UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                                               
                                     FORM 10-K

(Mark One)


 X   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
     ACT OF 1934 [FEE REQUIRED]

             For the fiscal year ended       December 31, 1998

                                        OR

     TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE  ACT OF 1934 [NO FEE REQUIRED]

     For the transition period from                  to                 
             Commission file number                0-19244

     Krupp Government Income Trust
          (Exact name of registrant as specified in its charter)

  Massachusetts                                                 04-3089272
(State or other jurisdiction of                                  (IRS Employer
incorporation or organization)                              Identification No.)

One Beacon Street, Boston, Massachusetts                                  02108
(Address of principal executive offices)                             (Zip Code)

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

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

                  Title                    Name of Exchange on which Registered
Shares of Beneficial Interest                                    None

Securities registered pursuant to Section 12(g) of the Act:   None

Indicate by check mark  whether  the  registrant  (1) has filed all  reports  
required to be filed by Section 13 or 15(d) of the  Securities  Exchange Act of
1934 during the preceding 12 months (or for such shorter  period that the
registrant was required to file such reports),  and (2) has been subject to such
filing  requirements  for the past 90 days.  Yes   X    No      

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K 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. [ ].

Aggregate market value of voting securities held by non-affiliates:  
Not applicable.

Documents incorporated by reference: see Part IV, Item 14

The exhibit index is located on pages 13-21


<PAGE>

                                          PART I

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

ITEM 1.  BUSINESS

   Krupp  Government  Income Trust (the  "Trust") was formed on November 1, 1989
by filing a  Declaration  of Trust in the  Commonwealth of  Massachusetts.  The
Trust is authorized to sell and issue not more than 17,510,000  shares of 
beneficial  interest ("the Shares").  The Trust raised  approximately  $300 
million through a public offering of Shares of beneficial  interest and used the
proceeds  available for investment primarily to acquire participating insured 
mortgages ("PIMs"),  participating insured mortgage investments ("PIMIs"),  and
mortgage-backed  securities ("MBS").  The Trust  considers  itself to be engaged
in only one industry  segment,  investment in  mortgages.  The Trust has elected
to be treated as a real estate investment trust  (AREIT@) under the  Internal 
Revenue Code of 1986, as amended.  The Trust shall terminate on December 31, 
2029,  unless earlier terminated by the  affirmative vote of holders of a 
majority of the outstanding Shares entitled to vote thereon.

   The  Trust's  investments  in PIMs on  multi-family  residential  properties
consist  of 1) a MBS or an insured mortgage loan (collectively,  the "insured 
mortgage")  guaranteed or insured as to principal and basic interest and 2) a  
participating  mortgage.  The insured mortgages were issued or originated under
or in connection with the housing  programs of Fannie Mae, the Government 
National  Mortgage  Association ("GNMA"), or the Federal Housing Administration
("FHA") under the authority of the Department of Housing and Urban  Development
("HUD").  PIMs provide  the  Trust with  monthly payments  of  principal and
basic  interest  and may also  provide  for Trust participation  in the current
revenue stream and in residual value, if any, from a sale or other realization
of the underlying property.  The borrower conveys the participation rights to 
the Trust  through a  subordinated promissory note and mortgage.  The 
participation features are neither insured nor guaranteed.

   The PIMIs consist of 1) an insured  mortgage issued by GNMA or originated  
under the lending program of the FHA, 2) an additional loan ("Additional  Loan")
to the borrower or owners of the borrower in excess of mortgage amounts insured
under GNMA or FHA programs that increases  the Trust's total financing with 
respect to that property and its participation interests and 3) a participating
mortgage.  Additional Loans associated with an insured mortgage issued or  
originated in connection with HUD  insured  programs  cannot,  under  government
regulations, be collateralized  by a mortgage on the underlying  property.  
These Additional Loans are typically  collateralized by a security interest
satisfactory to Berkshire  Mortgage  Advisors  Limited  Partnership  ("the  
Advisor").  The Additional Loans are neither insured nor guaranteed.  In
addition,  the  participation  features  related to the participating  mortgage
are neither insured nor  guaranteed.  Additional  Loans provide the Trust with 
semi-annual interest payments and may provide additional interest in the future
while the participating  mortgage provides for Trust participation in the net 
income and residual value, if any, of the underlying property.

   The Trust also acquired MBS collateralized  by single-family and multi-family
mortgage  loans  issued or originated  by GNMA,  Fannie Mae,  the Federal Home 
Loan Mortgage Corporation  ("FHLMC")  or FHA.  Fannie Mae and FHLMC  guarantee 
the principal and basic interest of the Fannie Mae and FHLMC MBS,  respectively.
GNMA  guarantees the timely payment of principal and interest on its MBS, and 
HUD insures the pooled  mortgage loans  underlying the GNMA MBS and FHA mortgage
loans.  The Trust will  distribute all proceeds from  prepayments or other 
realizations of mortgage  assets to investors either through quarterly dividends
or possibly special dividends.

   Although the Trust will terminate no later than  December 31, 2029, the value
of the PIMs and PIMIs may be realized  by the Trust  through repayment or sale 
as early as ten years  from the  dates of the  closings  of the permanent loans,
and the Trust may  realize the value of all of its other investments  within  
that time frame thereby resulting in a dissolution of the Trust significantly 
prior to December 31, 2029.

   The Trust's investments are not expected to be subject to seasonal 
fluctuations, although net income may vary somewhat from quarter to quarter 
based upon the  participation  features of its  investments.  The requirements 
for compliance with federal,  state and local regulations to date have not 
adversely  affected the Trust's  operations, and the Trust anticipates no 
adverse effect in the future.

   To qualify as a real estate  investment trust ("REIT") for federal income tax
purposes,  the Trust made a valid election to be so treated and must continue to
satisfy a range of complex  requirements  including criteria related to its  
ownership  structure,  the nature of its assets,  the sources of its income and 
the amount of its dividends to shareholders.  The Trust intends to qualify as a
REIT in each year of operation,  however,  certain factors may have an adverse 
effect on the  Trust's  REIT  status.  If for any  taxable  year,  the  Trustees
and the Advisor determine that any of the asset, income, or distribution tests 
are not likely to be satisfied,  the Trust may be required to borrow money, 
dispose of mortgages or take other action to avoid loss of REIT status.

   Additionally,  if the Trust  does not  qualify  as a REIT for any  taxable 
year,  it will be subject to federal income tax as if it were a corporation and
the shareholders  will be taxed as  shareholders  of a corporation.  If the 
Trust were taxed as a corporation, the payment of such tax by the Trust would 
substantially  reduce the funds available for dividends  to  shareholders or for
reinvestment.  To the extent that dividends had been made in anticipation of the
Trust's qualification as a REIT, the Trust might be required to borrow 
additional funds or to liquidate certain of its investments in order to pay the
applicable tax.  Moreover,  should the Trust's election to be taxed as a REIT be
terminated or voluntarily  revoked,  the Trust may not be able to elect to be
treated as a REIT for the following five-year period.

   As of December 31, 1998, there were no personnel directly employed by the 
Trust.

ITEM 2.  PROPERTIES

   None.


ITEM 3.  LEGAL PROCEEDINGS

   There  are no  material  pending  legal  proceedings  to which  the  Trust is
a party  or to  which  any of its investments are subject to.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

   None.

                                                       PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

   There currently is no established public trading market for the Shares.

   The number of investors holding Shares as of December 31, 1998 is 
approximately 13,200.

   The Trust has and  intends to  continue  declaring  and paying  dividends  on
a quarterly  basis.  The  Trustees established a dividend rate per Share per 
quarter of $.325 for 1998 and 1997.

ITEM 6.  SELECTED FINANCIAL DATA

   The following  table sets forth selected  financial  information  regarding 
the Trust's  financial  position and operating  results.  This information 
should be read in conjunction with  Management's  Discussion and Analysis of
Financial  Condition and Results of Operations and the Financial Statements and
Supplementary  Data,  which are included in Item 7 and Item 8 (Appendix A) of 
this report, respectively.
<TABLE>
<CAPTION>

                            (Amounts in thousands, except for per Share amounts)
                                          1998            1997          1996            1995             1994

<S>                                        <C>            <C>            <C>             <C>              <C>     
Total revenues                             $ 21,922       $ 17,618       $ 16,358        $ 17,200         $ 16,846

Net income                                 $ 14,836       $ 12,899       $ 12,481        $ 13,022         $ 12,599

Net income per Share                       $    .99       $    .86       $    .83        $    .87         $    .84

Weighted average Shares
 outstanding                                 15,053         15,053         15,053          15,053           15,053

Total assets at
 December 31                               $171,422       $221,779       $241,634        $247,620         $251,333

Average dividends
 per Share                                $   4.16       $   2.22      $   1.30         $   1.30        $   1.30

</TABLE>


ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
           RESULTS OF OPERATIONS

Management's  discussion  and analysis of financial  condition and results of 
operations  contains  forward-looking statements  within the meaning of Section
27A of the  Securities  Act of 1933 and  Section 21E of the  Securities Exchange
Act of 1934.  Actual results  could  differ  materially  from  those  projected
in the  forward-looking statements as a result of a number of factors, including
those identified herein.

The Advisor  of the Trust has conducted  an assessment of the Trust's core 
internal  and  external  computer information  systems and has taken the further
necessary  steps to  understand  the nature and extent of the work required to 
make its systems Year 2000 ready in those  situations  in which it is required 
to do so. The Year 2000 readiness issue concerns the inability of computerized
information systems to accurately  calculate,  store or use a date after 1999.
This could result in a system failure or miscalculations causing disruptions of
operations.  The Year 2000 issue affects virtually all companies and all 
organizations.

In this regard, the Advisor of the Trust, along with certain  affiliates,  began
a computer systems project in 1997 to significantly upgrade its existing 
hardware and software.  The Advisor completed the testing and conversion of the
financial accounting  operating systems in February 1998. As a result, the 
Advisor has generated  operating efficiencies  and believes  its  financial
accounting  operating  systems are Year 2000 ready.  The Advisor of the Trust  
incurred  hardware  costs as well as  consulting  and  other  expenses  related
to the  infrastructure  and facilities  enhancements  necessary  to complete  
the  upgrade  and  prepare for the Year 2000.  There are no other significant
internal systems or software that the Trust is using at the present time.

The Advisor of the Trust is in the process of evaluating  the potential  adverse
impact that could result from the failure of material  third-party service 
providers  (including but not limited to its banks and  telecommunications 
providers)  and  significant  vendors to be Year 2000 ready.  The Trust is in 
the process of surveying  these third party  providers  and assessing  their 
readiness  with year 2000. To date,  the Trust is not aware of any problems that
would materially  impact its results of operations, liquidity or capital 
resources.  However,  the Trust has not yet obtained all written assurances that
these providers would be Year 2000, ready.

The Trust  currently  does not have a  contingency  plan in the event of a 
particular  provider or system not being Year 2000  ready.  Such plan will be  
developed if it becomes  clear that a provider  is not going to achieve  its
scheduled readiness objectives by June 30, 1999.  The inability of one of these
providers to complete its Year 2000 resolution  process could impact the Trust.
In addition, the Trust is also subject to external  forces that might generally
affect industry and commerce,  such as utility and transportation  company Year
2000 readiness failures and related service interruptions.  To date, The Trust 
has not incurred any cost  associated  with being Year 2000  ready.  All costs 
have been incurred  by the Advisor  and it is  estimated  that any future Year
2000 readiness  costs  will be borne by the  Advisor.  No  estimate can be made
at this  time as to the  impact  of the readiness of such third parties.

Liquidity and Capital Resources

At December 31, 1998 the Trust had significant liquidity  consisting of cash and
cash equivalents of approximately $9  million  as well as the cash  inflows  
provided  by its  investment  in the  PIMs,  PIMIs  and MBS.  The  Trust
anticipates  that these  sources  will be  adequate  to provide  the Trust with
sufficient  liquidity  to meet its
obligations as well as to provide dividends to its investors.

The most significant  demand on the Trust's  liquidity is dividends paid to 
investors,  approximately  $4.9 million per quarter.  The Trust currently has an
annual dividend rate of $1.30 per share,  paid in quarterly  installments of 
$.325 per share.  Funds for the dividends distributed  by the Trust come from 
the principal and interest payments on the PIMs,  PIMIs and MBS,  the  principal
prepayments of the PIMs,  PIMIs and MBS,  and the interest earned on the Trust's
cash and cash  equivalents.  The  portion  of  dividends  attributable  to the
principal collected from those payments reduces the capital resources of the 
Trust.  As the capital  resources of the Trust decrease,  the total cash flows 
to the Trust also will decrease and over time may result in periodic adjustments
to the dividends paid to investors.

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

Three  properties with  Additional Loans,  Audubon Villas, Park Highlands and 
The Seasons made the scheduled 1998 Additional Loan interest  payments with 
operating cash flow. Two others,  Lifestyles and Windward  Lakes,  operated 
under  workout  agreements  with the Trust during 1998 that  require  Additional
Loan  interest  payments only if surplus cash is generated through property
operations after servicing the insured first mortgage.  Lifestyles did not 
generate any surplus cash during 1998 and consequently did not make any  
Additional  Loan interest  payments.  Windward Lakes generated some surplus cash
and made a partial  Additional  Loan interest payment during 1998 that the Trust
has recognized  as deferred  income.  Mountain View did not generate  surplus 
cash during 1998,  and its borrower  funded one  partial  Additional  Loan  
interest  payment  during  1998;  the  remaining  payment  remains outstanding
while a workout is  negotiated.  Red Run  generated  some  surplus  cash during
1998,  which funded a portion of the  Additional  Loan  interest  payment;  the
balance was funded  with  reserves  held in escrow by the Trust.  Only Red Run 
still has adequate  reserves held in escrow by the Trust to make the scheduled
1999 Additional Loan  interest payments if property cash flow is  insufficient.
Additional  Loan  interest  payments due from the Trust's other PIMI investments
will depend on those properties' ability to generate operating cash flow.

The Trust also could  receive  additional  income  through  its  participation 
interest  in either the  underlying properties'  cash flow  generated  by  
operations,  over and  above  operating  and  capital  requirements  and any
Additional  Loan  interest  payment  obligation,  or any  appreciation  in value
realized at the time of a sale or refinance.  However,  this  participation  
interest is dependent  upon  whether  property operations meet certain criteria.
During  1998,  the property  operating  results of three of the Trust's PIM  
investments  and one of the Trust's PIMI  investments  exceeded the thresholds 
established  by that criteria and paid the Trust  participation income: Lincoln
Green, $91,410;  Riverview,  $66,133;  Waterford Townhomes,  $44,860; and The 
Seasons, $93,457. The payment  received  from The  Season  was after it paid its
Additional  Loan  interest.  As a result of  continuing strong operating 
performance in 1998, the Advisor expects that the same four  properties will pay
participation interest to the Trust again in 1999.

