UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 T QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2010     or
 
  ̈ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 Commission File Number:                                                                333-62526
 
 COMMONWEALTH INCOME & GROWTH FUND IV
 (Exact name of registrant as specified in its charter)
 
 Pennsylvania
23- 3080409(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)
 
 Brandywine Bldg. One, Suite 200
 2 Christy Drive
 Chadds Ford, PA 19317
 (Address, including zip code, of principal executive offices)
 
 (484) 785-1480
 (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  T      NO   ̈
 
 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).YES   ̈      NO   ̈
 
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "accelerated filer, “large accelerated filer" and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
 Large accelerated filer  ̈
Accelerated filer  ̈Non-accelerated filer  ̈
Smaller reporting company T(Do not check if a smaller reporting company.)
 
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   YES   ̈ NO  T
 
 
 
 
 
 
 1
 
 FORM 10-Q
 SEPTEMBER 30, 2010
 
 TABLE OF CONTENTS
 
 PART IItem 1.
Financial Statements
3Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
16Item 3.
Quantitative and Qualitative Disclosures About Market Risk
22Item 4T.
Controls and Procedures
22PART IIItem 1.
Legal Proceedings
22Item 1 A.
Risk Factors
22Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
22Item 3.
Defaults Upon Senior Securities
22Item 4.
Submission of Matters to a Vote of Securities Holders
22Item 5.
Other Information
22Item 6.
Exhibits
22
 
 
 
 2
 
 
 Part I. FINANCIAL INFORMATION
 Item 1. Financial Statements
  
 Commonwealth Income & Growth Fund IVCondensed Balance SheetsSeptember 30,


December 31,2010


2009(unaudited)ASSETSCash and cash equivalents

$
213,591


$
154,079Lease income receivable, net of reserve of  approximately $32,000 and $280,000 at

September 30, 2010 and December 31, 2009, respectively


52,228



36,475Accounts receivable, other affiliated partnerships


6,825



6,825Refundable deposits


1,130



1,130Prepaid expenses


452



91274,226



198,600Net investment in finance leases


10,612



6,678Technology equipment, at cost


3,089,459



5,489,325Accumulated depreciation


(2,587,010
)


(4,904,218
)502,449



585,107Equipment acquisition costs and deferred expenses, net of accumulated amortization

of approximately $15,000 and  $37,000 at September 30, 2010 and December 31, 2009, respectively


14,544



14,791Prepaid acquisition fees


44,592



52,00659,136



66,797Total assets

$
846,423


$
857,182LIABILITIES AND PARTNERS' CAPITALLIABILITIESAccounts payable

$
76,095


$
81,537Accounts payable, General Partner


296,716



293,076Accounts payable, Commonwealth Capital Corp.


408,567



489,618Other accrued expenses


894



28,785Unearned lease income


35,455



51,821Notes payable


89,435



67,243Total liabilities


907,162



1,012,080PARTNERS' CAPITALGeneral Partner


1,000



1,000Limited Partners


(61,739
)


(155,898
)Total Partners' Capital


(60,739
)


(154,898
)Total Liabilities and Partners' Capital

$
846,423


$
857,182see accompanying notes to condensed financial statements
 
 3
 
 Commonwealth Income & Growth Fund IVCondensed Statements of Operations(unaudited)Three Months Ended


Nine Months EndedSeptember 30,


September 30,2010


2009


2010


2009RevenueLease

$
112,108


$
183,605


$
388,313


$
648,493Interest and other


1,451



243



3,783



686Gain on sale of computer equipment


30,807



2,718



62,999



3,980Total revenue


144,366



186,566



455,095



653,159ExpensesOperating, excluding depreciation


17,977



37,155



91,423



136,089Interest


1,178



2,415



2,959



9,542Depreciation


102,445



141,257



336,428



420,148Amortization of equipment acquisition costs and deferred expenses


2,436



4,720



7,661



15,501Bad debt expense


519



1,195



726



11,195Total expenses


124,555



186,742



439,197



592,475Net income (loss)

$
19,811


$
(176
)

$
15,898


$
60,684Net income (loss) allocated to Limited Partners

$
19,811


$
(176
)

$
15,898


$
60,684Net income (loss) per equivalent Limited Partnership unit

$
0.03


$
(0.00
)

$
0.02


$
0.08Weighted average number of equivalent limited partnership units outstanding during the period


749,123



749,400



749,308



749,400see accompanying notes to condensed financial statements






4
 
 
 Commonwealth Income & Growth Fund IVCondensed Statement of Partners' Capital (Deficit)For the nine months ended September 30, 2010(unaudited)General


LimitedPartner


Partner


General


LimitedUnits


Units


Partner


Partners


TotalBalance, January 1, 2010


50



749,400


$
1,000


$
(155,898
)

$
(154,898
)Net (loss)


-



-



-



15,898



15,898Forgiveness, payables


-



-



-



160,000



160,000Redemptions


-



(1,200
)


-



(6,268
)


(6,268
)Capital contributions- CCC


-



-



-



202,310



202,310Distributions


-



-



-



(277,781
)


(277,781
)Balance, September 30, 2010


50



748,200


$
1,000


$
(61,739
)

