<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 JUNE 30, 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)

                         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 [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
                                  JUNE 30, 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        16
Item 4.     Controls and Procedures                                           16

                                       PART II
Item 1.     Legal Proceedings                                                 17
Item 1 A.   Risk Factors                                                      18
Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds.      19
Item 3.     Defaults Upon Senior Securities                                   19
Item 4.     Submission of Matters to a Vote of Securities Holders             19
Item 5.     Other Information                                                 19
Item 6.     Index to Exhibits                                                 19
            Signatures
            Certifications


                                                                               2

<PAGE>

                      COMMONWEALTH INCOME & GROWTH FUND IV
                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                           JUNE 30,    DECEMBER 31,
                                                            2006          2005
                                                         -----------   ------------
                                                         (UNAUDITED)
<S>                                                      <C>           <C>
ASSETS
Cash and cash equivalents                                $   696,465   $   891,708
Lease income receivable, net of reserves of $260,937
   as of June 30, 2006 and  December 31, 2005                394,204       180,993
Other receivables - other affiliated partnerships             42,107        22,684
Other current assets                                           7,507         1,319
                                                         -----------   -----------
                                                           1,140,283     1,096,704
                                                         -----------   -----------
Computer equipment, at cost                               12,581,142    14,103,160
Accumulated depreciation                                  (7,307,916)   (7,161,684)
                                                         -----------   -----------
                                                           5,273,226     6,941,475
                                                         -----------   -----------
Equipment acquisition costs and deferred expenses, net       143,334       220,786
Other receivables - Commonwealth Capital Corp                154,136       206,132
Prepaid acquisition fees                                      80,301        91,671
                                                         -----------   -----------
                                                             377,771       518,589
                                                         -----------   -----------
TOTAL ASSETS                                             $ 6,791,280   $ 8,556,768
                                                         ===========   ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accounts payable, primarily for equipment purchases      $   135,472   $   102,254
Accounts payable - General Partner                            19,867        39,628
Unearned lease income                                        293,255       119,720
Notes payable                                              1,183,198     1,653,066
                                                         -----------   -----------
TOTAL LIABILITIES                                          1,631,788     1,914,668
                                                         -----------   -----------
PARTNERS' CAPITAL
General partner                                                1,000         1,000
Limited partners                                           5,158,488     6,641,100
                                                         -----------   -----------
TOTAL PARTNERS' CAPITAL                                    5,159,488     6,642,100
                                                         -----------   -----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL                  $ 6,791,280     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         SIX MONTHS ENDED
                                                        JUNE 30                    JUNE 30

                                                   2006         2005         2006         2005
                                                ----------   ----------   ----------   ----------
                                                      (UNAUDITED)                (UNAUDITED)
<S>                                             <C>          <C>          <C>          <C>
INCOME
Lease                                           $  848,058   $1,266,597   $1,801,259   $2,519,435
Interest and other                                   6,788            5       10,728          557
                                                ----------   ----------   ----------   ----------
TOTAL INCOME                                       854,846    1,266,602    1,811,987    2,519,992
                                                ----------   ----------   ----------   ----------
EXPENSES
Operating, excluding depreciation                  194,348      164,863      396,091      322,169
Equipment management fee - General Partner          42,403       65,985       90,063      125,971
Interest                                            18,661       29,347       41,588       58,600
Depreciation                                       862,718      933,251    1,661,729    1,845,501
Amortization of equipment
   acquisition costs and deferred expenses          45,640       56,320       98,334      109,966
Loss on sale of computer equipment                  50,115       66,778      258,068       75,583
                                                ----------   ----------   ----------   ----------
TOTAL EXPENSES                                   1,213,885    1,316,544    2,545,873    2,537,790
                                                ----------   ----------   ----------   ----------
NET (LOSS)                                      $ (359,039)  $  (49,942)  $ (733,886)  $  (17,798)
                                                ==========   ==========   ==========   ==========
NET (LOSS) ALLOCATED TO LIMITED PARTNERS        $ (362,756)  $  (53,689)  $ (741,348)  $  (25,292)
                                                ==========   ==========   ==========   ==========
NET (LOSS) PER EQUIVALENT LIMITED
   PARTNERSHIP UNIT                             $    (0.48)  $    (0.07)  $    (0.99)  $    (0.02)
                                                ==========   ==========   ==========   ==========
WEIGHTED AVERAGE NUMBER OF EQUIVALENT LIMITED
   PARTNERSHIP UNITS OUTSTANDING DURING THE
   PERIOD                                          749,400      749,950      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 SIX MONTHS ENDED JUNE 30, 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)                       --          --     7,460     (741,348)    (733,888)
   Redemption                                                                 --           --
   Distributions                           --          --    (7,460)    (741,263)    (748,723)
                                          ---     -------   -------   ----------   ----------
PARTNERS' CAPITAL - JUNE 30, 2006          50     749,400   $ 1,000   $5,158,488   $5,159,488
                                          ===     =======   =======   ==========   ==========
</TABLE>