Many of the  properties  had stable  operating  results  during 1998.  High  
occupancy  rates were  maintained  and moderate  rental rate  increases  were 
achieved  at more than half of the  properties  due to stable or  improving
markets or the unique  character of the specific  property.  Occupancy at Red 
Run was  consistently in the high 90% range throughout  1998.  The appeal of the
New Town submarket of Owings Mills,  Maryland  contributes to Red Run's strong  
performance  despite  increased  competition from other newly built apartment  
communities.  Audubon Villas 90% occupancy has lagged somewhat  behind the rest
of the Pinellas  County,  Florida  market,  but the property has still been able
to service its Additional Loan interest  obligations.  Windward Lakes 
successfully  completed 1998 by  generating  $45,623 of surplus cash that was 
paid to the Trust as Additional  Loan  interest  under its workout agreement. 
Occupancy at year-end was in the 95% range.

Occupancy and operating  results for four other  properties are being closely  
monitored by the Advisor and warrant mention.  Rivergreens and Mill Pond, while
generating  sufficient  operating  revenues to service debt obligations and 
adequately  maintain the properties,  experienced  drops in occupancy during 
1998.  Rivergreens is located in a submarket  that  typically  lags behind the 
rest of the  Portland,  Oregon  market,  which has been affected by the Asian 
financial crisis and Boeing's  downsizing.  Compounding the adverse effects of 
the general market,  two fires at the property took a number of apartments out 
of service.  While  reconstruction  is now complete,  releasing the apartments
in a soft market may take an extended  period of time.  Occupancy at year-end 
was in the low 80% range. Mill Pond,  located in Dayton,  Ohio,  also has 
experienced the effects of a soft market created by new multifamily 
construction, which creates more competition, and continuing low interest rates,
which shrinks the population of potential renters.  Occupancy at year-end was in
the 90% range.

The operating  results of Lifestyles and Mountain View declined more  seriously
during 1998.  Lifestyles  operated under a two-year  workout agreement  with the
Trust through the end of 1997 and in December 1998 the Trust entered into a new
workout agreement.  Due to increased  vacancy caused by  competition  from new
properties and a general deterioration in the property's appearance,  Lifestyles
was not able to generate  sufficient  revenues to maintain the  property  and 
service  the higher  interest  rate on the insured  first  mortgage  after the 
workout  expired.  Consequently,  the  borrower  on the  Lifestyles  PIMI 
defaulted on its May 1, 1998 debt service payment on the insured first mortgage.
The Trust agreed to reduce the effective  interest rate on the insured first 
mortgage by 1.75% retroactively for 1998 to clear the default, by 1.75% for 
1999, and by 1.5% each year thereafter until the property is sold or refinanced.
The borrower made a $550,000  equity  contribution,  which has been escrowed for
the exclusive  purpose of correcting  deferred  maintenance and making capital
improvements  to the property.  Any surplus cash that is  generated by property
operations  will be split evenly  between the Trust and the  borrower.  When the
property is sold or refinanced,  the first $1,100,000 of any proceeds remaining
after the insured first mortgage is paid off will be split 50% / 50%; the next
$1,690,220  of proceeds  will be split 75% to the Trust and 25% to the borrower;
and any remaining  proceeds will be split 50% / 50% between the Trust and the 
borrower.  The borrower's  new equity and the reduction in the effective  
interest rate on the insured first mortgage will provide funds for repairs and
improvements  that should help reposition  Lifestyles so it can compete more 
effectively for residents and rental rates.  As a result of the factors  
described  above, in December 1998,  management  determined that the additional
loan collateralized  by the Lifestyles  asset was impaired.  As a result the 
Trust recorded a valuation allowance of $1,130,346 in the fourth quarter of 
1998.

Mountain  View is similar to  Lifestyles  with respect to  competitive  market
conditions.  Mountain View operated under an 18-month  workout  agreement  with
the Trust during 1995 and 1996.  The major  components  of that workout had been
a 1/2% per annum  reduction  in the  interest  rate on the insured  first  
mortgage and the waiver of four Additional Loan interest payments.  That
workout  helped  stabilize the property  during a down economic cycle in
Huntsville.  However,  the improving  economy over the past 18 to 24 months  
combined  with low interest  rates and abundant  capital sources  caused a flood
of both  single-family  and new apartment construction.  Consequently, occupancy
and rental rates fell dramatically  during 1998 as competition  increased.  The
property is just breaking even on the insured first  mortgage debt  obligation
but has not generated  surplus cash to service the Additional Loan interest. 
Contractually,  the borrower must fund one-half of any  shortfalls in the PIMI 
Base  Interest.  The borrower met this  obligation  with respect to the first
payment that was due during 1998 and  subsequently  asked the Advisor to provide
long-term  debt  service  relief.  The second  payment that was due during  1998
remains outstanding  while the Advisor  continues  to  negotiate a loan 
modification  to provide  additional  debt service relief  until  the  market  
stabilizes  again.  As a result  of the  factors  described  above,  in  October
1998, management  determined  that the  additional  loan  collateralized  by the
Mountain View asset was  impaired.  As a result the Trust recorded a valuation 
allowance of $984,000 in the fourth quarter of 1998.

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

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

During 1998, the Trust received the prepayment of two of its PIMI  investments 
and was notified by the borrower of another PIMI of its intention to prepay its
loans during 1999.  During the third quarter 1998,  the Trust  received a  
prepayment  of the Park  Highlands PIMI when the property  was sold.  This  
prepayment  occurred  prior to the expiration of the five-year  prohibition.  
However,  the Advisor  agreed to allow the  transaction  to be completed while 
market conditions were favorable in return for an additional prepayment penalty.
The Trust received the prepayment of the principal balance of the insured  first
mortgage,  $16,752,295,  the principal  balance of the Additional  Loan,  
$3,000,000, the Additional Loan interest due at the time of the prepayment, 
$57,945,  and the prepayment  penalty  for the early  payoff,  $479,476.  In  
addition, the Trust received participation interest comprised of the outstanding
Preferred Return on the Trust investment, $1,481,865, and the Trust's share in 
the increase in the value of the underlying property, $1,206,719.

Also during the third quarter of 1998, the Trust  received a  prepayment of the
Coconut  Palm Club PIMI.  This transaction  was the result of a sale of the
underlying  property as well,  although the Trust  received less than its full
Preferred  Return.  The Advisor agreed to allow the transaction because the 
purchase price was judged to be favorable in light of the highly competitive 
rental market in Broward County,  Florida.  In addition, without the sale it was
likely  that the Advisor  would have agreed to a loan  restructure  with the
borrower rather than expose the Trust to the  uncertainty of a probable default.
The Trust received the  prepayment of the principal balance of the insured first
mortgage, $15,851,211, the principal balance of the Additional Loan, $2,850,900,
and the Additional Loan  interest  due at the  time of the  repayment, $89,090.
In  addition, the Trust received participation interest of $1,419,116 towards 
the Preferred Return.

The Trust paid a special  dividend  on  September  9, 1998 of $2.86 per share 
from the  prepayment proceeds of the Park Highlands and Coconut Palm Club PIMIs.

The borrower on the Audubon  Villas PIMI informed the Trust of its  intention to
prepay the insured first  mortgage and the  Additional  Loan during 1999.  An
appraisal of the  underlying  property was  completed  during the fourth quarter
1998 to determine its value for the purpose of  calculating  the  participation
interest that would be due when the PIMI is prepaid. The borrower has questioned
the Advisor's interpretation  of some of the  prepayment provisions in the loan
documents,  and the timing of the prepayment will depend on a satisfactory 
resolution of the dispute.

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


Assessment of Credit Risk

The Trust's  investments in insured  mortgages and MBS are guaranteed or insured
by Fannie Mae, FHLMC, GNMA and HUD and therefore the  certainty of their cash 
flows and the risk of material loss of the amounts  invested  depends on the 
creditworthiness of these entities.

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

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

    The Trust includes in cash and cash equivalents  approximately  $8.7 million
of  commercial  paper,  which is issued by entities  with a credit rating equal
to one of the top two rating categories of a nationally recognized statistical
rating organization.


Operations

   The following  discussion  relates to the operations of the Trust during the
years ended December 31, 1998, 1997 and 1996.  Dollars are stated in thousands,
except for per Share amounts.
<TABLE>
<CAPTION>


                                                       Year Ended December 31,                
                                             1998                       1997                       1996      
 Per                                                    Per                        Per
                                       Amount          Share      Amount          Share       Amount        Share
Interest income on PIMs
  and PIMIs:
<S>                                       <C>         <C>           <C>         <C>             <C>           <C>  
    Basic Interest                        $10,636     $ .71         $12,181     $ .81           $12,808       $ .86
    Additional Loan interest                3,081       .20             794       .05              -             -
    Participation income                    5,094       .34           1,385       .09               359         .02
Interest income on MBS                      1,930       .13           2,199       .15             2,306         .15
Interest income on cash
 and cash equivalents                       1,181       .08           1,059       .07               886         .06
Trust expenses                             (1,973)     (.13)         (2,313)     (.15)           (2,264)       (.15)
Amortization of prepaid
 fees and expenses                         (2,999)     (.20)         (2,406)     (.16)           (1,614)       (.11)
Provision for impaired
  mortgage loans                           (2,114)     (.14)            -           -               -               -  

      Net income                          $14,836  $ .99            $12,899  $ .86              $12,481    $ .83

Weighted average
   Shares outstanding                     15,053,13    515,053,135            15,053,135
</TABLE>

The net  income of the Trust for 1998  increased  as compared  to 1997 and 1996.
During  the three  years in the periods ended December 31, 1998 the Trust's  
operations have  experienced  changes in the mix of interest income as the Trust
has had prepayments in its PIMs and PIMIs in 1998,  1997 and 1996.  These
prepayments  have reduced the basic  interest on PIMs and PIMIs,  but there has
been an  increase in  participation  income and  Additional  Loan interest.

The Trust's net income for 1998  increased  by  approximately  $1,937,000  when
compared to 1997 due  primarily to higher  Participation  income and  Additional
Loan  interest  caused by the  prepayments  of Coconut Palm and Park Highlands.
This was somewhat  offset by the Trust  recording a provision  for impaired 
mortgage loans related to Lifestyles and Mountain View and lower basic interest.
The Trust received  $1,419,000  from Coconut Palm Club and $3,168,000 from Park
Highlands for Participation  Interest and the Trust recognized all of the
previously  deferred Additional  Loan interest of $1,290,000  from Coconut Palm
Club and  $1,295,000  from Park  Highlands as Additional Loan interest  income.
The Trust also received participation  income from Park  Highlands,  The Seasons
PIMI, the Lincoln  Green,  Riverview and Waterford PIMs of $212,000,  $93,000, 
$91,000,  $66,000 and $45,000,  respectively. Other interest income increased
$122,000 due primarily to the Trust having higher short-term investment balances
during 1998 when  compared to 1997.  These  increases  were offset by the 
recording of a $2,114,000  provision for impaired loans as mentioned  above. The
Trust saw a decline in expense  reimbursements  in 1998 due to a rebate for
expense  reimbursements  related to 1997 received in 1998. Basic interest 
decreased $1,545,000 and asset management fees  decreased  $199,000 in 1998 
primarily as a result of the Coconut Palm and Park  Highland  PIMI  prepayments.
Interest income on MBS will continue to decline as principal collections  reduce
 the  outstanding  balance of the MBS portfolio.  The increase in amortization 
expense is because the Trust fully  amortized the remaining  balances of prepaid
fees and expenses associated with the Park Highlands and Coconut Palm Club 
PIMI's.

The  Trust's  net income for 1997  increased  by  approximately  $418,000  when
compared  to 1996.  This  increase resulted  from  higher participation  income,
Additional  Loan  interest  income  and  other  interest income of approximately
$1,026,000,  $794,000 and $173,000,  respectively,  net of lower basic  interest
income on PIMs and interest income on MBS of approximately $627,000 and 107,000,
respectively and increases in amortization  expense and Trust  expenses of 
$792,000 and $49,000,  respectively.  The increase in  participation  income and
additional loan  interest  income  are primarily  related  to the  Timber  Ridge
PIMI.  The  Trust  received  $1,246,000  of participation  interest upon early
prepayment of the PIMI. The Trust also received  participation  income from the
Lincoln  Green PIM,  The  Seasons  PIMI and the  Riverview  PIM of  $102,000,  
$33,000  and  $4,000,  respectively.  Interest  income  on cash and cash  
equivalents  increased  as a result  of  short-term  investments  made with the
proceeds from the Canyon Ridge and Timber Ridge prepayments prior to the special
distribution  made in the third quarter.  Basic  interest  decreased as a result
of the repayment of the Timber Ridge PIMI during the first quarter of 1997,  the
repayment of the Canyon Ridge PIM during the second  quarter of 1996 and the 
interest rate  reduction given to Windward  Lakes  Apartments.  Interest  income
on MBS will continue to decline as principal  collections reduce the outstanding
balance of the MBS portfolio.  Amortization  expenses increased for 1997 as 
compared to 1996 due primarily to the Trust fully  amortizing  the prepaid 
acquisition  and servicing fees  associated  with Canyon Ridge Apartments PIM 
and Timber Ridge Apartments PIMI.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         See Appendix A to this report.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE

               None.

                        PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

  Information as to the Trustees and Executive Officers of Krupp Government 
  Income Trust is as follows:

                                                           Position with Krupp
                Name and Age                            Government Income Trust

        Douglas Krupp (52)             Chairman of Board of Trustees and Trustee
  *     Charles N. Goldberg (57)       Trustee
  *     E. Robert Roskind (54)         Trustee
  *     J. Paul Finnegan (74)          Trustee
        Robert A. Barrows (41)         Treasurer
        Scott D. Spelfogel (38)        Clerk
        Kristin L. Hicks (32)          Assistant Clerk

* Independent Trustee

      Douglas Krupp  co-founded and serves as Co-Chairman  and Chief Executive 
Officer of The Berkshire  Group, an integrated  real estate  financial  services
firm  engaged in real estate  acquisition  and  property  management, mortgage
banking and  financial  management.  The  Berkshire  Group's  interests  include
ownership of a mortgage company  specializing in  commercial mortgage financing
with a portfolio  of  approximately  $6.0  billion.  In addition,  The Berkshire
Group has a significant  ownership interest in Berkshire Realty Company,  Inc.
(NYSE-BRI), a real  estate  investment  trust  specializing  in  apartment
 investments.  Mr.  Krupp has held the  position  of Co-Chairman  since The  
Berkshire  Group was  established  as The Krupp  Companies in 1969 and he has 
served as the Chief  Executive  Officer  since 1992.  Mr. Krupp serves as 
Chairman of the Board and Director of Berkshire  Realty Company,  Inc.  
(NYSE-BRI) and he is also a member of the Board of Trustees at Brigham & Women's
Hospital.  He is a graduate of Bryant College where he received an honorary 
Doctor of Science in Business  Administration  in 1989 and was elected  trustee
in 1990.  Mr.  Krupp also  serves as  Chairman  of the Board and  Trustee of 
Krupp  Government Income Trust II.

