UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-Q
 
 TQUARTERLY REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 FOR
THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008 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)
 
 (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  TNO   ̈
 
 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, 2008
 TABLE OF CONTENTS
 
 PART
      IItem 1.
                Financial Statements
                3Item 2.
                Management's Discussion and Analysis of Financial Condition
      and Results of Operations
                12Item 3.
                Quantitative and Qualitative Disclosures About Market
      Risk
                15Item 4T.
                Controls and Procedures
                16PART
      IIItem 1.
                Legal Proceedings
                16Item 1 A.
                Risk Factors
                17Item 2.
                Unregistered Sales of Equity Securities and Use of
      Proceeds
                17Item 3.
                Defaults Upon Senior Securities
                17Item 4.
                Submission of Matters to a Vote of Securities
      Holders
                17Item 5.
                Other Information
                17Item 6.
                Exhibits
                17
 
 
  2
  Part
I. FINANCIAL INFORMATION
 Item
1. Financial Statements
 
 Commonwealth
      Income & Growth Fund IVCondensed
      Balance SheetsSeptember
      30,
                      
                      
                      December
      31,2008
                      
                      
                      2007(unaudited)AssetsCash
      and cash equivalents
                      
                      $
                      5,225
                      
                      
                      $
                      91,908Lease
      income receivable, net of reserves of  $308,587 and $311,137 as
      of September 30, 2008 and December 31, 2007
                      
                      
                      175,496
                      
                      
                      
                      117,122Accounts
      receivable – affiliated limited partnerships
                      
                      
                      2,805
                      
                      
                      
                      25,256Refundable
      deposits
                      
                      
                      1,130
                      
                      
                      
                      1,130Prepaid
      expenses
                      
                      
                      1,445
                      
                      
                      
                      115186,101
                      
                      
                      
                      235,531Computer
      equipment, at cost
                      
                      
                      5,802,678
                      
                      
                      
                      7,435,278Accumulated
      depreciation
                      
                      
                      (4,791,674
                      )
                      
                      
                      (5,864,450
                      )1,011,004
                      
                      
                      
                      1,570,828Equipment
      acquisition costs and deferred expenses, net of accumulated amortization
                        of
      $70,143 and $89,959, at September 30, 2008 and December 31,
      2007
                      
                      
                      26,663
                      
                      
                      
                      45,575Prepaid
      acquisition fees, General Partner
                      
                      
                      61,761
                      
                      
                      
                      63,24188,424
                      
                      
                      
                      108,816Total
      Assets
                      
                      $
                      1,285,529
                      
                      
                      $
                      1,915,175Liabilities
      and Partners’ CapitalLiabilitiesAccounts
      payable
                      
                      $
                      111,739
                      
                      
                      $
                      29,954Accounts
      payable, General Partner
                      
                      
                      260,100
                      
                      
                      
                      164,602Accounts
      payable, Commonwealth Capital Corp.
                      
                      
                      557,338
                      
                      
                      
                      33,860Accounts
      payable, Investor Distributions
                      
                      
                      2,374
                      
                      
                      
                      370,569Unearned
      lease income
                      
                      
                      46,709
                      
                      
                      
                      47,002Notes
      payable
                      
                      
                      298,945
                      
                      
                      
                      399,677Total
      Liabilities
                      
                      
                      1,277,205
                      
                      
                      
                      1,045,664Partners'
      CapitalGeneral
      partner
                      
                      
                      1,000
                      
                      
                      
                      1,000Limited
      partners
                      
                      
                      7,324
                      
                      
                      
                      868,511Total
      Partners' Capital
                      
                      
                      8,324
                      
                      
                      
                      869,511Total
      Liabilities and Partners' Capital
                      
                      $
                      1,285,529
                      
                      
                      $
                      1,915,175
  see
accompanying notes to condensed financial statements
  3
 Table of
Contents
   Commonwealth
      Income & Growth Fund IVCondensed
      Statements of Operations(unaudited)Three
      Months Ended
                                                    
                                                    
                                                    Nine
      Months EndedSeptember
      30,
                                                    
                                                    
                                                    September
      30,2008
                                                    
                                                    
                                                    2007
                                                    
                                                    
                                                    2008
                                                    
                                                    
                                                    2007RevenueLease
                                                    
                                                    $
                                                    229,129
                                                    
                                                    
                                                    $
                                                    383,776
                                                    
                                                    
                                                    $
                                                    769,961
                                                    
                                                    
                                                    $
                                                    1,531,508Interest
      and other
                                                    
