to the operations of the Partnership has been included in the accompanying financial statements because, as a partnership, it is not subject to federal or material state income taxes and the tax effect of its activities accrues to the BACs holders.  Net income for financial statement purposes may differ significantly from taxable income reportable to BACs holders as a result of differences between the tax bases and financial reporting bases of assets and liabilities and the taxable income allocation requirements under its Partnership Agreement.  In the event of an examination of the Partnership’s tax return, the tax liability of the partners could be changed if an adjustment in the Partnership’s income is ultimately sustained by the taxing authorities.  At March 31, 2011, the tax basis net assets exceeded the financial statement net assets by approximately $19,356,697 due to depreciation differences, impairments and related party accruals.
   NOTE 10 – Sale of Properties
  The Partnership is in the process of developing a plan to dispose of all of its investments.  It is anticipated that this process will continue to take a number of years.  During the year ended March 31, 2011, the Partnership sold its limited partnership interests in one Local Partnership.  As of March 31, 2011, the Partnership has sold its limited partnership interests in four Local Partnerships.  There can be no assurance as to when the Partnership will dispose of its remaining investments or the amount of proceeds which may be received.  However, based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, it is unlikely that the proceeds from such sales received by the Partnership will be sufficient to return to the limited partners their original investment.
  On December 31, 2010, the Partnership sold its limited partnership interest in Jefferis Square Housing Partnership L.P. (“Jefferis”) to an affiliate of the Local General Partner for a sales price of $25,000.  The Partnership received approximately $2,000 after the repayment of other liabilities of approximately $23,000.  The sale resulted in a gain of approximately $4,832,000, resulting from the write-off of the deficit basis in the Local Partnership of approximately $4,830,000 at the date of the sale and the $2,000 cash received from the sale, which was recorded during the quarter ended December 31, 2010.  An adjustment to the gain of approximately $196,000 was recorded during the quarter ended March 31, 2011, resulting in an overall gain of $5,028,000.  In addition, the sale resulted in a non-cash contribution to the Local Partnership from the General Partner of approximately $12,500 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.
  On March 31, 2010, the Partnership sold its limited partnership interest in Livingston Manor Urban Renewal Associates, L.P. (“Livingston Manor”) to an affiliate of the Local General Partner for a sales price of $20,000.  The Partnership received approximately $7,000 after the repayment of other liabilities of approximately $13,000.  The sale resulted in a loss of approximately $1,870,000, resulting from the write-off of the basis in the Local Partnership of approximately $1,877,000 at the date of the sale and the $7,000 cash received from the sale which was recorded during the year ended March 31, 2010.  An adjustment to the loss of approximately $42,000 was recorded during the quarter ended June 30, 2010, resulting in an overall loss of approximately $1,912,000.  In addition, the sale resulted in a non-cash contribution to the Local Partnership from the Local General Partner of approximately $324,000 as a result of the write-off of fees owed by the Local Partnership to the Local General Partner.
  On August 26, 2009, the Partnership sold its limited partnership interest in Pacific-East L.P. (“Eastern Parkway”) to an affiliate of the Local General Partner for a sales price of $250,000.  The Partnership received approximately $191,000 after the repayment of other liabilities of approximately $59,000.  The sale resulted in a gain of approximately $638,000, resulting from the write-off of the deficit basis in the Local Partnership of approximately $388,000 at the date of the sale and the $191,000 cash received from the sale, which was recorded during the quarter ended September 30, 2009.  An adjustment to the gain of approximately $(120,000) was recorded during the quarter ended March 31, 2010, resulting in an overall gain of $518,000.  The sale also resulted in a write-off of operating advances of approximately $1,016,000 owed to the Partnership which are eliminated in consolidation.  In addition, the sale resulted in a non-cash contribution to the Local Partnership from the General Partner of approximately $2,500 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.
      - 51 -
 INDEPENDENCE TAX CREDIT PLUS L.P. III
 AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2011
   NOTE 11 – Selected Quarterly Financial Data (Unaudited)
  The following table summarizes the Partnership’s quarterly results of operations for the years ended March 31, 2011 and 2010.
  Quarter EndedOPERATIONS