   Charles N. Goldberg is of counsel to the law firm of Broocks,  Baker & Lange,
L.L.P.,  which position he has held since December of 1997. Prior to joining  
Broocks,  Baker & Lange,  L.L.P.,  Mr. Goldberg was a partner in the law firm of
Hirsch & Westheimer  from March of 1996 to December of 1997.  Prior to Hirsch &
 Westheimer,  he was the Managing  Partner of Goldberg Brown,  Attorneys at Law
from 1980 to March of 1996. He received a B.B.A.  degree and a J.D.  degree from
 the  University of Texas.  He is a member of the State Bar of Texas and is 
admitted to practice before  the U.S.  Court of  Appeals,  Fifth  Circuit  and 
U.S.  District  Court,  Southern  District  of Texas.  He currently  serves as a
 Trustee of Krupp  Government  Income  Trust II and a director of Berkshire  
Realty  Company, Inc.  (NYSE-BRI).  He received a B.B.A.  degree and a J.D.  
degree from the University of Texas.  He is a member of the State Bar of Texas 
and is  admitted  to  practice  before the U.S.  Court of  Appeals,  Fifth  
Circuit and U.S. District Court, Southern District of Texas.

      E. Robert  Roskind is the Chairman and  Co-Chief  Executive  Officer of  
Lexington  Corporate  Properties,  a self-administered  REIT,  the  shares of 
which are listed on the NYSE.  Mr.  Roskind  has  served in this  capacity since
October of 1993. Mr. Roskind is also the Managing  Partner of The LCP Group,
a real estate  investment  firm based in New York, the  predecessor  of which he
co-founded in 1974. He holds a B.A. degree from the University of Pennsylvania 
and a J.D.  degree from Columbia Law School.  He has been a member of the New 
York Bar since 1970. He currently  serves as a Trustee of Krupp  Government 
Income Trust II. He is also  currently a director of Berkshire Realty Company,
Inc. (NYSE-BRI),  as well as Chairman of the Board of Trustees of Lexington 
Corporate  Properties.  Mr. Roskind holds a B.A.  degree from the University of
Pennsylvania  and a J.D.  degree from Columbia Law School.  He has been a member
 of the New York Bar since 1970. 

      J. Paul  Finnegan  retired  as a partner of Coopers & Lybrand in 1987.  
Since  then,  he has been  engaged in business as a consultant,  a director and 
arbitrator.  Mr. Finnegan holds a B.A.  degree from Harvard  College,  a J.D.  
degree from Boston  College Law School and an ASA from Bentley  College.  He is
also currently a director at Scituate  Federal  Savings Bank.  Mr.  Finnegan is 
a Certified  Public  Accountant and an attorney.  Mr.  Finnegan currently serves
as a Trustee of Krupp Government Income Trust II and a director at Scituate 
Federal Savings Bank and a director of Berkshire Realty Company, Inc.(NYSE-BRI).
Mr. Finnegan is a Certified Public Accountant and an attorney.

    Robert A. Barrows is the Treasurer of the Trust and is Senior Vice President
and Chief  Financial  Officer of Berkshire  Mortgage  Finance.  Mr. Barrows has
held several  positions within The Berkshire Group since joining the company in
1983 and is  currently  responsible  for  accounting,  financial  reporting,  
treasury  and  management information systems  for Berkshire  Mortgage  Finance.
Prior to joining  The  Berkshire  Group,  he was an audit supervisor for Coopers
& Lybrand  L.L.P.  in Boston.  He  received a B.S. degree  from  Boston  College
and is a Certified Public Accountant.

   Scott D.  Spelfogel  is the Clerk of the Trust and is Senior Vice  President
and  General  Counsel to The Berkshire  Group.  Prior to 1997, he served as Vice
President and Assistant  General  Counsel.  Before joining the firm in  November
1988,  he was a  litigator  in private  practice  in Boston.  He  received a 
Bachelor of Science degree in Business  Administration  from Boston  University,
a Juris  Doctor  Degree  from  Syracuse  University's College of Law,  and a 
Master of Laws  degree in  Taxation  from Boston  University  Law School.  He is
admitted to practice law in Massachusetts and New York, is a member of the 
American,  Boston,  Massachusetts and New York State bar associations and is a 
licensed real estate broker in Massachusetts.

   Kristin L. Hicks is the Assistant Clerk of the Trust and is Assistant General
Counsel to The Berkshire  Group. Prior to 1999,  she served as Staff  Attorney 
for The Berkshire  Group  beginning in September  1997,  and prior to that  
position, she was the manager of the transfer department  for Krupp  Funds Group
from May of 1992  through September of 1997.  She received a B.A. degree from
Northeastern  University  in 1989 and a J.D.  degree from the Suffolk University
Law School in 1995.  She is admitted to practice law in Massachusetts and is a
member of the American, Massachusetts and Boston bar associations.

   In addition, the following are deemed to be Executive Officers of the 
registrant:

   George Krupp (age 54) is the Co-Founder and  Co-Chairman of The Berkshire  
Group,  an integrated  real estate financial  services  firm  engaged in real  
estate  acquisition  and  property  management,  mortgage banking  and financial
management.  The Berkshire Group's  interests include ownership of a mortgage 
company  specializing in commercial  mortgage financing with a portfolio of 
approximately  $6.0 billion.  In addition, The Berkshire Group has a significant
ownership interest in Berkshire Realty Company,  Inc. (NYSE-BRI),  a real estate
investment trust specializing in apartment  investments.  Mr. Krupp has held the
position of Co-Chairman  since The Berkshire Group was  established as The Krupp
Companies in 1969.  Mr. Krupp has been an instructor of history at the New 
Jewish High School in Waltham, Massachusetts  since December of 1997.  Mr. Krupp
attended the University of  Pennsylvania and Harvard University and holds a 
Master's Degree in History from Brown University.

   Peter F. Donovan (age 45) is Chief  Executive  Officer of Berkshire  Mortgage
Finance which  position he has held since January of 1998 and in this capacity,
he oversees the strategic  growth plans of this mortgage  banking firm.  
Berkshire  Mortgage  Finance is the 16th  largest  in the  United  States  based
on  servicing  and  asset management  of a $5.7 billion loan  portfolio.  
Previously  he served as  President of Berkshire  Mortgage  Finance from January
of 1993 to January of 1998 and in that capacity he directed the  production, 
underwriting, servicing and asset  management  activities of the firm.  Prior to
that, he was Senior Vice  President of Berkshire  Mortgage Finance and was 
responsible for all participating  mortgage  originations.  Before joining the 
firm in 1984, he was Second Vice President, Real Estate Finance for  Continental
Illinois  National Bank & Trust,  where he managed a $300 million construction
loan  portfolio of  commercial  properties.  Mr.  Donovan  received a B.A. from
Trinity College and an M.B.A. degree from Northwestern University.

         Ronald  Halpern  (age 57) is  President  and COO of  Berkshire Mortgage
Finance.  He has served in these positions  since  January  of 1998 and in this
capacity,  he is  responsible  for the  overall  operations  of the Company.  
Prior  to  January  of 1998,  he was  Executive  Vice  President,  managing  the
underwriting,  closing, portfolio  management and servicing  departments for 
Berkshire  Mortgage Finance.  Before joining the firm in 1987, he held senior
management  positions with the Department of Housing and Urban  Development in
Washington  D.C. and several  HUD  regional  offices.  Mr.  Halpern  has over 30
 years  of  experience  in real  estate  finance.  He is currently  a member of 
the  Advisory  Council  for Fannie Mae and  Freddie  Mac and was prior  Chairman
of the MBA Multifamily  Housing  Committee.  He  holds a B.A.  degree  from  the
University  of the City of New York and J.D. degree from Brooklyn Law School.

    Carol J.C. Mills (age 49) is Senior Vice President for Loan Management of 
Berkshire  Mortgage  Finance and in this  capacity,  she is  responsible for the
Loan  Servicing  and Asset  Management  functions  of the  Boston, Bethesda and 
Seattle  offices of Berkshire  Mortgage  Finance.  She manages the  estimated 
$6 billion  portfolio of loans.  Ms. Mills joined  Berkshire in December 1997 as
 Vice  President  and was promoted to Senior Vice  President in January  1999. 
From  January 1989  through  November  1997,  Ms.  Mills was Vice  President  of
 First  Winthrop Corporation  and Winthrop  Financial  Associates, in Cambridge,
MA. Ms.  Mills  earned a B.A.  degree from Mount Holyoke College and a Master of
Architecture degree from Harvard  University.  Ms. Mills is a member of the Real
Estate Finance Association, New England Women in Real Estate and the Mortgage 
Bankers Association.

ITEM 11.  EXECUTIVE COMPENSATION

      Except for the  Independent  Trustees as  described  below,  the  Trustees
 and Officers of the Trust have not been and will not be  compensated  by the 
Trust for their  services.  However,  the Officers will be compensated by the 
Advisor or an affiliate of the Advisor.

    Compensation of Trustees

    The Trust paid each of the Independent Trustees a fee of $25,000 in 1998.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      As of February 5, 1999, no person owned of record or was known by the 
Advisor to own  beneficially  more than 5% of the Trust's  15,053,135  
outstanding  Shares.  The only  shares held by the Advisor or any of its
 affiliates consist of the original 10,000 Shares.
<TABLE>
<CAPTION>

<S>                    <C>                              <C>  
Class of               Name of Beneficial               Amount and Nature of                 Percent
 Stock                        Owner                     Beneficial Interest                  of Class
Shares of              Douglas Krupp
Beneficial             One Beacon Street
Interest               Boston, Mass. 02108              10,000 Shares**                       ***

Shares of
Beneficial             All Directors and
Interest                Officers                        10,000 Shares                         ***
</TABLE>

        ** Mr.  Krupp is a  beneficial  owner of the 10,000  shares held by  
Berkshire  Mortgage  Advisors  Limited Partnership,  the Advisor to the Company,
by virtue of being a director of  Berkshire  Funding  Corporation,  the general
partner of Berkshire  Mortgage Advisors Limited  Partnership.  In each case
where Mr. Krupp is a beneficial owner of shares he has shared voting and 
investment powers.

        *** The  amount  owned  does not exceed one  percent  of the  shares of
beneficial  interest  of the Trust outstanding as of February 5, 1999.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      See Note G to Financial Statements included in Appendix A of this report.


                                PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)     1.     Financial  Statements - see Index to Financial  Statements  and
               Supplementary  Data included  under Item 8, Appendix A, on page 
               F-2 of this report.

        2.     Financial  Statement  Schedules - see Index to Financial  
               Statements and Supplementary Data included under Item 8,  
               Appendix A, on page F-2 of this  report.  All  schedules  are 
               omitted as they are not applicable,  not required or the 
               information is provided in the Financial  Statements or the Notes
               thereto.

(b)     Exhibits:

        Number and Description
        Under Regulation S-K  

        The following reflects all applicable Exhibits required under Item 601 
        of Regulation S-K:

        (4)    Instruments defining the rights of security holders including 
               indentures:

               (4.1)      Second Amended and Restated  Declaration of Trust 
                          filed with the Massachusetts  Secretary of  State  on
                          April  12, 1990 [Included as Exhibit 4.4 to Prospectus
                          included in Pre-effective Amendment No. 3 to 
                          Registrant's Registration Statement on Form S-11 dated
                          April 16, 1990 (File No. 33-31942)].*

               (4.2)      Subscription  Agreement  Specimen  [Included  as  
                          Exhibit  C to  Prospectus  included  in Pre-effective
                          Amendment  No. 2 to  Regis-trant's  Registration  
                          Statement  on Form S-11 dated March 23, 1990 (File No.
                          33-31942)].*

        (10)  Material Contracts:

               (10.1)     Advisory  Services Agreement dated  October 22,  1990
                          between the Trustee and Krupp Mortgage Advisors 
                          Limited Partnership.  [Exhibit 10.1 to Registrant's 
                          report on Form 10-K for the year ended December 31, 
                          1994 (File No. 0-19244)].*

               (10.2)     Assignment and Assumption Agreement dated December 29,
                          1994 by and between  Berkshire Realty Advisors Limited
                          Partnership (formerly known as Krupp Realty Advisors
                          Limited Partnership ("Assignor")  and  Berkshire  
                          Mortgage Advisors Limited Partnership  ("Assignee")  
                          [Exhibit  10.2 to  Registrant's report on Form 10-K 
                          for the year ended December 31, 1994 (File No. 
                          0-19244)].*
 
               Lifestyles Apartments

               (10.3)     Modification Agreement by and between Krupp Government
                          Income Trust and  Lifestyles at Boot Ranch and M&D 
                          Palm Harbor, and FL-Tampa Inc. [Exhibit 10.1 to  
                          Registrant's report on Form 10-Q for the quarter ended
                          September 30, 1996 (File No. 0-19244)].*

               (10.4)     Escrow  Deposit Agreement by and between Krupp  
                          Government  Income Trust and M&D Palm Harbor, and 
                          FL-Tampa Inc. the general partners of Lifestyles at 
                          Boot Ranch.  [Exhibit 10.2 to Registrant's  report on
                          Form 10-Q for the quarter  ended  September  30, 1996
                          (File No. 0-19244)].*

               (10.5)     Subordinated  Promissory Note dated  December 11, 1990
                          between  Lifestyles  At Boot Ranch (the "Mortgagor")
                          and Krupp Government Income Trust (the "Holder") 
                          [Exhibit 10.1 to Registrant's Annual Report on Form
                          10-K for the fiscal year ended  December 31, 1990 
                          (File No. 33-31942)].*

               (10.6)     Agreement  RE  Subordinated  Note dated  December 11, 
                          1990  between  Krupp Government Income Trust and Krupp
                          Mortgage Corporation  [Exhibit  10.2 to  Registrant's
                          Annual Report on  Form  10-K  for  the  fiscal  year
                          ended  December  31,  1990  (File  No. 33-31942)].*