                                                    
                                                    72,113
                                                    
                                                    
                                                    
                                                    233
                                                    
                                                    
                                                    
                                                    78,675
                                                    
                                                    
                                                    
                                                    19,990Gain
      on sale of computer equipment
                                                    
                                                    
                                                    18,404
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    4,284
                                                    
                                                    
                                                    
                                                    -Total
      revenue
                                                    
                                                    
                                                    319,646
                                                    
                                                    
                                                    
                                                    384,009
                                                    
                                                    
                                                    
                                                    852,920
                                                    
                                                    
                                                    
                                                    1,551,498ExpensesOperating,
      excluding depreciation
                                                    
                                                    
                                                    71,237
                                                    
                                                    
                                                    
                                                    48,532
                                                    
                                                    
                                                    
                                                    333,671
                                                    
                                                    
                                                    
                                                    300,710Equipment
      management fee - General Partner
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    14,720
                                                    
                                                    
                                                    
                                                    33,835Interest
                                                    
                                                    
                                                    3,944
                                                    
                                                    
                                                    
                                                    9,599
                                                    
                                                    
                                                    
                                                    14,047
                                                    
                                                    
                                                    
                                                    30,005Depreciation
                                                    
                                                    
                                                    135,242
                                                    
                                                    
                                                    
                                                    387,966
                                                    
                                                    
                                                    
                                                    526,125
                                                    
                                                    
                                                    
                                                    1,443,613Amortization
      of equipment acquisition costs and
                                                      deferred
      expenses
                                                    
                                                    
                                                    8,332
                                                    
                                                    
                                                    
                                                    13,984
                                                    
                                                    
                                                    
                                                    25,159
                                                    
                                                    
                                                    
                                                    58,323Bad
      debt expense
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    17,650
                                                    
                                                    
                                                    
                                                    (2,550
                                                    )
                                                    
                                                    
                                                    21,281Loss
      on sale of computer equipment
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    38,285
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    190,656Total
      expenses
                                                    
                                                    
                                                    218,755
                                                    
                                                    
                                                    
                                                    516,016
                                                    
                                                    
                                                    
                                                    911,172
                                                    
                                                    
                                                    
                                                    2,078,423Net
      income (loss)
                                                    
                                                    $
                                                    100,891
                                                    
                                                    
                                                    $
                                                    (132,007
                                                    )
                                                    
                                                    $
                                                    (58,252
                                                    )
                                                    
                                                    $
                                                    (526,925
                                                    )Net
      income (loss) allocated to limited partners
                                                    
                                                    $
                                                    100,891
                                                    
                                                    
                                                    $
                                                    (135,750
                                                    )
                                                    
                                                    $
                                                    (58,252
                                                    )
                                                    
                                                    $
                                                    (538,154
                                                    )Net
      income (loss) per equivalent limited partnership unit
                                                    
                                                    $
                                                    0.13
                                                    
                                                    
                                                    $
                                                    (0.18
                                                    )
                                                    
                                                    $
                                                    (0.08
                                                    )
                                                    
                                                    $
                                                    (0.72
                                                    )Weighted
      average number of equivalent limited partnership units outstanding during
      the period
                                                    
                                                    
                                                    749,400
                                                    
                                                    
                                                    
                                                    749,400
                                                    
                                                    
                                                    
                                                    749,400
                                                    
                                                    
                                                    
                                                    749,400  see
accompanying notes to condensed financial
statements
  4
 Table of
Contents  
 Commonwealth
      Income & Growth Find IVCondensed
      Statements of Partners’ CapitalFor
      the Nine Months ended September 30, 2008(unaudited)Partner
                                                                                                            
                                                                                                            
                                                                                                            Partner
                                                                                                            
                                                                                                            
                                                                                                            General
                                                                                                            
                                                                                                            
                                                                                                            LimitedUnits
                                                                                                            
                                                                                                            
                                                                                                            Units
                                                                                                            
                                                                                                            
                                                                                                            Partner
                                                                                                            
                                                                                                            
                                                                                                            Partner
                                                                                                            
                                                                                                            
                                                                                                            TotalBalance,  January
      1, 2008
                                                                                                            
                                                                                                            
                                                                                                            50
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            749,400
                                                                                                            
                                                                                                            
                                                                                                            $
                                                                                                            1,000
                                                                                                            