June 30,

2010

September 30,

2010

December 31,

2010

March 31,

2011Revenues

$
1,530,456

$
1,541,105

$
1,483,401

$
1,551,059Operating expenses


(1,912,313
)

(1,957,680
)

(1,750,880
)

(3,970,749
)Loss from operations


(381,857
)

(416,575
)

(267,479
)

(2,419,690
)(Loss) income from discontinued operations


(81,582
)

(83,577
)

4,725,656


(3,037
)Net (loss) income


(463,439
)

(500,152
)

4,458,177


(2,422,727
)Net loss attributable to noncontrolling interests from operations


7,310


25,019


25,294


167,029Net loss (income) attributable to noncontrolling interests from discontinued operations

$
824

$
834

$
(34,151
)
$
-Net (loss) income attributable to Independence Tax Credit Plus L.P. III

$
(455,305
)
$
(474,299
)
$
4,449,320

$
(2,255,698
)Net (loss) income – limited partnership

$
(450,752
)
$
(469,556
)
$
4,404,827

$
(2,233,141
)Loss per weighted average BAC from operations

$
(8.54
)
$
(8.92
)
$
(5.52
)
$
(51.33
)(Loss) income per weighted average BAC from discontinued operation


(1.84
)

(1.89
)

106.92


(0.07
)Net (loss) income per weighted average BAC

$
(10.38
)
$
(10.81
)
$
101.40

$
(51.40
)Quarter EndedOPERATIONS

June 30,

2009*

September 30,

2009*

December 31,

2009*

March 31,

2010*Revenues

$
1,540,700

$
1,663,365

$
1,453,520

$
1,504,466Operating expenses


(2,208,370
)

(2,219,077
)

(2,145,292
)

(26,310,093
)Loss from operations


(667,670
)

(555,712
)

(691,772
)

(24,805,627
)Loss (income) from discontinued operations


(170,497
)

424,953


(144,278
)

(4,904,688
)Net loss


(838,167
)

(130,759
)

(836,050
)

(29,710,315
)Net loss attributable to noncontrolling interests from operations


58,360


61,968


56,835


2,523,763Net loss (income) attributable to noncontrolling interests from discontinued operations

$
715

$
(149,415
)
$
1,446

$
937,301Net loss attributable to Independence Tax Credit Plus L.P. III

$
(779,092
)
$
(218,206
)
$
(777,769
)
$
(26,249,251
)Net loss – limited partnership

$
(771,301
)
$
(216,024
)
$
(769,991
)
$
(25,986,758
)Loss per weighted average BAC from operations

$
(13.89
)
$
(11.25
)
$
(14.47
)
$
(507.81
)(Loss) income per weighted average BAC from discontinued operation


(3.87
)

6.28


(3.26
)

(90.41
)Net loss per weighted average BAC

$
(17.76
)
$
(4.97
)
$
(17.73
)
$
(598.22
)*    Reclassified for comparative purposes.
      