            see accompanying notes to condensed financial statements


                                                                               5

<PAGE>

                      COMMONWEALTH INCOME & GROWTH FUND IV
                        CONDENSED STATEMENTS OF CASH FLOW
                 FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005

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

NET CASH PROVIDED BY OPERATING ACTIVITIES              $ 598,090   $1,793,002
                                                       ---------   ----------
INVESTING ACTIVITIES:
Capital expenditures                                    (316,469)    (297,631)
Prepaid acquisition fees                                  11,369      (31,299)
Net proceeds from sale of computer equipment             229,377       44,392
Equipment acquisition fees paid to General Partner       (19,237)          --
                                                       ---------   ----------
NET CASH (USED IN) INVESTING ACTIVITIES                  (94,960)    (284,538)
                                                       ---------   ----------
FINANCING ACTIVITIES:
Redemptions                                                   --       (9,617)
Distributions to partners                               (748,723)    (749,451)
Other receivable, Commonwealth Capital Corp               51,996        6,514
Debt Placement fee paid to the General Partner            (1,645)      (6,592)
                                                       ---------   ----------
NET CASH (USED IN) FINANCING ACTIVITIES                 (698,373)    (759,146)
                                                       ---------   ----------
Net (decrease) increase in cash and cash equivalents    (195,243)     749,318
Cash and cash equivalents, beginning of period           891,708      719,161
                                                       ---------   ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD               $ 696,465   $1,468,479
                                                       =========   ==========

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

                                 The Partnership's General Partner is
                                 Commonwealth Income & Growth Fund, Inc. (the
                                 "General Partner"), a Pennsylvania corporation
                                 which is an indirect wholly owned subsidiary of
                                 CCC. 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 six-month period ended June 30,
                                 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. For the six month
                                 period ended June 30, 2006, the Partnership
                                 determined that the carrying amount of certain
                                 assets was greater than the undiscounted cash
                                 flows to be generated by these assets. The
                                 Partnership recorded charges of $88,000, to
                                 record the assets at their estimated fair
                                 value. Such amount has been included in
                                 depreciation expense in the accompanying
                                 financial statements. No adjustment was needed
                                 at June 30, 2005.

                                 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 12 to 42 months. In general, the lessee
                                 pays associated costs such as repairs and
                                 maintenance, insurance and property taxes.

                                 Through June 30, 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 six-month period ended June 30, 2006 and
                                 2005, remarketing fees were incurred in the
                                 amounts of $8,000 and $7,000 respectively.

                                 The Partnership's share of the computer
                                 equipment in which they


                                                                               8

<PAGE>

                                 participate at June 30, 2006 and December 31,
                                 2005 was approximately $1,250,000 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 June 30, 2006 and December 31,
                                 2005 was approximately $3,333,000 and
                                 $2,667,000 respectively. The Partnership's
                                 share of the outstanding debt associated with
                                 this equipment at June 30, 2006 and December
                                 31, 2005 was $74,000 and $137,000,
                                 respectively. The total outstanding debt at
                                 June 30, 2006 and December 31, 2005 was
                                 $144,000 and $266,000, respectively.

                                 The following is a schedule of future minimum
                                 rentals on noncancellable operating leases at
                                 June 30, 2006:

                                                                        Amount
                                                                      ----------
                                 Six Months ended December 31, 2006   $1,156,000
                                 Year Ended December 31, 2007          1,173,000
                                 Year Ended December 31, 2008            261,000
                                 Year Ended December 31, 2009             31,000
                                                                      ----------
                                                                      $2,621,000
                                                                      ==========

4.   RELATED PARTY               RECEIVABLES/PAYABLES
     TRANSACTIONS
                                 As of June 30, 2006, the Partnership's related
                                 party receivables and payables are short term,
                                 unsecured, and non-interest bearing.

