UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C.  20549
 
 ______________
 
 FORM
10-Q
 
 ______________
 (Mark
One)
 
 x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For
the quarterly period ended September 15, 2008
 
 OR
 
 [  ]
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 
 Commission
File Number 0-17015
 
 
 
 LIBERTY
TAX CREDIT PLUS L.P.
 (Exact
name of Registrant as specified in its charter)
 
 
 
 Delaware
            
            13-3446500(State
      or other jurisdiction of incorporation or organization)
            
            (I.R.S.
      Employer Identification No.)625
      Madison Avenue, New York, New York
            
            10022(Address
      of principal executive offices)
            
            (Zip
      Code)
 
 
 Registrant’s
telephone number, including area code (212) 317-5700
 
 
 Indicate
by check mark whether the registrant (1) 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 (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  xNo  [  ]
 
 
 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 “large accelerated filer”, “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
 
 
 Large
      accelerated filer [  ]
            
            Accelerated
      filer [  ]Non-accelerated
      filer [  ]  (Do not check if a smaller reporting
      company)
            
            Smaller
      reporting company 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
 
 
 
  PART I -
Financial Information
 
 Item
1.  Financial Statements
 
 LIBERTY
TAX CREDIT PLUS L.P.
 AND
SUBSIDIARIES
 Consolidated
Balance Sheets
  
 
 September
      15,
            
            
            March
      15,2008
            
            
            2008(Unaudited)
            
            
            (Audited)ASSETSOperating
      assetsProperty
      and equipment, at cost, net of accumulated depreciation of$0
      and $29,193,600, respectively
            
            $
            0
            
            
            $
            16,109,674Cash
      and cash equivalents
            
            
            3,831,654
            
            
            
            7,007,120Cash
      held in escrow
            
            
            0
            
            
            
            2,325,637Accounts
      receivable - tenants
            
            
            0
            
            
            
            116,669Deferred
      costs, net of accumulated amortization of $0 and
              $126,560,
      respectively
            
            
            0
            
            
            
            553,851Other
      assets
            
            
            3,921
            
            
            
            595,986Total
      operating assets
            
            
            3,835,575
            
            
            
            26,708,937Assets
      from discontinued operations (Note 6)Property
      and equipment held for sale, net of accumulated depreciationof
      $34,093,819 and $18,141,851, respectively
            
            
            18,444,334
            
            
            
            10,588,776Net
      assets held for sale
            
            
            4,904,131
            
            
            
            1,837,456Total
      assets from discontinued operations
            
            
            23,348,465
            
            
            
            12,426,232Total
      assets
            
            $
            27,184,040
            
            
            $
            39,135,169LIABILITIES
      AND PARTNERS’ (DEFICIT) CAPITALOperating
      liabilitiesMortgage
      notes payable
            
            $
            0
            
            
            $
            23,188,688Accounts
      payable
            
            
            19,719
            
            
            
            3,988,892Accrued
      interest payable
            
            
            0
            
            
            
            1,312,357Security
      deposits payable
            
            
            0
            
            
            
            114,270Due
      to local general partners and affiliates
            
            
            0
            
            
            
            15,546,224Due
      to general partners and affiliates
            
            
            2,184,633
            
            
            
            2,355,472Total
      operating liabilities
            
            
            2,204,352
            
            
            
            46,505,903Liabilities
      from discontinued operations (Note 6)Mortgage
      notes payable of assets held for sale
            
            
            26,075,344
            
            
            
            17,314,761Net
      liabilities held for sale (including minority interest)
            
            
            19,885,172
            
            
            
            4,959,349Total
      liabilities from discontinued operations
            
            
            45,960,516
            
            
            
            22,274,110Total
      liabilities
            
            
            48,164,868
            
            
            
            68,780,013Minority
      interests
            
            
            0
            
            
            
            (579,276
            )Commitments
      and contingencies (Note 7)Partners’
      (deficit) capitalLimited
      partners (15,987.5 BACs issued and outstanding)
            
            
            (25,676,606
            )
            
            
            (33,680,498
            )General
      partners
            
            
            4,695,778
            
            
            
            4,614,930Total
      partners’ (deficit) capital
            
            
            (20,980,828
            )
            
            
            (29,065,568
            )Total
      liabilities and partners’ (deficit) capital
            
            $
            27,184,040
            
            
            $
            39,135,169See
      accompanying notes to consolidated financial
  statements.
   - 2
-
  LIBERTY
TAX CREDIT PLUS L.P.
 AND
SUBSIDIARIES
 Consolidated
Statements of Operations
 (Unaudited)
 
 
 
 
 Three
      Months Ended
              September
      15,
            
            Six
      Months Ended
              September
      15,2008
            
            2007*
            
            2008
            
            2007*Operations:RevenuesOther
            
            $
            24,157
            
            $
            78,585
            
            $
            56,376
            
            $
            127,577Total
      revenues
            
            
            24,157
            
            
            78,585
            
            
            56,376
            
            
            127,577ExpensesGeneral
      and administrative
            
            
            42,845
            
            
            51,040
            
            
            142,114
            
            
            118,629General
      and administrative – related parties (Note 2)
            
            
            93,281
            
            
            167,092
            
            
            133,907
            
            
            323,976Total
      expenses from operations
            
            
            136,126
            
            
            218,132
            
            
            276,021
            
            
            442,605Loss
      from operations
            
            
            (111,969
            )
            
            (139,547
            )
            
            (219,645
            )
            
            (315,028
            )Discontinued
      Operations:(Loss)
      income from discontinued operations (including minority interest and gain
      on sale of properties) (Note 6)
            
            
            (330,301
            )
            
            (431,732
            )
            
            8,304,385
            
            
            (1,892,684
            )Net
      (loss) income
            
            $
            (442,270
            )
            $
            (571,279
            )
            $
            8,084,740
            
            $
            (2,207,712
            )Loss
      from operations – limited partners
            
            $
            (110,850
            )
            $
            (138,152
            )
            $
            (217,449
            )
            $
            (311,878
            )(Loss)
      income from discontinued operations (including minority interest and gain
      on sale of properties) – limited partners
            
            
            (326,998
            )
            
            (427,414
            )
            
            8,221,341
            
            
            (1,873,757
            )Net
      (loss) income - limited partners
            
            $
            (437,848
            )
            $
            (565,566
            )
            $
            8,003,892
            
            $
            (2,185,635
            )Number
      of BACs outstanding
            
            
            15,987.5
            
            
            15,987.5
            
            
            15,987.5
            
            
            15,987.5Loss
      from operations per BAC
            
            $
            (6.94
            )
            $
            (8.64
            )
            $
            (13.60
            )
            $
            (19.51
            )(Loss)
      income from discontinued operations per BAC
            
            
            (20.45
            )
            
            (26.74
            )
            
            514.23
            
            
            (117.20
            )Net
      (loss) income per BAC
            
            $
            (27.39
            )
            $
            (35.38
            )
            $
            500.63
            
            $
            (136.71
            )*  Reclassified
      for comparative purposes
  See
accompanying notes to consolidated financial statements.
 