 - 52 -
 INDEPENDENCE TAX CREDIT PLUS L.P. III
 AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2011
   NOTE 12 – Commitments and Contingencies
  a)  Going Concern Consideration
  At March 31, 2011, the Partnership’s liabilities exceeded assets by $29,721,119 and for the 2010 year recognized net income of $1,071,859, including gain on sale of properties of $4,985,357 and loss on impairment of properties of $1,877,504.  These factors raise substantial doubt about the Partnership’s ability to continue as a going concern. As discussed in Note 8, partnership management fees of approximately $3,520,000 will be payable out of sales or refinancing proceeds only to the extent of available funds after payments on all other Partnership liabilities have been made and after the Limited Partners have received a 10% return on their capital contributions.  As such, the General Partner cannot demand payment of these deferred fees beyond the Partnership’s ability to pay them.  In addition, where the Partnership has unpaid partnership management fees related to sold properties, such management fees are written off and recorded as capital contributions.  During the year ended March 31, 2011, the Partnership wrote off approximately $575,000 of such management fees.
 All of the mortgage payable balance of $30,836,027 and the accrued interest payable balance of $9,248,146 is of a nonrecourse nature and secured by the respective properties.  The Partnership is currently in the process of developing a plan to dispose all of its investments.  Historically, the mortgage notes and accrued interest thereon have been assumed by the buyer in instances of sales of the Partnership’s interest or have been paid off from sales proceeds in instances of sales of the property.  In most instances when the Partnership’s interest was sold and liabilities were assumed, the Partnership recognized a gain from the sale.  The Partnership owns the limited partner interest in all its investments, and as such has no financial responsibility to fund operating losses incurred by the Local Partnerships.  The maximum loss the Partnership would incur is its net investment in the respective Local Partnerships.  Dispositions of any investment in a Local Partnership should not impact the future results of operations, liquidity, or financial condition of The Partnership.
  The Partnership has working capital reserves of approximately $882,000 at March 31, 2011.  Such amount is considered sufficient to cover the Partnership’s day to day operating expenses, excluding fees to the General Partner, for at least the next year.  The Partnership’s operating expenses, excluding the Local Partnerships’ expenses and related party expenses amounted to approximately $161,000 for the year ended March 31, 2011.
  Management believes the above mitigating factors enable the Partnership to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
  b)  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 2010, Mansion Court has sustained operating losses and has not generated sufficient cash flow from operations to meet its obligations.  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 continues to explore 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, 2011 and 2010 was reduced to zero as a result of prior years’ losses and the noncontrolling interests balance was $(166,000) and $(164,000), respectively.  Mansion Court’s net loss after noncontrolling interests amounted to approximately $250,000 and $65,000 for the 2010 and 2009 Fiscal Years, respectively.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
  During the year ended March 31, 2011, in accordance with ASC 360, Property, Plant and Equipment,the Partnership deemed the building of Mansion Court impaired and wrote it down to its fair value of zero, which resulted in a loss on impairment of approximately $194,000.  Fair value was obtained from an assessment made by management after indications that the carrying value of the assets were not recoverable, evidenced by a history of net operating losses over the past few years.
  Brannon Group, L.C. (“Keys”)
 The financial statements for Keys have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of Keys as a going concern.  Keys has obligations that matured on March 31, 2011 in the amount of $1,246,798.  If Keys is unable to raise sufficient funds to meet these obligations, it would raise substantial doubt about its ability to continue as a going concern.  Keys’ management has obtained an extension and is currently working with the lender to refinance its obligations.
 The Partnership’s investment in Keys at March 31, 2011 and 2010 was reduced to zero as a result of prior years’ losses and the noncontrolling interests balance was approximately $(2,543,000) and $(2,307,000), respectively.  Keys’ net income (loss) after noncontrolling interests amounted to approximately $75,000 and $(2,333,000) for the 2010 and 2009 Fiscal Years, respectively.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
  During the year ended March 31, 2010, in accordance with ASC 360,Property, Plant and Equipment,the Partnership deemed the building of Keys impaired and wrote it down to its estimated fair value which resulted in a loss of impairment of approximately $4,382,000.  Fair value was obtained from an assessment made by the management after indications that the carrying value of the assets was not recoverable.
      - 53 -
 INDEPENDENCE TAX CREDIT PLUS L.P. III
 AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2011
   c)  Subsidiary Partnerships – Gain on Extinguishment of Debt
  During the year ended March 31, 2010, BK-10K Partners L.P. (“Knickerbocker”) recognized a gain on extinguishment of debt on its New York City Department of Housing Preservation and Development (“HPD”) Third Mortgage, which had a balance of $172,373 and a construction period interest rate of 0.25% per annum, and subsequent rate of 0%.  No regular payments of principal were required under the HPD mortgage.  The terms included provisions that the HPD mortgage would be canceled and extinguished if Knickerbocker did not default on its first and second mortgages during the first fifteen years of their terms, which Knickerbocker complied with in 2009.
  d)  Leases
  Savannah 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,