                                 OTHER RECEIVABLES

                                 As of June 30, 2006, the Partnership has an
                                 unsecured, non-interest bearing receivable from
                                 CCC, a related party to the Partnership, in the
                                 amount of approximately $154,000, 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, 2004. During the
                                 quarter ended June 30, 2005, CCC reimbursed
                                 $23,000 to the Partnership.

                                 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
                                 six-months ended June 30, 2006 and 2005, the
                                 Partnership recorded $316,000 and $150,000,
                                 respectively, for reimbursement of expenses to
                                 the General Partner.


                                                                               9

<PAGE>

                                 EQUIPMENT ACQUISITION FEE

                                 The General Partner is entitled to be paid an
                                 equipment acquisition fee of 4% of the purchase
                                 price of each item of equipment purchased as
                                 compensation for the negotiation of the
                                 acquisition of the equipment and lease thereof
                                 or sale under a conditional sales contract.
                                 During the six-months ended June 30, 2006 and
                                 2005, equipment acquisition fees of
                                 approximately $19,000 and $38,000,
                                 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 six-months ended
                                 June 30, 2006 and 2005, debt placement fees of
                                 approximately $1,600 and $6,600, 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
                                 six-months ended June 30, 2006 and 2005,
                                 equipment management fees of approximately
                                 $90,000 and $126,000, 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
                                 six-months ended June 30, 2006 and 2005,
                                 equipment liquidation fees of approximately
                                 $8,000 and $1,000, respectively, were earned by
                                 the General Partner.


                                                                              10

<PAGE>

5.   NOTES PAYABLE               Notes payable consisted of the following:

<TABLE>
<CAPTION>
                                                                JUNE 30,    DECEMBER 31,
                                                                  2006          2005
                                                               -------------------------
<S>                                                            <C>           <C>
                                 Installment notes payable
                                 to banks; interest ranging
                                 from 4.76% to 6.00%, due in
                                 monthly installments
                                 ranging from $155 to
                                 $22,902, including
                                 interest, with final
                                 payments due in January
                                 through December 2006.            32,441       261,002

                                 Installment notes payable
                                 to banks; interest ranging
                                 from 4.29% to 7.50%, due in
                                 monthly installments
                                 ranging from $256 to
                                 $13,489, including
                                 interest, with final
                                 payments due in January
                                 through December 2007.           732,013       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.                            418,744       409,688
                                                               ----------    ----------
                                                               $1,183,198    $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
                                 June 30, 2006 are as follows:

                                                                       Amount
                                                                     ----------
                                 Six months ended December 31, 2006  $  449,019
                                 Year ended December 31, 2007           652,872
                                 Year ended December 31, 2008            81,307
                                                                     ----------
                                                                     $1,183,198
                                                                     ----------

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

<TABLE>
<CAPTION>
Six months Ended June 30,                                   2006       2005
-------------------------------------------------------   --------   --------
<S>                                                       <C>        <C>
Lease income, net of interest expense on
   notes payable realized as a result of direct payment
     of principal by lessee to bank                       $634,321   $678,312
</TABLE>


                                       11

<PAGE>

     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:

Six months Ended June 30,                                      2006       2005
----------------------------------------------------------   --------   --------
Debt assumed in connection with purchase of
  computer equipment                                         $164,453   $663.906

Equipment acquisition fees earned by General Partner upon
   purchase of equipment from prepaid acquisition fees       $ 11,370   $      -

 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.

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


                                       12

<PAGE>

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," "expects," "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.

COMPUTER EQUIPMENT

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

REVENUE RECOGNITION

Through June 30, 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 six-months ended June 30,
2006 and 2005 was from net proceeds received from sale of equipment of
approximately $229,000 and $44,000, respectively. The primary uses of cash for
the six-months ended June 30, 2006 and 2005 were for capital expenditures for
new equipment of approximately $316,000 and $298,000, respectively, and the
payment of preferred distributions to partners of approximately $749,000 and
$748,000, respectively.

For the six-month period ended June 30, 2006, the Partnership generated cash
flows from operating activities of approximately $598,000, which includes a net
loss of approximately $734,000, a loss on sale of equipment of approximately
$258,000, and depreciation and


                                       13

<PAGE>

amortization expenses of approximately $1,760,000. Other non-cash activities
included in the determination of net income include direct payments of lease
income by lessees to banks of approximately $634,000.