                                                                                                            
                                                                                                            $
                                                                                                            868,511
                                                                                                            
                                                                                                            
                                                                                                            $
                                                                                                            869,511Net
      (loss)
                                                                                                            
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            (58,252
                                                                                                            )
                                                                                                            
                                                                                                            
                                                                                                            (58,252
                                                                                                            )Forgiveness
      of payables
                                                                                                            
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            122,053
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            122,053Distributions
                                                                                                            
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            -
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            (924,988
                                                                                                            )
                                                                                                            
                                                                                                            
                                                                                                            (924,988
                                                                                                            )Balance,  September
      30, 2008
                                                                                                            
                                                                                                            
                                                                                                            50
                                                                                                            
                                                                                                            
                                                                                                            
                                                                                                            749,400
                                                                                                            
                                                                                                            
                                                                                                            $
                                                                                                            1,000
                                                                                                            
                                                                                                            
                                                                                                            $
                                                                                                            7,324
                                                                                                            
                                                                                                            
                                                                                                            $
                                                                                                            8,324
 
 see
accompanying notes to condensed financial statements
  5
 Table of
Contents  
 
 Commonwealth
      Income & Growth Fund IVCondensed
      Statements of Cash FlowNine
      Months EndedSeptember
      30,2008
                  
                  
                  2007(unaudited)Net
      cash provided by operating activities
                  
                  $
                  687,827
                  
                  
                  $
                  724,354Investing
      activities:Capital
      expenditures
                  
                  
                  (62,627
                  )
                  
                  
                  (204,797
                  )Prepaid
      acquisition fees
                  
                  
                  1,480
                  
                  
                  
                  6,729Net
      proceeds from sale of computer equipment
                  
                  
                  217,872
                  
                  
                  
                  275,903Equipment
      acquisition fees paid to General Partner
                  
                  
                  (5,399
                  )
                  
                  
                  (18,029
                  )Net
      cash provided by investing activities
                  
                  
                  151,326
                  
                  
                  
                  59,806Financing
      activities:Distributions
      to partners
                  
                  
                  (924,988
                  )
                  
                  
                  (1,122,935
                  )Other
      receivable, Commonwealth Capital Corp.
                  
                  
                  -
                  
                  
                  
                  161,285Debt
      placement fee paid to the General Partner
                  
                  
                  (848
                  )
                  
                  
                  (2,459
                  )Net
      cash (used in) financing activities
                  
                  
                  (925,836
                  )
                  
                  
                  (964,109
                  )Net
      (decrease) in cash and cash equivalents
                  
                  
                  (86,683
                  )
                  
                  
                  (179,949
                  )Cash
      and cash equivalents, beginning of period
                  
                  
                  91,908
                  
                  
                  
                  185,564Cash
      and cash equivalents, end of period
                  
                  $
                  5,225
                  
                  
                  $
                  5,615
 
 see
accompanying notes to condensed financial statements
  6
 Table of
Contents  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 offered 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 used the proceeds of the Offering to acquire, own and lease various
types of computer 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 computer equipment
subject to associated debt obligations and lease agreements and allocates a
participation in the cost, debt and lease revenue to the various partnerships it
controls 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.
 
 The
Partnership had a negative working capital balance at September 30, 2008. 
This was primarily attributable to liabilities owed to affiliates of the
Partnership. The General Partner will continue to reassess the funding of
limited partner distributions on a quarterly basis in 2008 and will waive
certain fees if Management determines it is in the best interest of the
Partnership to do so.
 
 2.
Summary of Significant Accounting Policies
 
 Recent
Accounting Pronouncements
 
 Management’s
assessment of the following accounting pronouncements has changed since
disclosed in its Form 10K for December 31, 2007
 
 In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (“SFAS 162”). SFAS 162 identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States. SFAS 162 is effective 60 days following the Securities and
Exchange Commission’s approval of the Public Company Accounting Oversight Board
amendments to Audit Section 411, The Meaning of Present Fairly in Conformity
with Generally Accepted Accounting Principles. The Partnership is currently
evaluating the potential impact, if any, of the adoption of SFAS 162 on its
financial statements.
 