Amount2011

$
21,2522012


21,2522013


21,2522014


21,2522015


21,252Thereafter


651,728$
757,988
 
  As of December 31, 2010, the lease agreement was current.  For the years ended December 31, 2010 and 2009, $21,252 and $21,252, respectively, have been paid under the terms of the lease and $0 and $0, respectively, remained payable.
  e)  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 (“FDIC”).  Uninsured cash and cash equivalents approximated $637,000 at March 31, 2011.
  f)  Property Management Fees
  Property management fees incurred by Local Partnerships amounted to $423,182 and $456,453 for the years ended March 31, 2011 and 2010, respectively.  Of these fees, $265,387 and $278,803 were incurred to affiliates of the subsidiary partnerships’ general partners, which includes $32,163 and $48,109 of fees relating to discontinued operations.
  g)  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.
  h)  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 was 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 were recognized in the 11th through 13th years.  As of December 31, 2009, all the Local Partnerships have completed their Credit Periods.
  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 31% 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.
     - 54 -
 INDEPENDENCE TAX CREDIT PLUS L.P. III
 AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2011
 i)
Subsequent Events
  We evaluated all subsequent events from the date of the balance sheet through June 27, 2011, which represents the issuance date of these financial statements.  There were no events or transactions occurring during this subsequent event reporting period which require recognition or disclosure in the financial statements.
  NOTE 13 – Discontinued Operations
  The following table summarizes the results of operations of the Local Partnerships that are classified as discontinued operations.  For the year ended March 31, 2011, Jefferis Square, which was sold during the year ended March 31, 2011, and Livingston Manor, which was sold on March 2010, were classified as discontinued operations in the consolidated statements of operations.  For the year ended March 31, 2010, Eastern Parkway and Livingston Manor, which were sold during the year ended March 31, 2010 and Jefferis Square, in order to present comparable results to the year ended March 31, 2011, were classified as discontinued operations in the consolidated statements of operations.
   Consolidated Statement of Discontinued Operations:
  Years Ended March 31,2011

2010*RevenuesRental income

$
347,373

$
796,851Other (Note 2)


11,387


14,453Gain (loss) on sale of properties (Note 10)


4,985,357


(1,351,902
)Total revenues


5,344,117


(540,598
)ExpensesGeneral and administrative


130,131


270,395General and administrative-related parties (Note 8)


34,663


55,609Repairs and maintenance


91,144


137,644Taxes


24,051


58,913Operating and other


29,856


144,000Insurance


9,699


53,752Financial, primarily interest


350,721


381,464Depreciation and amortization


116,392


400,190Loss on impairment of fixed assets


-


2,751,945Total expenses


786,657


4,253,912Income (loss) from discontinued operations


4,557,460


(4,794,510
)Noncontrolling interest in (income) loss of subsidiaries from discontinued operations


(32,493
)

790,047Income (loss) from discontinued operations – Independence Tax Credit Plus L.P. III

$
4,524,967

$
(4,004,463
)Income (loss) – limited partners from discontinued operations

$
4,479,717

$
(3,964,418
)Number of BACs outstanding


43,440


43,440Income (loss) from discontinued operations

$
103.12

$
(91.26
)
 
 *
Reclassified for comparative purposes.
  Years Ended March 31,2011

2010*Cash flows from discontinued operationsNet cash (used in) provided by operating activities

$
(202,910
)
$
(4,313,145
)Net cash provided by investing activities

$
20,809

$
9,205,430Net cash provided by (used in) financing activities

$
1,662

$
(4,989,394
)
 
 *
Reclassified for comparative purposes.
      - 55 -
    Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  None.
  Item 9A.  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 March 31, 2011.  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.
  (c)  Changes in Internal Controls over Financial Reporting.Except as noted in (b) above, during the year ended March 31, 2011, 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.
       - 56 -
   
 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.  However, Centerline Holding Company (“Centerline”), the ultimate parent of the General Partner, 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 A. Pace

Chief Financial OfficerRobert L. Levy

President and Chief Executive Officer
 
  ROBERT A. PACE, 38, is the Chief Financial Officer of RIAI III and a Director of Centerline.  Mr. Pace oversees the accounting operations of the General Partner, and is also responsible for overseeing the accounting operations of Centerline’s Affordable Housing Group.  Mr. Pace joined Centerline’s predecessor in January of 2003 as an Assistant Controller.  Prior to joining Centerline’s predecessor, Mr. Pace worked for KPMG in the financial services real estate group as an audit manager.  He received a Bachelor of Science Degree from Wagner College in 1994 and is a Certified Public Accountant.
  ROBERT L. LEVY, 45, is the President and Chief Executive Officer of RIAI III and is also a managing trustee and President, Chief Financial Officer and Chief Operating Officer of Centerline.  Mr. Levy was appointed as Chief Financial Officer of Centerline in November 2006 and was appointed its President and Chief Operating Officer in April 2010.  He directs the day-to-day operations of Centerline and is also responsible for overseeing all of Centerline’s business and operations. Mr. Levy joined Centerline in November of 2001 as the Director of Capital Markets.  From 1998 through 2001, he 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 the Prudential Realty Group, the real estate investment arm of the Prudential Insurance Company.  He received his Master’s in Business Administration from the Leonard N. Stern School of Business at New York University and his Bachelor of Arts from Northwestern University.
  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 annual partnership management fees, 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.
  Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder 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 28, 2011, 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.
      - 57 -
    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.
  Name of Beneficial Owner (1)