 - 3
-
  LIBERTY
TAX CREDIT PLUS L.P.
 AND
SUBSIDIARIES
 Consolidated
Statement of Changes in Partners’ (Deficit) Capital
 (Unaudited)
  
 
 Total
            
            Limited
              Partners
            
            General
              PartnerPartners’
      (deficit) capital – March 16, 2008
            
            $
            (29,065,568
            )
            $
            (33,680,498
            )
            $
            4,614,930Net
      income
            
            
            8,084,740
            
            
            8,003,892
            
            
            80,848Partners’
      (deficit) capital – September 15, 2008
            
            $
            (20,980,828
            )
            $
            (25,676,606
            )
            $
            4,695,778
 
 
 See
accompanying notes to consolidated financial statements
   - 4
-
  LIBERTY
TAX CREDIT PLUS L.P.
 AND
SUBSIDIARIES
 Consolidated
Statements of Cash Flows
 Increase
(decrease) in Cash and Cash Equivalents
 (Unaudited)
  Six
      Months Ended
                  September
      15,2008
                
                
                2007Net
      income (loss)
                
                $
                8,084,740
                
                
                $
                (2,207,712
                )Adjustments
      to reconcile net income (loss) to net cash used in operating
      activities:Gain
      on sale of properties
                
                
                (8,518,263
                )
                
                
                (84,827
                )Depreciation
      and amortization
                
                
                519,127
                
                
                
                1,282,336Minority
      interest in (income) loss of subsidiaries
                
                
                (1,038,047
                )
                
                
                307,464(Increase)
      decrease in accounts receivable – tenants
                
                
                (134,172
                )
                
                
                23,861Decrease
      (increase) in other assets
                
                
                219,209
                
                
                
                (191,775
                )Increase
      in accounts payable
                
                
                272,570
                
                
                
                2,877Increase
      in accrued interest payable
                
                
                380,929
                
                
                
                300,447Increase
      (decrease) in security deposits payable
                
                
                1,934
                
                
                
                (6,674
                )(Decrease)
      increase in due to general partners and affiliates
                
                
                (117,089
                )
                
                
                70,906Decrease
      (increase) in cash held in escrow
                
                
                210,974
                
                
                
                (206,185
                )Net
      cash used in operating activities
                
                
                (118,088
                )
                
                
                (709,282
                )Cash
      flows from investing activities:(Increase)
      decrease in cash held in escrow
                
                
                (384,418
                )
                
                
                55,361Proceeds
      from sale of investments
                
                
                8,359,177
                
                
                
                3,435,000Costs
      paid relating to sale of properties
                
                
                (286,454
                )
                
                
                (438,161
                )Improvements
      to property and equipment
                
                
                0
                
                
                
                (59,318
                )Net
      cash provided by investing activities
                
                
                7,688,305
                
                
                
                2,992,882Cash
      flows from financing activities:Repayments
      of mortgage notes
                
                
                (7,526,697
                )
                
                
                (192,317
                )Increase
      in due to local general partners and affiliates
                
                
                9,765
                
                
                
                327,537Decrease
      in due to local general partners and affiliates
                
                
                (47,592
                )
                
                
                (24,749
                )Increase
      in deferred costs
                
                
                0
                
                
                
                (3,834
                )Decrease
      in capitalization of consolidated subsidiaries attributable to minority
      interest
                
                
                0
                
                
                
                (212,161
                )Distribution
                
                
                (2,828,217
                )
                
                
                (2,777,970
                )Net
      cash used in financing activities
                
                
                (10,392,741
                )
                
                
                (2,883,494
                )Net
      decrease in cash and cash equivalents
                
                
                (2,822,524
                )
                
                
                (599,894
                )Cash
      and cash equivalents at beginning of period
                
                
                7,258,111
                
                
                
                6,390,501Cash
      and cash equivalents at end of period*
                
                $
                4,435,587
                
                
                $
                5,790,607Summarized
      below are the components of the gain on sale of
properties:Proceeds
      from sale of investments – net
                
                $
                (8,072,723
                )
                
                $
                (2,996,839
                )Decrease
      in property and equipment, net of accumulated depreciation
                
                
                7,748,517
                
                
                
                2,605,211Decrease
      in mortgage notes payable
                
                
                (6,901,408
                )
                
                
                0Decrease
      in due to general partner and affiliates
                
                
                (24,998
                )
                
                
                0Decrease
      in due to local general partner and affiliates
                
                
                (83,431
                )
                
                
                0Decrease
      in cash held in escrow
                
                
                653,356
                
                
                
                18,663Decrease
      in rents receivable
                
                
                63,165
                
                
                
                14,532Decrease
      in other assets
                
                
                62,684
                
                
                
                38,109(Decrease)
      increase in accounts payable
                
                
                (1,281,775
                )
                
                
                254,160Decrease
      in accrued interest payable
                
                
                (679,595
                )
                
                
                0Decrease
      in security deposits payable
                
                
                (38,503
                )
                
                
                (18,663
                )Decrease
      in deferred cost
                
                
                170,163
                
                
                
                0Decrease
      in capitalization of consolidated subsidiaries attributable to minority
      interest
                
                
                (133,715
                )
                
                
                0* 
      Cash and cash equivalents, end of period, includes cash and cash
      equivalents from discontinued operations of $603,933 and $389,670,respectively.See
      accompanying notes to consolidated financial
  statements.
   - 5
-
  LIBERTY
TAX CREDIT PLUS L.P.
 AND
SUBSIDIARIES
 Notes to
Consolidated Financial Statements
 September
15, 2008
 (Unaudited)
 
 
 NOTE 1 -
General
 
 The
consolidated financial statements for the six months ended September 15, 2008
and 2007, include the accounts of Liberty Tax Credit Plus L.P. (the
“Partnership”) and seven and nine subsidiary partnerships (each a “subsidiary
partnership” or “Local Partnership”), respectively, in which the Partnership is
a limited partner.  Through the rights of the Partnership and/or a
general partner of the Partnership (a “General Partner”), which General Partner
has a contractual obligation to act on behalf of the Partnership, to remove the
general partners of each subsidiary partnership (the “Local General Partners”)
and to approve certain major operating and financial decisions, the Partnership
has a controlling financial interest in the subsidiary
partnerships.  All intercompany accounts and transactions with the
subsidiary partnerships have been eliminated in consolidation.
 
 For
financial reporting purposes, the Partnership’s fiscal quarter ends on September
15.  All subsidiary partnerships have fiscal quarters ending June
30.  Accounts of the subsidiary partnerships have been adjusted for
intercompany transactions from July 1 through September 15.  The
Partnership’s quarter ends on September 15 in order to allow adequate time for
the subsidiary partnerships’ financial statements to be prepared and
consolidated.  The books and records of the Partnership are maintained
on the accrual basis of accounting, in accordance with accounting principles
generally accepted in the United States of America (“GAAP”).
 
 In the
opinion of the General Partners, the accompanying unaudited financial statements
contain all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial position of the Partnership as of
September 15, 2008 and March 15, 2008, the results of operations for the three
and six months ended September 15, 2008 and 2007 and cash flows for the six
months ended September 15, 2008 and 2007.  However, the operating
results and cash flows for the six months ended September 15, 2008 may not be
indicative of the results for the year.
 
 Certain
information and note disclosures which are normally included in financial
statements prepared in accordance with GAAP have been omitted or
condensed.  These consolidated financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Partnership’s Annual Report on Form 10-K for the period ended March 15,
2008.
 