 In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Liabilities, including an amendment of FASB Statement No.
115” (“SFAS No. 159”). SFAS No. 159 permits entities to choose, at specified
election dates, to measure many financial instruments and certain other items at
fair value that are not currently required to be measured at fair value.
Unrealized gains and losses will be reported on items for which the fair value
option has been elected in earnings at each subsequent reporting date. SFAS No.
159 is effective for fiscal years beginning after November 15, 2007. Early
adoption is permitted as of the beginning of a fiscal year that begins on or
before November 15, 2007, provided the entity also elects to apply the
provisions of SFAS No. 157 “Fair Value Measurements”.  As of January 1,
2008 the Partnership adopted SFAS No.159. The Partnership has not elected the
fair value option for any assets or liabilities.
  7
 Table of
Contents
  In
September 2006, the FASB issued Statement of Financial Accounting Standards 157,
“Fair Value Measurements” (“SFAS 157”), which provides guidance on measuring the
fair value of assets and liabilities. SFAS 157 applies to other accounting
pronouncements that require or permit assets or liabilities to be measured at
fair value but does not expand the use of fair value to any new circumstances.
This standard also requires additional disclosures in both annual and quarterly
reports. SFAS 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007 and will be adopted by the Partnership in the
first quarter of its fiscal year 2008.   In February 2008, the FASB issued
two Staff Positions on SFAS 157: (1) FASB Staff Position No. FAS 157-1 (FAS
157-1), “Application of FASB Statement No. 157 to FASB Statement No. 13 and
Other Accounting Pronouncements That Address Fair Value Measurements for
Purposes of Lease Classification or Measurement Under Statement 13,” and (2)
FASB Staff Position No. FAS 157-2 (FAS 157-2), “Effective Date of FASB Statement
No 157.” FAS 157-1 excludes FASB Statement No. 13, Accounting for Leases, as
well as other accounting pronouncements that address fair value measurements on
lease classification or measurement under Statement 13, from SFAS 157’s scope.
FAS157-2 partially defers Statement 157’s effective date.  As of January 1,
2008 the Partnership partially adopted SFAS No. 157 for all financial assets.
 Adoption of this pronouncement did not impact the financial statements of
the Partnership at September 30, 2008.  In October 2008, the FASB issued
FSP SFAS 157-3 "Determining the Fair Value of a Financial Asset When the Market
for That Asset is Not Active" ("FSP SFAS 157-3"), which is effective upon
issuance for all financial statements that have not been issued. FSP SFAS 157-3
clarifies the application of SFAS 157, in a market that is not active. The
Partnership is currently evaluating the potential impact, if any, of the
adoption of FSP SFAS 157-3 on its financial statements.
 
 Basis
of Presentation
 
 The
financial information presented as of any date other than December 31, 2007 has
been prepared from the books and records without audit.  Financial
information as of December 31, 2007 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, 2007.  Operating results for the nine months ended
September 30, 2008 are not necessarily indicative of financial results that may
be expected for the full year ended December 31, 2008.
 
 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,
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 existed during the period ended September 30, 2008.
Impairment charges of approximately $102,000 were recorded to reflect the assets
at their current estimated net realizable value for the period ended September
30, 2007.
 
 Depreciation
on computer equipment for financial statement purposes is based on the
straight-line method estimated generally over useful lives of three or four
years.
 
 Forgiveness
of Related Party Payables
 
 In
accordance with Accounting Principles Board Opinion No. 26, Early Extinguishment of Debt,
the Partnership accounts for forgiveness of related party payables as partner’s
capital transactions.
 
 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.
 
 8
 Table of
Contents
  3.
Computer Equipment
 
 The
Partnership is the lessor of equipment under operating leases with periods
ranging from 15 to 37 months. In general, associated costs such as repairs and
maintenance, insurance and property taxes are paid by the lessee.
 
 Through
September 30, 2008, the Partnership has only entered into operating
leases.  Lease revenue is recognized on the monthly straight-line
basis which is generally 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 nine months ended September 30, 2008 and 2007,
remarketing fees were incurred in the amounts of  approximately $72,000 and
$86,000, respectively. For the nine months ended September 30, 2008 and 2007
remarketing fees were paid in the amount of  approximately $13,000 and
$110,000, respectively.
 
 The
Partnership’s share of the computer equipment in which it participates with
other partnerships at September 30, 2008 and December 31, 2007 was approximately
$1,235,000 and $1,128,000, 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, 2008 and
December 31, 2007 was approximately $7,179,000 and $3,886,000, respectively. The
Partnership’s share of the outstanding debt associated with this equipment at
September 30, 2008 and December 31, 2007 was approximately $239,000 and
$265,000, respectively.  The total shared outstanding debt associated
with this equipment at September 30, 2008 and December 31, 2007 was
approximately $2,934,000 and $751,000, respectively.
 
