<PAGE>

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


                                    FORM 10-Q

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

 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004

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

                        Commission File Number: 33-62526

                      COMMONWEALTH INCOME & GROWTH FUND IV
             (Exact name of registrant as specified in its charter)

         Pennsylvania                                   23- 3080409
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)

                          470 John Young Way Suite 300
                                 Exton, PA 19341
          (Address, including zip code, of principal executive offices)

                                 (610) 594-9600
               (Registrant's telephone number including area code)

         Indicate by check mark whether the registrant (i) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (ii) has been subject to such filing
requirements for the past 90 days: YES [X] NO [ ]

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12c-2 of the Act): YES [ ] NO [X]




<PAGE>
                            COMMONWEALTH INCOME & GROWTH FUND IV
                                       BALANCE SHEETS

<TABLE>
<CAPTION>
                                                              MARCH 31,         DECEMBER 31,
                                                                2004               2003
                                                             -----------        -----------
                                                             (UNAUDITED)
<S>                                                          <C>                <C>
ASSETS

Cash and cash equivalents                                    $ 1,518,488        $ 4,644,293

Lease income receivable                                          141,237             88,996

Other receivables - affiliated limited partnerships               68,994             56,639
Deferred revenue                                                   2,057              2,438
Refundable deposits                                                1,130              1,130
Prepaid expenses                                                  32,507                  -
                                                             -----------        -----------
                                                               1,764,413          4,793,496
                                                             -----------        -----------



Computer equipment, at cost                                   11,270,077         10,738,728
Accumulated depreciation                                      (1,948,021)        (1,285,576)
                                                             -----------        -----------
                                                               9,322,056          9,453,152
                                                             -----------        -----------

Equipment acquisition costs and deferred expenses, net           361,808            378,428
Other receivables - Commonwealth Capital Corp                    313,240            229,801
Prepaid acquisition fees                                         153,277            177,841
                                                             -----------        -----------
                                                                 828,325            786,070
                                                             -----------        -----------

TOTAL ASSETS                                                 $11,914,794        $15,032,718
                                                             ===========        ===========


LIABILITIES AND PARTNERS' CAPITAL

LIABILITIES
Accounts payable, primarily for equipment purchases               65,332          2,325,446
Accounts payable - General Partner                                 4,941             71,024
Other accrued expenses                                            12,100             17,000
Unearned lease income                                            111,420            102,485
Notes payable                                                  1,566,789          1,816,668
                                                             -----------        -----------
TOTAL LIABILITIES                                              1,760,582          4,332,623
                                                             -----------        -----------

PARTNERS' CAPITAL
General partner                                                    1,000              1,000
Limited partners                                              10,153,212         10,699,095
                                                             -----------        -----------
TOTAL PARTNERS' CAPITAL                                       10,154,212         10,700,095
                                                             -----------        -----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL                      $11,914,794        $15,032,718
                                                             ===========        ===========
</TABLE>


                       see accompanying notes to financial statements


<PAGE>

                      COMMONWEALTH INCOME & GROWTH FUND IV
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>


                                                     THREE MONTHS        THREE MONTHS
                                                         ENDED              ENDED
                                                       MARCH 31,          MARCH 31,
                                                         2004                2003
                                                      ----------          ---------
                                                                (UNAUDITED)
<S>                                                   <C>                 <C>
INCOME
Lease                                                 $  967,692          $ 270,255
Interest and other                                         7,663              1,587
                                                      ----------          ---------
TOTAL INCOME                                             975,355            271,842
                                                      ----------          ---------