 Increases
(decreases) in the capitalization of consolidated subsidiaries attributable to
minority interest arise from cash contributions and cash distributions to the
minority interest partners.
 
 The
Partnership’s investment in each subsidiary partnership is equal to the
respective subsidiary partnership’s partners’ equity less minority interest
capital, if any.  Losses attributable to minority interests which
exceed the minority interests’ investments in the subsidiary partnerships have
been charged to the Partnership.  There were no such losses for the
three and six months ended September 15, 2008 and 2007.  In
consolidation, all subsidiary partnership losses are included in the
Partnership’s capital account except for losses allocated to minority interest
capital.
 
 Recent Accounting
Pronouncements
 
 In
December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in
Consolidated Financial Statements.  This statement was issued
with the intent to improve the relevance, comparability, and transparency of the
financial information that a reporting entity provides in its consolidated
financial statements for those entities that have outstanding non-controlling
interest in one or more subsidiaries.  The effective date for this
provision is for fiscal years beginning after December 15, 2008.  The
Partnership is currently evaluating the impact of the provisions of this
statement on the consolidated financial statements.
 
 In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (“SFAF No. 162”).  SFAS No. 162
identifies the sources of accounting principles and the framework for selecting
the principles to be used in the preparation of financial statements of
non-governmental entities that are presented in conformity with generally
accepted accounting principles.  SFAF No. 162 directs the hierarchy to
the entity, rather than the independent auditors, as the entity is responsible
for selecting accounting principles for financial statements that are presented
in conformity with generally accepted accounting principles.  The
standard is effective 60 days following Securities and Exchange Commission
(“SEC”) approval of the Public Company Accounting Oversight Board (“PCAOB”)
amendments to remove the hierarchy of generally accepted accounting principles
from the auditing standards.  SFAF No. 162 is not expected to have an
impact on the Partnership’s consolidated financial statements.
 
 
 NOTE 2 -
Related Party Transactions
 
 An
affiliate of the General Partners has a 1% interest, as a special limited
partner, in each of the subsidiary partnerships.  An affiliate of the
General Partners also has a minority interest in certain subsidiary
partnerships.
 
 - 6
-
 LIBERTY
TAX CREDIT PLUS L.P.
 AND
SUBSIDIARIES
 Notes to
Consolidated Financial Statements
 September
15, 2008
 (Unaudited)
 The costs
incurred to related parties from operations for the three and six months ended
September 15, 2008 and 2007 were as follows:
 
 Three
      Months Ended
              September
      15,
            
            
            Six
      Months Ended
              September
      15,2008
            
            
            2007*
            
            
            2008
            
            
            2007*Partnership
      management fees (a)
            
            $
            78,335
            
            
            $
            108,375
            
            
            $
            104,014
            
            
            $
            228,000Expense
      reimbursement (b)
            
            
            14,946
            
            
            
            58,717
            
            
            
            29,893
            
            
            
            95,976Total
      general and administrative-related parties
            
            $
            93,281
            
            
            $
            167,092
            
            
            $
            133,907
            
            
            $
            323,976*   Reclassified
      for comparative purpose.
 
 
 The costs
incurred to related parties from discontinued operations for the three and six
months ended September 15, 2008 and 2007 were as follows:
 
 Three
      Months Ended
              September
      15,
            
            
            Six
      Months Ended
              September
      15,2008
            
            
            2007*
            
            
            2008
            
            
            2007*Local
      administrative fee (d)
            
            $
            (1,930
            )
            
            $
            3,125
            
            
            $
            5,000
            
            
            $
            6,250Total
      general and administrative-General Partners
            
            
            (1,930
            )
            
            
            3,125
            
            
            
            5,000
            
            
            
            6,250Property
      management fees incurred to affiliates of the local general partners
      (c)
            
            
            79,341
            
            
            
            91,632
            
            
            
            194,395
            
            
            
            265,327Total
      general and administrative-related parties
            
            $
            77,411
            
            
            $
            94,757
            
            
            $
            199,395
            
            
            $
            271,577*   Reclassified
      for comparative purpose.
 
 
 (a)  The
General Partners are entitled to receive a partnership management fee, after
payment of all Partnership expenses, which together with the local annual
administrative fees will not exceed a maximum of 0.5% per annum of invested
assets (as defined in the Partnership’s Amended and Restated Agreement of
Limited Partnership (“Partnership Agreement”)), for administering the affairs of
the Partnership.  The partnership management fee, subject to the
foregoing limitation, will be determined by the General Partners in their sole
discretion based upon their review of the Partnership’s
investments.  Unpaid partnership management fees for any year will be
accrued without interest and will be payable from working capital reserves or to
the extent of available funds after the Partnership has made distributions to
the limited partners and BACs holders of sale or refinancing proceeds equal to
their original capital contributions plus a 10% priority return thereon (to the
extent not theretofore paid out of cash flow).  Partnership management
fees owed to the General Partners amounting to approximately $2,142,000 and
$2,172,000 were accrued and unpaid as of September 15, 2008 and March 15, 2008,
respectively.  Without the General Partner’s advances and continued
accrual without payment of certain fees and expense reimbursements, the
Partnership would not be in a position to meet its obligations.
 
 (b)  The
Partnership reimburses the General Partners and their affiliates for actual
Partnership operating expenses incurred by the General Partners and their
affiliates on the Partnership’s behalf.  The amount of reimbursement
from the Partnership is limited by the provisions of the Partnership
Agreement.  Another affiliate of the General Partners performs asset
monitoring for the Partnership.  These services include site visits
and evaluations of the subsidiary partnerships’ performance.  Expense
reimbursements and asset monitoring fees owed to affiliates of the General
Partners amounting to approximately $31,000 and $84,000 were accrued and unpaid
as of September 15, 2008 and March 15, 2008, respectively.
 
 (c)  Property
management fees incurred by the subsidiary partnerships in operations amounted
to $148,252 and $155,446 and $329,659 and $392,955 for the three and six months
ended September 15, 2008 and 2007, respectively.  Of these fees,
$79,341 and $91,632 and $194,395 and $265,327 were incurred to affiliates of the
Local General Partners, all of which related to discontinued
operations.
 
 (d)  Liberty
Associates III L.P., a General Partner and the special limited partner of the
subsidiary partnerships, is entitled to receive a local administrative fee of up
to $2,500 per year from each subsidiary partnership.
 
 
 NOTE 3 –
Fair Value Measurements
 
 In the
first quarter of 2008, we adopted SFAS No. 157, “Fair Value Measurements”,for
financial assets and liabilities.This standard
defines fair value, provides guidance for measuring fair value and requires
certain disclosures.  This standard does not require any new fair
value measurements, but discusses valuation techniques, such as the market
approach (comparable market prices), the income approach (present value of
future income or cash flow), and the cost approach (cost to replace the service
capacity of an asset or replacement cost).  The statement provides for
a fair value hierarchy that prioritizes the inputs to valuation techniques used
to measure fair value into three broad levels.  The following is a
brief description of those three levels:
 - 7
-
  LIBERTY
TAX CREDIT PLUS L.P.
 AND
SUBSIDIARIES
 Notes to
Consolidated Financial Statements
 September
15, 2008
 (Unaudited)
 Level
      1:
            Observable
      inputs such as quoted prices (unadjusted) in active markets for identical
      assets or liabilities.
 