               (10.7)     Subordinated  Multifamily  Mortgage dated December 11,
                          1990 between Lifestyles at Boot Ranch (the 
                          "Mortgagor") and Krupp Government Income Trust (the 
                          "Mortgagee")  [Exhibit 10.3 to Registrant's Annual 
                          Report on Form 10-K for the fiscal year ended December
                          31, 1990 (File No. 33-31942)].*

               (10.8)     Additional  Loan Agreement  dated December 11, 1990
                          between  FL-Tampa,  Inc. and M & D Palm Harbor,  Inc
                          (collectively,  the "Borrowers") and Krupp Government
                          Income Trust (the  "Holder")  [Exhibit  10.4 to  
                          Registrant's  Annual  Report  on Form 10-K for the 
                          fiscal year ended December 31, 1990 (File No. 
                          33-31942)].*

               (10.9)     Additional  Loan Note dated  December  11,1990 
                          between  FL-Tampa,  Inc and M & D Palm Harbor,  Inc.
                          (collectively,  the "Borrowers") and Krupp Government
                          Income Trust (the "Holder")  [Exhibit  10.5 to 
                          Registrant's Annual Report on Form 10-K for the fiscal
                          year ended December 31, 1990 (File No. 33-31942)].*

               (10.10)    Mortgage Note dated  December 11, 1991 between 
                          Lifestyles  at  Boot  Ranch (the "Borrower") and Krupp
                          Mortgage  Corporation (the  "Holder").  [Exhibit  10.6
                          to Registrant's Annual Report on Form 10-K for the 
                          fiscal year ended  December 31, 1991(File No. 
                          0-19244)].*

               (10.11)    GNMA  Purchase  Agreement  dated  December 11, 1991 
                          between  Krupp  Government  Income Trust and Krupp 
                          Mortgage Corporation. [Exhibit 10.7 to Registrant's 
                          Annual Report on Form 10-K for the fiscal year ended 
                          December 31, 1991 (File No. 0-19244)].*

               Windward Lakes Apartments

               (10.12)    Subordinated  Promissory  Note dated December 28, 1990
                          between the McNab-K C 3 Limited Partnership (the 
                          "Mortgagor") and Krupp Government Income  Trust  (the
                          "Holder") [Exhibit  10.6 to Registrant's Annual Report
                          on Form 10-K for the fiscal year ended December 31, 
                          1990 (File No. 33-31942)].*

               (10.13)    Additional  Loan  Agreement  dated  December 28, 1990
                          between George Krupp, Douglas Krupp and Krupp GP, Inc.
                          (collectively,  the "Borrowers") and Krupp Government
                          Income Trust (the  "Holder") [Exhibit  10.7 to  
                          Registrant's Annual Report on Form 10-K for the fiscal
                          year ended December 31, 1990 (File No. 33-31942)].*

               (10.14)    Additional Loan Note dated December 28, 1990  between
                          Krupp GP, Inc.,  George Krupp and Douglas Krupp  
                          (collectively,  the "Borrowers") and Krupp Government
                          Income Trust (the  "Holder") [Exhibit  10.8 to 
                          Registrant's  Annual  Report  on Form 10-K for the
                          fiscal year ended December 31, 1990 (File No. 
                          33-31942)].*

               (10.15)    Agreement RE Subordinated Note dated December 28, 1990
                          between  Krupp  Government Income Trust and Love
                          Funding  Corporation. [Exhibit 10.11 to  Registrant's
                          Annual Report on Form 10-K for the fiscal year ended
                          December 31, 1991 (File No. 0-19244)].*

               (10.16)    Subordinated Multi-family  Mortgage dated December 28,
                          1991 between McNab-KC3 Limited Partnership (the
                          "Borrower")  and Krupp  Government Income Trust (the 
                          "Lender"). [Exhibit 10.12 to Registrant's Annual 
                          Report on Form 10-K for the fiscal year ended December
                          31, 1991 (File No. 0-19244)].*

               (10.17)    GNMA  Purchase  Agreement  dated  December 28, 1991 
                          between  Krupp  Government  Income Trust and Love 
                          Funding  Corporation.  [Exhibit 10.13 to Registrant's
                          Annual Report on Form 10-K for the fiscal year ended 
                          December 31, 1991 (File No. 0-19244)].*

               River View Apartments

               (10.18)    Subordinated  Promissory Note  dated  April 2, 1991
                          between  Sterling  Partners  III Limited Partnership
                          (the  "Mortgagor") and Krupp Government  Income  Trust
                          (the "Holder") [Exhibit  19.1 to  Registrant's  report
                          on Form 10-Q for the quarter ended June 30, 1991 (File
                          No. 0-19244)].*

               (10.19)    Agreement  RE  Subordinated  Promissory Note dated
                          April  2,  1991  between Krupp Government Income Trust
                          and Love Funding Corporation [Exhibit 19.2 to
                          Registrant's report on Form 10-Q for the quarter ended
                          June 30, 1991 (File No. 0-19244)].*

               (10.20)    Subordinated Multifamily  Mortgage dated April 2, 1991
                          between Sterling Partners III Limited Partnership (the
                          "Mortgagor")  and  Krupp  Government Income Trust (the
                          "Mortgagee")  [Exhibit 19.3 to Registrant's  report on
                          Form 10-Q for the quarter ended June 30, 1991 (File 
                          No. 0-19244)].*

               (10.21)    Supplement  to  Prospectus  dated  May  1,  1991  for
                          Government   National Mortgage Association Pool Number
                          280840 [Exhibit 19.4 to Registrant's  report on Form
                          10-Q for the quarter ended June 30, 1991 (File No. 
                          0-19244)].*

               Mill Pond Apartments

               (10.22)    Subordinated  Promissory   Note  dated  May  28,  1991
                          between  Mill  Pond  Limited Partnership  (the
                          "Mortgagor") and Krupp Government  Income  Trust  (the
                          "Holder") [Exhibit  19.5 to  Registrant's  report on 
                          Form 10-Q for the  quarter  ended  June 30, 1991 (File
                          No. 0-19244)].*

               (10.23)    Agreement  RE   Subordinated   Promissory  Note  dated
                          May  28,  1991  between  Krupp Government Income Trust
                          and Krupp Mortgage  Corporation [Exhibit 19.6 to 
                          Registrant's report on Form 10-Q for the quarter ended
                          June 30, 1991 (File No. 0-19244)].*

               (10.24)    Subordinated  Multifamily  Mortgage  dated May 28,
                          1991  between  Mill  Pond  Limited Partnership  (the 
                          "Mortgagor") and Krupp  Government Income Trust (the
                          "Mortgagee") [Exhibit  19.7 to  Registrant's  report
                          on Form 10-Q for the  quarter  ended  June 30, 1991
                          (File No. 0-19244)].*

               (10.25)    Mortgage Note dated May 28, 1991 between Krupp  
                          Mortgage  Corporation  (the  "Holder") and Mill Pond
                          Apartments (the  "Borrower")  [Exhibit 19.8 to 
                          Registrant's report on Form 10-Q for the quarter ended
                          June 30, 1991 (File No. 0-19244)].*

               (10.26)    Participation Agreement dated May 28, 1991 between 
                          Krupp Mortgage  Corporation  (the "Mortgagee")  and 
                          Krupp Government  Income Trust [Exhibit 19.9 to 
                          Registrant's  report on Form 10-Q for the quarter 
                          ended June 30, 1991 (File No. 0-19244)].*

               (10.27)    Assignment  of Open End  Mortgage  Deed and  Security
                          Agreement  dated  May 28,  1991 between Krupp Mortgage
                          Corporation  (the  "Assignor")  and Krupp  Government
                          Income Trust  (the  "Assignee")  [Exhibit  19.1 to  
                          Registrants  report  on Form 10-Q for the
                          quarter ended September 30, 1991 (File No. 0-19244)].*

               Waterford Townhome Apartments

               (10.28)    Subordinated  Promissory  Note dated June 12, 1991 
                          between  Waterford  Apartment Corp. (the "Mortgagor")
                          and Krupp Government Income Trust (the "Holder") 
                          [Exhibit 19.10 to Registrant's  report on Form 10-Q 
                          for the  quarter  ended  June 30,  1991  (File No.
                          0-19244)].*

               (10.29)    Agreement  RE  Subordinated  Promissory  Note dated 
                          June  12,  1991  between Krupp Government Income Trust
                          and  Nichols/Conlan Financial  Company [Exhibit  19.11
                          to Registrant's report  on Form  10-Q for the  quarter
                          ended  June 30,  1991  (File No. 0-19244)].*

               (10.30)    Subordinated  Multifamily Mortgage dated June 12, 1991
                          between  Waterford  Apartments Corp. (the "Mortgagor")
                          and Krupp Government  Income Trust (the "Mortgagee")
                          [Exhibit 19.12 to  Registrant's  report on Form 10-Q
                          for the quarter  ended June 30, 1991 (File No. 
                          0-19244)].*

               (10.31)    Mortgage  Note dated June 12,  1991  between  Nichols/
                          Conlan  Financial  Company  (the "Holder") and 
                          Waterford   Apartment  Corp.  (the   "Borrower")  
                          [Exhibit  19.13  to Registrant's  report on Form  10-Q
                          for the  quarter  ended  June 30,  1991  (File No.
                          0-19244)].*

               (10.32)    Assignment of Loan Documents dated June 12, 1991 by
                          Nichols/Conlan  Financial Company to Krupp Mortgage 
                          Corp [Exhibit  19.14 to  Registrant's  report on Form
                          10-Q for the quarter ended June 30, 1991 (File No. 
                          0-19244)].*

               (10.33)    Participation  Agreement dated June 12, 1991 between 
                          Nichols/Conlan Financial Company (the "Mortgagee") and
                          Krupp  Government  Income Trust [Exhibit 19.15 to
                          Registrant's report on Form 10-Q for the quarter ended
                          June 30, 1991 (File No. 0-19244)].*

               Rivergreens Apartments

               (10.34)    Subordinated  Promissory Note dated November 14, 1991
                          between  Rivergreens  Associates Limited  Partnership
                          (the  "Mortgagor") and Krupp Government  Income  Trust
                          (the "Holder").  [Exhibit 10.33 to Registrant's Annual
                          Report on Form 10-K for the fiscal year ended December
                          31, 1991 (File No. 0-19244)].*

               (10.35)    Agreement  Re-Subordinated  Promissory  Note dated  
                          November  14, 1991  between  Krupp Government Income
                          Trust  and  Krupp   Mortgage   Corporation.   [Exhibit
                          10.34  to Registrant's Annual  Report on Form 10-K for
                          the fiscal year ended  December 31, 1991 (File No. 
                          0-19244)].*

               (10.36)    Subordinated  Multifamily Deed of Trust dated November
                          14, 1991 between  Rivergreens Associates Limited 
                          Partnership (the "Borrower"), Oregon Title Insurance
                          Company (the "Trustee")  and Krupp  Government  Income
                          Trust  (the "Lender").  [Exhibit 10.35 to Registrant's
                          Annual  Report on Form 10-K for the fiscal year ended
                          December 31, 1991 (File No. 0-19244)].*

               (10.37)    Mortgage  Note dated  November 14, 1991 between  Krupp
                          Mortgage  Corporation  and Rivergreens Associates
                          Limited  Partnership.  [Exhibit 10.36 to Registrant's
                          Annual Report on Form 10-K for the fiscal year ended 
                          December 31, 1991 (File No. 0-19244)].*

               (10.38)   Participation Agreement dated November 14, 1991 between
                         Krupp Mortgage Corporation and Krupp Government Income
                         Trust.  [Exhibit 10.37 to Registrant's  Annual Report
                         on Form 10-K for the fiscal year ended December 31, 
                         1991 (File No. 0-19244)].*

               Audubon Villas

               (10.39)   Prospectus for Government National Mortgage Association
                         Pool Number  295307(CS) and Pool Number  295308(PN).
                         [Exhibit  10.38 to  Registrant's  Annual Report on Form
                         10-K for the fiscal year ended December 31, 1991 (File
                         No. 0-19244)].* 

               (10.40)   Subordinated  Promissory  Note dated  December 27, 1991
                         between  Golf View  Partners, Ltd. (the  "Mortgagor") 
                         and Krupp  Government  Income Trust (the "Holder"). 
                         [Exhibit 10.39 to  Registrant's  Annual Report on Form
                         10-K for the fiscal year ended  December 31, 1991 (File
                         No. 0-19244)].*

               (10.41)   Agreement Re-Subordinated Promissory Note dated 
                         December  27, 1991  between  Krupp Government Income 
                         Trust and Love Funding  Corporation.  [Exhibit 10.40 to
                         Registrant's Annual Report on Form 10-K for the fiscal
                         year  ended  December  31,  1991 (File No. 0-19244)].*

               (10.42)   Subordinated   Multifamily  Mortgage dated  December
                         27,  1991  between  Golf  View Partners,  Ltd. (the
                         "Borrower") and Krupp Government Income Trust (the 
                         "Lender"). [Exhibit 10.41 to Registrant's Annual Report
                         on Form 10-K for the fiscal year ended December 31, 
                         1991 (File No. 0-19244)].*

               (10.43)   Additional  Loan  Agreement  dated  December  27, 1991
                         between Capital  Developments, Inc., Gus M. Pelias,Jr.,
                         and Durham Partners, Ltd.  (collectively,  the 
                         "Borrowers"), Golf View  Partners,  Ltd. (the "Owner")
                         and Krupp  Government  Income  Trust  (the  "Holder").
                         [Exhibit 10.42 to Registrant's  Annual Report on Form
                         10-K for the fiscal year ended December 31, 1991 (File
                         No. 0-19244)].*

               (10.44)   Additional Loan Note dated December 27, 1991 between 
                         Capital  Developments,  Inc., Gus M. Pelias, Jr., and
                         Durham Partners, Ltd.  (collectively,  the "Borrowers")
                         and Krupp Government Income Trust (the "Holder").
                         [Exhibit  10.43  to  Registrant's  Annual Report on 
                         Form 10-K for the fiscal year ended December 31, 1991
                         (File No. 0-19244)].*


               Mountain View Apartments

               (10.45)  Subordinated  Promissory  Note dated April 21, 1992 
                        between  Mountain  View Ltd. (the "Mortgagor") and Krupp
                        Government  Income Trust (the  "Holder").  [Exhibit 
                        19.1 to Registrant's report on Form 10-Q for the quarter
                        ended  June 30,  1992  (File No. 0-19244)].*

               (10.46)  Agreement RE Subordinated  Promissory  Note  dated April
                        21,  1992  between  Krupp Government Income Trust and 
                        Krupp Mortgage Corporation. [Exhibit 19.2 to
                        Registrant's  report  on Form  10-Q for the  quarter  
                        ended  June 30,  1992  (File No. 0-19244)].*