EXPENSES
Operating, excluding depreciation                        338,370            238,056
Organizational costs                                           -             22,067
Equipment management fee - General Partner                48,385             13,513
Interest                                                  28,052             10,442
Depreciation                                             686,836            186,548
Amortization of equipment
  acquisition costs and deferred expenses                 41,184             10,747
Loss on sale of computer equipment                         2,919                  -
                                                      ----------          ---------
TOTAL EXPENSES                                         1,145,746            481,373
                                                      ----------          ---------
NET (LOSS)                                            $ (170,391)         $(209,531)
                                                      ==========          =========
NET (LOSS) PER EQUIVALENT LIMITED
  PARTNERSHIP UNIT                                    $    (0.23)         $   (0.94)
                                                      ==========          =========
WEIGHTED AVERAGE NUMBER OF EQUIVALENT LIMITED
PARTNERSHIP UNITS OUTSTANDING DURING THE PERIOD          749,950            222,915
                                                      ==========          =========
</TABLE>








                   see accompanying notes to financial statements


<PAGE>
<TABLE>
<CAPTION>
                                               COMMONWEALTH INCOME & GROWTH FUND IV
                                                 STATEMENTS OF PARTNERS' CAPITAL

                                                                  FOR THE THREE MONTHS ENDED MARCH 31, 2004
                                                                               (UNAUDITED)

                                                GENERAL          LIMITED
                                                PARTNER          PARTNER           GENERAL           LIMITED
                                                 UNITS            UNITS            PARTNER           PARTNER            TOTAL
                                                -------          -------           -------         -----------       -----------
<S>                                             <C>              <C>               <C>             <C>               <C>
PARTNERS' CAPITAL - DECEMBER 31, 2003                50          749,950           $ 1,000         $10,699,095       $10,700,095
  Net income (loss)                                   -                -             3,755            (174,146)         (170,391)
  Distributions                                       -                -            (3,755)           (371,737)         (375,492)
                                                -------          -------           -------         -----------       -----------
PARTNERS' CAPITAL - MARCH 31, 2004                   50          749,950           $ 1,000         $10,153,212       $10,154,212
                                                =======          =======           =======         ===========       ===========
</TABLE>






                 see accompanying notes to financial statements


<PAGE>

<TABLE>
<CAPTION>
                                 COMMONWEALTH INCOME & GROWTH FUND IV
                                        STATEMENTS OF CASH FLOW
                          FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003

                                                                          2004                2003
                                                                      -----------          ----------
OPERATING ACTIVITIES                                                             (UNAUDITED)
<S>                                                                   <C>                  <C>
Net (loss)                                                            $  (170,391)         $ (209,531)
Adjustments to reconcile net (loss) to net cash
   (used in) operating activities
      Depreciation and amortization                                       728,020             197,295
      Loss on sale of computer equipment                                    2,919                   -
      Other noncash activities included in
          determination of net (loss)                                    (249,879)            (73,420)
     Changes in assets and liabilities
         (Increase) decrease in assets
              Lease income receivable                                     (52,241)             28,519
              Deferred revenue                                                381                   -
              Other receivables - affiliated limited partnerships         (12,355)            (18,141)
              Refundable deposits                                               -              (1,130)
              Prepaid expenses                                            (32,507)                  -
         Increase (decrease) in liabilities
              Accounts payable                                         (2,260,114)             56,835
              Accounts payable, Common Capital Corp.                            -             (61,807)
              Accounts payable, General Partner                           (66,083)             17,782
              Other accrued expenses                                       (4,900)                  -
              Unearned lease income                                         8,935              43,749
                                                                      -----------          ----------
NET CASH (USED IN) OPERATING ACTIVITIES                                (2,108,215)            (19,849)
                                                                      -----------          ----------

INVESTING ACTIVITIES:
Capital Expenditures                                                     (614,091)           (170,062)
Prepaid acquisition fees                                                        -             (67,595)
Net proceeds from sale of computer equipment                               55,432                   -
Equipment acquisition fees paid to General Partner                              -             (39,809)
                                                                      -----------          ----------
NET CASH (USED IN) INVESTING ACTIVITIES                                  (558,659)           (277,463)
                                                                      -----------          ----------

FINANCING ACTIVITIES:
Contributions                                                                   -           2,101,649
Offering Costs                                                                  -            (231,843)
Distributions to partners                                                (375,492)           (104,520)
Other receivable, CCC                                                     (83,439)           (123,923)
Debt Placement fee paid to the General Partner                                  -              (8,160)
                                                                      -----------          ----------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES                      (458,931)          1,633,203
                                                                      -----------          ----------