$
(60,739
)see accompanying notes to condensed financial statements
  5
 Commonwealth Income & Growth Fund IVCondensed Statements of Cash Flow(unaudited)Nine Months ended


Nine Months endedSeptember 30,


September 30,2010


2009Net cash provided by operating activities

$
267,921


$
333,270Investing activities:Capital Expenditures


(1,009
)


(32,717
)Payments from finance leases


3,057



-Net proceeds from the sale of computer equipment


73,592



21,533Net cash provided by (used in) investing activities


75,640



(11,184
)Financing activities:Redemptions


(6,268
)


-Distributions to partners


(277,781
)


(277,929
)Net cash (used in) financing activities


(284,049
)


(277,929
)Net increase in cash and cash equivalents


59,512



44,157Cash and cash equivalents beginning of period


154,079



952Cash and cash equivalents end of period

$
213,591


$
45,109see accompanying notes to condensed financial statements
  6
 
 
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 
 1. Business
 
 Commonwealth Income and Growth Fund IV (“CIGF4”) was formed on April 20, 2001 under the Pennsylvania Revised Uniform Limited Partnership Act.  The Partnership offered $15,000,000 of Limited Partnership units to the public on October 19, 2001.  The Partnership raised the minimum capital required ($1,150,000) and commenced operations on July 8, 2002.  The Partnership was fully subscribed and terminated its offering of units on September 15, 2003 with 749,950 units ($14,967,729) sold.
 
 The Partnership used the proceeds of the offering to acquire, own and lease various types of  information technology equipment and other similar capital equipment, which is leased primarily to U.S. corporations and institutions.  Commonwealth Capital Corp. (“CCC”), on behalf of the Partnership and other affiliated partnerships, acquires technology equipment subject to associated debt obligations and lease agreements and allocate a participation in the cost, debt and lease revenue to the various partnerships that it manages based on certain risk factors.
 
 The Partnership’s General Partner is Commonwealth Income & Growth Fund, Inc. (the “General Partner”), a Pennsylvania corporation that is an indirect wholly-owned subsidiary of CCC.  CCC is a member of the Investment Program Association (IPA), Financial Planning Association (FPA), and the Equipment Leasing and Finance Association (ELFA).  Approximately ten years after the commencement of operations, the Partnership intends to sell or otherwise dispose of all of its equipment, make final distributions to partners, and to dissolve.  Unless sooner terminated, the Partnership will continue until December 31, 2013.
 
 In an effort to increase cash flow for the Partnership the General Partner forgave $160,000 of payables owed to it by the Partnership during the nine months ended September 30, 2010 and CCC made non-cash capital contributions of equipment to the Partnership in the amount of approximately $202,000. Additionally, the General Partner elected to forego any distributions and allocations of net income owed to it during the nine months ended September 30, 2010.
 
 The General Partner will continue to reassess the funding of limited partner distributions throughout 2010 and will continue to waive certain fees if the General Partner determines it is in the best interest of the Partnership to do so.  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.  Since the Partnership’s leases are on a triple-net basis, no reserve for maintenance and repairs is deemed necessary.
 
 7
 
 2. Summary of Significant Accounting Policies
 
 Basis of Presentation
 
 The financial information presented as of any date other than December 31, 2009 has been prepared from the books and records without audit.  Financial information as of December 31, 2009 has been derived from the audited financial statements of the Partnership, but does not include all disclosures required by generally accepted accounting principles to be included in audited financial statements.  In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial information for the periods indicated, have been included.  For further information regarding the Partnership’s accounting policies, refer to the financial statements and related notes included in the Partnership’s annual report on Form 10-K for the year ended December 31, 2009.  Operating results for the nine months ended September 30, 2010 are not necessarily indicative of financial results that may be expected for the full year ended December 31, 2010.
 
 Disclosure of Fair Value of Financial Instruments
 
 Estimated fair value was determined by management using available market information and appropriate valuation methodologies.  However, judgment was necessary to interpret market data and develop estimated fair value. Cash, receivables, accounts payable and accrued expenses and other liabilities are carried at amounts which reasonably approximate their fair values as of September 30, 2010 and December 31, 2009.
 
 The Partnership’s long-term debt consists of notes payable, which are secured by specific technology equipment and are nonrecourse liabilities of the Partnership. The estimated fair value of this debt at September 30, 2010 and December 31, 2009 approximates the carrying value of these instruments, due to the interest rates approximating current market values.
 
 Disclosure about fair value of financial instruments is based on pertinent information available to management as of September 30, 2010 and December 31, 2009.
 
 Revenue Recognition
 
 Through September 30, 2010, we have primarily entered into operating leases.  Lease revenue is recognized on a monthly straight-line basis which is in accordance with the terms of the lease agreement.
 
 In December 2009, we entered into direct financing leases. Direct financing lease interest is recorded on a monthly basis according to the terms of the lease agreement. For finance leases, we record, at lease inception, unearned finance lease income which is calculated as follows: total lease payments, plus any residual value and initial direct costs, less the cost of the leased equipment. Interest income is earned on the finance lease receivable over the lease term using the interest method.  As required, at each reporting period, management evaluates the finance lease for impairment and considers any need for an allowance for credit losses.
 
 Our leases do not contain any step-rent provisions or escalation clauses nor are lease revenues adjusted based on any index.
 