 The
following is a schedule of future minimum rentals on noncancellable operating
leases at September 30, 2008:
 
 AmountThree
      Months ended December 31, 2008
                                  
                                  $
                                  236,114Year
      Ended December 31, 2009
                                  
                                  
                                  436,601Year
      Ended December 31, 2010
                                  
                                  
                                  70,858Year
      Ended December 31, 2011
                                  
                                  
                                  16,123$
                                  759,696
 
 4.
Related Party Transactions
 
 Forgiveness
of Related Party payables
 
 During
the nine months ended September 30, 2008, CCC and the General Partner forgave
payables owed to them by the Partnership in the amount of approximately
$122,000.
  9
 Table of
Contents
  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 nine months ended September 30, 2008 and
2007, the Partnership recorded approximately $716,000 and $249,000,
respectively, for reimbursement of expenses to the General Partner. This
increase is primarily attributable to monies owed to CCC in the amount of
approximately $400,000 for distributions funded during the first three months of
2008.
 
 Equipment
Acquisition Fee
 
 The
General Partner is entitled to be paid an equipment acquisition fee of 4% of the
purchase price of each item of equipment purchased as compensation for the
negotiation of the acquisition of the equipment and lease thereof or sale under
a conditional sales contract.  For the nine months ended September 30,
2008 and 2007, equipment acquisition fees of approximately $2,000 and $7,000
were earned bythe
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.  For the nine months ended September 30, 2008 and 2007
debt placement fees of approximately $800 and $2,400, 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.  For the nine months ended September 30, 2008,
equipment management fees of approximately $38,000 were earned by the General
Partner. Of this amount, approximately $24,000 was waived by the General
Partner.  For the nine months ended September 30, 2007, equipment
management fees of approximately $76,000 were earned bythe
General Partner. Of this amount, approximately $43,000 was waived by the General
Partner for the nine months ended September 30, 2007.
 
 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.  For the nine months
ended September 30, 2008 and 2007, equipment liquidation fees of approximately
$7,000 and $11,000 respectively, were earned by the General
Partner.
 
 10
 Table of
Contents
  5.
Notes Payable
 
 Notes
payable consisted of the following:
 
 September
      30, 2008
                                                          
                                                          
                                                          December
      31, 2007Installment
      notes payable to banks; interest ranging from 4.65% to 6.06%, due in
      monthly installments ranging
                                                            from
      $162 to $7,289 including interest, final payment was due in January
      through September 2008.
                                                          
                                                          $
                                                          -
                                                          
                                                          
                                                          $
                                                          81,043Installment
      notes payable to banks; interest ranging from 5.9% to 6.25%, due in
      monthly installments ranging from $1,901 to $73,654, including
      interest, with final payments from January through October
      2009.
                                                          
                                                          
                                                          223,741
                                                          
                                                          
                                                          
                                                          318,634Installment
      notes payable to banks; interest rate of 5.75%, due in monthly
      installments ranging from
                                                            $2,528
      to $5,083, including interest, with final payments from January through
      April 2011.
                                                          
                                                          
                                                          75,204
                                                          
                                                          
                                                          
                                                          -$
                                                          298,945
                                                          
                                                          
                                                          $
                                                          399,677
 
 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 September 30, 2008 are as follows:
 
 AmountThree
      months ended December 31, 2008
                                  
                                  $
                                  83,183Year
      ended December 31, 2009
                                  
                                  
                                  174,622Year
      ended December 31, 2010
                                  
                                  
                                  28,695Year
      ended December 31, 2011
                                  
                                  
                                  12,445$
                                  298,945
 
 6.
Supplemental Cash Flow Information
 
 Other
noncash activities included in the determination of net loss are as
follows:
 
 Nine
      months ended September30,
                                                        
                                                        2008
                                                        
                                                        
                                                        2007Lease
      income, net of interest expense on notes payable realized as a result of
      direct payment of principal by lessee to bank
                                                        
                                                        $
                                                        217,995
                                                        
                                                        
                                                        $
                                                        687,038
 
 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,
                                                                        
                                                                        2008
                                                                        
                                                                        
                                                                        2007Forgiveness
      of related party payables recorded as a capital
    contribution
                                                                        