 Level
      2:
            Inputs
      other than quoted prices that are observable for the asset or liability,
      either directly or indirectly.  These include quoted prices for
      similar assets or liabilities in active markets and quoted prices for
      identical or similar assets or liabilities in markets that are not
      active.
 
 Level
      3:
            Unobservable
      inputs that reflect our own
assumptions.
 
 As
permitted, we chose not to elect the fair value option as prescribed by FASB
SFAS No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities” – Including an
Amendment of FASB Statement No. 115, for our financial assets and liabilities
that had not been previously carried at fair value.  Therefore, we did
not elect to fair value any additional items under SFAS No. 159.  We,
in accordance with Financial Accounting Standards Board Staff Position No.
157-2, “The Effective Date of
FASB Statement No. 157”, will defer application on SFAS No. 157 for
nonfinancial assets and nonfinancial liabilities until first quarter
2009.
 
 The
estimated fair value of financial instruments has been determined using
available market information or other appropriate valuation
methodologies.  However, considerable judgment is required in
interpreting market data to develop estimates of fair
value.  Consequently, the estimates are not necessarily indicative of
the amounts that could be realized or would be paid in a current market
exchange.  At September 15, 2008, the carrying amount of the
Partnership’s mortgage notes payable approximated fair value as their
contractual interest rates approximated market yields for similar debt
instruments.
 
 At
      September 15, 2008
            
            Fair
      Value Measurements at
              September
      15, 2008 using
              Fair
      Value HierarchyCost
            
            Fair
      Value
            
            Level
      1
            
            Level
      2
            
            Level
      3LIABILITIES:Mortgage
      notes
            
            $
            26,075,344
            
            
            $
            26,075,344
            
            
            $
            0
            
            
            $
            0
            
            
            $
            26,075,344
 
  NOTE4 – Sale of
Properties
 
 The
Partnership is currently in the process of disposing all of its
investments.  It is anticipated that this process will be completed
within one year.  As of September 15, 2008, the Partnership has sold
its limited partnership interest in nine Local Partnerships, the property and
the related assets and liabilities of seventeen Local Partnerships and has
transferred the deed to the property and the related assets and liabilities of
one Local Partnership.  In addition, as of September 15, 2008, the
Partnership has entered into agreements to sell its limited partnership interest
in two Local Partnerships and one Local Partnership entered into an agreement to
sell its property and the related assets and liabilities (see Note
5).  Subsequently, the Partnership sold its limited partnership
interest in one of those Local Partnerships (see Note 8).  There can
be no assurance as to when the Partnership will dispose of its remaining three
investments or the amount of proceeds which may be received.  However,
based on the historical operating results of the Local Partnerships and the
current economic conditions, including changes in tax laws, it is unlikely that
the proceeds from such sales received by the Partnership will be sufficient to
return to the limited partners their original investment.
 
 On March
5, 2008, Magnolia Arms Associates, Ltd. (“Magnolia”) transferred the deed to the
property and the related assets and liabilities to an unaffiliated third party
in lieu of foreclosure.  The transfer of assets of approximately
$2,241,000 and liabilities of $7,505,000 resulted in a gain of approximately
$5,239,000.
 
 On
February 6, 2008, the property and the related assets and liabilities of Quality
Hill Historic District – Phase II – A, L.P. (“Quality Hill”) were sold to an
unaffiliated third party purchaser for a sales price of
$3,275,000.  The Partnership received $375,000 as a distribution from
this sale after the repayment of other liabilities, closing cost and
distributions to minority interest of approximately $2,900,000.  The
sale resulted in a gain of approximately $1,587,000, resulting from the
write-off of the deficit basis in property at the date of sale, which was
recorded during the quarter ended June 15, 2008.  An adjustment of
approximately $280,000 in gain was recorded during the quarter ended September
15, 2008, resulting in an overall gain of approximately $1,867,000.
 
 On
January 29, 2008, the property and the related assets and liabilities of
Greenleaf Associates, L.P. (“Greenleaf”) were sold to an unaffiliated third
party purchaser for a sales price of $5,084,177.  The Partnership
received $169,291 as a distribution from this sale after the repayment of other
liabilities, closing cost and distribution to minority interest of approximately
$4,915,000.  The sale resulted in a gain of approximately $1,412,000,
resulting from the write-off of the deficit basis in property at the date of
sale.
  On May
11, 2007, the property and the related assets and liabilities of Charles Drew
Court Associates, L.P. (“Charles Drew”) were sold to an unaffiliated third party
purchaser for a sales price of $3,435,000.  The Partnership received
$3,144,463 as a distribution from this sale after the repayment of other
liabilities, closing costs and distributions to minority interest of
approximately $291,000.  The sale resulted in a loss of approximately
$24,000, resulting from the write-off of the basis in the property at the date
of the sale, which was recorded during the quarter ended June 15,
2007.  Adjustments of approximately $88,000 and $766,000 in gain were
recorded during the quarters ended September 15, 2007 and March 15, 2008,
respectively, resulting in overall gain of approximately $830,000.
 - 8
-
 LIBERTY
TAX CREDIT PLUS L.P.
 AND
SUBSIDIARIES
 Notes to
Consolidated Financial Statements
 September
15, 2008
 (Unaudited)
  
 NOTE 5 –
Assets Held for Sale
 
 On April
29, 2008, State Street 86 Associates, L.P. (“State Street”) entered into a
purchase and sale agreement to sell the property and the related assets and
liabilities to an unaffiliated third party purchaser for a sales price of
$1,500,000 plus the assumption of the mortgage debt.  The sales
documents have been executed and the initial deposit funds are being held in
escrow.  The sale requires HUD approval.  At this time, the
Partnership cannot determine when or if HUD will grant its
approval.  State Street has been classified as an asset held for sale
as of the quarter ended June 15, 2008.  As of June 30, 2008, State
Street had property and equipment, at cost, of approximately $13,923,000,
accumulated depreciation of approximately $10,353,000 and mortgage debt of
approximately $5,330,000.
 
 On April
11, 2008, the Partnership entered into an assignment and assumption agreement to
sell its limited partnership interest in Grove Parc Associates, L.P. (“Grove
Parc”) to an affiliate of the Local General Partner for a sales price of
$10,000.  The sales documents have been executed and the initial
deposit funds are being held in escrow.  As of June 30, 2008, Grove
Parc had property and equipment, at cost, of approximately $21,965,000,
accumulated depreciation of approximately $13,179,000 and mortgage debt of
approximately $11,363,000.  Subsequently, on September 30, 2008, the
Partnership sold its limited partnership interest in Grove Parc (see Note
8).
 
 On April
10, 2008, the Partnership entered into an assignment and assumption agreement to
sell its limited partnership interest in B & C Housing Associates, L.P. (“B
& C Housing”) to an affiliate of the Local General Partner for a sales price
of $75,000.  The sales documents have been executed and the initial
deposit funds are being held in escrow.  The sale requires HUD
approval.  At this time, the Partnership cannot determine when or if
HUD will grant its approval.  B & C Housing has been classified as
an asset held for sale as of the quarter ended June 15, 2008.  As of
June 30, 2008, B & C Housing had property and equipment, at cost, of
approximately $9,272,000, accumulated depreciation of approximately $6,006,000
and mortgage debt of approximately $6,483,000.
 