Net (decrease) increase in cash and cash equivalents                   (3,125,805)          1,335,891
Cash and cash equivalents, beginning of period                          4,644,293             510,780
                                                                      -----------          ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD                              $ 1,518,488          $1,846,671
                                                                      ===========          ==========
</TABLE>



                            see accompanying notes to financial statements




<PAGE>




                          NOTES TO FINANCIAL STATEMENTS

1.      BUSINESS                   Commonwealth Income & Growth Fund IV (the
                                   "Partnership") is a limited partnership
                                   organized in the Commonwealth of Pennsylvania
                                   on May 15, 2001. The Partnership was offering
                                   for sale up to 750,000 units of the limited
                                   partnership at the purchase price of $20 per
                                   unit (the "Offering"). The Partnership
                                   reached the minimum amount in escrow and
                                   commenced operations on July 8, 2002 and was
                                   fully subscribed on September 15, 2003.

                                   The Partnership uses the proceeds of the
                                   Offering to acquire, own and lease various
                                   types of computer peripheral equipment and
                                   other similar capital equipment, which will
                                   be leased primarily to U.S. corporations and
                                   institutions. Commonwealth Capital Corp
                                   ("CCC"), on behalf of the Partnership and
                                   other affiliated partnerships, will acquire
                                   computer equipment subject to associated debt
                                   obligations and lease agreements and allocate
                                   a participation in the cost, debt and lease
                                   revenue to the various partnerships based on
                                   certain risk factors.

                                   The Partnership's General Partner is
                                   Commonwealth Income & Growth Fund, Inc. (the
                                   "General Partner"), a Pennsylvania
                                   corporation which is an indirect wholly owned
                                   subsidiary of CCC. CCC is a member of the
                                   Investment Program Association (IPA),
                                   Financial Planning Association (FPA), and the
                                   Equipment Leasing Association (ELA).
                                   Approximately ten years after the
                                   commencement of operations, the Partnership
                                   intends to sell or otherwise dispose of all
                                   of its computer equipment, make final
                                   distributions to partners, and to dissolve.
                                   Unless sooner terminated, the Partnership
                                   will continue until December 31, 2012.

2.      SUMMARY OF                 BASIS OF PRESENTATION
        SIGNIFICANT
        ACCOUNTING                 The financial information presented as of any
        POLICIES                   date other than December 31 has been prepared
                                   from the books and records without audit.
                                   Financial information as of December 31 has
                                   been derived from the audited financial
                                   statements of the Partnership, but does not
                                   include all disclosures required by generally
                                   accepted accounting principles. In the
                                   opinion of management, all adjustments,
                                   consisting only of normal recurring
                                   adjustments, necessary for a fair
                                   presentation of the financial information for
                                   the periods indicated have been included. For
                                   further information regarding the
                                   Partnership's accounting policies, refer to
                                   the financial statements and related notes
                                   included in the Partnership's annual report
                                   on Form 10-K for the year ended December 31,
                                   2003. Operating results for the three-month
                                   period ended March 31, 2004 are not
                                   necessarily indicative of financial results
                                   that may be expected for the full year ended
                                   December 31, 2004.




<PAGE>

                                   REVENUE RECOGNITION

                                   Through March 31, 2004, the Partnership has
                                   only entered into operating leases. Lease
                                   revenue is recognized on a monthly basis in
                                   accordance with the terms of the operating
                                   lease agreements.

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

                                   USE OF ESTIMATES

                                   The preparation of financial statements in
                                   conformity with generally accepted accounting
                                   principles requires management to make
                                   estimates and assumptions that affect the
                                   reported amounts of assets and liabilities
                                   and disclosure of contingent assets and
                                   liabilities at the date of the financial
                                   statements and the reported amounts of
                                   revenues and expenses during the reporting
                                   period. Actual results could differ from
                                   those estimates.

