UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-KSB
                         Amendment No. 2 to Form 10-KSB
(Mark One)

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

     For the fiscal year ended December 31, 2007 OR

( )  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                        Commission File Number: 333-11625

       CAPITAL ALLIANCE INCOME TRUST LTD., A REAL ESTATE INVESTMENT TRUST
       ------------------------------------------------------------------
                 (Name of small business issuer in its charter)

              Delaware                                        94-3240473
-------------------------------                          ---------------------
(State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                          Identification Number)

         100 Pine Street
         Suite 560
         San Francisco, California                                 94111
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         (Address of principal executive office)                 (zip code)

Issuer's telephone number                          (415) 693-9500


Securities registered pursuant to Section 12(b) of the Act:

      Title of each class Name of each exchange on which registered Common
                 Stock $0.01 par value American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None.

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.

                                 Yes [X] No [_]

Registrant meets the condition of General Instruction G(1)(a) and (b) of Form
10-KSB and is filing this form 10-KSB pursuant to its reduced disclosure format.

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [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]


Issuer's revenues for its most recent fiscal year were $1,114,958.

As of March 3, 2008, the issuer's common shares closed at $3.35 and the
aggregate market value of the issuer's shares of Common Stock, $.01 par value,
held by non-affiliates of the issuer was approximately $817,400. At that date
approximately 380,532 common shares were outstanding and 244,000 common shares
were held by non-affiliates.

Transitional Small Business Disclosure Format.   Yes [_]   No [X]



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                                EXPLANATORY NOTE

This Amendment No. 2 on Form 10-KSB amends the Form 10-KSB/A Amendment No. 1 for
the year ending December 31, 2007 as filed with the Securities and Exchange
Commission on September 5, 2008. This amendment addresses Item 8A regarding
Management's assessments over disclosure controls and procedures as well as
internal control over financial reporting.










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ITEM 8A. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with the participation of our Company's management,
including our Chief Executive Officer and Principal Accounting Officer, we
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934) as of the end of the period covered by this
report.

When we originally filed this Form 10-KSB, we inadvertently did not include
management's report on internal control over financial reporting pursuant to
Item 308T of Regulation S-K and as a result, our management has concluded that
our disclosures controls and procedures as of the end of the period covered by
this report were not effective. Effective disclosure controls and procedures
means that the material information required to be included in our Securities
and Exchange Commission reports is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and regulations for the period of time covered by this report.

The omission of the above referenced report does not require the Company to
restate or amend its audited financial statements nor does it impact our
earnings and financial position. In addition, our management has implemented new
disclosure policies to improve the effectiveness of the design and operation of
our disclosure controls and procedures and expects that in future reporting
periods, our disclosures controls and procedures will be effective.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rule 13a-15(f) under the
Exchange Act). Our internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of our Company's assets; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles in the
United States of America and that receipts and expenditures of the Company are
being made only in accordance with the authorization of the Company's management
and directors; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of our
Company's assets that could have a material effect on the financial statements.

Because of the inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Therefore, even those systems
determined to be effective can provide only reasonable assurance of achieving
their control objectives. Further, the evaluation of the effectiveness of
internal control over financial reporting was made as of a specific date, and
continued effectiveness in future periods is subject to the risks that controls
may become inadequate because of changes in conditions or that the degree of
compliance with the policies and procedures may decline.

Under the supervision and with the participation of our Company's management,
including our Chief Executive Officer and Principal Accounting Officer, we
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO"). Based on our evaluation under the framework, management has
concluded that our internal control over financial reporting was effective as of
December 31, 2007 despite the oversight described below.

Once again, when we originally filed this Form 10-KSB, we inadvertently did not
include management's report on internal control over financial reporting
pursuant to Item 308T of Regulation S-K and as a result, we are now unable to
conclude that our disclosure controls and procedures as of the end of the period
covered by this report were effective. The omission of the above referenced
report does not require the Company to restate or amend its audited financial
statements nor does it impact our earnings and financial position.



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This annual report does not include an attestation report of the Company's
independent registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by our
independent registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit us to provide only management's
report in this annual report.

REMEDIATION EFFORTS

In order to ensure that our disclosure controls and procedures are effective
going forward, we have taken the steps referred to below.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

During the period ended December 31, 2007, we inadvertently did not include
management's report on internal control over financial reporting pursuant to
Item 308T of Regulation S-K and as a result, we are now unable to conclude that
our disclosures controls and procedures as of the end of the period covered by
this report were effective.

In addition, our management has taken the following steps:

o        Expanded monthly accounting meeting topics to include compliance
         issues, new rules, regulations and their financial reporting
         requirements;
o        Attended SEC compliance training to keep current on issues; and
o        Implemented new policies to better evaluate the effectiveness of the
         design and operation of our disclosure controls and procedures.

We believe that these steps have remediated the ineffective disclosure controls
and procedures as of the date of filing this amended Form 10-KSB.





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                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(D) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, hereunto duly authorized.

                      Capital Alliance Income Trust, Ltd.
                         A Real Estate Investment Trust


Dated: November 12, 2008

By: /s/   Richard J. Wrensen              By: /s/  Andrea Barney
    --------------------------                ----------------------------
     Richard J. Wrensen                       Andrea Barney
     Chairman and                             Principal Accounting Officer
     Chief Executive Officer                  Controller




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