Amount and Nature of

Beneficial Ownership

Percentage of ClassLehigh Tax Credit Partners, Inc.


3,242.94
(2)


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 A. Pace


-



-Robert L. Levy


-



-All directors and executive officers of the general partner of the Related General Partner as a group (nine persons)


3,242.94
(2)


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. on January 25, 1999 with the Securities and Exchange Commission (the “Commission”).
  (3)
Each own only an economic interest.
  Item 13.  Certain Relationships and Related Transactions, and Director Independence
  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, 2011 and 2010 and for the reviews of the financial statements included in the Partnership’s quarterly reports on Form 10-Q for those years were $57,000 and $63,500, respectively.
  Audit Related Fees
 None
  Tax Fees
 None.
  All Other Fees
 None
  The Partnership is not required to have, and does not have, a standalone audit committee.
      - 58 -
    PART IV
  
 
 Item 15.
Exhibits and Financial Statement Schedules.Sequential

Page(a) 1.
Financial StatementsReport of Independent Registered Public Accounting Firm

13Consolidated Balance Sheets at March 31, 2011 and 2010

39Consolidated Statements of Operations for the Years Ended March 31, 2011 and 2010

40Consolidated Statements of Changes in Partners’ Capital (Deficit) for the Years Ended March 31, 2011 and 2010

41Consolidated Statements of Cash Flows for the Years Ended March 31, 2011 and 2010

42Notes to Consolidated Financial Statements

43(a) 2.
Consolidated Financial Statement SchedulesReport of Independent Registered Public Accounting Firm

63Schedule I - Condensed Financial Information of Registrant

64Schedule III - Real Estate and Accumulated Depreciation

67All 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

60(31.1)+
Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a)(31.2)+
Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a)(32.1)+
Certification Pursuant to Section 1350 of Title 18 of the United States Code (18 U.S.C. 1350).(32.2)+
Certification Pursuant to Section 1350 of Title 18 of the United States Code (18 U.S.C. 1350).*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}+Filed herewith.
 
      - 59 -
    Item 15.
Exhibits and Financial Statement Schedules (continued).
 Subsidiaries of the Registrant (Exhibit 21)

Jurisdiction

of OrganizationEdward Hotel Limited Partnership

CAOvertown Development Group, Ltd.

FLSumpter Commons Associates, L.P.

NYPark Housing Limited Partnership

CTLewis 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
 
      - 60 -
    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 27, 2011



By:
/s/ Robert A. PaceRobert A. PaceChief Financial Officer and Principal Accounting OfficerDate:
June 27, 2011



By:
/s/ Robert L. LevyRobert L. LevyPresident and Chief Executive Officer
        - 61 -
   
 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 A. Pace

Robert A. Pace

Chief Financial Officer and Principal Accounting Officer of Related Independence Associates III Inc.

June 27, 2011/s/ Robert L. Levy

Robert L. Levy

President (Chief Executive Officer) of Related Independence Associates III Inc.

June 27, 2011
      - 62 -
   
 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 27, 2011 on page 14, and based on the reports of other auditors, we have also audited supporting Schedule I for the 2010 and 2009 Fiscal Years and Schedule III as of March 31, 2011.  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.
 