                                   LONG-LIVED ASSETS

                                   The Partnership evaluates its long-lived
                                   assets when events or circumstances indicate
                                   that the value of the asset may not be
                                   recoverable. The Partnership determines
                                   whether an impairment exists by estimating
                                   the undiscounted cash flows to be generated
                                   by each asset. If the estimated undiscounted
                                   cash flows are less than the carrying value
                                   of the asset then an impairment exists. The
                                   amount of the impairment is determined based
                                   on the difference between the carrying value
                                   and the fair value. The fair value is
                                   determined based on estimated discounted cash
                                   flows to be generated by the asset. As of
                                   March 31, 2004, there is no impairment.

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

                                   INTANGIBLE ASSETS

                                   Equipment acquisition costs and deferred
                                   expenses are amortized on a straight-line
                                   basis over two- to-four year lives.
                                   Unamortized acquisition fees and deferred
                                   expenses are charged to amortization expense
                                   when the associated leased equipment is sold.

                                   CASH AND CASH EQUIVALENTS

                                   The Partnership considers all highly liquid
                                   investments with a maturity of three months
                                   or less to be cash equivalents. Cash
                                   equivalents have been invested in a money
                                   market fund investing directly in Treasury
                                   obligations.





<PAGE>

                                   INCOME TAXES

                                   The Partnership is not subject to federal
                                   income taxes; instead, any taxable income
                                   (loss) is passed through to the partners and
                                   included on their respective income tax
                                   returns.

                                   Taxable income differs from financial
                                   statement net income as a result of reporting
                                   certain income and expense items for tax
                                   purposes in periods other than those used for
                                   financial statement purposes, principally
                                   relating to depreciation, amortization, and
                                   lease income.

                                   OFFERING COSTS

                                   Offering costs are payments for selling
                                   commissions, dealer manager fees,
                                   professional fees and other offering expenses
                                   relating to the syndication. Selling
                                   commissions were 8% of the partners'
                                   contributed capital and dealer manager fees
                                   were 1% of the partners' contributed capital.
                                   These costs have been deducted from
                                   partnership capital in the accompanying
                                   financial statements.

                                   NET INCOME (LOSS) PER EQUIVALENT LIMITED
                                   PARTNERSHIP UNIT

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

                                   REIMBURSABLE EXPENSES

                                   Reimbursable expenses, which are charged to
                                   the Partnership by CCC in connection with the
                                   administration and operation of the
                                   Partnership, are allocated to the Partnership
                                   based upon several factors including, but not
                                   limited to, the number of investors,
                                   compliance issues, and the number of existing
                                   leases.

3.      COMPUTER                   The Partnership is the lessor of equipment
        EQUIPMENT                  under operating leases with periods ranging
                                   from 16 to 36 months. In general, the lessee
                                   pays associated costs such as repairs and
                                   maintenance, insurance and property taxes.

                                   The Partnership's share of the computer
                                   equipment in which they participate at March
                                   31, 2004 and December 31, 2003 was
                                   approximately $8,000 for both period ends,
                                   which is included in the Partnership's fixed
                                   assets on their balance sheet, and the total
                                   cost of the equipment shared by the
                                   Partnership with other partnerships at
                                   March 31, 2004 and December 31, 2003 was
                                   approximately $48,000 for both period ends.





<PAGE>

                               The following is a schedule of future minimum
                               rentals on noncancellable operating leases at
                               March 31, 2004:
                                                                       Amount
                                                                     ----------
                               Nine Months ended December 31, 2004   $3,002,000
                               Year Ended December 31, 2005           3,754,000
                               Year Ended December 31, 2006           2,188,000
                               Year Ended December 31, 2007              17,000
                                                                     ----------
                                                                     $8,961,000
                                                                     ==========

4.      RELATED PARTY
        TRANSACTIONS
                               OTHER RECEIVABLES

                               As of March 31, 2004, the Partnership has a
                               non-interest bearing receivable from CCC, a
                               related party to the Partnership, in the amount
                               of approximately $313,000, which primarily
                               originated in 2003. CCC, through its indirect
                               subsidiaries, including the General Partner of
                               the Partnership, earns fees based on revenues and
                               new lease purchases from this fund. CCC intends
                               to repay these receivables, through acquisition
                               fees, debt placement fees and reimbursement of
                               expenses, with a minimum amount of $12,500 per
                               quarter, commencing in the quarter ending March,
                               2004.