               (10.47)  Subordinated  Multifamily  Mortgage dated April 21, 1992
                        between  Mountain View Ltd. (the  "Mortgagor") and Krupp
                        Government  Income  Trust (the  "Mortgagee").  [Exhibit
                        19.3 to Registrant's report on Form 10-Q for the quarter
                        ended June 30, 1992 (File No. 0-19244)].*

               (10.48)  Additional  Loan  Agreement dated April 21, 1992 between
                        Philip P. Mulkey,  Henry V. Bragg and  Gregory V.  Bragg
                        (collectively,  the  "Borrowers")  and Krupp  Government
                        Income Trust (the  "Holder").  [Exhibit 19.4 to  
                        Registrant's  report on Form 10-Q for the quarter ended
                        June 30, 1992 (File No. 0-19244)].*

               (10.49)  Additional Loan Note dated April 21, 1992 between Philip
                        P.  Mulkey,  Henry V. Bragg and Gregory V. Bragg  
                        (collectively,  the  "Borrowers")  and Krupp  Government
                        Income Trust (the "Holder").  [Exhibit  19.5 to  
                        Registrant's  report  on Form 10-Q for the quarter ended
                        June 30, 1992 (File No. 0-19244)].*

               (10.50)  Mortgage Note dated April 21, 1992 between Mountain View
                        Ltd.  (the  "Borrower")  and Krupp Mortgage  Corporation
                        (the "Holder").  [Exhibit 19.6 to Registrant's report on
                        Form 10-Q for the quarter ended June 30, 1992 (File No. 
                        0-19244)].*

               (10.51)  Modification  Agreement by and between Krupp  Government
                        Income  Trust and Mountain View  Ltd.  [Exhibit  10.1 to
                        Registrant's  report  Form 10-Q for the  quarter  ended
                        September 30, 1995 (File No. 0-19244)].*

               Red Run Apartments

               (10.52)  Subordinated  Promissory  Note dated May 5, 1992 between
                        Red Run Limited  Partnership (the "Mortgagor") and Krupp
                        Government  Income Trust (the "Holder").  [Exhibit 19.7
                        to Registrant's  report  on Form  10-Q for the  quarter
                        ended  June 30, 1992  (File No. 0-19244)].*

               (10.53)  Agreement RE Subordinated Promissory Note dated May 5, 
                        1992 between Krupp  Government Income Trust and Maryland
                        National  Mortgage  Corporation  (the"Mortgagee").  
                        [Exhibit 19.8 to Registrant's report on Form 10-Q for 
                        the quarter ended June 30, 1992 (File No. 0-19244)].*

               (10.54)  Subordinated Multifamily  Mortgage  dated  May  5,  1992
                        between  Red  Run  Limited Partnership  (the  "Trustor")
                        and Krupp Government Income Trust (the  "Lender").
                        [Exhibit  19.9 to  Registrant's  report on Form 10-Q 
                        for the  quarter  ended  June 30, 1992 (File No. 
                        0-19244)].*

               (10.55)  Additional  Loan Agreement dated May 5, 1992 between Red
                        Run Corporation and Summit Towers Company (collectively,
                        the  "Borrowers")  and Krupp  Government  Income Trust
                        (the  "Holder").  [Exhibit 19.10 to  Registrant's report
                        on Form 10-Q for the quarter ended June 30, 1992 (File
                        No. 0-19244)].*

               (10.56)  Additional  Loan Note dated May 5, 1992 between Red Run
                        Corporation and Summit Towers Company (collectively, the
                        "Borrowers")  and Krupp  Government  Income  Trust  (the
                        "Holder").  [Exhibit 19.11 to  Registrant's  report on 
                        Form 10-Q for the quarter ended June 30, 1992 (File No.
                        0-19244)].*

               (10.57)  Deed of  Trust Note dated May 5, 1992 between Red Run 
                        Limited  Partnership  and Maryland  National  Mortgage  
                        Corporation.  [Exhibit  19.3 to  Registrant's  report on
                        Form 10-Q for the quarter ended September 30, 1992 
                        (File No. 0-19244)].*

               (10.58)  Participation and Servicing Agreement by and between 
                        Maryland  National  Mortgage Corporation and Krupp 
                        Government Income Trust.  [Exhibit 19.4 to Registrant's
                        report on Form 10-Q for the quarter ended September 30,
                        1992 (File No. 0-19244)].*

               Lincoln Green Apartments

               (10.59)  Supplement  to  prospectus  dated  August  1,  1992  for
                        Federal  National   Mortgage Association pool number 
                        MX-073023.  [Exhibit 19.8 to Registrant's report on Form
                        10-Q for the quarter ended September 30, 1992 (File No.
                        0-19244)].*

               (10.60)  Subordinated  promissory  note dated  September 15, 1992
                        by and between  Lincoln Green Associates Limited 
                        Partnership (the "Mortgagor") and Krupp Government 
                        Income Trust (the  "Holder").  [Exhibit  19.9 to
                        Registrant's  report on Form 10-Q for the quarter ended 
                        September 30, 1992 (File No. 0-19244)].*

               (10.61)  Subordinated  Multi-family Deed of Trust dated September
                        16,  1992 by and  between Lincoln Green  Associates
                        Limited Partnership (the "Borrower") and Krupp 
                        Government Income Trust (the "Lender").  [Exhibit 19.10
                        to  Registrant's  report on Form 10-Q for the quarter 
                        ended September 30, 1992 (File No. 0-19244)].*

               The Seasons

               (10.62)  Additional  Loan Agreement  dated September 16, 1993 
                        between The Krupp Company Limited Partnership-IV (the 
                        "Borrower") and Krupp Government Income Trust II (the 
                        "Holder") [Exhibit 10.80 to Registrant's  report on Form
                        10-K for the year ended  December 31, 1994 (File No. 
                        0-19244)].*

               (10.63)  Additional  Loan Note dated  September  16, 1993 between
                        The Krupp  Company  Limited Partnership-IV  (the 
                        "Borrower") and Krupp  Government  Income Trust II (the
                        "Holder")[Exhibit 10.81 to  Registrant's  report on Form
                        10-K for the year ended  December 31, 1994 (File No. 
                        0-19244)].*

               (10.64)  Subordinated  Promissory  Note dated  September 16, 1993
                        between  Maryland  Associates Limited  Partnership  (the
                        "Maker") and  Krupp  Government  Income  Trust  II  (the
                        "Holder") [Exhibit 10.82 to Registrant's report  on Form
                        10-K for the year  ended December 31, 1994 (File No. 
                        0-19244)].*

               (10.65)  Pledge and Security Agreement dated September  16,  1993
                        by and  between The Krupp Company Limited Partnership-IV
                       (the "Debtor") and Krupp  Government  Income Trust II
                       (the  "Secured  Party")  [Exhibit  10.83 to  Registrant's
                        report on Form 10-K for the year ended December 31, 1994
                        (File No. 0-19244)].*

               (10.66)  The  Deed of  Trust  dated  September  16,  1993 by
                        and  between  Maryland  Associates Limited  Partnership
                        and Krupp Mortgage  Corporation  [Exhibit 10.84 to 
                        Registrant's report on Form 10-K for the year ended 
                        December 31, 1994 (File No. 0-19244)].*

               (10.67)  Participation  and  Servicing  Agreement  made as of 
                        September 16, 1993 by and between Krupp Mortgage
                        Corporation  (the  "Servicer")  and Krupp  Government 
                        Income Trust II (the  "Participant")  [Exhibit 10.85 to
                        Registrant's  report on Form 10-K for the year   ended 
                        December 31, 1994 (File No. 0-19244)].*

               (10.68)  Assignment and Assumption  Agreement   dated   September
                        16, 1993  between  Krupp Government Income Trust II (the
                        "Assignor") and Krupp  Government  Income Trust (the
                        "Assignee")  [Exhibit  10.86 to  Registrant's  report on
                        Form 10-K for the year ended December 31, 1994 (File No.
                        0-19244)].*

               Rosemont Apartments

               (10.69)  Participation  and Servicing  Agreement  dated July 14,
                        1994, by and between  Rockport Mortgage Corporation (the
                        "Servicer")  and  Krupp  Government  Income  Trust  (the
                        "Participant")  [Exhibit 10.87 to Registrant's report on
                        Form 10-K for the year ended December 31, 1994 (File No.
                        0-19244)].*

               (10.70)  Deed of Trust Note dated July 1, 1994 between  Rosemont
                        Ltd.  and  Rockport  Mortgage Corporation.  [Exhibit 
                        10.88 to  Registrant's  report on Form 10-K for the year
                        ended December 31, 1994 (File No. 0-19244)].*

               (10.71)  Allonge to Deed of Trust Note dated July 1, 1994 between
                        Rosemont  Ltd. and Rockport Mortgage Corporation  
                        [Exhibit 10.89 to Registrant's report on Form 10-K for 
                        the year ended December 31, 1994 (File No. 0-19244)].*

               (10.72)  Participation Certificate with Krupp Government Income 
                        Trust as registered  owner.  [Exhibit 10.96 to 
                        Registrant's  report on Form 10-K for the year ended
                        December 31, 1995 (File No. 0-19244)].*

        * Incorporated by reference

        (c)    Reports on Form 8-K

               During the last quarter of the year ended  December 31, 1998,  
               the Trust did not file any reports on Form 8-K.



<PAGE>

                                          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,
on the 12th day of March, 1999.

                               KRUPP GOVERNMENT INCOME TRUST




                           By:   /s/ Douglas Krupp                          
                                 Douglas  Krupp,  Chairman of Board of Trustees
                                 and a Trustee of Krupp Government Income Trust

     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 indicated, on the 12th day of March, 1999.

            Signatures  Title(s)


/s/ Douglas Krupp                      Chairman of Board of Trustees and a
Douglas Krupp                         Trustee of Krupp Government Income Trust


/s/ Robert A. Barrows                 Treasurer of Krupp Government Income Trust
Robert A. Barrows


/s/ Charles N. Goldberg               Trustee of Krupp Government Income Trust
Charles N. Goldberg


/s/ E. Robert Roskind                 Trustee of Krupp Government Income Trust
E. Robert Roskind


/s/ J. Paul Finnegan                  Trustee of Krupp Government Income Trust
J. Paul Finnegan



                                APPENDIX A

                     KRUPP GOVERNMENT INCOME TRUST
                                                                 









                FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                             ITEM 8 of FORM 10-K

                ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
                      For the Year Ended December 31, 1998
<PAGE>




                           KRUPP GOVERNMENT INCOME TRUST

             INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                                                                  



Report of Independent Accountants                                           F-3

Balance Sheets at December 31, 1998 and 1997                                F-4

Statements of Income for the Years Ended December 31, 1998,
 1997 and 1996                                                              F-5

Statements of Changes in Shareholders' Equity for the Years Ended
December 31, 1998, 1997 and 1996                                            F-6

Statements of Cash Flows for the Years Ended December 31, 1998, 1997
and 1996                                                                    F-7

Notes to Financial Statements                                        F-8 - F-20

Schedule II - Valuation and Qualifying Accounts                            F-21

Supplementary Data - Selected Quarterly Financial Data (Unaudited)         F-22




All other  schedules are omitted as they are not applicable or not required,  
or the information is provided in the financial statements or the notes thereto.

<PAGE>


                          REPORT OF INDEPENDENT ACCOUNTANTS
                                                                 






To the Shareholders of
Krupp Government Income Trust:

     In our opinion,  the accompanying  financial  statements and financial 
statement schedule listed in the index on page  F-2 of this  Form  10-K  present
fairly,  in all  material  respects,  the  financial  position  of Krupp
Government  Income Trust (the  "Trust") at December 31, 1998 and 1997,  and the
results of its  operations  and its cash flows for each of the three  years in 
the period ended  December  31,  1998,  in  conformity  with  generally accepted
accounting principles.  These  financial   statements  are  the  responsibility
of  management;   our responsibility is to express an opinion on these financial
statements  based on our  audits.  We conducted  our audits of these  statements
in accordance  with generally  accepted  auditing  standards which require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
financial  statements are free of material misstatement.  An audit includes  
examining,  on a test basis,  evidence  supporting the amounts and disclosures
in the financial  statements,  assessing the accounting  principles used and 
significant estimates made by management, and  evaluating  the overall financial
statement  presentation.  We believe that our audits  provide a reasonable basis
for our opinion expressed above.












Boston, Massachusetts
March 12, 1999
<PAGE>
<TABLE>


                            KRUPP GOVERNMENT INCOME TRUST

                                     BALANCE SHEETS

                             December 31, 1998 and 1997
                                                                  

<CAPTION>

                                                         ASSETS
 
                                                                              1998                       1997

Participating Insured Mortgage Investments
                          
 ("PIMIs") (Notes B, C and J):
<S>                                                                              <C>                <C>         
 Insured Mortgages                                                               $ 75,386,460       $108,470,247
 Additional loans, net                                                             11,243,862         19,209,108
Participating Insured Mortgages ("PIMs")
 (Notes B, D and J)                                                                47,737,583         48,112,523
Mortgage-Backed Securities and insured
 mortgage ("MBS") (Notes B, E and J)                                               22,132,858         27,085,341

              Total mortgage investments                                          156,500,763        202,877,219

Cash and cash equivalents (Notes B and J)                                           9,004,397          9,749,804
Interest receivable and other assets                                                1,057,365          1,294,240
Prepaid acquisition fees and expenses, net
 of accumulated amortization of $6,125,191
   and $6,658,224 respectively (Note B)                                             3,445,605          5,608,226
Prepaid participation servicing fees, net of
 accumulated amortization of $1,776,625
   and $1,839,070 respectively (Note B)                                             1,413,559          2,249,643

              Total assets                                                       $171,421,689       $221,779,132

                                         LIABILITIES AND SHAREHOLDERS' EQUITY
 
Deferred income on Additional Loans (Note B)                                     $  5,773,669       $  7,871,606
Other liabilities                                                                      33,230             25,414

              Total liabilities                                                     5,806,899          7,897,020

Commitments (Note H)

Shareholders' equity (Notes A, F, H and I):
        Common stock, no par value; 17,510,000
        Shares authorized; 15,053,135 Shares
        issued and outstanding                                                    164,742,014        212,496,510
     Accumulated comprehensive income (Note B)                                        872,776          1,385,602
 
              Total Shareholders= equity                                          165,614,790        213,882,112

              Total liabilities and Shareholders'
                equity                                                           $171,421,689       $221,779,132
 