                                                                        $
                                                                        122,053
                                                                        
                                                                        
                                                                        $
                                                                        -Debt
      assumed in connection with purchase of computer equipment
                                                                        
                                                                        $
                                                                        117,265
                                                                        
                                                                        
                                                                        $
                                                                        245,921Equipment
      acquisition fees earned by General Partner upon purchase of equipment from
      prepaid acquisition fees
                                                                        
                                                                        $
                                                                        5,399
                                                                        
                                                                        
                                                                        $
                                                                        18,029
  11
 Table of Contents
  Item
2: Management’s Discussion and Analysis of Financial Condition and Results ofOperations
  FORWARD
LOOKING STATEMENTS
  Certain
statements within this Quarterly Report on Form 10-Q may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 (“PSLRA”). These statements are being made
pursuant to the PSLRA, with the intention of obtaining the benefits of the “safe
harbor” provisions of the PSLRA, and, other than as required by law, we assume
no obligation to update or supplement such statements. Forward-looking
statements are those that do not relate solely to historical fact. They include,
but are not limited to, any statement that may predict, forecast, indicate or
imply future results, performance, achievements or events. You can identify
these statements by the use of words such as “may,” “will,” “could,”
“anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict” or “project”
and variations of these words or comparable words or phrases of similar meaning.
These forward-looking statements reflect our current beliefs and expectations
with respect to future events and are based on assumptions and are subject to
risks and uncertainties and other factors outside our control that may cause
actual results to differ materially from those projected.
 
 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.  Depreciation on
computer equipment for financial statement purposes is based on the
straight-line method estimated generally over useful lives of three or four
years.
 
 REVENUE
RECOGNITION
 
 Through
September 30, 2008, the Partnership has only entered into operating
leases.  Lease revenue is recognized on the monthly straight-line
basis which is generally in accordance with the terms of the operating lease
agreements.
 
 The
Partnership reviews a customer’s credit history before extending credit and
establishes provisions for uncollectible accounts based upon the credit risk of
specific customers, historical trends and other information.
 
 12
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Contents
  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.  The Partnership determined that
no impairment existed during the period ended September 30, 2008. Impairment
charges of approximately $102,000 were recorded to reflect the assets at their
current estimated net realizable value for the period ended September 30,
2007.
 
 LIQUIDITY
AND CAPITAL RESOURCES
 
 The
Partnership’s primary source of capital for the nine months ended September 30,
2008 and 2007 was net proceeds received from the sale of equipment of
approximately $218,000 and $276,000, respectively, and cash generated by
operating activities in the amount of approximately $688,000 and $724,000,
respectively.  The primary uses of cash for the nine months ended
September 30, 2008 and 2007 were for capital expenditures for new equipment of
approximately $63,000 and $205,000, respectively, and the payment of
distributions to partners of approximately $925,000 and $1,123,000,
respectively.
 
 While the
Partnership intends to invest additional capital in equipment during the
remainder of 2008, the amount of such additional investment is uncertain, as
available funds will first be committed to the payment of investor distributions
and operating expenses.
 
 For the
nine months ended September 30, 2008, the Partnership generated cash flows from
operating activities of approximately $688,000 which includes a net loss of
approximately $58,000, a gain on sale of equipment of approximately
$4,000, and depreciation and amortization expenses of approximately
$551,000. Other non-cash activities included in the determination of net income
include direct payments of lease income by lessees to banks of approximately
$218,000.
 
 For the
nine months ended September 30, 2007, the Partnership generated cash flows from
operating activities of approximately $724,000, which includes a net loss of
approximately $527,000, a loss on sale of equipment of approximately
$191,000, and depreciation and amortization expenses of approximately
$1,502,000. Other non-cash activities included in the determination of net
income include direct payments of lease income by lessees to banks of
approximately $687,000.
 
 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 September 30, 2008, the Partnership had future
minimum rentals on non-cancelable operating leases of approximately $236,000 for
the balance of the year ending December 31, 2008 and approximately $524,000
thereafter.  At September 30, 2008, the outstanding debt was
approximately $299,000, with interest rates ranging from 5.75% to 6.25%, and
will be payable through April 2011.
 