 As discussed in Note 12(b), the consolidated financial statements include the financial statements of two subsidiary partnerships with significant uncertainties.  The financial statements of these subsidiary partnerships were prepared assuming that they will continue as going concerns.  These two subsidiary partnerships’ net losses aggregated $413,927 (2010 Fiscal Year) and $4,959,477 (2009 Fiscal Year) and their assets aggregated $1,715,468 at March 31, 2011 and $1,938,832 at March 31, 2010.  Management’s plan in regard to this matter is also described in Note 12(b).  The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
  
 
 
 /s/TRIEN ROSENBERG
 WEINBERG CIULLO & FAZZARI LLP
 
 New York, New York
 June 27, 2011
 
 
 - 63 -
 
 
 
 
 INDEPENDENCE TAX CREDIT PLUS L.P. III
 SCHEDULE I
 CONDENSED FINANCIAL INFORMATION OF REGISTRANT
 (Not Including Consolidated Subsidiary Partnerships)
 
 
 CONDENSED BALANCE SHEETS
 
 
 
 
 ASSETS
 
 
 March 31,2011

2010Cash and cash equivalents

$
887,382

$
1,136,520Investment in subsidiary partnerships


1,218,139


1,305,061Cash held in escrow


115,345


115,345Other assets


-


47Total assets

$
2,220,866

$
2,556,973LIABILITIES AND PARTNERS’ CAPITALDue to general partner and affiliates

$
4,466,373

$
4,803,251Other liabilities


44,996


9,649Total liabilities


4,511,369


4,812,900Partners’ (deficit) capital


(2,290,503
)

(2,255,927
)Total liabilities and partners’ capital

$
2,220,866

$
2,556,973
 
 
 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.
      - 64 -
   
 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 31,2011

2010RevenuesOther income

$
4,452

$
4,926Total revenues


4,452


4,926ExpensesAdministrative and management


160,860


114,682Administrative and management - related parties


442,724


530,258Total expenses


603,584


644,940Losses from operations


(599,132
)

(640,014
)Equity in loss of subsidiary partnerships*


(5,058,110
)

(6,299,627
)Gain (loss) on sale of investment in subsidiary partnership


5,048,115


(1,351,902
)Net loss

$
(609,127
)
$
(8,291,543
)*   Includes suspended prior year losses in excess of investment in accordance with the equity method of accounting amounting to $(5,059,894) and $(356,332) for 2011 and 2010, respectively.
 
 
 
 
 
 
 
 - 65 -
 
 
 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 31,2011

2010Cash flows from operating activities:Net loss

$
(609,127
)
$
(8,291,543
)Adjustments to reconcile net loss to net cash used in operating activities:(Gain) loss on sale of investment in subsidiary partnership


(5,048,115
)

1,351,902Equity in loss of subsidiary partnerships


5,058,110


6,299,627Decrease (increase) in other assets


47


1,197(Decrease) increase in liabilities:Due to general partners and affiliates


237,626


(502,400
)Other liabilities


(3,414
)

(62,736
)Total adjustments


244,254


7,087,590Net cash used in operating activities


(364,873
)

(1,203,953
)Cash flows from investing activities:Proceeds from sale of investment in subsidiary partnership


25,000


270,000Distributions from subsidiary partnerships


90,735


46,010Net cash provided by investing activities


115,735


316,010Net decrease in cash and cash equivalents


(249,138
)

(887,943
)Cash and cash equivalents, beginning of year


1,136,520


2,024,463Cash and cash equivalents, end of year

$
887,382

$
1,136,520
      - 66 -
   
 INDEPENDENCE TAX CREDIT PLUS L.P. III
 AND SUBSIDIARIES
 SCHEDULE III
 REAL ESTATE AND ACCUMULATED DEPRECIATION
 Partnership Property Pledged as Collateral
 MARCH 31, 2011
 
 
 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

$
(743,070
)
$
6,123

$
117,047

$
123,170

$
33,969

1994-95

Nov. 1994

27.5
yearsPacific East, L.P. (d)Brooklyn, NY


0


1,950


3,125,584


(3,127,534
)

0


0


0


0

1994-95

Dec. 1994

27.5
yearsOvertown Development Group, Ltd.Miami, FL


(1,289,678
)

52,284


2,627,099


(638,698
)

58,408


1,982,277


2,040,685


1,135,712

1994-95

Dec. 1994

40
yearsSumpter Commons Associates, L.P.