 On April
26, 2007, the Partnership entered into an agreement to sell its limited
partnership interest in West Kinney Associates, L.P. (“West Kinney”) to an
affiliate of the Local General Partner for a sales price of $600,000 and the
assumption of the outstanding mortgages and related accrued interest, which
amounted to approximately $4,475,000 on September 30, 2007.  This
contract has currently expired and management is vigorously searching the market
for a potential buyer.  West Kinney has been classified as an asset
held for sale as of the quarter ended June 15, 2007.  As of June 30,
2008, West Kinney had property and equipment, at cost, of approximately
$7,187,000, accumulated depreciation of approximately $4,465,000 and mortgage
debt of approximately $2,899,000.
 
 
 NOTE6 – Discontinued
Operations
 
 The
following table summarizes the financial position of the Local Partnerships that
are classified as discontinued operations because the respective Local
Partnerships were classified as assets held for sale.  As of September
15, 2008, Grove Parc, B & C Housing, State Street and West Kinney, were
classified as discontinued operations on the consolidated balance
sheets.  As of March 15, 2008, Magnolia, Greenleaf, Quality Hill and
West Kinney were classified as discontinued operations on the consolidated
balance sheets.
 
 
 September
      15,
              2008
            
            
            March
      15,
              2008AssetsProperty
      and equipment, net of accumulated depreciation of $34,093,819 and
      $18,141,851, respectively
            
            $
            18,444,334
            
            
            $
            10,588,776Cash
      and cash equivalents
            
            
            603,933
            
            
            
            250,991Cash
      held in escrow
            
            
            3,106,311
            
            
            
            1,260,586Deferred
      costs, net of accumulated amortization of $136,734 and $324,585,
      respectively
            
            
            543,677
            
            
            
            173,516Other
      assets
            
            
            650,210
            
            
            
            152,363Total
      assets
            
            $
            23,348,465
            
            
            $
            12,426,232LiabilitiesMortgage
      notes payable
            
            $
            26,075,344
            
            
            $
            17,314,761Accounts
      payable and other liabilities
            
            
            4,907,463
            
            
            
            3,684,320Due
      to local general partners and affiliates
            
            
            15,508,397
            
            
            
            83,431Due
      to general partners and affiliates
            
            
            53,750
            
            
            
            24,998Minority
      interest
            
            
            (584,438
            )
            
            
            1,166,600Total
      liabilities
            
            $
            45,960,516
            
            
            $
            22,274,110
 
 
 The
following table summarizes the results of operations of the Local Partnerships
that are classified as discontinued operations.  For the three and six
months ended September 15, 2008, Greenleaf, Quality Hill and Magnolia, which
were sold during the current year, and Grove Parc, B&C Housing, State Street
and West Kinney, which were classified as assets held for sale, were all
classified as discontinued operations on the consolidated financial
statements.  For the three and six months ended September 15, 2007,
Charles Drew, which was sold during the six months ended September 15, 2007,
Sartain School Venture, L.P., which was sold during the year ended March 31,
2008, Greenleaf and West Kinney, which were classified as assets held for sale
at September 15, 2007, and, in order to present comparable results for the three
and six months ended September 15, 2008, Grove Parc, B&C Housing, State
Street, Quality Hill and Magnolia, were all classified as discontinued
operations on the consolidated financial statements.
 
 - 9
-
 LIBERTY
TAX CREDIT PLUS L.P.
 AND
SUBSIDIARIES
 Notes to
Consolidated Financial Statements
 September
15, 2008
 (Unaudited)
 
 Three
      Months Ended
              September
      15,
            
            Six
      Months Ended
              September
      15,2008
            
            2007*
            
            2008
            
            2007*Revenues:Rental
      income
            
            $
            2,425,631
            
            $
            3,139,438
            
            $
            5,002,861
            
            $
            6,397,922Other
            
            
            68,234
            
            
            (55,597
            )
            
            388,724
            
            
            63,185Gain
      on sale of properties
            
            
            279,989
            
            
            108,471
            
            
            8,518,263
            
            
            84,827Total
      revenue
            
            
            2,773,854
            
            
            3,192,312
            
            
            13,909,848
            
            
            6,545,934Expenses:General
      and administrative
            
            
            519,264
            
            
            631,202
            
            
            1,055,507
            
            
            1,253,861General
      and administrative-related parties (Note 2)
            
            
            77,411
            
            
            94,757
            
            
            199,395
            
            
            271,577Repairs
      and maintenance
            
            
            990,990
            
            
            662,831
            
            
            1,885,938
            
            
            1,559,642Operating
            
            
            486,312
            
            
            418,613
            
            
            1,058,942
            
            
            1,214,505Taxes
            
            
            151,087
            
            
            154,305
            
            
            333,823
            
            
            328,998Insurance
            
            
            149,602
            
            
            198,100
            
            
            320,778
            
            
            381,647Interest
            
            
            578,845
            
            
            851,473
            
            
            1,270,000
            
            
            1,838,588Depreciation
      and amortization
            
            
            15,997
            
            
            585,089
            
            
            519,127
            
            
            1,282,336Total
      expenses
            
            
            2,969,508
            
            
            3,596,370
            
            
            6,643,510
            
            
            8,131,154(Loss)
      income before minority interest
            
            
            (195,654
            )
            
            (404,058
            )
            
            7,266,338
            
            
            (1,585,220
            )Minority
      interest in (income) loss of subsidiaries from discontinued
      operations
            
            
            (134,648
            )
            
            (27,674
            )
            
            1,038,047
            
            
            (307,464
            )Net
      (loss) income from discontinued operations (including gain on sale of
      properties)
            
            $
            (330,302
            )
            $
            (431,732
            )
            $
            8,304,385
            
            $
            (1,892,684
            )(Loss)
      income – limited partners from discontinued operations(including
      gain on sale of properties)
            
            $
            (326,999
            )
            $
            (427,414
            )
            $
            8,221,341
            
            $
            (1,873,757
            )Number
      of BACs outstanding
            
            
            15,987.5
            
            
            15,987.5
            
            
            15,987.5
            
            
            15,987.5(Loss)
      income from discontinued operations (including gain on sale of properties)
      per BAC
            
            $
            (20.45
            )
            $
            (26.74
            )
            $
            514.23
            
            $
            (117.20
            )
 
 Cash
Flows from Discontinued Operations:
 
 Six
      Months Ended
              September
      15,2008
            
            2007*Net
      cash provided by (used in) operating activities
            
            
            
            
            
            
            $
            2,214,264
            
            $
            (422,923
            )Net
      cash provided by investing activities
            
            
            
            
            
            
            $
            7,614,097
            
            $
            2,839,502Net
      cash used in financing activities
            
            
            
            
            
            
            $
            (7,430,809
            )
            $
            (2,671,333
            )
 
 *  Reclassified
for comparative purposes.
 