 The
Partnership had a negative working capital balance at September 30, 2008. 
This was primarily attributable to liabilities owed to affiliates of the
Partnership.  In an effort to increase cash flow for the Fund, the General
Partner and CCC have helped finance distributions to Limited partners and have
forgiven certain fees owed to the General Partner.  Limited partners’
distributions for the first quarter of 2008 were partially funded from CCC.
 The General Partner will continue to reassess the funding of limited
partner distributions on a quarterly basis in 2008 and will waive certain fees
if Management 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.  The
Partnership’s cash from operations is expected to be adequate to cover all
operating expenses, liabilities, and distributions to Partners during the next
12-month period.
 
 13
 Table of
Contents
  RESULTS
OF OPERATIONS
  Three Months Ended September
30, 2008 compared to Three Months September 30, 2007
 
 For the
three months ended September 30, 2008, the Partnership recognized revenues of
approximately $320,000 and expenses of approximately $219,000, resulting in net
income of approximately $101,000.  For the three months ended September 30,
2007, the Partnership recognized revenue of approximately $384,000, and
expenses of approximately $516,000, resulting in net loss of approximately
$132,000.
 
 Lease
income decreased by 40% to $229,000 for the three months ended September 30,
2008, from $384,000 for the three months ended September 30,
2007.  This decrease was primarily due to more lease agreements ending
versus new lease agreements being acquired during the three months ended
September 30, 2008.
 
 Depreciation
and amortization expenses consist of depreciation on computer equipment,
including impairment charges, and amortization of equipment acquisition
fees. The expenses decreased 64% to approximately $144,000 for the three months
ended September 30, 2007, from $402,000 for the three months ended September 30,
2007 due to equipment and acquisition fees being fully
depreciated  and amortized, as applicable,  and not being
offset by as many new equipment purchases.
 
 Operating
expenses, excluding depreciation, primarily consist of accounting, legal,
outside service fees and reimbursement of expenses to CCC for administration and
operation of the Partnership.  With the exception of legal and
accounting fees, CCC has determined that in the best interest of the
Partnership, the majority of shared expenses will not be allocated to the
Partnership.  Expenses that were allocated to the Partnership
increased 47% to approximately $71,000 for the three months ended September 30,
2008, from approximately $49,000 for the three months ended September 30, 2007.
This increase is primarily attributable to an increase in remarketing and legal
fees and was partially offset by a decrease in other expenses.
 
 The
equipment management fee is approximately 5% of the gross lease revenue
attributable to equipment that is subject to operating leases. This fee was
approximately $11,000 and $19,000 for the three months ended September 30, 2008
and 2007, respectively, and was waived by the general partner for both periods,
in an effort to assist in the operating results of the Partnership.
 
 The
Partnership sold computer equipment with a net book value of approximately
$32,000 for the three months ended September 30, 2008, for a net gain of
approximately $18,000.  The Partnership sold computer equipment with a
net book value of approximately $64,000 for the three months ended September 30,
2007, for a net loss of approximately $32,000.
 14
 Table of
Contents
  Nine Months Ended September
30, 2008 compared to Nine Months Ended September 30,
2007
 
 For the
nine months ended September 30, 2008, the Partnership recognized revenues of
approximately $853,000 and expenses of approximately $911,000, resulting in net
loss of approximately $58,000.  For the nine months ended September 30,
2007, the Partnership recognized revenue of approximately $1,551,000, and
expenses of approximately $2,078,000, resulting in net loss of approximately
$527,000.
 
 Lease
income decreased by 50% to approximately $770,000 for the nine months ended
September 30, 2008, from approximately $1,532,000 for the nine months ended
September 30, 2007.  This decrease was primarily due to more lease
agreements ending versus new lease agreements being acquired during the nine
months ended September 30, 2008.
 
 Depreciation
and amortization expenses consist of depreciation on computer equipment and
amortization of equipment acquisition fees. The expenses decreased 63% to
approximately $551,000 for the nine months ended September 30, 2008, from
approximately $1,502,000 for the nine months ended September 30, 2007 due to
specific equipment and acquisition fees being fully depreciated and amortized,
as applicable.
 
 The
Partnership determined that no impairment existed during the nine months ended
September 30, 2008. Impairment charges of approximately $102,000 were recorded
to reflect the assets at their current estimated net realizable value for the
nine month period ended September 30, 2007.
 
 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 11% to approximately $334,000 for the nine months ended September 30,
2008, from approximately $301,000 for the nine months ended September 30, 2007,
primarily due to an increase in remarketing, storage and other
expenses.  This increase was partially offset by decreases in
information technology, tax, accounting and equipment transportation expenses
for the nine months ended September 30, 2008.
 