 8
 
 Use of Estimates
 
 The preparation of financial statements is in conformity with accounting principles generally accepted in the United States of America which 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.
 
 Intangible Assets
 
 Equipment acquisition costs and deferred expenses are amortized on a straight-line basis over two-to-four year lives based on the original term of the lease and the loan, respectively.  Unamortized acquisition costs and deferred expenses are charged to amortization expense when the associated leased equipment is sold.
 
 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 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, 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.
 
 Depreciation on technology equipment for financial statement purposes is based on the straight-line method estimated generally over useful lives of three or four years.
 
 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.  For example, if the Partnership has more investors than another program sponsored by CCC, then higher amounts of expenses related to investor services, mailing and printing costs will be allocated to the Partnership.  Also, while a Partnership is in its offering stage, higher compliance costs are allocated to it than to a program not in its offering stage, as compliance resources are utilized to review incoming investor suitability and proper documentation.  Finally, lease related expenses, such as due diligence, correspondence, collection efforts and analysis and staff costs increase, as programs purchase more leases, and decrease as leases terminate and equipment is sold. All of these factors contribute to CCC’s determination as to the amount of expenses to allocate to the Partnership or to other sponsored programs.  For the Partnership, all reimbursable expenses are expensed as they are incurred.
 
 Forgiveness of Related Party Payables
 
 In accordance with ASC Topic 470-50 Debt Modifications and Extinguishments, the Partnership accounts for forgiveness of related party payables as Partners’ capital transactions.
 
 9
 
 Accounts Receivable
 
 The Partnership monitors accounts receivable to ensure timely and accurate payment by lessees.  Its Lease Relations department is responsible for monitoring accounts receivable and, as necessary, resolving outstanding invoices. Lease revenue is recognized on a monthly straight-line basis which is in accordance with the terms of the lease agreement.
 
 The Partnership reviews a customer’s credit history before extending credit. In the event of a default it may establish a provision for uncollectible accounts receivable based upon the credit risk of specific customers, historical trends and other information.
 
 During the second quarter of 2010, the Partnership wrote off approximately $249,000 of reserves on accounts receivable.
 
 Cash and cash equivalents
 
 At September 30, 2010 cash was held in three accounts maintained at one financial institution. The accounts were, in the aggregate, federally insured for up to $250,000.  At September 30, 2010, the total cash bank balance of approximately $244,000 did not exceed the federally insured limit of $250,000.
 
 The Partnership deposits its funds with a Moody's Aaa-Rated banking institution which is one of only three Aaa-Rated banks listed on the New York Stock Exchange.  The Partnership has not experienced any losses in such accounts, and believes it is not exposed to any significant credit risk. The amount in such accounts will fluctuate throughout 2010 due to many factors, including the pace of additional cash receipts, equipment acquisitions and distributions to investors.
 
 Income Taxes
 
 Pursuant to the provisions of Section 701 of the Internal Revenue Code, the Partnership is not subject to federal income taxes. All income and losses of the Partnership are the liability of the individual partners and are allocated to the partners for inclusion in their individual tax returns. The Partnership does not have any entity-level uncertain tax positions. In addition, the Partnership believes its tax status as a pass-through entity would be sustained under U.S. federal, state or local tax examination. The Partnership files U.S. federal and various state income tax returns and is generally subject to examination by federal, state and local income tax authorities for three years from the filing of a tax return.
 
 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.
 
 10
 Recent Accounting Pronouncements
 
 In August 2010, the FASB issued ASU No. 2010-22 (“ASC Update 2010-22”),Accounting for Various Topics – Technical Corrections  to SEC Paragraphs, An announcement made by the staff of the SEC.This ASU amends various SEC paragraphs of the FASB’s Accounting Standards Codification as a result of external comments received and the issuance of the SEC Staff Accounting Bulletin (SAB) 112 in June of 2009.  The issuance of ASU 2010-22 is not expected to significantly change current practice. This update does not impact the Partnership’s current accounting and reporting practices.
 
 In August 2010, the FASB issued ASU No. 2010-21. (“ASC Update 2010-21”), Accounting for Technical Amendments to Various SEC Rules and Schedules - Amendments to SEC Paragraphs Pursuant to Release No. 33-9026: Technical Amendments to Rules, Forms, Schedules and Codification of Financial Reporting Policies (SEC Update). This ASU amends various SEC paragraphs in the FASC pursuant to SEC Release No. 33-9026. The changes affect provisions relating to consolidation and reporting requirements under conditions of majority and minority ownership positions and ownership by both controlling and non-controlling entities.  The amendments also deal with redeemable and non-redeemable preferred stocks and convertible preferred stocks.  This update does not impact the Partnership’s current accounting and reporting practices.
 
 In July 2010, the FASB issued Accounting Standards Update No. 2010-20 (“ASC Update 2010-20”)Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.  The purpose of this is ASU is to improve transparency in financial reporting by public and nonpublic companies that hold financing receivables, which include loans, lease receivables, and other long-term receivables.  This ASU requires additional disclosures to assist financial statement users in assessing an entity’s credit risk exposures and evaluating the adequacy of its allowance for credit losses.  For public companies, the amendments that require disclosures as of the end of a reporting period are effective for periods ending on or after December 15, 2010. The amendments that require disclosures about activity that occurs during a reporting period are effective for periods beginning on or after December 15, 2010.  The Partnership is currently evaluating the potential impact of the adoption of this ASU on its financial statements.
 
