<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, 2006

[_]  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          (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 a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):

     Large accelerated filer [_] Accelerated filer [_] Non-accelerated filer [X]

     Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act) YES [_] NO [X]


                                                                               1

<PAGE>

                                    FORM 10-Q
                                 MARCH 31, 2006

                                TABLE OF CONTENTS

                                         PART I
Item 1.     Condensed Financial Statements                                     3
Item 2.     Management's Discussion and Analysis of Financial Condition and
            Results of Operations                                             12
Item 3.     Quantitative and Qualitative Disclosures About Market Risk        15
Item 4.     Controls and Procedures                                           15

                                        PART II
Item 1.     Legal Proceedings                                                 15
Item 1 A.   Risk Factors                                                      16
Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds.      18
Item 3.     Defaults Upon Senior Securities                                   18
Item 4.     Submission of Matters to a Vote of Securities Holders             18
Item 5.     Other Information                                                 18
Item 6.     Index to Exhibits                                                 18

            Signatures

            Certifications


                                                                               2

<PAGE>

                      COMMONWEALTH INCOME & GROWTH FUND IV
                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                          MARCH 31,    DECEMBER 31,
                                                             2006          2005
                                                         -----------   ------------
                                                         (UNAUDITED)
<S>                                                      <C>           <C>
ASSETS
Cash and cash equivalents                                $   783,970   $   891,708
Lease income receivable, net of reserves of $260,937
   as of March 31, 2006 and  December 31, 2005               379,658       180,993
Other receivables - other affiliated partnerships             27,758        22,684
Deferred revenue                                                 108           189
Refundable deposits                                            1,130         1,130
Prepaid expenses                                               9,072            --
                                                         -----------   -----------
                                                           1,201,696     1,096,704
                                                         -----------   -----------
Computer equipment, at cost                               13,112,199    14,103,160
Accumulated depreciation                                  (6,941,366)   (7,161,684)
                                                         -----------   -----------
                                                           6,170,833     6,941,475
                                                         -----------   -----------
Equipment acquisition costs and deferred expenses, net       185,479       220,786
Other receivables - Commonwealth Capital Corp                170,605       206,132
Prepaid acquisition fees                                      83,796        91,671
                                                         -----------   -----------
                                                             439,880       518,589
                                                         -----------   -----------
TOTAL ASSETS                                             $ 7,812,409   $ 8,556,768
                                                         ===========   ===========

LIABILITIES AND PARTNERS' CAPITAL

LIABILITIES
Accounts payable, primarily for equipment purchases      $   272,243   $   102,254
Accounts payable - General Partner                            90,292        39,628
Unearned lease income                                        102,122       119,720
Notes payable                                              1,454,876     1,653,066
                                                         -----------   -----------
TOTAL LIABILITIES                                          1,919,533     1,914,668
                                                         -----------   -----------
PARTNERS' CAPITAL
General partner                                                1,000         1,000
Limited partners                                           5,891,876     6,641,100
                                                         -----------   -----------
TOTAL PARTNERS' CAPITAL                                    5,892,876     6,642,100
                                                         -----------   -----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL                  $ 7,812,409     8,556,768
                                                         ===========   ===========
</TABLE>

            see accompanying notes to condensed financial statements


                                                                               3

<PAGE>

                      COMMONWEALTH INCOME & GROWTH FUND IV
                       CONDENSED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED   THREE MONTHS ENDED
                                                    MARCH 31, 2006       MARCH 31, 2005
                                                  ------------------   ------------------
                                                                (UNAUDITED)
<S>                                                   <C>                  <C>
INCOME
Lease                                                 $  953,201           $1,252,838
Interest and other                                         3,940                  551
                                                      ----------           ----------
TOTAL INCOME                                             957,141            1,253,389
                                                      ----------           ----------
EXPENSES
Operating, excluding depreciation                        201,742              157,306
Equipment management fee - General Partner                47,660               59,986
Interest                                                  22,927               29,253
Depreciation                                             799,012              912,250
Amortization of equipment
   acquisition costs and deferred expenses                52,694               53,645
Loss on sale of computer equipment                       207,954                8,805
                                                      ----------           ----------
TOTAL EXPENSES                                         1,331,989            1,221,246
                                                      ----------           ----------
NET INCOME (LOSS)                                     $ (374,848)          $   32,144
                                                      ==========           ==========
NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS       $ (378,591)          $   28,396
                                                      ==========           ==========
NET INCOME (LOSS) PER EQUIVALENT LIMITED
   PARTNERSHIP UNIT                                   $    (0.95)          $     0.04
                                                      ==========           ==========
WEIGHTED AVERAGE NUMBER OF EQUIVALENT LIMITED
PARTNERSHIP UNITS OUTSTANDING DURING THE PERIOD          749,400              749,950
                                                      ==========           ==========
</TABLE>