 The
equipment management fee is approximately 5% of the gross lease revenue
attributable to equipment that is subject to operating leases. This fee was
approximately $39,000 and $76,000 for the nine months ended September 30, 2008
and 2007, respectively.  Of these amounts, the General Partner waived
approximately $24,000 and $34,000 for the nine months ended September 30, 2008
and 2007, respectively in an effort to assist in the operating results of the
Partnership.
 
 The
Partnership sold computer equipment with a net book value of approximately
$214,000 for the nine months ended September 30, 2008, for a net gain of
approximately $4,000.  The Partnership sold computer equipment with a
net book value of approximately $467,000 for the nine months ended September 30,
2007, for a net loss of approximately $191,000.
 
 Item
3.Quantitative and
Qualitative Disclosures About Market Risk
 
 N/A
 
 15
 Table of
Contents
  Item
4T.  Controls and Procedures
 
 Our
management, under the supervision and with the participation of the principal
executive officer and principal financial offer, have evaluated the
effectiveness of our controls and procedures related to our reporting and
disclosure obligations as of September 30, 2008 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 2008 or subsequent to the date of the
evaluation.
 
 Part
II:                      OTHER
INFORMATION
 
 Item
1.                                Legal
Proceedings
 
 In
the 4th quarter
of 2005, CCC identified payment problems with Allserve Systems Corp.
(“Allserve”), one of the Partnership’s 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 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. The Allserve equipment leases were purchased by the
Partnership between December 2003 and December 2004.
 
 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 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 was 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 was audited and tested, as well as evaluated for sale or
re-lease.
 
 In
January 2007, executive management of CCC met with a nationally known leasing
company that has been in business for over 25 years. This company has helped
other Allserve creditors sell and/or re-lease recovered equipment and they are
currently doing an analysis of the best possible way to bring the Allserve
equipment to market. As there is a great deal of this equipment currently
available, due to the size of the Allserve bankruptcy, this process has taken
more time than usual.  Since August 14, 2007, the Partnership has been
in the process of reviewing the audit reports prepared by Global Key, a third
party who received and tested the equipment; and obtaining a list of parts
required in order to bring the equipment up to specifications for
sale.  It has been the intention of the Partnership to attempt to
market the equipment in the third world market once this upgrade has taken
place.  Further, the Partnership intends to offer the equipment “as
is” both domestically and internationally while soliciting a buyer (or buyers)
in order to maximize revenue.  Management of the Partnership
anticipates this process to continue until the end of 2008.  In
recognition of this, the Partnership recorded further impairment charges of
approximately $79,000 as of December 31, 2007.  The Partnership
recorded a reserve against all outstanding rentals in the amount of
approximately $261,000 through December 31, 2006 and has recorded cumulative
impairment charges against the equipment leased to Allserve of approximately
$724,000 through December 31, 2007.
 
 16
 Table of
Contents
  Further,
the Bankruptcy trustee filed a claim against several Allserve creditors in
November 2007, alleging that regularly scheduled lease payments made by Allserve
to such creditors are recoverable by the bankruptcy estate under various
theories of preference and avoidance.  In the case of the Partnership,
the complaint covers certain payments made between December 2003 and October
2005.  Management believes these claims are without merit and the
Partnership’s motion to dismiss such claims is scheduled for hearing during the
fourth quarter of 2008.
 
 As of
December 31, 2007, the Allserve equipment had a net book value of zero. The
Partnership has not experienced any significant changes related to this matter
during the first nine months of 2008, and does not anticipate any further
significant impact to the Partnership’s financials statements unless, and until,
the equipment can be sold.
  Item
      1A.
              Risk FactorsN/A.Item
      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
  31.1THE RULE 15d-14(a) CERTIFICATION OF PRINCIPAL
EXECUTIVE OFFICER
 31.2 THE RULE 15d-14(a) CERTIFICATION OF PRINCIPAL
FINANCIAL OFFICER
 32.1SECTION 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 14, 2008
                    By:/s/ Kimberly A.
      Springsteen-AbbottDate
                    Kimberly
      A. Springsteen-AbbottChief
      Executive OfficerBy:/s/ Lynn A.
FranceschinaLynn
      A. FranceschinaExecutive
      Vice President, Chief Operating Officer