 In January 2010, the FASB issued Accounting Standards Update No. 2010-06 (“ASC Update 2010-06”) Improving Disclosures about Fair Value Measurements, to enhance the usefulness of fair value measurements. ASU 2010-06 amends the disclosures about fair value measurements in FASB Accounting Standards CodificationTM (ASC) 820-10, Fair Value Measurements and Disclosures.  The amended guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disaggregation requirement for the reconciliation disclosure of Level 3 measurements, which is effective for fiscal years beginning after December 15, 2010 and for interim periods within those years. The Partnership adopted this ASU in the first quarter of 2010. The adoption of this standard did not have a material impact on the Partnership’s financial statements.
 
 In January 2010, the FASB issued Accounting Standards Update No. 2010-04 (“ASC Update 2010-04”)Accounting for Various Topics – Technical Corrections to SEC Paragraphs.  The purpose of this ASU is to make technical corrections to certain guidance issued by the SEC that is included in the FASB Accounting Standards Codification (ASC).  Primarily, this ASU changes references to various FASB and AICPA pronouncements to the appropriate ASC paragraph numbers. The Partnership adopted this ASU in the first quarter of 2010. The adoption of this standard did not have a material impact on the Partnership’s financial statements.
 
 11
 
 In December 2009, the FASB issued Accounting Standards Update No. 2009-17, (“ASC Update 2009-17”),Consolidations (ASC 810) – Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. This ASU incorporates FAS 167, Amendments to FASB Interpretation No. 46(R),into the Codification. The new requirements are effective as of the beginning of thePartnership’s first fiscal year beginning after November 15, 2009. During the first quarter of 2010, the Partnership adopted this ASU. The adoption of this standard did not have a material impact on the Partnership’s financial statements.
 In December 2009, the FASB issued Accounting Standards Update No. 2009-16, (“ASC Update 2009-16”) Transfers and Servicing (ASC 860) – Accounting for Transfers of Financial Assets. This ASU incorporates FAS 166, Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140,into the FASB Accounting Standards Codification (the Codification).The new requirements are effective for transfers of financial assets occurring in fiscal years beginning after November 15, 2009.This standard will require more information about transferred financial assets, including securitization transactions, and where entities have continuing exposure to the risks related to transferred financial assets. During the first quarter of 2010, the Partnership adopted this ASU. The adoption of this standard did not have a material impact on the Partnership’s financial statements.
 
 3. Information Technology Equipment
 
 The Partnership is the lessor of equipment under leases with periods that generally range from 12 to 36 months.  In general, associated costs such as repairs and maintenance, insurance and property taxes are paid by the lessee.
 
 Through September 30, 2010, the Partnership has primarily entered into operating leases.  Lease revenue is recognized on a monthly straight-line basis which is in accordance with the terms of the lease agreement.
 
 Beginning in December 2009, the Partnership entered into direct financing leases. Direct financing lease interest is recorded on a monthly basis according to the terms of the lease agreement. For finance leases, we record, at lease inception, unearned finance lease income which is calculated as follows: total lease payments, plus any residual value and initial direct costs, less the cost of the leased equipment. Interest income is earned on the finance lease receivable over the lease term using the interest method.  As required, at each reporting period, management evaluates the finance lease for impairment and considers any need for an allowance for credit losses.
 
 The Partnership determined that no impairment charge was necessary at September 30, 2010 and 2009.
 
 Remarketing fees are paid to the leasing companies from which the Partnership purchases leases.  These are fees earned by the leasing companies when the initial terms of the lease have been met and the lessee extends or renews the lease, or the equipment is sold.  The General Partner believes that this strategy adds value since it entices the leasing company to remain actively involved with the lessee and encourages potential extensions, remarketing or sale of equipment.  This strategy is designed to minimize any conflicts the leasing company may have with a new lessee and may assist in maximizing overall portfolio performance.  The remarketing fee is tied into lease performance thresholds and is a factor in the negotiation of the fee.  Remarketing fees incurred in connection with lease extensions are accounted for as operating costs.  Remarketing fees incurred in connection with the sale of technology equipment are included in our gain or loss calculations.  For the nine months ended September 30, 2010 and 2009, remarketing fees were incurred in the amounts of approximately $51,000 and $74,000, respectively. For the nine months ended September 30, 2010 and 2009 remarketing fees were paid in the amount of approximately $63,000 and $100,000, respectively.
 
 12
 
 The Partnership’s share of the technology equipment in which it participates with other partnerships at September 30, 2010 and December 31, 2009 was approximately $1,432,000 and $1,264,000, respectively, and is included in the Partnership’s fixed assets on its balance sheet.  The total cost of the equipment shared by the Partnership with other partnerships at September 30, 2010 and December 31, 2009 was approximately $19,030,000 and $18,274,000, respectively. The Partnership’s share of the outstanding debt associated with this equipment at September 30, 2010 and December 31, 2009 was approximately $89,000 and $67,000, respectively.  The total outstanding debt associated with this equipment at September 30, 2010 and December 31, 2009 was approximately $1,104,000 and $1,853,000, respectively.
 