                               REIMBURSABLE EXPENSES

                               The General Partner and its affiliates are
                               entitled to reimbursement by the Partnership for
                               the cost of supplies and services obtained and
                               used by the General Partner in connection with
                               the administration and operation of the
                               Partnership from third parties unaffiliated with
                               the General Partner. In addition, the General
                               Partner and its affiliates are entitled to
                               reimbursement for certain expenses incurred by
                               the General Partner and its affiliates in
                               connection with the administration and operation
                               of the Partnership. During the three months ended
                               March 31, 2004 and 2003, the Partnership recorded
                               $311,000 and $211,000, respectively, for
                               reimbursement of expenses to the General Partner.

                               EQUIPMENT ACQUISITION FEE

                               The General Partner is entitled to be paid an
                               equipment acquisition fee of 4% of the purchase
                               price of each item of equipment purchased as
                               compensation for the negotiation of the
                               acquisition of the equipment and lease thereof or
                               sale under a conditional sales contract. During
                               the three months ended March 31, 2004 and 2003,
                               equipment acquisition fees of approximately
                               $25,000 and $40,000, respectively, were earned by
                               the General Partner.

                               DEBT PLACEMENT FEE

                               As compensation for arranging term debt to
                               finance the acquisition of equipment by the
                               Partnership, the General Partner is paid a fee
                               equal to 1% of such indebtedness; provided,
                               however, that such fee shall be reduced to the
                               extent the Partnership incurs such fees to third
                               parties, unaffiliated with the General Partner or
                               the lender, with respect to such indebtedness and
                               no such fee will be paid with respect to
                               borrowings from the General Partner or its
                               affiliates. During the three months ended March
                               31, 2003, debt placement fees of approximately
                               $8,000 were earned by the General Partner. There
                               were no debt placement fees earned by the General
                               Partner during the three months ended March 31,
                               2004.




<PAGE>

                               EQUIPMENT MANAGEMENT FEE

                               The General Partner is entitled to be paid a
                               monthly fee equal to the lesser of (i) the fees
                               which would be charged by an independent third
                               party for similar services for similar equipment
                               or (ii) the sum of (a) two percent of (1) the
                               gross lease revenues attributable to equipment
                               which is subject to full payout net leases which
                               contain net lease provisions plus (2) the
                               purchase price paid on conditional sales
                               contracts as received by the Partnership and (b)
                               5% of the gross lease revenues attributable to
                               equipment which is subject to operating and
                               capital leases. During the three months ended
                               March 31, 2004 and 2003, equipment management
                               fees of approximately $48,000 and $14,000,
                               respectively, were earned by the General Partner.

                               EQUIPMENT LIQUIDATION FEE

                               With respect to each item of equipment sold by
                               the General Partner (other than in connection
                               with a conditional sales contract), a fee equal
                               to the lesser of (i) 50% of the competitive
                               equipment sale commission or (ii) three percent
                               of the sales price for such equipment is payable
                               to the General Partner. The payment of such fee
                               is subordinated to the receipt by the limited
                               partners of the net disposition proceeds from
                               such sale in accordance with the Partnership
                               Agreement. Such fee will be reduced to the extent
                               any liquidation or resale fees are paid to
                               unaffiliated parties. During the three months
                               ended March 31, 2004, equipment liquidation fees
                               of approximately $2,000 were earned by the
                               General Partner. There were no equipment
                               liquidation fees earned by the General Partner
                               during the three months ended March 31, 2003.