For the six-month period ended June 30, 2005, the Partnership generated cash
flows from operating activities of approximately $1,793,000, which includes net
loss of approximately $18,000, payment of accounts payable, which was primarily
for the purchase of equipment of approximately $221,000, a loss on sale of
equipment of approximately $76,000, and depreciation and amortization expenses
of approximately $1,955,000. Other non-cash activities included in the
determination of net income include direct payments of lease income by lessees
to banks of approximately $678,000.

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 June 30, 2006, the Partnership had future minimum rentals on non-cancelable
operating leases of $1,156,000 for the balance of the year ending December 31,
2006 and $1,465,000 thereafter. At June 30, 2006, the outstanding debt was
$1,183,000, with interest rates ranging from 4.29% to 7.50%, and will be payable
through September 2008.

As of June 30, 2006, the Partnership has an unsecured, non-interest bearing
receivable from CCC, a related party to the Partnership, in the amount of
approximately $154,000, 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, 2004.

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

The Partnership intends to invest $750,000 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
June 30, 2006 and December 31, 2005 was approximately $1,250,000 and $909,000
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 June 30, 2006 and December 31, 2005 was approximately
$3,333,149 and $1,798,000 respectively.

RESULTS OF OPERATIONS

     Three Months Ended June 30, 2006 compared to Three Months June 30, 2005


                                       14

<PAGE>

For the three-months ended June 30, 2006, the Partnership recognized income of
approximately $855,000, and expenses of approximately $1,214,000, resulting in
net loss of approximately $359,000. For the three-months ended June 30, 2005,
the Partnership recognized income of approximately $1,267,000 and expenses of
approximately $1,317,000 resulting in a net loss of approximately $50,000.

Lease income decreased by 33% to $855,000 for the quarter ended June 30, 2006,
from $1,267,000 for the quarter ended June 30, 2005, primarily due to the fact
that fewer lease agreements were entered into since the quarter ended June 30,
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 18% to approximately $194,000 for the quarter ended June 30, 2006,
from $165,000 for the quarter ended June 30, 2005.

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 36% to approximately $42,000 for the quarter ended June
30, 2006, from $66,000 for the quarter ended June 30, 2005, which is consistent
with the decrease in lease income.

Depreciation and amortization expenses consist of depreciation on computer
equipment and amortization of equipment acquisition fees. The expenses decreased
8% to approximately $908,000 for the quarter ended June 30, 2006, from $990,000
for the quarter ended June 30, 2005 due to equipment and acquisition fees being
fully depreciated/amortized. The Partnership identified specific computer
equipment and associated equipment acquisition costs, which were reevaluated due
to technological changes. At June 30, 2006, the Partnership determined that the
carrying amount of certain assets was greater than the undiscounted cash flows
to be generated by these assets. The Partnership recorded charges of $88,000 in
the second quarter of 2006 to record the assets at their estimated fair value.
Such amounts have been included in depreciation expense in the accompanying
financial statements. No such adjustment was necessary for the period ended June
30, 2005.

The Partnership sold computer equipment with a net book value of approximately
$122,000 for the quarter ended June 30, 2006 for a net loss of approximately
$50,000. The Partnership sold computer equipment with a net book value of
approximately $93,000 for the quarter ended June 30, 2005, for a net loss of
approximately $67,000.

    Six Months Ended June 30, 2006 compared to Six Months Ended June 30, 2005

For the six-months ended June 30, 2006, the Partnership recognized income of
approximately $1,812,000, and expenses of approximately $2,546,000, resulting in
a net loss of approximately $734,000. For the six months ended June 30, 2005,
the Partnership recognized income of approximately $2,520,000, and expenses of
approximately $2,538,000, resulting in a net loss of approximately $18,000.

Lease income decreased by 29% to $1,812,000 for the six months ended June 30,
2006, from $2,519,000 for the six-months ended June 30, 2005, primarily due to
the fact that fewer lease agreements were entered into since the six months
ended June 30, 2005.


                                                                              15

<PAGE>

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 23% to approximately $396,000 for the six-months ended June 30, 2006,
from $322,000 for the six-months ended June 30, 2005, primarily due to an
increase in the amount charged by CCC, a related party, to the Partnership for
its legal fees.

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 29% to approximately $90,000 for the six-months ended
June 30, 2006, from $126,000 for the six months ended June 30, 2005, which is
consistent with the decrease in lease income.