</TABLE>




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

<TABLE>
                

                             KRUPP GOVERNMENT INCOME TRUST

            
                                   STATEMENTS OF INCOME

                 For the Years Ended December 31, 1998, 1997 and 1996
 <CAPTION>
                                                                

                                                             1998                    1997                 1996

Revenues:
    Interest income - PIMs and PIMIs:
<S>                                                           <C>                   <C>                  <C>        
      Basic interest                                          $ 10,635,959          $12,180,539          $12,807,392
      Additional Loan interest                                   3,080,944              793,577               -
      Participation income                                       5,094,353            1,385,480              359,161
    Interest income - MBS                                        1,930,383            2,199,234            2,305,613
    Interest income cash and cash
       equivalents                                               1,180,647            1,058,966              885,874

      Total revenues                                            21,922,286           17,617,796           16,358,040

Expenses:
    Asset management fee
     to an affiliate (Note G)                                    1,331,745            1,531,026            1,604,853
    Expense reimbursements
     to affiliates (Note G)                                        207,165              395,934              343,214
    Amortization of prepaid fees
     and expenses                                                2,998,705            2,405,645            1,613,665
    General and administrative                                     433,860              385,956              315,613
    Provision for impaired mortgage
     Loans (Notes B and C)                                       2,114,346                 -                    -    

             Total expenses                                      7,085,821            4,718,561            3,877,345

Net income (Note I)                                            $14,836,465          $12,899,235          $12,480,695

Basic earnings per share                                   $       .99         $       .86          $       .83

Weighted average shares outstanding                             15,053,135           15,053,135           15,053,135










</TABLE>













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


<TABLE>

                        KRUPP GOVERNMENT INCOME TRUST

              STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

            For the Years Ended December 31, 1998, 1997 and 1996
<CAPTION>
                                                                     
                                                                                     Accumulated
                                                                                                           Total
                                              Common              Retained          Comprehensive        Shareholders'
                                               Stock             Earnings               Income              Equity    


<S>                                             <C>                <C>                   <C>                  <C>          
Balance at December 31, 1995                    $ 240,103,655      $     -               $ 1,574,821          $ 241,678,476

Dividends                                          (7,088,400)         (12,480,695)             -               (19,569,095)

Net income                                          -                   12,480,695              -                12,480,695

Change in unrealized gain
       on MBS                                          -                    -               (309,469)              (309,469)

Balance at December 31, 1996                      233,015,255            -                 1,265,352            234,280,607

Dividends                                         (20,518,745)         (12,899,235)             -               (33,417,980)

Net income                                          -                   12,899,235              -                12,899,235

Change in unrealized gain
       on MBS                                          -                    -                120,250                120,250

Balance at December 31, 1997                      212,496,510            -                 1,385,602            213,882,112

Dividends                                         (47,754,496)         (14,836,465)             -               (62,590,961)

Net income                                          -                   14,836,465              -                14,836,465

Change in unrealized gain
       on MBS                                          -                    -               (512,826)              (512,826)

Balance at December 31, 1998                     $164,742,014          $    -            $   872,776           $165,614,790


Shares issued and outstanding for each of the three years ended December 31, 
1998 are 15,053,135

</TABLE>





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

<TABLE>


                              KRUPP GOVERNMENT INCOME TRUST
                                 STATEMENTS OF CASH FLOWS

                   For the Years Ended December 31, 1998, 1997 and 1996
                                                                      
<CAPTION>

                                                                     1998               1997                   1996
Operating activities:
<S>                                                                 <C>                 <C>                    <C>        
   Net income                                                       $ 14,836,465        $ 12,899,235           $12,480,695
   Adjustments to reconcile net income
    to net cash provided by operating
    activities:
   Amortization of premium and discounts                                  (7,646)              2,816                (1,110)
   Provision for impaired mortgage loans                               2,114,346               -                     -
   Amortization of prepaid fees and expenses                           2,998,705           2,405,645             1,613,665
   Changes in assets and liabilities:
    Decrease in interest receivable
     and other assets                                                    236,875             413,559               154,536
    Increase (decrease) in other
     liabilities                                                           7,816              (2,319)                7,156

         Net cash provided by operating
          activities                                                  20,186,561          15,718,936            14,254,942

Investing activities:
   Principal collections on Insured Mortgages                            855,221             891,321               855,308
   Principal collections on MBS                                        4,447,303           3,152,419             4,331,574
   Increase (decrease) in deferred
    income on Additional Loans                                        (2,097,937)            546,192             1,404,457
   Insured mortgage prepayments                                       32,603,506           5,630,985             8,862,450
   Additional Loan prepayments                                         5,850,900           1,540,000                -
   Acquisition of MBS                                                      -              (3,366,000)                 -    

         Net cash provided by investing
          activities                                                  41,658,993           8,394,917            15,453,789

Financing activity:
   Dividends                                                         (62,590,961)        (33,417,980)          (19,569,095)

Net increase (decrease) in cash and
 cash equivalents                                                       (745,407)         (9,304,127)           10,139,636

Cash and cash equivalents, beginning
 of year   9,749,804                                                  19,053,931           8,914,295

Cash and cash equivalents, end of year                               $ 9,004,397        $  9,749,804           $19,053,931





</TABLE>






                       The accompanying notes are an integral
                          part of the financial statements.
<PAGE>
 

                            KRUPP GOVERNMENT INCOME TRUST

                            NOTES TO FINANCIAL STATEMENTS
                                                                  
A.    Organization

      Krupp  Government  Income Trust (the "Trust") was formed on November 1, 
      1989 by filing a Declaration of Trust in The  Commonwealth  of  
      Massachusetts.  The Trust is authorized to sell and issue not more than
      17,510,000 shares of  beneficial interest  (the  "Shares").  The Trust was
      organized  for the purpose of  investing in commercial and  multi-family
      loans and mortgage backed securities.  Berkshire Mortgage Advisors Limited
      Partnership  ("BMALP")(the Advisor),  acquired  10,000 of such Shares for
      $200,000 and  14,999,999 Shares were sold for $299,480,263 net of purchase
      volume discounts  of $519,717  under a public offering which commenced on
      April 19, 1990 and ended on July 15, 1991. Under the Dividend Reinvestment
      Plan  ("DRP"), 43,136 Shares were sold for $819,356 during its public 
      offering.  The Trust shall terminate on December 31, 2029,  unless earlier
      terminated by the affirmative vote of holders of a majority of the 
      outstanding Shares entitled to vote thereon.

B.    Significant Accounting Policies

      The Trust uses the following accounting policies for financial reporting
      purposes:

             MBS

             The Trust, in accordance with the Financial Accounting Standards 
             Board's Statement 115,  "Accounting for Certain Investments in Debt
             and Equity Securities" (AFAS 115"), classifies its MBS portfolio as
             available-for-sale.  As such  the Trust carries its MBS at fair  
             market  value  and  reflects  any unrealized  gains  (losses) as a
             separate component of  Shareholders'  Equity.  The Trust  amortizes
             purchase premiums or discounts over the life of the underlying  
             mortgages using the effective interest method.

             Effective January 1, 1998, the Trust adopted "Statement of 
             Financial  Accounting  Standards No. 130, 'Reporting Comprehensive
             Income'" (FAS 130), was issued establishing standards for reporting
             and displaying  comprehensive  income and its components.  FAS 130
             requires  comprehensive  income and its components,  as recognized
             under accounting  standards,  to be displayed in a financial 
             statement with the same prominence as other  financial  statements,
             if material.  FASB 130 had no material effect on the Trust's 
             financial position or results of operations.

             The Federal Housing  Administration insured mortgages are carried 
             at amortized cost unless the Advisor of the Trust believes there is
             an impairment  in value, in which  case a  valuation  allowance  is
             established in accordance with Financial Accounting Standards No. 
             114,  Accounting by Creditors for  Impairment  of a Loan, and  
             Financial Accounting Standard No. 118,  AAccounting  by  Creditors
             for Impairment of a Loan - Income Recognition and Disclosures.

             PIMs and PIMIs

             The Trust  accounts  for its  Insured  Mortgages  which are MBS in
             accordance  with FAS 115 under the classification of held to 
             maturity. The Trust carries those MBS at amortized cost.


<PAGE>


                               

                               KRUPP GOVERNMENT INCOME TRUST

                               NOTES TO FINANCIAL STATEMENTS, Continued
                                                                  

B.    Significant Accounting Policies, Continued

             PIMs and PIMIs, Continued

             The  Federal  Housing  Administration  Insured  Mortgages  and all
             Additional  Loans are carried at amortized  cost unless the Advisor
             of the Trust  believes  there is an impairment  in value,  in which
             case a valuation allowance is established in accordance with 
             Financial  Accounting  Standards No. 114, Accounting  by  Creditors
             for Impairment  of a Loan, and  Financial  Accounting  Standard No.
             118, Accounting by Creditors for Impairment of a Loan - Income 
             Recognition and Disclosures.

             Basic  interest  is  recognized  based on the  stated  rate of the
             Department  of  Housing  and Urban Development  ("HUD")  Insured
             Mortgage  loan  (less the  servicer's  fee) or the  coupon  rate of
             the Government National Mortgage Association ("GNMA") or Fannie Mae
             MBS.  The Trust recognizes interest related to the participation
             features as earned and when it deems these amounts are collectible.
             The Trust  defers the  recognition  of  Additional  Loan  interest
             payments as income to the extent these interest  payments are from
             escrows  established  with the proceeds of the Additional  Loan.
             When the properties underlying the PIMIs generate  sufficient  cash
             flow to make the required  Additional Loan interest  payments  with
             funds other than from escrows,  the Trust may recognize  income as
             earned and may commence amortizing  deferred  interest amounts into
             income over the remaining  estimated term of the Additional Loan.
             During periods where mortgage loans are impaired the trust supsends
             amortizing interest income.  

             The Trust also fully reserves the portion of any Additional Loan 
             interest  payment  satisfied  through the issuance of an operating
             loan and any associated  interest due on such operating  loan. The
             Trust will recognize the income  related to the operating loan when
             the borrower repays amounts due under the operating loan.

             Impaired Mortgage Loans

             Impaired  loans are those loans which the Advisor  believes that 
             the  collection of all amounts due in accordance with the 
             contractual terms of the loan agreement are not likely.  Impaired
             loans are measured  based on the fair value of the  underlying
             collateral.  Interest  received on the  impaired loans is generally
             applied against the loan principal or as interest income if deemed
             collectable by the Advisor.  

             Cash Equivalents

             The Trust includes all short-term  investments  with  maturities of
             three months or less from the date of  acquisition in cash and cash
             equivalents.  The Trust  invests its cash  primarily in  commercial
             paper and money market funds with a commercial  bank and has not
             experienced  any loss to date on its invested cash.

             Prepaid Fees and Expenses

             Prepaid fees and expenses  represent prepaid  acquisition fees and
             expenses and prepaid  participation servicing fees paid for the
             acquisition and servicing of PIMs and PIMIs.  The Trust amortizes

<PAGE>

                                KRUPP GOVERNMENT INCOME TRUST

                            NOTES TO FINANCIAL STATEMENTS, Continued
                                                                  

B.    Significant Accounting Policies, Continued

             Prepaid Fees and Expenses, Continued

             prepaid  acquisition fees and expenses using a method that 
             approximates the effective  interest method over a period of ten to
             twelve years,  which represents the actual maturity or anticipated
             call payoff of the underlying mortgage.

             The Trust  amortizes  prepaid  participation  servicing fees using
             a method  that  approximates  the effective  interest  method over
             a ten year period  beginning  at final endorsement of the loan if a
             HUD-insured mortgage loan or a GNMA MBS and at closing if a Fannie
             Mae MBS.

             Income Taxes

             The Trust has elected to be taxed as a REIT under the Internal
             Revenue Code of 1986, as amended,  and believes it will continue to
             meet all  such  qualifications.  Accordingly,  the  Trust  will not
             be subject to federal income taxes on amounts distributed to 
             shareholders  provided it distributes  annually at least 95% of
             its REIT taxable income and meets certain other requirements for 
             qualifying as a REIT.  Therefore,  no provision for federal income
             taxes has been recorded in the financial statements.

             Estimates and Assumptions

             The preparation of financial  statements in accordance with 
             generally accepted  accounting  principles requires  management to
             make estimates and  assumptions  that affect the reported amount of
             assets and liabilities,  contingent  assets  and  liabilities  and
             revenues  and  expenses  during the  period.  Significant estimates
             include the net carrying value of Additional  Loans and the 
             unrealized gain on MBS investments.  Actual results could differ 
             from those estimates.

C.    PIMIs

      The Trust had investments in six PIMIs on December 31,  1998 that  provide
      the  permanent  financing  of multi-family  housing.  One  component of a 
      PIMI is either a securitized HUD-insured first  mortgage  loan issued and
      guaranteed by GNMA or a sole participation interest in a first mortgage 
      loan  originated  under the Federal Housing Administration ("FHA") lending
      program and insured by HUD  (collectively  the "Insured Mortgages").  The
      FHA first mortgage or the first mortgage  underlying  the GNMA  security
      provides  the borrower (generally a limited  partnership) with a below 
      market interest rate loan in exchange for providing the Trust with
      participation  in a  percentage  of the cash  generated  from  property 
      operations  and in a percentage of any  appreciation of the underlying  
      property to a preferred  return,  then a percentage of any    appreciation
      thereafter.  The borrower  conveys these rights to the Trust through a 
      subordinated  promissory note and mortgage.  In addition,  the Trust made
      an Additional  Loan to the owners of the borrower to provide   additional
      funds for the  construction  and  permanent  financing  of the  property.
      The owners generally collateralize  the  Additional  Loan through a pledge
      and security  agreement  that pledges  their  ownership   interests in the
      borrower,  and their share of any  distributions  made from  surplus cash
      generated by the property and the proceeds realized upon the refinancing
      of the property, sale


                                                     
<PAGE>

                              KRUPP GOVERNMENT INCOME TRUST

                              NOTES TO FINANCIAL STATEMENTS, Continued
                                                                  

C.       PIMIs, Continued

      of the  property  or sale of the  partnership  interests.  Amounts payable
      under  the  Additional  Loan are  neither guaranteed nor insured.

      The Trust receives monthly principal and  interest ("Basic Interest") 
      payments on the Insured Mortgage and is entitled  to receive participation
      income  under  the  subordinated  promissory  note  and  mortgage,  and
      semi-annual interest payments ("Additional Loan  Interest")  and preferred
      interest under the Additional Loan. The Trust receives  principal and 
      interest payments on the insured mortgages currently, because these 
      payments are insured or  guaranteed;  however,  there are  limitations  to
      the amount and obligation  to pay participation income and Additional Loan
      interest.