 Sharing in the acquisition of a lease portfolio gives the fund an opportunity to acquire additional assets and revenue streams, while allowing the fund to remain diversified and reducing its overall risk with respect to one portfolio.
 
 The following is a schedule of future minimum rentals on noncancellable operating leases at September 30, 2010:
 
 AmountThree months ended December 31, 2010

$
109,000Year Ended December 31, 2011


168,000Year Ended December 31, 2012


92,000Year Ended December 31, 2013


14,000$
383,000
 
 The following lists the components of the net investment in direct financing leases at September 30, 2010:
 
 AmountTotal minimum lease payments to be received

$
11,200Estimated residual value of leased equipment (unguaranteed)


1,200Less: unearned income


(1,800)Net investment in direct finance leases

$
10,600
 
 The following is a schedule of future minimum rentals on noncancelable direct financing leases at September 30, 2010:
 
 AmountThree months ended December 31, 2010

$
1,400Year Ended December 31, 2011


5,600Year Ended December 31, 2012


3,000Year Ended December 31, 2013


1,200$
11,200
 
 13
 
 4. Related Party Transactions
 
 Forgiveness of Related Party payables
 
 During the nine months ended September 30, 2010, CCC and the General Partner forgave payables owed to them by the Partnership in the amount of $160,000.  Additionally, CCC made noncash capital contributions of equipment to the Partnership in the amount of approximately $202,000.
 
 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. See "Summary of Significant Accounting Policies - Reimbursable Expenses,” above.
 
 Equipment acquisition fee
 The General Partner earned 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. At September 30, 2010, the remaining balance of prepaid acquisition fees was approximately $45,000, which is expected to be earned in future periods.
 
 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 charges by and 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 leases and 2% of the gross lease revenues attributable to equipment which is subject to finance leases. For nine months ended September 30, 2010 total equipment management fees of approximately $19,000 were earned but were waived by the General Partner. For the nine months ended September 30, 2009, total equipment management fees of approximately $32,000 were earned but waived 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. Debt placement fees of approximately $700 were earned and were waived by the General Partner during 2010.
 
 14
 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 he limited partners of (i) a return of their net capital contributions and a 10% per annum cumulative return, compounded daily, on adjusted capital contribution and (ii) the net disposition proceeds form such sale in accordance with the Partnership Agreement. Such fee will be reduced to the extent any liquidation of resale fees are paid to unaffiliated parties. For the nine months ended September 30, 2010, equipment liquidation fees were waived by the General Partner.
 
 
 For the nine months ended September 30,
2010
2009we incurred the following:Reimbursable expenses
$32,000
$66,000Equipment acquisition fee
$7,000
$7,000Equipment management fee
$-
$ -Debt placement fee
$-
$ -Equipment liquidation fee
$-
$1,000
 
 5. Notes Payable
 
 Notes payable consisted of the following approximate amounts:
 
 September 30, 2010


December 31, 2009Installment notes payable to bank; interest at 5.75% due in quarterly installments ranging from $2,528 to $5,083, including interest, with final payments from January through July 2011

$
35,000


$
67,000Installment note payable to bank; interest at 7.50% due in quarterly installments of $6,632, including interest, with final payment in October 2012


54,000



-$
89,000


$
67,000
 
 The notes are secured by specific technology equipment and are nonrecourse liabilities of the Partnership.  As such, the notes do not contain any debt covenants with which we must comply on either an annual or quarterly basis.  Aggregate maturities of notes payable for each of the periods subsequent to September 30, 2010 are as follows:
 
 AmountThree months ended December 31, 2010

$
17,000Year ended December 31, 2011


47,000Year ended December 31, 2012


25,000$
89,000
 
 
 15
 6. Supplemental Cash Flow Information
 
 Other noncash activities included in the determination of net loss are as follows:
 
 Nine months ended September 30,

2010


2009Lease revenue net of interest expense on notes payable realized as a result of  direct payment of  principal by lessee to bank

$
45,000


$
185,000
 
 No interest or principal on notes payable was paid by the Partnership because direct payment was made by lessee to the bank in lieu of collection of lease income and payment of interest and principal by the Partnership.
 
 Noncash investing and financing activities include the following:
 
 Nine months ended September 30,

2010


2009Forgiveness of related party payables recorded as a capital contribution

$
160,000


$
117,000Capital Contribution- equipment transfer from CCC*

$
202,000


$
153,000Debt assumed in connection with purchase of technology equipment

$
67,000


$
-Equipment acquisition fees earned by General Partner upon purchase of equipment

$
7,000


$
7,000
 
 *For the nine months ended September 30, 2010, CCC contributed equipment of approximately $202,000. Of this amount, approximately $6,000 was a capital contribution of a direct financing lease.
 
 Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
 FORWARD LOOKING STATEMENTS
 
 Forward-looking statement disclaimers, or the “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995.
 