            see accompanying notes to condensed financial statements


                                                                               4

<PAGE>

                      COMMONWEALTH INCOME & GROWTH FUND IV
                    CONDENSED STATEMENTS OF PARTNERS' CAPITAL
                    FOR THE THREE MONTHS ENDED MARCH 31, 2006
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                        GENERAL   LIMITED
                                        PARTNER   PARTNER   GENERAL     LIMITED
                                         UNITS     UNITS    PARTNER     PARTNER       TOTAL
                                        -------   -------   -------   ----------   ----------
<S>                                        <C>    <C>       <C>       <C>          <C>
PARTNERS' CAPITAL - DECEMBER 31, 2005      50     749,400   $ 1,000   $6,641,099   $6,642,099
   Net income (loss)                       --          --     3,744     (378,591)    (374,848)
      Redemption                                                              --           --
   Distributions                           --          --    (3,744)    (370,632)    (374,375)
                                          ---     -------   -------   ----------   ----------
PARTNERS' CAPITAL - MARCH 31, 2006         50     749,400   $ 1,000   $5,891,876   $5,892,876
                                          ===     =======   =======   ==========   ==========
</TABLE>

            see accompanying notes to condensed financial statements


                                                                               5

<PAGE>

                      COMMONWEALTH INCOME & GROWTH FUND IV
                        CONDENSED STATEMENTS OF CASH FLOW
               FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005

                                                        2006       2005
                                                     ---------   ---------
                                                          (UNAUDITED)

NET CASH PROVIDED BY OPERATING ACTIVITIES            $ 312,492   $ 359,988
                                                     ---------   ---------
INVESTING ACTIVITIES:
Capital expenditures                                  (229,103)   (284,023)
Prepaid acquisition fees                                 7,875      (1,818)
Net proceeds from sale of computer equipment           157,233      18,066
Equipment acquisition fees paid to General Partner     (15,742)    (25,314)
                                                     ---------   ---------
NET CASH (USED IN) INVESTING ACTIVITIES                (79,737)   (293,089)
                                                     ---------   ---------
FINANCING ACTIVITIES:
Redemptions                                                 --      (9,617)
Distributions to partners                             (374,375)   (374,775)
Other receivable, Commonwealth Capital Corp             35,527         324
Debt Placement fee paid to the General Partner          (1,645)     (5,686)
                                                     ---------   ---------
NET CASH (USED IN)  FINANCING ACTIVITIES              (340,493)   (389,755)
                                                     ---------   ---------
Net (decrease) in cash and cash equivalents           (107,738)   (322,856)
Cash and cash equivalents, beginning of period         891,708     719,161
                                                     ---------   ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD             $ 783,970   $ 396,305
                                                     =========   =========

            SEE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS


                                                                               6

<PAGE>

                     NOTES TO CONDENSED 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, 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. 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 SIGNIFICANT      BASIS OF PRESENTATION
     ACCOUNTING POLICIES
                                 The financial information presented as of any
                                 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, 2005. Operating
                                 results for the three-month period ended March
                                 31, 2006 are not necessarily indicative of
                                 financial results that may be expected for the
                                 full year ended December 31, 2006.

                                 LONG-LIVED ASSETS

                                 The Partnership evaluates its long-lived assets
                                 when events or circumstances indicate that the
                                 value of the asset may not be


                                                                               7

<PAGE>

                                 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. The Partnership
                                 determined that no impairment had occurred
                                 during the three months ended March 31, 2006.

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

                                 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.

3.   COMPUTER EQUIPMENT          The Partnership is the lessor of 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.

                                 Through March 31, 2006, 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.