 
 - 10
-
 LIBERTY
TAX CREDIT PLUS L.P.
 AND
SUBSIDIARIES
 Notes to
Consolidated Financial Statements
 September
15, 2008
 (Unaudited)
 
 NOTE 7 –
Commitments and Contingencies
 
 a)  Lease
Commitment
 
 None
 
 The
Partnership maintains its cash and cash equivalents in various
banks.  Accounts at each bank are guaranteed by the Federal Deposit
Insurance Corporation (FDIC) up to $250,000.
 
 c)  Cash
Distributions
 
 Cash
distributions from the Local Partnerships to the Partnership are restricted by
the provisions of the respective Local Partnership agreements and/or
HUD.  Such cash distributions are typically made from surplus cash
flow.
 
 d)  Tax
Credits
 
 A portion
of the Tax Credits could be subject to recapture in future years if (i) a Local
Partnership ceases to meet qualification requirements, (ii) there is a decrease
in the qualified basis of the Local Partnership property or (iii) there is a
reduction in the Local Partnership interest in the property at any time during
the 15-year period (the “Compliance Period”) that began with the first tax year
of the period of the Partnership’s entitlement to claim Tax Credits (for each
property, ten years from the date of investment or, if later, the date the
property is placed in service is referred to herein as the “Tax Credit
Period”).  As of December 31, 2003, the Tax Credit Period for each
Local Partnership had expired.  The Compliance Periods continue
through December 31, 2008 with respect to the properties depending upon when the
Tax Credit Periods commenced.
 
 e)  Other
 
 Greenleaf
 A former
tenant brought suit against Greenleaf’s on-site manager for damages of
$100,000.  An amended complaint does not specify an amount of
damages.  The former tenant claims violation of the 14th
Amendment, false arrest, obstruction of justice and civil
conspiracy.  On March 26, 2008, Greenleaf’s motion to dismiss the case
was granted by the court.  Greenleaf was sold on January 29, 2008 (see
Note 4).
 
 State
Street
 The
Camden Redevelopment Agency has designated the Cramer Hill Waterfront
Redevelopment Agency as a possible future redevelopment project.  This
area includes Centennial Village, a 200-unit apartment project that State Street
owns and operates.  There have been various lawsuits involving this
redevelopment at this time.  On April 29, 2008, State Street entered
into a purchase and sale agreement to sell its property and related assets and
liabilities (see Note 5).
 
 Grove
Parc
 Grove
Parc experienced significant cash flow difficulties.  Grove Parc
withdrew $431,716 from the replacement reserve of which $303,081 was used to pay
operating expenses incurred by the Property.  The mortgage was in
technical default and on March 11, 2008 the mortgagee assigned the mortgage to
HUD pursuant to the applicable FHA insurance.On April 11,
2008, the Partnership entered into an agreement to sell its limited partnership
interest in Grove Parc (see Note 5).  Subsequently, on September 30,
2008, the Partnership sold its limited partnership interest in Grove Parc (see
Note 8).
 
 The
Partnership is subject to the risks incident to potential losses arising from
the management and ownership of improved real estate.  The Partnership
can also be affected by poor economic conditions generally, and due to the fact
that the Partnership is in the final stages of liquidating its portfolio, the
portfolio is no longer geographically diverse.  There are also
substantial risks associated with owning properties receiving government
assistance, for example the possibility that Congress may not appropriate funds
to enable HUD to make rental assistance payments.  HUD also restricts
annual cash distributions to partners based on operating results and a
percentage of the owners’ equity contribution.  As of September 15,
2008, there are three Local Partnerships subsidized by HUD.  The
Partnership cannot sell or substantially liquidate its investments in subsidiary
partnerships during the period that the subsidy agreements are in existence,
without HUD’s approval.  Furthermore, there may not be market demand
for apartments at full market rents when the rental assistance contracts
expire.
 
 
 NOTE 8 –
Subsequent Event
 
 On
September 30, 2008, the Partnership sold its limited partnership interest in
Grove Parc to an affiliate of the Local General Partner for a sales price of
$10,000.  The sale will result in a gain of approximately $18,236,000
resulting from the write-off of the deficit basis in the Local Partnership of
approximately $18,226,000 at the date of the sale and the $10,000 received from
the sale, which will be recognized during the quarter ending December 15,
2008.
  - 11
-
 
 
 Liquidity and Capital
Resources
 
 The
Partnership’s capital was originally invested in thirty-one Local
Partnerships.  As of September 15, 2008, the Partnership has sold its
limited partnership interest in nine Local Partnerships, the properties and the
related assets and liabilities of seventeen Local Partnerships and has
transferred the deed to the property and the related assets and liabilities of
one Local Partnership.  For a discussion of sales of the Local
Partnerships see Note 4.  In addition, as of September 15, 2008, the
Partnership has entered into agreements to sell its limited partnership interest
in two Local Partnerships and one Local Partnership has entered into an
agreement to sell its property and the related assets and liabilities (see Note
5).  Subsequently, the Partnership sold its limited partnership
interest in one of those Local Partnerships (see Note 8).
 
 Short-Term
 
 The
Partnership’s primary sources of funds included:  (i) working capital
reserves; (ii) interest earned on the working capital reserves; (iii) cash
distributions from operations of the Local Partnerships; and (iv) sales proceeds
and distributions.  Such funds are available to meet the obligations
of the Partnership.  During the six months ended September 15, 2008
and 2007, distributions from operations of the Local Partnerships amounted to
approximately $0 and $60,000, respectively.  Additionally, during the
six months ended September 15, 2008 and 2007, the Partnership received
approximately $0 and $2,765,000 distributions of proceeds from sales,
respectively.
 
 For the
six months ended September 15, 2008, cash and cash equivalents of the
Partnership and its consolidated Local Partnerships decreased approximately
$2,823,000.  This decrease is attributable to net cash used in
operating activities ($118,000), costs paid relating to sale of properties
($286,000), repayments of mortgage notes ($7,527,000), a net decrease in due to
local general partners and affiliates relating to finance activities ($38,000),
an increase in cash held in escrow relating to investing activities ($384,000)
and distributions ($2,828,000), which exceeded proceeds from sale of investments
($8,359,000).  Included in the adjustments to reconcile net income to
net cash used in operating activities are depreciation and amortization of
approximately ($519,000) and a gain on sale of properties
($8,518,000).
 
 Accounts
payable as of September 15, 2008 and March 15, 2008, were $19,719 and
$3,988,892, respectively.  Accounts payable are short term liabilities
which are expected to be paid from operating cash flows, working capital
balances at the Local Partnership level, Local General Partner advances and in
certain circumstances advances from the Partnership.  The Partnership
believes it (and the applicable Local Partnerships) has sufficient liquidity and
ability to generate cash and to meet existing and known or reasonably likely
future cash requirements over both the short and long term.  In
addition, accounts payable from discontinued operations, as of September 15,
2008 and March 15, 2008, totaled $1,227,452 and $1,095,701,
respectively.
 
 Accrued
interest payable as of September 15, 2008 and March 15, 2008 was $0 and
$1,312,357, respectively.  Accrued interest payable represents the
accrued interest on all mortgage loans, which include primary and secondary
loans.  Certain secondary loans have provisions such that interest is
accrued but not payable until a future date.  The Partnership
anticipates the payment of accrued interest on the secondary loans (which make
up the majority of the accrued interest payable amount and which have been
accumulating since the Partnership’s investment in the respective Local
Partnership) will be made from future refinancings or sales proceeds of the
respective Local Partnerships.  Furthermore, each Local Partnership’s
mortgage notes are collateralized by the land and buildings of the respective
Local Partnership, and are without further recourse to the
Partnership.  In addition, accrued interest payable from discontinued
operations, as of September 15, 2008 and March 15, 2008, totaled $3,531,504 and
$2,517,813, respectively.
 