      The  subordinated  promissory  note and  mortgage  entitles  the Trust to
      receive  (i)  Participating  Income Interest  generally  equal  to 50% of 
      (a) all  distributable  Surplus  Cash  (as  defined  in the  regulatory
      agreement of the HUD-insured  first mortgage)  generated by the property
      (b) any unrestricted  cash generated from  property  operations and (c) to
      the  extent  available  unexpended  reserves  and  escrows,  and  (ii)
      Participating  Appreciation  Interest  generally  equal to 50% of the net
      proceeds or value of the  property upon the sale,  refinancing,  maturity
      or accelerated  maturity,  or permitted  prepayment of all amounts due
      under the Insured  Mortgage  and  Additional  Loan less the  Outstanding
      Indebtedness,  as defined.  Amounts received by the Trust pursuant to the
      subordinated  promissory note as  Participating  Income Interest reduce
      amounts  payable as Preferred  Interest and may reduce amounts  payable as
      Base Interest under the Additional Loan.

      The Insured Mortgage and subordinated  promissory note generally have 
      maturities of 30 to 40 years,  however, under the subordinated  promissory
      note the Trust can generally  accelerate these maturity dates at any time
      after the ninth or tenth anniversary of final endorsement for  coinsurance
      or insurance,  but in certain cases for construction loans after the 
      eleventh or twelfth anniversary of initial  endorsement  (commencement of
      construction)  for coinsurance or insurance,  upon giving twelve months
      written notice for the payment of all accrued  participation  interest  
      through the  accelerated  maturity  date.  The Trust can accelerate the
      maturity date for payment of amounts due under the subordinated promissory
      note and the insured  mortgage providing  the contract of  insurance or  
      coinsurance  with the  Secretary of HUD on the insured  mortgage is 
      canceled prior to the accelerated maturity date.

      Additional  Loan Interest is payable from the following  sources:  (i) any
      Surplus Cash received  pursuant to the  subordinated  promissory note as 
      Participating  Income  Interest,  (ii) amounts conveyed to the Trust by
      the owners of the borrowing entity representing  distributions of Surplus
      Cash and (iii) amounts in reserve accounts established with the Additional
      Loan  proceeds,  if available,  and any interest  earned on these amounts.
      If these sources are not sufficient to make  Additional  Loan Interest  
      payments the owners of the borrowing  entity  must notify the Trust of the
      amount of the  shortfall  and at its option the Trust  could require a 
      capital  call from the owners of the  borrowing  entity.  The capital call
      would be equal to 50% of the Base  Interest  shortfall  and the Trust in 
      certain  situations  could  convert the remaining 50% into an operating 
      loan.

<PAGE>


                               KRUPP GOVERNMENT INCOME TRUST

                                NOTES TO FINANCIAL STATEMENTS, Continued
                                                               

C.       PIMIs, Continued

      In addition to the Additional Loan Interest  payments, the Additional Loan
      requires the payment of Preferred Interest representing a cumulative, non-
      compounded preferred return from the date of final endorsement to the date
      of calculation at interest rates ranging from 9.5% to 11% per annum on the
      outstanding  balance of the Insured  Mortgage  plus the  Additional  Loan 
      and any other funds  advanced by the Trust to the borrowing  entity or the
      owners of the  borrowing  entity  less:  (i)  interest  payments  paid to
      the Trust under the Insured Mortgage,  (ii) Participating  Income Interest
      and (iii) Additional Loan Interest payments made under the Additional Loan
      including amounts foregone by the Trust.

      The insured  mortgage and  subordinated  promissory note generally cannot
      be prepaid for a term of five years from the construction completion  date
      or final  endorsement and thereafter may be  prepaid in whole without 
      penalty  provided  all  participation  interest  and  amounts  under  the
      insured mortgage  are  paid.  Any prepayment requires not less than ninety
      nor more than 180 days prior written notice.

      The  Additional  Loan  generally  may not be prepaid  before the fifth 
      anniversary  of the  Agreement or the construction  completion  date and
      thereafter  may be prepaid in full  without  penalty  provided  Preferred
      Interest and any amounts due under the insured mortgage and subordinated 
      promissory note are paid in full.

      On May 1, 1998, the borrowers on the  Lifestlyes PIMI defaulted on its May
      1998 debt service  payment.  The  Trust  continued to receive its monthly
      principal  and interest  payments  guaranteed  by GNMA.  In December 1998,
      the Trust entered into a second modification agreement  with the borrowers
      of the  Lifestlyes  PIMI    reducing  the  interest  paid  monthly on the
      insured  mortgage by 1.75% per annum for 1998 and 1999 and 1.5%  per annum
      for 2000 through 2007. In addition,  the borrowers made a $550,000 equity
      contribution,  which has been escrowed,  for the exclusive purpose of 
      correcting deferred maintenance.  Under the Agreement any future   surplus
      cash  generated by property  operations  will be split evenly  between the
      Trust and the borrowers as Participating Income Interest. When the 
      property  is sold or  refinanced,  the  first  $1,100,000  of any proceeds
      remaining after the insured  first  mortgage  is paid  off  will be  split
      50% / 50%;  the next $1,690,220  of  proceeds  will be  split  75% to the
      Trust  and  25% to the  borrower(the  repayment  of the Additional  Loan);
      and any remaining  proceeds  will be split 50% / 50% between the Trust and
      the borrower. The Trust will not earn any Preferred Return or Base 
      Interest on the Additional Loan.

      During June of 1998, the Trust received a prepayment of the Park Highlands
      Insured Mortgage and Additional Loan having a remaining principal balances
      of $16,752,295  and $3,000,000  respectively.  In addition,  the    Trust
      received  the  following:  (i) a  Preferred  Return of  $1,481,865,  (ii)
      Participating  Appreciation  interest of  $1,206,719,  (iii) a  Prepayment
      Premium of $479,476,  (iv)  Participating  Income interest of $211,316 and
      (v) Additional Loan interest payable through the date of sale of $57,945.

      On July 15,  1998,  the Trust  received a  prepayment  of The Coconut Palm
      Club  Insured  Mortgage  having a remaining  principal  balance of  
      $15,851,211.  In addition, in June the Trust  received a prepayment of the
      Coconut Palm Club


<PAGE>



                           KRUPP GOVERNMENT INCOME TRUST

                          NOTES TO FINANCIAL STATEMENTS, Continued
                                                               

C.    PIMIs, Continued

      Additional Loan of $2,850,900.  The Trust also received a preferred return
      of $1,419,116 and Additional Loan interest payable through the date of
      sale of $89,091.

      Due to the prepayments of the Park Highlands and Coconut Palm Club  
      Additional  Loans in June, the Trust also recognized  additional  loan
      interest of $1,290,000 and  $1,295,354  respectively,  that had been  
      previously   classified as deferred income on these Additional Loans.

      On August 6, 1998, the Advisor of the Trust  declared a special  dividend
      of $2.86 per share that was paid on  September 9, 1998 from the prepayment
      proceeds of the Park Highlands and Coconut Palm Club PIMIs.

      Mountain View  Apartments  has been  adversely  affected by a competitive
      housing market in the  Huntsville area.  Since September 1998 the borrower
      of the Mountain View  Additional Loan has been in technical  defaulton its
      Additional Loan for not making the full required  interest  payments.  The
      Advisor  is  currently assessing the feasibility of extending debt service
      relief to the borrower until the market stabilizes.

      On February 6, 1997, the Trust, with the approval of the independent 
      Trustees,  agreed to a workout with the borrower of the Windward Lakes 
      Apartments PIMI, an affiliate of the Advisor of the Trust.  The terms are
      as follows:  a) interest  rate  relief for 1997 of 2% per annum and 1% per
      annum for 1998  through  2000 on the Insured Mortgage: b) the borrower, 
      McNab KC-3 L.P.  ("McNab"),  contributed  $133,036 of new equity into the
      property;  c) the borrower will cap the annual management fee paid to an 
      affiliate at 3% of revenues;  d) the Trust's  participation  in current
      operations shall be 50% of Surplus Cash as determined under HUD 
      guidelines;  e)  Additional  Loan Interest is payable from the  Trust's 
      share of Surplus  Cash and unpaid  amounts  accrue at 7.5% per annum;  and
      f) the  Trust's participation  in a sale or refinancing,  after  repayment
      of the  first  mortgage  and  additional  loans,   interest  rate  relief,
      accrued  Additional  Loan  Interest  and  McNab=s  new  equity,  shall be 
      50% of any   remaining  proceeds  up to an  amount  which  would  result
      in  the  Trust  having  received  a  cumulative,  noncompounded  preferred
      return of 10% on its investment in the first mortgage and additional
      loans;  any  remaining proceeds shall be distributed to McNab.

      During  the first  quarter of 1997 the Trust  received  proceeds  from the
      prepayment  of The  Timber  Ridge Apartments PIMI as follows:  $1,540,000
      to payoff the Additional Loan; $1,246,159 representing  Participation
      income which includes  prepayment  penalties;  $5,630,985 to payoff the
      outstanding first mortgage  principal balance.  During  the third  quarter
      of 1997,  the Trust  made a special  dividend  of $.92 per share to its
      investors.  This special  dividend was funded from the 1996 Canyon Ridge
      PIM  prepayment  and the 1997 Timber Ridge prepayment proceeds, net of the
      reinvestment in a $3,400,000 face value insured multifamily mortgage.

      At December 31, 1998 and 1997 there are no Insured  Mortgage loans  within
      the Trust's  portfolio  that are delinquent as to principal or interest.

      The Trust's investments in PIMIs consist of the following at December 31,
      1998 and 1997:

                                 Continued
<PAGE>

<TABLE>
<CAPTION>

                                           KRUPP GOVERNMENT INCOME TRUST

                                     NOTES TO FINANCIAL STATEMENTS, Continued
                                                               

      C.  PIMIs, Continued
                                    Original
                                      Loan           Interest        Maturity           Balance Outstanding
      PIM      Amount               Rate               Date            at December 31,
                                                                                        1998                  1997
<S>                                    <C>             <C>            <C>              <C>                  <C>         
Lifestyles (GNMA)                      $10,292,394     7.00%(a)       5/1/32           $10,022,381          $ 10,074,176

Windward (GNMA)                         14,000,778     7.50%(b)       6/1/32            13,667,163            13,732,172

Audubon Villas (GNMA)                   15,250,000     7.75%          9/15/33           14,909,371            14,985,694

Coconut Palm (GNMA)                     16,155,100     8.25%          5/1/33                 -                15,899,315

Mountain View (FHA)                      9,547,700     8.125%(c)      1/1/34             9,363,459             9,407,192

Red Run (FHA)                           19,019,600     7.875%         5/1/34            18,651,261                 18,742,124

Park Highland (FHA)                     17,068,500     7.625%         1/1/34                 -                16,788,083

The Seasons (FHA) (d)                    9,075,351     7.875%        10/1/28             8,772,825             8,841,491

                                      $110,409,423                                     $75,386,460          $108,470,247
                                                                                        (f)
</TABLE>
<TABLE>
<CAPTION>

                                                                             Base        Preferred
                                    Outstanding Balance                   Interest        Interest
      Additional Loan                 1998                1997              Rate            Rate   
<S>                                 <C>                 <C>                 <C>               <C>     
      Lifestyles (a)                $ 1,817,665         $ 1,817,665          -                -

      Windward                        2,471,294           2,471,294          7.5%             10%

      Audubon Villas                  2,691,000           2,691,000          7.0%             10%

      Coconut Palm                       -                2,850,900          7.5%             11%

      Mountain View (c)               1,553,600           1,553,600          7.0%             10%

      Red Run                         2,900,000           2,900,000          7.0%             10%

      Park Highland                      -                3,000,000          7.5%             9.5%

      The Seasons (d)(e)              1,924,649           1,924,649          9.0%             10%
 
                                    $13,358,208        $ 19,209,108
</TABLE>

      (a)     The Trust entered into an Agreement  which reduced the interest 
              rate on the Insured Mortgage by 1.75% per annum  effective January
              1, 1998 for a period  of  twenty-four  months  and 1.5% per annum
              for 2000 though 2007.  The Trust will not receive  any  Additional
              Loan Base or  Preferred  interest  due to workout.
      (b)     The Trust entered into an agreement which reduced the interest 
              rate on the Insured  Mortgage by 2.0% per annum for 1997 and by 
              1.0% for 1998 through 2000.
      (c)     The Trust entered into an agreement  which reduced the interest 
              rate on the Insured  Mortgage .5% per annum effective July 1, 1995
              for a period of eighteen  months.  The borrower  was also  allowed
              to forego making

                                      Continued
<PAGE>
                

                           KRUPP GOVERNMENT INCOME TRUST

                      NOTES TO FINANCIAL STATEMENTS, Continued
                                                               

C.       PIMIs, Continued

              four semiannual  Additional  Loan interest  payments  beginning 
              March 1, 1995.  These unpaid amounts  will be payable from the net
              proceeds of a sale or refinancing of the property.
      (d)     The total PIM and Additional Loan on this property were  
              $32,300,000  and  $6,850,000,  respectively,  of which 72% is held
              by Krupp  Government Income Trust II.  The Seasons  is  affiliated
              with the Advisor of the Trust.
      (e)     The  Additional  Loan interest rate was 6% per annum for the first
              three  years and  beginning  in September 1996 increased to 9% per
              annum.
      (f)     The aggregate cost for federal income tax purposes is $75,386,460.


Impaired Mortgage Loans

As a result of  continued  deterioration  in  property  operations,  the Advisor
of the Trust  determined  that the Lifestyles  Additional Loan was impaired.  As
a result, a valuation  allowance of $1.1 million has been established to adjust
the carrying  amount of the loan to the estimated  fair market value of the 
collateral  less  anticipated costs of sale.  The Trust will recognize  interest
income to the  extent  cash is  received  and  supported  by operating cash flow
generated by the collateral.  The Trust did not recognize interest income on the
Lifestyles Additional Loan during 1998.

The  Advisor of the Trust has  determined  that The  Mountain  View  Additional
Loan is  impaired.  The Trust will recognize interest  income to the extent cash
received is  supported  by  operating  cash flow  generated  by the collateral.
The Trust did not  recognize  interest  income on the Mountain  View  Additional
Loan during 1998. In addition,  a valuation  allowance of $984,000  has been
established  to adjust the carrying  amount of the loan to estimated fair market
value of the collateral less anticipated costs of sale.