 This section, as well as other portions of this document, includes certain forward-looking statements about our business and our prospects, tax treatment of certain transactions and accounting matters, sales of securities, expenses, cash flows, distributions, investments and operating and capital requirements. Such forward-looking statements include, but are not limited to: acquisition policies of our general partner; the nature of present and future leases; provisions for uncollectible accounts; the strength and sustainability of the U.S. economy; the continued difficulties in the credit markets and their impact on the economy in general; and the level of future cash flow, debt levels, revenues, operating expenses, amortization and depreciation expenses. You can identify those statements by the use of words such as “could,” “should,” “would,” “may,” “will,” “project,” “believe,” “anticipate,” “expect,” “plan,” “estimate,” “forecast,” “potential,” “intend,” “continue” and “contemplate,” as well as similar words and expressions.
 
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 Actual results may differ materially from those in any forward-looking statements because any such statements involve risks and uncertainties and are subject to change based upon various important factors, including, but not limited to, nationwide economic, financial, political and regulatory conditions; the health of debt and equity markets, including interest rates and credit quality; the level and nature of spending in the information, medical and telecommunications technologies markets; and the effect of competitive financing alternatives and lease pricing.
 
 Readers are also directed to other risks and uncertainties discussed in other documents we file with the SEC, including, without limitation, those discussed in Item 1A. “Risk Factors.” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 filed with the SEC. We undertake no obligation to update or revise any forward-looking information, whether as a result of new information, future developments or otherwise.
 
 CRITICAL ACCOUNTING POLICIES
 
 Our discussion and analysis of our financial condition and results of operations are based upon our financial statements which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base these estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
 
 We believe that our critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements.
 
 See Note 2 to our condensed financial statements included herein for a discussion of recent accounting pronouncements.
 
 INFORMATION TECHNOLOGY EQUIPMENT
 
 CCC, on our behalf and on behalf of other affiliated partnerships, acquires information technology 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.  Depreciation on information technology equipment for financial statement purposes is based on the straight-line method estimated generally over useful lives of three to four years.
 
 According to the North American Equipment Dealers Association, American companies are increasing their purchases of equipment and software at the fastest pace since the late 1990's, in order to replace older equipment or to improve efficiency.
 
 In October 2010, the ELFA released its 2010 State of the Equipment Finance Industry Report.  According to the report, the Commerce Department stated that equipment purchases in the second quarter of 2010 increased by nearly 22% (based on an inflation-adjusted annual rate). Also, with more restrictive bank regulations and capital requirements, corporations have reduced commercial borrowing for new equipment purchases.  Given the tighter lending environment, corporations have been relying on internal liquidity to finance new equipment investments, according to the report.
 
 The ELFA reports states that the trend of equipment finance volume improved significantly from April 2010 to July 2010, as evidenced by the slowing decline of month over month new business volume comparisons, and that many industry leaders and analysts expect significant growth to return over the next 4 quarters.
 
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 ACCOUNTS RECEIVABLE
 
 We monitor our accounts receivable to ensure timely and accurate payment by lessees.  Our Lease Relations department is responsible for monitoring accounts receivable and, as necessary, resolving outstanding invoices. Lease revenue is recognized on a monthly straight-line basis which is in accordance with the terms of the lease agreement.
 
 We review a customer’s credit history before extending credit. In the event of a default, we may establish a provision for uncollectible accounts receivable based upon the credit risk of specific customers, historical trends or other information.
 
 REVENUE RECOGNITION
 
 Through September 30, 2010, we have primarily entered into operating leases.  Lease revenue is recognized on a monthly straight-line basis which is in accordance with the terms of the lease agreement.
 
 In December 2009, we entered into direct financing leases. Direct financing lease interest is recorded on a monthly basis according to the terms of the lease agreement. For finance leases, we record, at lease inception, unearned finance lease income which is calculated as follows: total lease payments, plus any residual value and initial direct costs, less the cost of the leased equipment. Interest income is earned on the finance lease receivable over the lease term using the interest method.  As required, at each reporting period, management evaluates the finance lease for impairment and considers any need for an allowance for credit losses.
 
 Our leases do not contain any step-rent provisions or escalation clauses nor are lease revenues adjusted based on any index.
 
 LONG-LIVED ASSETS
 
 We evaluate our long-lived assets when events or circumstances indicate that the value of the asset may not be recoverable.  We determine whether 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 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.
 
 LIQUIDITY AND CAPITAL RESOURCES
 
 Sources of Cash
 
 Our primary sources of cash for the nine months ended September 30, 2010 were from operating activities of approximately $268,000 and proceeds from the sale of equipment in the amount of approximately $74,000.
 
 This compares to the nine months ended September 30, 2009 where our primary sources of cash were from operating activities of approximately $333,000 and proceeds from the sale of equipment of approximately $22,000.
 
 Additionally, for the nine months ended September 30, 2010 and 2009, CCC made non-cash capital contributions of equipment in the amount of approximately $202,000 and $153,000, respectively.
 
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 Uses of Cash
 
 Our primary use of cash for the nine months ended September 30, 2010 was for the payment of distributions to partners of approximately $278,000.  This compares to the nine months ended September 30, 2009 where our primary use of cash was for capital expenditures for new equipment of $33,000, and for the payment of distributions to partners of approximately $278,000.
 
 While we intend to invest additional capital in equipment during the remainder of 2010, the amount of such additional investment is uncertain, as available funds will first be committed to the payment of investor distributions and operating expenses.
 