                                 Remarketing fees are paid to the leasing
                                 companies from which the Partnership purchases
                                 leases. These are fees that are earned by the
                                 leasing companies when the initial terms of the
                                 lease have been met. The General Partner
                                 believes that this strategy adds value since it
                                 entices the leasing company to "stay with the
                                 lease" for potential extensions, remarketing or
                                 sale of equipment. This strategy potentially
                                 minimizes any conflicts the leasing company may
                                 have with a potential new lease and will
                                 potentially assist in maximizing overall
                                 portfolio performance. The remarketing fee is
                                 tied into lease performance thresholds and is
                                 factored 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 computer equipment are
                                 included in our gain or loss calculations. For
                                 the three month period ended March 31, 2006 and
                                 2005, remarketing fees were incurred in the
                                 amounts of $5,000 and $2,000 respectively

                                 The Partnership's share of the computer
                                 equipment in which they participate at March
                                 31, 2006 and December 31, 2005 was
                                 approximately $1,205,000 and $1,188,000
                                 respectively, 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


                                                                               8

<PAGE>

                                 other partnerships at March 31, 2006 and
                                 December 31, 2005 was approximately $3,131,000
                                 and $2,667,000 respectively. The Partnership's
                                 share of the outstanding debt associated with
                                 this equipment at March 31, 2006 and December
                                 31, 2005 was $106,000 and $137,000,
                                 respectively. The total outstanding debt at
                                 March 31, 2006 and December 31, 2005 was
                                 $205,000 and $266,000, respectively.

                                 The following is a schedule of future minimum
                                 rentals on noncancellable operating leases at
                                 March 31, 2006:

                                                                        Amount
                                                                      ----------
                                 Nine Months ended December 31, 2006  $2,786,000
                                 Year Ended December 31, 2007          1,190,000
                                 Year Ended December 31, 2008            176,000
                                 Year Ended December 31, 2009              2,000
                                                                      ----------
                                                                      $4,153,000
                                                                      ==========

4.   RELATED PARTY
     TRANSACTIONS
                                 RECEIVABLES/PAYABLES

                                 As of March 31, 2006, the Partnership's related
                                 party receivables and payables are short term,
                                 unsecured, and non-interest bearing.

                                 OTHER RECEIVABLES

                                 As of March 31, 2006, the Partnership has an
                                 unsecured, non-interest bearing receivable from
                                 CCC, a related party to the Partnership, in the
                                 amount of approximately $171,000, 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, which commenced
                                 in the quarter ending March, 2005.

                                 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, 2006 and 2005, the
                                 Partnership recorded $170,000 and $66,000,
                                 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


                                                                               9

<PAGE>

                                 contract. During the three months ended March
                                 31, 2006 and 2005, equipment acquisition fees
                                 of approximately $16,000 and $34,000,
                                 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, 2006 and 2005, debt placement
                                 fees of approximately $2,000 and $6,000,
                                 respectively, were earned by the General
                                 Partner.

                                 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, 2006 and 2005, equipment
                                 management fees of approximately $48,000 and
                                 $60,000, 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, 2006 and 2005,
                                 equipment liquidation fees of approximately
                                 $6,000 and $500, respectively, were earned by
                                 the General Partner.


                                                                              10

<PAGE>

5.   NOTES PAYABLE               Notes payable consisted of the following:

<TABLE>
<CAPTION>
                                                                                   MARCH 31,    DECEMBER
                                                                                     2006       31, 2005
                                                                                  ----------   ----------
<S>                                                                               <C>          <C>
                                 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 through August 2006.                        100,009      261,002

                                 Installment notes payable to banks; interest
                                 ranging from 4.29% to 6.35%, due in monthly
                                 installments ranging from $3,746 to $13,488,
                                 including interest, with final payments due in
                                 January through December 2007.                      882,516      982,376

                                 Installment notes payable to banks; interest
                                 ranging from 4.65% to 6.06%, due in monthly
                                 installments ranging from $162 to $7,289
                                 including interest, with final payment due in
                                 January through September 2008.                     472,350      409,688
                                                                                  ----------   ----------
                                                                                  $1,454,876   $1,653,066
                                                                                  ==========   ==========
</TABLE>

                                      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, 2006
                                      are as follows:

<TABLE>
<CAPTION>
                                                                                   Amount
                                                                                 ----------
<S>                                                                              <C>
                                           Nine months ended December 31, 2006   $  720,697
                                           Year ended December 31, 2007             652,872
                                           Year ended December 31, 2008              81,307
                                                                                 ----------
                                                                                 $1,454,876
                                                                                 ----------
</TABLE>

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

Three months Ended March 31,          2006       2005
---------------------------------   --------   --------
Lease income, net of interest
   expense on notes payable
   realized as a result of direct
   payment of principal by lessee
   to bank                          $362,643   $336,417

     No interest or principal on notes payable was paid by the Partnership


                                                                              11

<PAGE>

     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,          2006       2005
------------------------------      --------   --------
Debt assumed in connection
   with purchase of computer
   equipment                        $164,000   $569,000
                                    ========   ========
Equipment acquisition fees
   earned by General Partner upon
   purchase of equipment from
   prepaid acquisition fees         $  7,875   $     --
                                    ========   ========

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

CRITICAL ACCOUNTING POLICIES

The Partnership's discussion and analysis of its financial condition and results
of operations are based upon its financial statements which have been prepared
in accordance with accounting principles generally accepted in the United
States. The preparation of these financial statements requires the Partnership
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. The Partnership bases its 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.

The Partnership believes that its critical accounting policies affect its more
significant judgments and estimates used in the preparation of its financial
statements.

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.


                                                                              12

<PAGE>

REVENUE RECOGNITION

Through March 31, 2006, 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,
2006 and 2005 was from net proceeds received from sale of equipment of
approximately $157,000 and $18,000, respectively. The primary uses of cash for
the three months ended March 31, 2006 and 2005 were for capital expenditures for
new equipment of approximately $230,000 and $284,000, respectively, and the
payment of preferred distributions to partners of approximately $374,000 and
$375,000, respectively.

For the three month period ended March 31, 2006, the Partnership generated cash
flows from operating activities of approximately $312,000, which includes a net
loss of approximately $375,000, a loss on sale of equipment of approximately
$208,000, and depreciation and amortization expenses of approximately $852,000.
Other non-cash activities included in the determination of net income include
direct payments of lease income by lessees to banks of approximately $363,000.

For the three month period ended March 31, 2005, the Partnership generated cash
flows from operating activities of approximately $360,000, which includes net
income of approximately $32,000, payment of accounts payable, which was
primarily for the purchase of equipment of approximately $52,000, a loss on sale
of equipment of approximately $9,000, and depreciation and amortization expenses
of approximately $966,000. Other non-cash activities included in the
determination of net income include direct payments of lease income by lessees
to banks of approximately $336,000.

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, 2006, the Partnership had future minimum rentals on non-cancelable
operating leases of $2,786,000 for the balance of the year ending December 31,
2006 and $1,367,000 thereafter. At March 31, 2006, the outstanding debt was
$1,455,000, with interest rates ranging from 4.29% to 6.35%, and will be payable
through September 2008.


                                                                              13

<PAGE>

As of March 31, 2006, the Partnership has an unsecured, non-interest bearing
receivable from CCC, a related party to the Partnership, in the amount of
approximately $171,000, 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, which
commenced in the quarter ending March, 2005.

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 intends to invest $500,000 in additional equipment for the
remainder of 2006. The acquisition of this equipment will be funded by debt
financing, and the debt service will be funded from cash flows from lease rental
payments.

The Partnership's share of the computer equipment in which they participate at
March 31, 2006 and December 31, 2005 was approximately $1,205,000 and $1,188,000
respectively, 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, 2006 and December 31, 2005 was
approximately $3,131,000 and $2,667,000 respectively.

RESULTS OF OPERATIONS

    Three Months Ended March 31, 2006 compared to Three Months March 31, 2005

For the three months ended March 31, 2006, the Partnership recognized income of
approximately $957,000, and expenses of approximately $1,332,000, resulting in
net loss of approximately $375,000. For the three months ended March 31, 2005,
the Partnership recognized income of approximately $1,253,000 and expenses of
approximately $1,221,000 resulting in net income of approximately $32,000.

Lease income decreased by 24% to $950,000 for the quarter ended March 31, 2006,
from $1,253,000 for the quarter ended March 31, 2005, primarily due to the fact
that more lease agreements were entered into since the quarter ended March 31,
2005.