 A working
capital reserve at the Partnership level of approximately $3,832,000 remained
unused at September 15, 2008.
 
 The
Partnership is not expected to have access to additional sources of
financing.
 
 Partnership
management fees owed to the General Partners amounting to approximately
$2,142,000 and $2,172,000 were accrued and unpaid as of September 15, 2008 and
March 15, 2008, respectively.  Unpaid partnership management fees for
any year will be accrued without interest and will be payable from working
capital reserves or to the extent of available funds after the Partnership has
made distributions to the limited partners and BACs holders of sale or
refinancing proceeds equal to their original capital contributions plus a 10%
priority return thereon (to the extent not theretofore paid out of cash
flow).  Without the General Partner’s advances and continued accrual
without payment of certain fees and expense reimbursements, the Partnership
would not be in a position to meet its obligations.
 
 For a
discussion of contingencies affecting certain Local Partnerships, see Item 1,
Note 7 to the financial statements.  Since the maximum loss the
Partnership would be liable for is its net investment in the respective Local
Partnerships, the resolution of the existing con­tingencies is not
anticipated to impact future results of operations, liquidity or financial
condition in a material way.  However, the Partnership’s loss of its
investment in a Local Partnership may result in recapture of Tax Credits if the
investment is lost before the expiration of the applicable Compliance Period,
during which the properties owned by the Local  Partnerships must
comply with various rent and other restrictions.  The Compliance
Periods continue through December 31, 2008 with respect to such properties
depending upon when the Tax Credit Periods commenced.
 
 The Local
Partnerships are impacted by inflation in several ways.  Inflation
allows for increases in rental rates generally to reflect the impact of higher
operating and replacement costs.  Furthermore, inflation generally
does not impact the fixed long-term financing under which real property
investments were purchased.  Inflation also affects the Local
Partnerships adversely by increasing operating costs, such as fuel, utilities,
and labor.  Since revenues from the sales of assets are driven by
market conditions, inflation has little impact.
 
 Except as
described above, management is not aware of any trends or events, commitments or
uncertainties which have not otherwise been disclosed that will, or are likely
to impact liquidity in a material way.  Management believes the only
impact would be from laws that have not yet been adopted.  The
Partnership is in the final stages of liquidating its portfolio, and as such,
the portfolio is no longer geographically diverse.
 
 - 12
-
 
 
 Off-Balance Sheet
Arrangements
 
 The
Partnership has no off-balance sheet arrangements.
 
 Tabular Disclosure of
Contractual Obligations
 
 The
Partnership disclosed in Item 7 to the financial statements in the Partnership’s
Annual Report on Form 10-K for the year ended March 15, 2008, the Partnership’s
commitments to make future payments under its debt agreements and other
contractual obligations.  There are no material changes to such
disclosure or amounts as of September 15, 2008.
 
 Fair Value
Measurements
 
 In the
first quarter of 2008, we adopted SFAS No. 157, “Fair Value Measurements”,for
financial assets and liabilities.This standard
defines fair value, provides guidance for measuring fair value and requires
certain disclosures.  This standard does not require any new fair
value measurements, but discusses valuation techniques, such as the market
approach (comparable market prices), the income approach (present value of
future income or cash flow), and the cost approach (cost to replace the service
capacity of an asset or replacement cost).  The statement provides for
a fair value hierarchy that prioritizes the inputs to valuation techniques used
to measure fair value into three broad levels.  The following is a
brief description of those three levels:
 
 Level
      1:
            Observable
      inputs such as quoted prices (unadjusted) in active markets for identical
      assets or liabilities.
 
 Level
      2:
            Inputs
      other than quoted prices that are observable for the asset or liability,
      either directly or indirectly.  These include quoted prices for
      similar assets or liabilities in active markets and quoted prices for
      identical or similar assets or liabilities in markets that are not
      active.
 
 Level
      3:
            Unobservable
      inputs that reflect our own
assumptions.
 
 As
permitted, we chose not to elect the fair value option as prescribed by FASB
SFAS No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities” – Including an
Amendment of FASB Statement No. 115, for our financial assets and liabilities
that had not been previously carried at fair value.  Therefore, we did
not elect to fair value any additional items under SFAS No. 159.  We,
in accordance with Financial Accounting Standards Board Staff Position No.
157-2, “The Effective Date of
FASB Statement No. 157”, will defer application on SFAS No. 157 for
nonfinancial assets and nonfinancial liabilities until first quarter
2009.
 
 The
estimated fair value of financial instruments has been determined using
available market information or other appropriate valuation
methodologies.  However, considerable judgment is required in
interpreting market data to develop estimates of fair
value.  Consequently, the estimates are not necessarily indicative of
the amounts that could be realized or would be paid in a current market
exchange.  At September 15, 2008, the carrying amount of the
Partnership’s mortgage notes payable approximated fair value as their
contractual interest rates approximated market yields for similar debt
instruments.
 
 At
      September 15, 2008
            
            Fair
      Value Measurements at
              September
      15, 2008 using
              Fair
      Value HierarchyCost
            
            Fair
      Value
            
            Level
      1
            
            Level
      2
            
            Level
      3LIABILITIES:Mortgage
      notes
            
            $
            26,075,344
            
            
            $
            26,075,344
            
            
            $
            0
            
            
            $
            0
            
            
            $
            26,075,344
 
  Critical Accounting Policies
and Estimates
 
 In
preparing the consolidated financial statements, management has made estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods.  Actual results could differ
from those estimates.  Set forth below is a summary of the accounting
policies that management believes are critical to the preparation of the
consolidated financial statements.  The summary should be read in
conjunction with the more complete discussion of the Partnership’s accounting
policies included in Item 8, Note 2 to the consolidated financial statements in
the Partnership’s Annual Report on Form 10-K for the year ended March 15,
2008.
 
 Property and
Equipment
 
 Property
and equipment to be held and used are carried at cost which includes the
purchase price, acquisition fees and expenses, and any other costs incurred in
acquiring the properties.  The cost of property and equipment is
depreciated over their estimated useful lives using accelerated and
straight-line methods.  Expenditures for repairs and maintenance are
charged to expense as incurred; major renewals and betterments are
capitalized.  At the time property and equipment are retired or
otherwise disposed of, the cost and accumulated depreciation are eliminated from
the assets and accumulated depreciation accounts and the profit or loss on such
disposition is reflected in earnings.
 
 In
accordance with Statement of Financial Accounting Standards No. 144, “Accounting
for the Impairment or Disposal of Long-Lived Assets”, the results of
discontinued operations are reported as a separate component of income before
extraordinary items on the consolidated statements of
operations.  Discontinued operations include the results of operations
and any gain or loss recognized for Local Partnerships that have been disposed
of or are held for sale.  A gain or loss recognized on the disposal is
disclosed in the notes to the financial statements.  Adjustments to
amounts previously reported in operations that are directly related to the
disposal of a Local Partnership are reclassified in the current period as
discontinued operations for comparability purposes.  Assets and
liabilities of a Local Partnership that are classified as held for sale are
presented separately in the asset and liability sections, respectively, of the
consolidated balance sheets.
 