 Cash from Operating Activities
 
 For the nine months ended September 30, 2010, cash was provided by operating activities of approximately $268,000, which includes net income of approximately $16,000, a gain on sale of equipment of approximately $63,000 and depreciation and amortization expenses of approximately $344,000. Other non-cash activities included in the determination of net income include direct payments of lease income by lessees to banks of approximately $45,000.
 
 For the nine months ended September 30, 2009, cash was provided by operating activities of approximately $333,000, which includes net income of approximately $61,000, a gain on sale of equipment of approximately $4,000, decreases in accounts payable of $55,000 and depreciation and amortization expenses of approximately $436,000. Other non-cash activities included in the determination of net income include direct payments of lease income by lessees to banks of approximately $185,000.
 
 Cash and cash equivalents
 
 At September 30, 2010 cash was held in three accounts maintained at one financial institution. The accounts were, in the aggregate, federally insured for up to $250,000.  At September 30, 2010, the total cash bank balance of approximately $244,000 did not exceed the federally insured limit of $250,000.
 
 We deposit our funds with a Moody's Aaa-Rated banking institution which is one of only three Aaa-Rated banks listed on the New York Stock Exchange.  We have not experienced any losses in such accounts, and believe that we are not exposed to any significant credit risk. The amount in such accounts will fluctuate throughout 2010 due to many factors, including the pace of additional cash receipts, equipment acquisitions and distributions to investors.
 
 As of September 30, 2010, we had future minimum rentals on non-cancelable operating leases of approximately $109,000 for the balance of the year ending December 31, 2010 and approximately $274,000 thereafter.    As of September 30, 2010, we had future minimum rentals on non-cancelable finance leases of approximately $1,000 for the balance of the year ending December 31, 2010 and approximately $10,000 thereafter.
 
 As of September 30, 2010, our debt was approximately $89,000 with an interest rates ranging from 5.75% to 7.50% and is payable through October 2012.
 
 In an effort to increase cash flow our General Partner forgave $160,000 of payables owed to it by us during the nine months ended September 30, 2010 and CCC made non-cash capital contributions of equipment in the amount of approximately $202,000. Additionally, our General Partner elected to forgo any distributions and allocations of net income owed to it during the nine months ended September 30, 2010 and 2009.
 
 Our General Partner will continue to reassess the funding of limited partner distributions throughout 2010 and will continue to waive certain fees if the General Partner determines it is in our best interest to do so.  If available cash flow or net disposition proceeds are insufficient to cover our expenses and liabilities on a short and long term basis, we will attempt to obtain additional funds by disposing of or refinancing equipment, or by borrowing within our permissible limits.  Since our leases are on a triple-net basis, no reserve for maintenance and repairs is deemed necessary.
 
 
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 RESULTS OF OPERATIONS
 
 Three Months Ended September 30, 2010 compared to
 three Months September 30, 2009
 
 Revenue
 
 For the three months ended September 30, 2010, we recognized revenue of approximately $144,000. This compares to the three months ended September 30, 2009, where we recognized revenue of approximately $187,000.  The decrease in revenue from the prior period is primarily due to a decrease in lease revenue.
 
 Lease revenue decreased to $112,000 for the three months ended September 30, 2010, from $184,000 for the three months ended September 30, 2009.  This decrease was primarily due to more lease agreements ending versus new lease agreements being acquired during the three months ended September 30, 2010.
 
 Sale of Information Technology Equipment
 
 We sold technology equipment with a net book value of approximately $10,000 for the three months ended September 30, 2010, for a net gain of approximately $31,000.  We sold technology equipment with a net book value of approximately $3,000 for the three months ended September 30, 2009, for net gain of approximately $3,000.
 
 Operating Expenses
 
 Our operating expenses, excluding depreciation, primarily consist of accounting, legal, outside service fees and reimbursement of expenses to CCC, a related party, for administration and operation of the Partnership.  These expenses decreased to approximately $18,000 for the three months ended September 30, 2010, compared to $37,000 for the three months ended September 30, 2009.  In addition to decreases in accounting, legal and various administrative expenses, this decrease is primarily attributable to our management’s decision to waive certain fees during the three months ended September 30, 2010.
 
 Equipment Management Fees
 
 We pay an equipment management fee to our General Partner for managing our equipment portfolio. The equipment management fee is approximately 5% of the gross lease revenue attributable to equipment that is subject to operating leases and 2% of the gross lease revenue attributable to equipment that is subject to finance leases.  In an effort to increase cash flows, our General Partner earned and waived total equipment management fees of approximately $5,600 for the three months ended September 30, 2010.  This fee was approximately $9,000 for the three months ended September 30, 2009 and was also waived by our General Partner.
 
 Depreciation and Amortization Expense
 
 Depreciation and amortization expenses consist of depreciation on information technology equipment, including impairment charges, and amortization of equipment acquisition fees. The expenses decreased to approximately $105,000 for the three months ended September 30, 2010, from $146,000 for the three months ended September 30, 2009 due to equipment and acquisition fees being fully depreciated and not being replaced with as many new purchases of equipment.
 
 We determined no impairment was necessary at September 30, 2010 and 2009.
 
 Net Income (Loss)
 
 For the three months ended September 30, 2010, we recognized revenue of approximately $144,000, and expenses of approximately $125,000 resulting in net income of approximately $20,000. The increase in net income from the prior period is primarily due to a decline in operating expenses as a result of leases being terminated and not being replaced with as many new leases.  For the three months ended September 30, 2009, we recognized revenue of approximately $187,000, and expenses of approximately $187,000, resulting in a net loss of approximately $200.
 