(1,151,635
)

500


1,862,916


(436,549
)

3,673


1,423,194


1,426,867


1,028,239

1995-96

Apr. 1995

27.5
yearsPark Housing Limited Partnership


(791,900
)

5,000


2,343,351


(1,083,367
)

8,173


1,256,811


1,264,984


1,170,104

1995-96

May 1995

27.5
yearsLivingston Manor Urban Renewal Associates, L.P. (d)


0


119,988


7,047,532


(7,167,520
)

0


0


0


0

1995-96

June 1995

15-40
yearsJefferis Square Housing Partnership, L.P. (e)


0


55,158


0


(55,158
)

0


0


0


0

1995-96

June 1995

20 - 40
years2301 First Avenue Limited Partnership (c)


0


64,350


5,818,269


(5,819,155
)

0


0


0


0

1995-96

Aug. 1995

27.5
yearsLewis Street Limited Partnership


(1,600,000
)

7,000


0


1,458,587


10,173


1,455,414


1,465,587


1,434,402

1995-96

Oct. 1995

27.5
yearsSavannah Park Housing Limited Partnership


(484,585
)

0


2,049,888


(121,880
)

3,173


1,910,417


1,913,590


1,655,879

1995-96

Oct. 1995

27.5
yearsBrannon Group, L.C.


(4,209,206
)

380,000


2,598,402


1,185,015


383,173


3,780,244


4,163,417


2,644,675

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


1,358,609


5,123


1,709,497


1,714,620


1,465,687

1995-96

Dec. 1995

20 - 40
yearsPrimm Place Partners, L.P.


(4,529,595
)

168,258


0


6,991,640


67,577


7,092,121


7,159,698


2,497,052

1995-96

Dec. 1995

10 - 40
yearsBK-9-A Partners L.P.


(1,928,287
)

0


1,517,313


57,531


3,173


1,571,671


1,574,844


630,937

1995-96

Dec. 1995

40
yearsBK-10K Partners L.P.


(656,283
)

11,000


1,637,762


116,057


14,176


1,750,643


1,764,819


690,867

1995-96

Dec. 1995

40
yearsWestmill Creek Associates III L.P.


(2,729,167
)

37,031


6,922,563


(3,105,128
)

37,649


3,816,817


3,854,466


3,821,998

1997-98

Dec. 1996

27.5
yearsUniversal Court Associates


(1,650,000
)

31,024


279,220


1,162,710


31,642


1,441,312


1,472,954


1,489,633

1997-98

Apr. 1997

20-40
yearsNew Zion Apartments


(630,705
))

20,000


2,688,770


94,960


20,618


2,783,112


2,803,730


1,430,788

1997-98

Nov. 1997

15 - 27.5
yearsDreitzer House


(4,275,000
)

5


0


2,720,052


623


2,719,434


2,720,057


2,736,740

1997-99

Dec. 1997

27.5
yearsLess discontinued operation and dispositions


0


(241,446
)

(15,991,385
)

16,169,357


0


0


0


0$
(30,836,027
)
$
988,834

$
25,458,185

$
9,016,469

$
653,477

$
34,810,011

$
35,463,488

$
23,866,683
 
 (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.

(c)The Partnership’s limited partnership interest was sold during the fiscal year ended March 31, 2009.

(d)The Partnership’s limited partnership interest was sold during the fiscal year ended March 31, 2010.

(e)The Partnership’s limited partnership interest was sold during the fiscal year ended March 31, 2011.
 
 
   - 67 -
    INDEPENDENCE TAX CREDIT PLUS L.P. III
 AND SUBSIDIARIES
 SCHEDULE III
 REAL ESTATE AND ACCUMULATED DEPRECIATION
 Partnership Property Pledged as Collateral
 MARCH 31, 2011
 (continued)
 Cost of Property and Equipment

Accumulated DepreciationYear Ended March 31,2011

2010

2011

2010Balance at beginning of period

$
39,118,378

$
78,326,313

$
24,907,752

$
28,830,729Additions during period:Improvements


105,582


149,386Depreciation expense








771,684


2,265,266Reductions during period:Discontinued operation, dispositions and impairment loss


(3,760,472
)

(39,357,321
)

(1,812,753
)

(6,188,243
)Balance at close of period

$
35,463,488

$
39,118,378

$
23,866,683

$
24,907,752At 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.
 
 
    - 68 -