The activity in the  valuation  allowance  together  with the related  recorded
and carrying  value of the mortgage loans is as follows:
<TABLE>
<CAPTION>

                                         Recorded              Valuation             Carrying
                                            Value              Allowance               Value

<S>                                        <C>                     <C>                   <C>     
Lifestyles                                 $1,817,665              $1,130,346            $687,319

Mountainview                                1,553,600                 984,000             569,600

Balance at December
        31, 1998                           $3,371,265              $2,114,346          $1,256,919
</TABLE>

The recorded value of the impaired mortgage loans did not differ materially from
the balances reported at the end of each period with the exception of the
impairment recorded in the fourth  quarter of 1998 for the  Lifestyles and 
Mountainview additional  loans.  The Trust has also deferred  income  related 
to  Lifestyles and Mountain View of $687,319 and $367,383, respectively.

A reconciliation of activity for each of the three years in the period ended 
December 31, 1998 is as follows:


                                  Continued

<PAGE>
<TABLE>
<CAPTION>

                             KRUPP GOVERNMENT INCOME TRUST

                     NOTES TO FINANCIAL STATEMENTS, Continued
                                                                     
      C.  PIMIs, Continued

                                                       1998                        1997                   1996

<S>                                                    <C>                        <C>                     <C>         
Balance at beginning of period                         $108,470,247               $114,625,179            $115,131,611

     Insured mortgage prepayments                       (32,603,506)                (5,630,985)               -

     Principal collections    (480,281)                    (523,947)                  (506,432)

Balance at end of period  $ 75,386,460                 $108,470,247               $114,625,179

</TABLE>
Property descriptions:
    Lifestyles  Apartments  ("Lifestyles") is a  236-unit garden style apartment
    complex  located in Palm Harbor, Florida.
    Windward Lakes  Apartments ("Windward") is a 276-unit garden style apartment
    complex located in Pompano Beach, Florida.
    Audubon Villas is a 308-unit apartment complex located in Clearwater,
    Florida.
    Coconut Palm Club ("Coconut Palm") is a 301-unit apartment complex located
    in Coconut Creek, Florida.
    Mountain View Apartments ("Mountain View") is a 256-unit apartment complex 
    located in Madison, Alabama.
    Red Run Apartments ("Red Run") is a 304-unit apartment complex located in 
    Owings Mills, Maryland.
    Park  Highland Apartments ("Park  Highland") is a 250-unit apartment complex
    located  in  Bellevue, Washington.
    The Seasons is a 1,088-unit apartment complex located in Laurel, Maryland.

   D. PIMs

    The Trust had  investments  in five PIMs at December 31,  1998.  The Trust's
    PIMs consist of a GNMA or Fannie Mae MBS representing the securitized first
    mortgage loan on the underlying  property or a sole  participation
    interest in a first mortgage loan originated under the FHA  lending  program
    on the  underlying  property (collectively the "Insured  Mortgages"),  and 
    participation  interests in the revenue stream and appreciation of the 
    underlying property above specified base levels.  The borrower conveys these
    participation  features to the Trust generally through a subordinated
    promissory note and mortgage (the "Agreement").

    The Trust receives guaranteed  monthly payments of principal and interest on
    the GNMA and Fannie Mae MBS and HUD insures the mortgage loan underlying the
    GNMA MBS and the FHA  mortgage  loan.  The  borrower  usually cannot  prepay
    the first mortgage loan during the first five years and may prepay the first
    mortgage  loan thereafter  subject to a 9% prepayment  penalty in years six
    through  nine, a 1% prepayment penalty in year ten and no prepayment penalty
    thereafter.  The Trust  may  receive  income  related  to its  participation
    interests in the underlying property, however, these amounts are neither 
    insured nor guaranteed.

    Generally, the participation features consist of the following: (i) "Minimum
    Additional Interest" at rates ranging from .5% to .75% per annum  calculated
    on the unpaid  principal  balance of the first mortgage on the underlying
    property, (ii) "Shared Income Interest" ranging from 25% to 30% of the

                                   Continued
<PAGE>

                            KRUPP GOVERNMENT INCOME TRUST

                       NOTES TO FINANCIAL STATEMENTS, Continued
                                                               
D.    PIMs, continued

      monthly gross rental income generated by the underlying property in excess
      of a specified base, but only to the extent that it exceeds the amount of
      Minimum  Additional Interest received during such month, and (iii) "Shared
      Appreciation  Interest" ranging from 25% to 30% of any increase in value
      of the underlying  property   in excess of a specified  base.  Payment of
      participation  interest  from the operations of the property is limited to
      50% of net revenue or surplus cash as defined by Fannie Mae or HUD, 
      respectively.  Payment of participation interest at the time of the  
      prepayment of the PIM or upon its maturity  generally cannot exceed 50% of
      any increase in value of the underlying property.

      Shared  Appreciation Interest is payable when one of the following occurs:
      (1) the sale of the  underlying   property  to an  unrelated  third  party
      on a date  which  is  later  than  five  years  from the date of the
      Agreement,  (2) the maturity  date or  accelerated  maturity  date of the
      Agreement,  or (3)  prepayment  of amounts due under the Agreement and the
      Insured Mortgage.

      Under the Agreement, the Trust,  upon giving twelve months written notice,
      can accelerate the maturity date  of the  Agreement to a date not earlier
      than ten years from the date of the  Agreement for (a) the payment of all
      participation interest due under the Agreement as of the accelerated 
      maturity date, or (b) the payment of all participation interest due  under
      the  Agreement  plus all  amounts  due on the first  mortgage note on the
      property.

      At December 31, 1998 and 1997 there are no Insured Mortgage  loans  within
      the  Trust's  portfolio  that are  delinquent of principal or interest.

      The Trust's PIMs consisted of the following at December 31, 1998 and 1997:
<TABLE>
<CAPTION>

                                   Original
                                     Loan         Interest        Maturity
PIM                                 Amount           Rate           Date                Balance at December 31,
                                                                                              1998               1997
<S>                                   <C>              <C>           <C>                  <C>                <C>        
River View (GNMA)                     $ 9,284,877      8.00%         1/15/33              $ 9,070,196        $ 9,116,775

Mill Pond (FHA)                         7,812,100      8.15%         1/1/33                 7,622,447          7,661,308

Waterford (FHA)                         6,935,900      8.125%        8/1/32                 6,752,284          6,787,988

Rivergreens (FHA)                      10,003,000      8.005%        4/1/33                 9,765,665          9,815,836

Lincoln Green (FNMA)                   15,565,000      6.75%        10/1/02                14,526,991         14,730,616
                                                                        (a)
   Total                              $49,600,877                                       $47,737,583          $48,112,523


                                                                                          (b)
</TABLE>

(a)  Normal  monthly  benefit  is  based  on  a  30-year  amortization.   All  
     unpaid  principal  of approximately $13,583,000 and accrued interest is due
     at the maturity date.
(b)  The aggregate cost for federal income tax purposes is $47,737,583.

A reconciliation of activity for each of the three years in the period ended 
December 31, 1998 is as follows:





                                  Continued
<PAGE>
<TABLE>
<CAPTION>


                         KRUPP GOVERNMENT INCOME TRUST

                    NOTES TO FINANCIAL STATEMENTS, Continued
                                                               

D.    PIMs, continued
                                                      1998                 1997                 1996

<S>                                                   <C>                 <C>                    <C>        
Balance at beginning of period                        $48,112,523         $48,479,897            $57,691,223

   PIM prepayment                                           -                   -                 (8,862,450)
   Prinicipal collections                                (374,940)           (367,374)              (348,876)
 
Balance at end of period                              $47,737,583         $48,112,523            $48,479,897

Property descriptions:
</TABLE>

    River View Apartments ("River View") is a 220-unit apartment complex located
    in Columbia, South Carolina.
    Mill Pond Apartments ("Mill Pond") is a 146-unit apartment complex in 
    Bellbrook, Ohio.
    Waterford Townhomes Apartments ("Waterford") is a 122-unit apartment complex
    in Eagen, Minnesota.
    Rivergreens Apartments ("Rivergreens") is a 208-unit apartment complex in 
    Gladstone, Oregon.
    Lincoln Green Apartments ("Lincoln Green") is a 616-unit apartment complex
    in Greensboro, North Carolina.

E. MBS

     At December 31, 1998,  the Trust's MBS portfolio had an amortized cost of
     $16,255,176  and gross unrealized gains and losses of $875,328  and $2,552,
     respectively.  At December  31,  1998, the Trust has a FHA insured mortgage
     with an amortized cost of  $4,904,905.  At December  31, 1997,  the Trust's
     MBS  portfolio  had an amortized cost of $25,699,739  and gross  unrealized
     gains of  $1,385,602.  The Trust's MBS have maturities ranging from 2008 to
     2029.

     During the first quarter of 1997, the Trust acquired a $3,400,000 face 
     value insured  multi-family mortgage for $3,366,000 having a coupon rate of
     7.5% per annum and a maturity of April 2032.

F. Shareholders' Equity

     Under the Declaration of Trust and commencing  with the initial closing of
     the public offering of shares,  the Trust has declared and paid  dividends
     on a quarterly  basis.  During the period in which the Trust  qualifies
     as a REIT,  the Trust has and will pay quarterly  dividends aggregating  at
     least 95% of taxable income on an annual basis to be allocated to the 
     shareholders in proportion to their respective number of shares.  In order
     for the Trust to maintain its REIT status with respect to the  requirements
     of Share  ownership,  the  Declaration of Trust prohibits any investor from
     owning,  directly or  indirectly,  more than 9.8% of the outstanding Shares
     and empowers the Trustees to refuse to permit any transfer of Shares which,
     in their opinion, would jeopardize the status of the Trust as a REIT.

                                                     Continued

<PAGE>


                             KRUPP GOVERNMENT INCOME TRUST

                      NOTES TO FINANCIAL STATEMENTS, Continued
                                                                

G. Related Party Transactions

     Under the terms of the Advisory Service  Agreement,  the Advisor  receives
     an Asset Management Fee equal to .75% per annum of the value of the Trust's
     actual and committed invested assets payable quarterly.

     The Trust also reimburses  affiliates  of the  Advisor  for  certain  costs
     incurred in connection with maintaining  the books and records of the Trust
     and the  preparation  and mailing of  financial  reports,  tax  information
     and other communications to investors.

     During the three years ended December 31, 1998, the Trust received interest
     collections on Additional Loans with affiliates of the Advisor of the Trust
     of $218,841,  $400,838,  and $234,593 respectively.  In addition, the Trust
     received $93,457 in 1998 and $32,622 in 1997 related to Participating 
     Interest Income.

H.   Original Shares

     Upon  termination of the Trust, an affiliate of the Advisor is committed to
     pay to holders of Original Shares the amount (if any) by which (a) the 
     Shareholders'  Original  Investments exceed (b) all Dividends (as defined
     in the prospectus) paid by the Trust with respect to such Original  Shares.
     Original Shares are those Shares purchased  during the Trust's  initial  
     public  offering  either  through  purchase  or through  the  dividend
     reinvestment program and held until the last mortgage held by the Trust is
     repaid or disposed of.

<TABLE>
<CAPTION>
I. Federal Income Taxes

<S>                                                              <C>         
     Net income per statement of income                          $ 14,836,465

     Add:     Provision for impaired mortgage loan                  2,114,346
     Less:    Additional Loan interest deferred
      for book purposes                                            (1,478,403)

     Book to tax difference for amortization
      of prepaid fees and expenses                                   (557,790)

     Net income for federal income tax purposes                  $ 14,914,618
</TABLE>

     The Trust paid  dividends of $4.16 per share during 1998 which  represents
     approximately  $.99 from ordinary income and $3.17 represents a non-taxable
     distribution for federal income tax purposes.

     The basis of the Trust's assets for financial  reporting  purposes is less
     than its tax basis by approximately $7,311,000 and $4,622,000 at December
     31, 1998 and 1997,  respectively.  The basis of the Trust=s  liabilities
     for  financial reporting purposes exceeded its tax basis by  approximately
     $5,774,000  and  $7,872,000  at  December 31, 1998 and 1997, respectively.

J. Fair Value Disclosures of Financial Instruments

     The Trust uses the  following  methods and  assumptions  to estimate the
     fair value of each class of financial instruments:

                                      Continued
<PAGE>


                           KRUPP GOVERNMENT INCOME TRUST

                     NOTES TO FINANCIAL STATEMENTS, Continued
                                                                

J. Fair Value Disclosures of Financial Instruments, continued

      Cash and Cash Equivalents

      The carrying amount approximates fair value because of the short maturity
      of those instruments.

      MBS

      The Trust  estimates  the fair value of MBS based on quoted  market prices
      while it estimates the fair value of insured mortgages based on quoted
      price of MBS with similar interest rates.

      PIMs and PIMIs
 
      There is no active trading market for these investments,  so management
      estimates the fair value of the PIMs  and the  insured  mortgage  portion
      of the PIMIs  using  quoted  market  prices of MBS having the same stated
      coupon  rate as the  Insured  Mortgages.  Additional  Loans  are  based on
      the  estimated  fair value of the underlying  properties.  Management does
      not include any participation income in the Trust's estimated fair values,
      because Management does not believe it can predict the time of realization
      of the feature with any certainty.  Based on the estimated fair value
      determined  using these methods and  assumptions,  the Trust's investments
      in PIMs and PIMIs had gross unrealized losses and  gains of  approximately
      $5,647,000  and $1,491,000, respectively, at  December 31,  1998 and gross
      unrealized  losses and gains of  approximately $6,551,000 and $381,000, 
      respectively, at December 31, 1997.

      At December 31, 1998 and 1997, the Trust estimated the fair value of its
      financial instruments as follows:
<TABLE>
<CAPTION>

                                                              (amounts in thousands)
                                                             1998                        1997        
                                                       Fair        Carrying         Fair        Carrying
                                                       Value          Value         Value         Value

<S>                                                     <C>            <C>           <C>            <C>    
         Cash and cash equivalents                      $  9,004       $ 9,004       $  9,750       $ 9,750

         MBS                                              22,473        22,133         27,085        27,085

         PIMs and PIMIs:
           PIMs                                           49,229        47,738         48,382        48,113
           Insured mortgages                              77,627        75,386        109,902       108,470
           Additional Loans                               11,244        11,244         19,209        19,209

                                                        $169,577      $165,505       $214,328      $212,627
</TABLE>
<PAGE>

 
<TABLE>
<CAPTION>

                                      KRUPP GOVERNMENT INCOME TRUST

                                  SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                                                                

                            Balance at           Charged to                               Balance at
                             Beginning           costs and                                    end of
Description                  of period            expenses            Revenues            period   

<S>                            <C>                   <C>                  <C>                  <C>        
Additional Loan                $  -                  $2,114,346           $   -                $2,114,346
(1)      (2)

</TABLE>

(1)    The Trust recognized a valuation allowance related to the Lifestyles and
       Mountain View Additional Loans.