<TABLE>
<CAPTION>
5. NOTES PAYABLE               Notes payable consisted of the following:

                                                                                   MARCH 31,         DECEMBER 31,
                                                                                     2004                2003
                                                                                   ---------         ------------
                               <S>                                                   <C>             <C>
                               Installment notes payable to banks; interest
                               ranging from 5.75% to 7.75%, due in monthly
                               installments ranging from $60 to $1,980,
                               including interest, with final payments due from
                               June through December 2004.                         $  38,738           $   56,857
</TABLE>





<PAGE>
<TABLE>
                               <S>                                                 <C>                  <C>
                               Installment notes payable to banks; interest
                               ranging from 5.00% to 6.75%, due in monthly
                               installments ranging from $151 to $4,212,
                               including interest, with final payments due from
                               January through December 2005.                        298,418              396,330

                               Installment notes payable to banks; interest
                               ranging from 4.85% to 6.00%, due in monthly
                               installments ranging from $155 to $22,902,
                               including interest, with final payments due in
                               January thru August 2006.                           1,229,633            1,363,481
                                                                                  ----------            ---------
                                                                                  $1,566,789            1,816,668
                                                                                  ==========            =========

                                    These notes are secured by specific computer
                                    equipment and are nonrecourse liabilities of
                                    the Partnership. Aggregate maturities of
                                    notes payable for each of the periods
                                    subsequent to March 31, 2004 are as follows:
                                                                                                         Amount
                                                                                                       ----------
                                       Nine months ended December 31, 2004                             $  650,649
                                       Year ended December 31, 2005                                       713,529
                                       Year ended December 31, 2006                                       202,611
                                                                                                       ----------
                                                                                                       $1,566,789
                                                                                                       ----------
</TABLE>


6.      SUPPLEMENTAL           Other noncash activities included in the
        CASH FLOW              determination  of net  loss are as follows:
        INFORMATION

Three Months Ended March 31,                       2004        2003
                                                 --------    --------

Lease income, net of interest expense on
  notes payable realized as a result of
  direct payment of principal by lessee to
  bank
                                                 $249,879    $ 73,240

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

                               Noncash investing and financing activities
include the following:

Three Months Ended March 31,                       2004        2003
                                                 --------    --------

   Debt assumed in connection with purchase of
     computer equipment                          $      -    $816,000
                                                 --------    --------

   Equipment acquisition fees earned by
     General Partner upon purchase of
     equipment from prepaid acquisition fees     $ 24,564           -
                                                 --------    --------




<PAGE>


  ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS


CRITICAL ACCOUNTING POLICIES

Financial Reporting Release No. 60, which was released by the Securities and
Exchange Commission, requires all companies to include a discussion of critical
accounting policies or methods used in the preparation of financial statements.
Our significant accounting policies are described in Note 1 of the Notes to the
Financial Statements. The significant accounting policies that we believe are
the most critical to aid in fully understanding our reported financial results
include the following:

COMPUTER EQUIPMENT

Commonwealth Capital Corp, on behalf of the Partnership and other affiliated
partnerships, acquires computer equipment subject to associated debt obligations
and lease revenue and allocates a participation in the cost, debt and lease
revenue to the various partnerships based on certain risk factors. The
Partnership will acquire equipment with no associated debt obligations with the
original contributions. The Partnership plans on acquiring equipment leases with
associated debt obligations from the monthly rental payments associated with the
equipment acquired with its original capital contributions. Depreciation on
computer equipment for financial statement purposes is based on the
straight-line method over estimated useful lives of four years.

REVENUE RECOGNITION

Through March 31, 2004, the Partnership has only entered into operating leases.
Lease revenue is recognized on a monthly basis in accordance with the terms of
the operating lease agreements.

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

LONG-LIVED ASSETS

The Partnership evaluates its long-lived assets when events or circumstances
indicate that the value of the asset may not be recoverable. The Partnership
determines whether an impairment exists by estimating the undiscounted cash
flows to be generated by each asset. If the estimated undiscounted cash flows
are less than the carrying value of the asset then an impairment exists. The
amount of the impairment is determined based on the difference between the
carrying value and the fair value. Fair value is determined based on estimated
discounted cash flows to be generated by the asset.