 
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 Nine Months Ended September 30, 2010 compared to
 Nine Months September 30, 2009
 
 
 Revenue
 
 For the nine months ended September 30, 2010, we recognized revenue of approximately $455,000. This compares to the nine months ended September 30, 2009, where we recognized revenue of approximately $653,000.  The decrease in revenue from the prior period is primarily due to a decrease in lease revenue.
 
 Lease revenue decreased to $388,000 for the nine months ended September 30, 2010, from $648,000 for the nine months ended September 30, 2009.  This decrease was primarily due to more lease agreements ending versus new lease agreements being acquired during the nine months ended September 30, 2010.
 
 Sale of Information Technology Equipment
 
 We sold technology equipment with a net book value of approximately $11,000 for the nine months ended September 30, 2010, for a net gain of approximately $63,000.  We sold technology equipment with a net book value of approximately $17,000 for the nine months ended September 30, 2009, for a net gain of approximately $4,000.
 
 Operating Expenses
 
 Our operating expenses, excluding depreciation, primarily consist of accounting, legal, outside service fees and reimbursement of expenses to CCC, a related party, for administration and operation of the Partnership.  These expenses decreased to approximately $91,000 for the nine months ended September 30, 2010, compared to $136,000 for the nine months ended September 30, 2009.  In addition to decreases in accounting, legal and various administrative expenses, this decrease is primarily attributable to our management’s decision to waive certain fees during the nine months ended September 30, 2010.
 
 Equipment Management Fees
 
 We pay an equipment management fee to our General Partner for managing our equipment portfolio. The equipment management fee is approximately 5% of the gross lease revenues attributable to equipment which is subject to operating leases and 2% of the gross lease revenues attributable to equipment which is subject to finance leases. In an effort to increase cash flows, our General Partner waived equipment management fees of approximately $19,000 for the nine months ended September 30, 2010.  This fee was approximately $32,000 for the nine months ended September 30, 2009 and was also waived by our General Partner.
 
 Depreciation and Amortization Expense
 
 Depreciation and amortization expenses consist of depreciation on information technology equipment, including impairment charges, and amortization of equipment acquisition fees. The expenses decreased to approximately $344,000 for the nine months ended September 30, 2010, from $436,000 for the nine months ended September 30, 2009 due to equipment and acquisition fees being fully depreciated and not being replaced with as many new purchases of equipment.
 
 We determined no impairment charge was necessary at September 30, 2010 and 2009.
 
 Net Income (Loss)
 
 For the nine months ended September 30, 2010, we recognized revenue of approximately $455,000, and expenses of approximately $439,000 resulting net income of approximately $16,000. The decrease in net income from the prior period is primarily due to a decline in lease revenue as a result of more lease agreements ending versus new lease agreements being acquired. This was offset by decreases in operating expenses and depreciation expense as a result of lease agreements ending and not being replaced with as many new leases. For the nine months ended September 30, 2009, we recognized revenue of approximately $653,000, and expenses of approximately $592,000, resulting in net income of approximately $61,000.
 
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 Item 3.
Quantitative and Qualitative Disclosures About Market RiskN/AItem 4T.
Controls and Procedures
 
 Our management, under the supervision and with the participation of the principal executive officer and principal financial officer, have evaluated the effectiveness of our controls and procedures related to our reporting and disclosure obligations as of September 30, 2010 which is the end of the period covered by this Quarterly Report on Form 10-Q.  Based on that evaluation, the principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective to provide that (a) material information relating to us, including our consolidated affiliates is made known to these officers by us and our consolidated affiliates’ other employees, particularly material information related to the period for which this periodic report is being prepared; and (b) this information is recorded, processed, summarized, evaluated and reported, as applicable, within the time periods specified in the rules and forms promulgated by the Securities and Exchange Commission.  There have been no significant changes in the General Partner’s internal controls or in other factors that could significantly affect our disclosure controls and procedures in the third quarter of 2010 or subsequent to the date of the evaluation.
  Part II:
OTHER INFORMATIONItem 1.
Legal ProceedingsN/AItem 1A
Risk FactorsN/AItem 2.
Unregistered Sales of Equity Securities and Use of ProceedsN/AItem 3.
Defaults Upon Senior SecuritiesN/AItem 4.
Submission of Matters to a Vote of Securities HoldersN/AItem 5.
Other InformationN/AItem 6.
Exhibits
 
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 31.1 THE RULE 15d-14(a) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
 31.2 THE RULE 15d-14(a) CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
 32.1 SECTION 1350 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
 32.2 SECTION 1350 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
 
 SIGNATURE
 
 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 COMMONWEALTH INCOME & GROWTH FUND IVBY: COMMONWEALTH INCOME & GROWTH FUND, INC., General PartnerNovember 15, 2010
By: /s/ Kimberly A. Springsteen-AbbottDate
Kimberly A. Springsteen-AbbottChief Executive OfficerNovember 15, 2010
By: /s/ Lynn A. FranceschinaDate
Lynn A. FranceschinaExecutive Vice President, Chief Operating Officer