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. The expenses
increased 28% to approximately $202,000 for the quarter ended March 31, 2006,
from $156,000 for the quarter ended March 31, 2005. This increase is primarily
attributable to an increase in the amount charged by CCC to the Partnership for
the administration and operation of approximately $27,000, and an increase in
legal fees of approximately $46,000 associated with the bankruptcy of Allserve
Systems Corp.

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 decreased 21% to approximately $48,000 for the quarter ended
March 31, 2006, from $60,000 for the quarter ended March 31, 2005, which is
consistent with the decrease in lease income.


                                                                              14

<PAGE>

Depreciation and amortization expenses consist of depreciation on computer
equipment and amortization of equipment acquisition fees. The expenses decreased
12% to approximately $850,000 for the quarter ended March 31, 2006, from
$965,000 for the quarter ended March 31, 2005 due to equipment and acquisition
fees being fully depreciated/amortized and not being replaced with as many new
purchases.

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-term debt.

ITEM 4. CONTROLS AND PROCEDURES

The Chief Executive Officer and Financial Officer of the General Partner have
conducted a review of the Partnership's disclosure controls and procedures as of
March 31, 2006.

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 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 General Partner's Chief Executive Officer and
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.

There have been no changes in the General Partner's internal controls or in
other factors that could materially affect our disclosure controls and
procedures in the quarter ended March 31, 2006, that have materially affected or
are reasonably likely to materially affect the General Partner's internal
controls over financial reporting.

PART II: OTHER INFORMATION

                      COMMONWEALTH INCOME & GROWTH FUND IV

     Item 1. LEGAL PROCEEDINGS.

In the 4th quarter of 2005, CCC identified payment problems with Allserve
Systems Corp. ("Allserve"), one of the Partnerships' lessees. The bank had
returned a number of Allserve's checks issued in October 2005. The Partnership
immediately began communication with the lessee, only to ultimately find that
they filed for protection under Chapter 11 of the United States Bankruptcy Code
on November 18, 2005. The General Partner responded to the Bankruptcy petition
promptly and assertively. Counsel was


                                                                              15

<PAGE>

retained for the Partnership. All litigation meetings and equipment inspections
were attended by the General Partner, for purpose of identifying and tagging all
assets belonging to the Partnership. The Partnership owns either all or portions
of 5 equipment leases with Allserve, with original purchase prices of
approximately $2,789,000.

On January 12, 2006, the trustee filed a petition before the court asking for
the bankruptcy petition to be changed to a Chapter 7 Liquidation, due to
Allerve's inability to pay its ongoing bills and the trustee's belief that
Allserve was not being honest in its dealings with the Trustee. The Judge
granted this request.

An official creditors' committee ("Creditors' Committee") was organized by the
Trustee in February 2006. An officer of CCC is a member of the Creditors'
Committee. Other creditors affected and represented on the creditors committee
include IBM Credit LLC, DB Zwirn and Universal Equipment Leasing. A forensic
accounting firm is being retained by the Creditors' Committee to investigate
transfers of significant quantities of cash from Allserve accounts, prior to its
Bankruptcy petition. On March 16, 2006, the Trustee granted stay relief to allow
the Partnership and other creditors to take possession of their assets. As of
March 23, 2006, the Partnership had recovered all of its equipment which was
subject to leases with Allserve. The equipment was relocated to an asset
management location in New Jersey, where it will be audited and tested, as well
as evaluated for sale or re-lease.

The equipment leases were purchased by the Partnership between December 2003 and
December 2004. The Partnership believes there is resale value for this equipment
and will be pursuing resale and litigation options in an attempt to maximize
investor's total return on this equipment. The Partnership received lease
payments up through and including September 2005. Therefore the Partnership has
recovered a portion of the equipment's purchase price to date. The Partnership
recorded a reserve against all outstanding rentals in the amount of
approximately $261,000 at December 31, 2005 and also recorded impairment charges
of approximately $363,000 to reflect the assets at their current estimated net
realizable value.