LIQUIDITY AND CAPITAL RESOURCES

The Partnership's primary source of capital for the three months ended March 31,
2004 was from net proceeds received from sale of equipment of approximately
$55,000. The Partnership's primary source of capital for the three months ended
March 31, 2003 was contributions of approximately $2,102,000. The primary uses
of cash for the three months ended March 31, 2004 and 2003 were for capital




<PAGE>

expenditures for new equipment of approximately $614,000 and $170,000,
respectively, and the payment of preferred distributions to partners of
approximately $375,000 and $105,000, respectively. The Partnership also incurred
offering costs of approximately $232,000 and payment of an advance by the
Partnership to CCC, a related party to the Partnership, in the amount of
approximately $83,000 and $124,000 for the three months ended March 31, 2004 and
2003, respectively.

For the three month period ended March 31, 2004, the Partnership used cash flows
from operating activities of approximately $2,108,000, which includes a net loss
of approximately $170,000, payment of accounts payable, which was primarily for
the purchase of equipment, of approximately $2,260,000, a loss on sale of
equipment of approximately $3,000, and depreciation and amortization expenses of
approximately $728,000. Other noncash activities included in the determination
of net income include direct payments of lease income by lessees to banks of
approximately $250,000.

For the three month period ended March 31, 2003, the Partnership used cash flows
from operating activities of approximately $20,000, which includes a net loss of
approximately $210,000 and depreciation and amortization expenses of
approximately $197,000. Other noncash activities included in the determination
of net income include direct payments of lease income by lessees to banks of
approximately $73,000.

Cash is invested in money market accounts that invest directly in treasury
obligations pending the Partnership's use of such funds to purchase additional
computer equipment, to pay Partnership expenses or to make distributions to the
Partners. At March 31, 2004, the Partnership did not have any cash invested in
these money market accounts due to a change in banks used by the Partnership.

The Partnership's investment strategy of acquiring computer equipment and
generally leasing it under "triple-net leases" to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses. As
of March 31, 2004, the Partnership had future minimum rentals on non-cancelable
operating leases of $3,002,000 for the balance of the year ending December 31,
2004 and $5,959,000 thereafter. At March 31, 2004, the outstanding debt was
$1,567,000, with interest rates ranging from 4.85% to 7.75%, and will be payable
through August 2006.

As of March 31, 2004, the Partnership has a non-interest bearing receivable from
CCC, a related party to the Partnership, in the amount of approximately
$313,000, which primarily originated in 2003. CCC, through its indirect
subsidiaries, including the General Partner of the Partnership, earns fees based
on revenues and new lease purchases from this fund. CCC intends to repay these
receivables, through acquisition fees, debt placement fees and reimbursement of
expenses, with a minimum amount of $12,500 per quarter, commencing in the
quarter ending March, 2004.

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

The Partnership's share of the computer equipment in which they participate at
March 31, 2004 and March 31, 2003 was approximately $8,000 for both period ends,
which is included in the Partnership's fixed assets on their balance sheet, and
the total cost of the equipment shared by the Partnership with other
partnerships at March 31,2004 and March 31, 2003 was approximately $48,000 for
both period ends.





<PAGE>

RESULTS OF OPERATIONS

Three Months Ended March 31, 2004 compared to Three Months Ended March 31, 2003

For the three months ended March 31, 2004, the Partnership recognized income of
approximately $975,000, and expenses of approximately $1,145,000, resulting in a
net loss of approximately $170,000. For the three months ended March 31, 2003,
the Partnership recognized income of approximately $272,000 and expenses of
approximately $482,000 resulting in a net loss of approximately $210,000.

Lease income increased by 258% to $968,000 for the quarter ended March 31, 2004,
from $270,000 for the quarter ended March 31, 2003, primarily due to the fact
that more lease agreements were entered into since the quarter ended March 31,
2003.