Depreciation and amortization expenses consist of depreciation on computer
equipment and amortization of equipment acquisition fees. The expenses decreased
10% to approximately $1,760,000 for the six months ended June 30, 2006, from
$1,955,000 for the six months ended June 30, 2005 due to equipment and
acquisition fees being fully depreciated/amortized. The Partnership identified
specific computer equipment and associated equipment acquisition costs, which
were reevaluated due to technological changes. At June 30, 2006, the Partnership
determined that the carrying amount of certain assets was greater than the
undiscounted cash flows to be generated by these assets. The Partnership
recorded charges of $88,000 in the second quarter of 2006 to record the assets
at their estimated fair value. Such amounts have been included in depreciation
expense in the accompanying financial statements. No such adjustment was
necessary for the period ended June 30, 2005.

The Partnership sold computer equipment with a net book value of approximately
$488,000 for the six months ended June 30, 2006, for a net loss of approximately
$258,000. The Partnership sold computer equipment with a net book value of
approximately $120,000 for the six months ended June 30, 2005, for a net loss of
approximately $76,000.

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. There are no material changes to this
disclosure related to these items since the filing of our Annual Report on Form
10-K for the year ended December 31, 2005.

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
June 30, 2006.

The Company'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
General Partner'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 periods.


                                                                              16

<PAGE>

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 June 30, 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 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.


                                                                              17

<PAGE>

Commonwealth Capital Corp. has retained Beach Financial Corporation, of Safety
Harbor, Florida, to help place the AllServe equipment currently in storage onto
new leases. Beach Financial was founded in 1978, and specializes in the sale and
re-lease of numerous types of equipment, including the manufacturers of the
equipment on the AllServe Schedules, Motorola and Nortel. Commonwealth has had
five meetings with Beach Financial to strategize how to redeploy this equipment.
In a conference call on Tuesday August 1st, Beach informed Commonwealth that
there are currently three companies that are interested in leasing this
equipment.

     Item 1A. RISK FACTORS

Other than with respect to the risk factor below, there have been no material
changes from the risk factors disclosed in "Item 1A. Risk Factors" of our Annual
Report on Form 10-K for the year ended December 31, 2005. The risk factor
presented below should be read in conjunction with the risk factors and
information disclosed in our Annual Report on Form 10-K.

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 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.


                                                                              18

<PAGE>

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.

     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 AND REPORTS ON FORM 8-K


                                                                              19

<PAGE>

               a)   Exhibits:

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

               b)   Report on Form 8-K

On April 24, 2006 COMMONWEALTH INCOME & GROWTH FUND IV issued an 8-K statement
to the SEC. Items reported in this statement consisted of the following: George
S. Springsteen, Founder and former Chairman of the Board, CEO and Treasurer of
the general partner's parent company, Commonwealth Capital Corp. ("CCC"), passed
away unexpectedly on April 18, 2006. The Board of Directors immediately took
action and adopted the following changes in management effective April 24, 2006:
Mr. Springsteen's spouse, Kimberly A. Springsteen, 46, has been appointed as
Chairman of the Board, Chief Executive Officer and Treasurer of CCC, CIGF, Inc.
and CCSC, and remains a Director and Chief Operating Officer of each. Henry J.
Abbott, 55, has been appointed as President of CCC, CIGF, Inc. and CCSC. Jay M.
Dugan, 58, has been appointed as Executive Vice President of CCC, CIGF, Inc. and
CCSC. Lynn A. Franceschina, 34, has been appointed as Executive Vice President
of CCC, CIGF, Inc. and CCSC. James Pruett, 40, has been appointed as a Vice
President of CCC, CIGF, Inc. and CCSC. Donnamarie D. Abbott, 46, has been
appointed as a Vice President of CCC, CIGF, Inc. and CCSC.

Also included in the April 24, 2006 8-K statement were changes among the Board
of Directors as follows: Effective as of April 18, 2006, Jay M. Dugan, Katrina
M. Mason and Lynn A. Franceschina have joined Ms. Springsteen and Mr. Abbott on
the Board of Directors of CCC and CIGF, Inc. Ms. Springsteen has been appointed
as the Chairman of the Board of Directors and Katrina M. Mason, 33, has been
appointed President of CCSC, effective as of the date hereof.

                                    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


August 14, 2006                                By: /s/ Kimberly A. Springsteen
Date                                               -----------------------------
                                                   Kimberly A. Springsteen
                                                   Chief Executive Officer


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