     Item 1A. RISK FACTORS

THERE IS NO PUBLIC MARKET FOR THE UNITS, AND YOU MAY BE UNABLE TO SELL OR
TRANSFER YOUR UNITS AT A TIME AND PRICE OF YOUR CHOOSING

There exists no public market for the units, and the general partner does not
expect a public market for units to develop. The units cannot be pledged or
transferred without the consent of the general partner. The units should be
purchased as a long-term investment only. The general partner intends to limit
the number of transfers to no more than that number permitted by one of the safe
harbors available under the tax laws and regulations to prevent CIGF4 from being
taxed as a corporation. Generally, these safe harbors require that all nonexempt
transfers and redemptions of units in any calendar year not exceed two percent
of the outstanding interests in the capital or profits of CIGF4.

The general partner has sole discretion in deciding whether we will redeem units
in the future. Consequently, you may not be able to liquidate your investment in
the event of an emergency. You must be prepared to hold your units for the life
of CIGF4. CIGF4's life cycle will last approximately 10 to 12 years, and any
extension of this period will require


                                                                              16

<PAGE>

an amendment to the partnership agreement, which must be approved by a majority
of the limited partners. You may be able to resell your units, if at all, only
at a discount to the offering price, which may be significant, and the
redemption or sale price may be less than the price you originally paid for your
units.

INFORMATION TECHNOLOGY EQUIPMENT WE PURCHASE WILL DEPRECIATE IN VALUE AND/OR
BECOME OBSOLETE OR LOSE VALUE AS NEW TECHNOLOGY IS DEVELOPED, WHICH CAN REDUCE
THE VALUE OF YOUR UNITS AND YOUR ULTIMATE CASH RETURN.

Residual value is the amount realized upon the sale or release of equipment when
the original lease has expired. The residual value of our equipment may decline
if technological advancements make it obsolete or change market preferences. The
residual value depends on, among other factors, the condition of the equipment,
the cost of comparable new equipment, the technological obsolescence of the
equipment and supply and demand for the equipment.

In either of these events, the equipment we purchased may have little or no
residual value. This will result in insufficient assets for us to distribute
cash in a total amount equal to the invested capital of the limited partners
over the term of our existence. Also, such an occurrence may reduce the value of
the units. Although currently we expect CIGF4 to acquire predominantly new
equipment, CIGF4 may purchase used equipment. There is no limitation on the
amount of used equipment which CIGF4 may acquire. The acquisitions of used
equipment may increase the risk that such equipment will become obsolete so that
it will have little or no residual value.

WE PAY SIGNIFICANT FEES TO THE GENERAL PARTNER AND AFFILIATES, WHICH REDUCE CASH
AVAILABLE FOR DISTRIBUTIONS.

The general partner and its affiliates, including Commonwealth Capital
Securities Corp., will receive substantial fees. Some fees will be paid without
regard to the amount of distributions paid or the success or profitability of
CIGF4's operations and investments. For example, an increase in portfolio
turnover or the amount of leverage used to purchase equipment may increase the
fees we pay to the general partner. Such compensation and fees were established
by the general partner and are not based on arm's-length negotiations. Our
operations may not ultimately be successful and we may be unable to meet our
stated investment objectives. Specifically, sufficient cash may ultimately not
be available for distribution to investors. Our general partner sponsors four
other public equipment leasing programs with investment objectives similar to
CIGF4. The general partner has also sponsored several privately held equipment
leasing programs. Results for these prior public and private programs have in
some cases been lower than originally anticipated.

ANY DELAY IN ACQUIRING EQUIPMENT WILL DIMINISH OUR RETURNS.

Due to competition with other lessors, we may experience difficulty in obtaining
and leasing appropriate equipment. Our ability to acquire and lease equipment
may also be adversely affected by interest rates, the availability of capital or
increases in corporate liquidity, since prospective lessees may prefer to raise
capital, incur debt or use internally-generated cash to purchase equipment
rather than enter the leasing market.


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<PAGE>

     Item 2. CHANGES IN SECURITIES.

             N/A

     Item 3. DEFAULTS UPON SENIOR SECURITIES.

             N/A

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

             N/A

     Item 5. OTHER INFORMATION.

             N/A

     Item 6. EXHIBITS

             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

                                    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 IV

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


May 15, 2006                            By: /s/ Kimberly A. Springsteen
Date                                        ------------------------------------
                                            Kimberly A. Springsteen
                                            Chief Executive Officer


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