Operating expenses, excluding depreciation, primarily consist of accounting,
legal, outside service fees and reimbursement of expenses to CCC for
administration and operation of the Partnership. The expense increased 42% to
approximately $338,000 for the quarter ended March 31, 2004, from $238,000 for
the quarter ended March 31, 2003, which is primarily attributable to an increase
in the amount charged by CCC of approximately $168,000 to the Partnership for
the administration and operation of approximately $83,000, an increase in
professional fees of approximately $57,000 and an increase in due diligence
expenses of approximately $28,000. There was also a decrease in travel expenses
of approximately $45,000 and a decrease in printing of approximately $12,000.

Organizational costs were approximately $22,000 for the three months ended March
31, 2003. There were no organizational costs incurred in the three months ended
March 31, 2004.

The equipment management fee is approximately 5% of the gross lease revenue
attributable to equipment that is subject to operating leases. The equipment
management fee increased 258% to approximately $48,000 for the quarter ended
March 31, 2004, from $14,000 for the quarter ended March 31, 2003, which is
consistent with the increase in lease income.

Depreciation and amortization expenses consist of depreciation on computer
equipment and amortization of equipment acquisition fees. The expenses increased
269% to approximately $728,000 for the quarter ended March 31, 2004, from
$197,000 for the quarter ended March 31, 2003 due to additional equipment being
purchased and the associated acquisition and finance fees being recorded by the
Partnership since the quarter ended March 31, 2003.

Interest expense increased 169% to $28,000 for the quarter ended March 31, 2004
from $10,000 for the quarter ended March 31, 2003, primarily due to the increase
in debt relating to the purchase of computer equipment and due to the fact that
more lease agreements were entered into with debt since the quarter ended March
31, 2003.

The Partnership sold computer equipment with a net book value of approximately
$58,000 for the quarter ended March 31, 2004, for a net loss of approximately
$3,000. The Partnership did not sell computer equipment during the quarter ended
March 31, 2003.



<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Partnership believes its exposure to market risk is not material due to the
fixed interest rate of its long-debt.

ITEM 4. CONTROLS AND PROCEDURES

The Chief Executive Officer and a Financial Officer of the Partnership have
conducted a review of the Partnership's disclosure controls and procedures as of
March 31, 2004.

The Partnership's disclosure controls and procedures include the Partnership's
controls and other procedures designed to ensure that information required to be
disclosed in this and other reports filed under the Securities Exchange Act of
1934, as amended (the " Exchange Act") is accumulated and communicated to the
Partnership's management, including its chief executive officer and a financial
officer, to allow timely decisions regarding required disclosure and to ensure
that such information is recorded, processed, summarized and reported with the
required time quarters.

Based upon this review, the Partnership's Chief Executive Officer and a
Financial Officer have concluded that the Partnership's disclosure controls (as
defined in pursuant to Rule 13a-14 c promulgated under the Exchange Act) are
sufficiently effective to ensure that the information required to be disclosed
by the Partnership in the reports it files under the Exchange Act is recorded,
processed, summarized and reported with adequate timeliness.


<PAGE>

PART II: OTHER INFORMATION

                      COMMONWEALTH INCOME & GROWTH FUND IV

         Item 1.          LEGAL PROCEEDINGS.

                          Inapplicable

         Item 2.          CHANGES IN SECURITIES.

                          Inapplicable

         Item 3.          DEFAULTS UPON SENIOR SECURITIES.

                          Inapplicable

         Item 4.          SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.

                          Inapplicable

         Item 5.          OTHER INFORMATION.

                          Inapplicable

         Item 6.          EXHIBITS AND REPORTS ON FORM 8-K.

                         a) Exhibits:

                            31.1 THE RULE 15D-14(A)
                            31.2 THE RULE 15D-14(A)
                            32.1 SECTION 1350 CERTIFICATION OF CEO
                            32.2 SECTION 1350 CERTIFICATION OF CFO

                         b) Report on Form 8-K: None



<PAGE>

                                    SIGNATURE

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

                                           COMMONWEALTH INCOME & GROWTH FUND III
                                               BY: COMMONWEALTH INCOME &
                                               GROWTH FUND, INC. General Partner

May 17, 2004                               By: /s/ George S. Springsteen
------------------                            ---------------------------------
Date                                       George S. Springsteen
                                           President