 - 13
-
  A loss on
impairment of assets is recorded when management estimates amounts recoverable
through future operations and sale of the property on an undiscounted basis are
below depreciated cost.  At that time property investments themselves
are reduced to estimated fair value (generally using discounted cash
flows).
 
 During
the six months ended September 15, 2008, the Partnership has not recorded any
loss on impairment of assets or reduction to estimated fair
value.  Through September 15, 2008, the Partnership has recorded
approximately $3,760,000 as an aggregate loss on impairment of assets or
reduction to estimated fair value.
 
 At the
time management commits to a plan to dispose of assets, said assets are adjusted
to the lower of carrying amount or fair value less costs to
sell.  These assets are classified as property and equipment-held for
sale and are not depreciated.  As of September 15, 2008 and March 15,
2008, the Partnership has recorded property and equipment net of accumulated
depreciation of $18,444,334 and $10,588,776, respectively, as held for
sale.
 
 Revenue
Recognition
 
 Rental
income is earned primarily under standard residential operating leases and is
typically due the first day of each month, but can vary by property due to the
terms of the tenant leases.  Rental income is recognized when earned
and as rents become due and charged to tenants’ accounts receivable if not
received by the due date.  Rental payments received in advance of the
due date are deferred until earned.  Rental subsidies are recognized
as rental income during the month in which it is earned.
 
 Other
revenues are recorded when earned and consist of the following
items:  Interest income earned on cash and cash equivalent balances
and cash held in escrow balances, income from forfeited security deposits, late
charges, laundry and vending income, and other rental related
items.
 
 Income
Taxes
 
 The
Partnership is not required to provide for, or pay, any federal income
taxes.  Net income or loss generated by the Partnership is passed
through to the partners and is required to be reported by them.  The
Partnership may be subject to state and local taxes in jurisdictions in which it
operates.  For income tax purposes, the Partnership has a fiscal year
ending December 31.
 
 Results of
Operations
 
 The
General Partners are currently in the process of liquidating the Partnership and
all of its remaining assets are classified as assets held for
sale.  Therefore, all operations have been discontinued.
 
 Item
3.  Quantitative and Qualitative Disclosures about Market
Risk
 
 The
Partnership has mortgage notes that are payable in aggregate monthly
installments including principal and interest at rates varying from 1% to 12%
per annum.  The Partnership does not believe there is a material risk
associated with the various interest rates associated with the mortgage notes as
the majority of the Local Partnership mortgage notes have fixed
rates.  The Partnership disclosed in Item 8, Note 3 to the financial
statements in the Partnership’s Annual Report on Form 10-K for the year ended
March 15, 2008, as well as in Item 2, the fair value of the mortgage notes
payable.
 
 The
Partnership does not have any other market risk sensitive
instruments.
 
 Item
4T.  Controls and Procedures
 
 (a)Evaluation of Disclosure
Controls and Procedures.The Chief Executive Officer and Chief
Financial Officer of Related Credit Properties L.P. and Liberty Associates III,
L.P., the general partner of the Partnership, have evaluated the effectiveness
of the Partnership’s disclosure controls and procedures (as such term is defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (“Exchange Act”) as of the end of the period covered by this
report.  Based on such evaluation, such officers have concluded that,
as of the end of such period, the Partnership’s disclosure controls and
procedures are effective.
 
 (b)  Management’s Annual
Report on Internal Control over Financial Reporting.Our management is
responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and
15d-15(f).  In evaluating the Partnership’s internal control over
financial reporting, management has adopted the framework in Internal
Control-Integrated Framework issued by the Committee of Sponsoring organizations
of the Treadway Commission (the “COSO Framework”).  Under the
supervision and with the participation of our management, including the Chief
Executive Officer and Chief Financial Officer of the General Partner, the
Partnership conducted an evaluation of the effectiveness of its internal control
over financial reporting as of March 15, 2008.  The Partnership’s
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external reporting purposes in
accordance with generally accepted accounting principles.  Internal
control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the Company;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors of
the Company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.  However, because of inherent limitations, internal
control over financial reporting may not prevent or detect
misstatements.  Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
 
 - 14
-
  Based on
management’s evaluation under the COSO Framework, it has concluded that the
Partnership’s internal control over financial reporting, was, as of March 15,
2008, (1) effective at the Partnership level, in that they provide reasonable
assurance that information required to be disclosed by the Partnership in the
reports it files or submits under the Securities Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms and (2) ineffective at the subsidiary level due to certain
control deficiencies noted in the audit reports for such
subsidiaries.  Management will attempt to cause the Local General
Partner’s to remedy such deficiencies; however, the General Partner does not
have control over the internal controls at the subsidiary
level.  Management believes they have sufficient controls at the
Partnership level to mitigate these deficiencies, and such deficiencies do not
have a material impact on the consolidated financial statements.
 
 The
Partnership’s Annual Report on Form 10-K did not include an attestation report
of the Partnership’s registered public accounting firm regarding internal
control over financial reporting.  The Partnership’s internal control
over financial reporting was not subject to attestation by the Partnership’s
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Partnership to provide only this
report.
 
 (c)  Changes in Internal Controls over Financial
Reporting.Except as noted in (b) above, during the period
ended September 15, 2008, there were no changes in the Partnership’s internal
control over financial reporting that have materially affected, or are
reasonably likely to materially affect, the Partnership’s internal control over
financial reporting.
 
 - 15
-
  PART
II.  OTHER INFORMATION
 
 
 Item
      1.
              Legal
      Proceedings – NoneItem
      1A.
              Risk
      Factors – No changesItem
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds – NoneItem
      3.
              Defaults
      upon Senior Securities – NoneItem
      4.
              Submission
      of Matters to a Vote of Security Holders – NoneItem
      5.
              Other
      Information – NoneItem
      6.
              Exhibits(31.1)
              Certification Pursuant to Rule 13a-14(a) or Rule
      15d-14(a)(31.2)
              Certification Pursuant to Rule 13a-14(a) or Rule
      15d-14(a)(32.1)
              Certification Pursuant to Rule 13a-14(b) or Rule
      15d-14(b) and Section 1350 of Title 18 of the United States Code (18
      U.S.C. 1350)
 
 
 - 16
-
  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, thereunto duly authorized.
 
 
 LIBERTY TAX CREDIT PLUS
L.P.
 (Registrant)
 
 
 By:
            RELATED
      CREDIT PROPERTIES L.P.,a
      General PartnerBy:
            Credit
      Properties GP LLC,its
      General PartnerDate:
            October 30,
      2008By:
            /s/ Robert L.
      LevyRobert
      L. LevyChief
      Financial Officer,
              Principal
      Accounting Officer and DirectorDate:
            October 30,
      2008By:
            /s/ Andrew J.
      WeilAndrew
      J. WeilPresident
      and Chief Executive OfficerBy:
            LIBERTY
      ASSOCIATES III, L.P.,a
      General PartnerBy:
            Related
      Credit Properties L.P.,its
      General PartnerBy:
            Credit
      Properties GP LLCits
      General PartnerDate:
            October 30,
      2008By:
            /s/ Robert L.
      LevyRobert
      L. LevyChief
      Financial Officer,
              Principal
      Accounting Officer and DirectorDate:
            October 30,
      2008By:
            /s/ Andrew J.
      WeilAndrew
      J. WeilPresident
      and Chief Executive Officer
   - 17
-