UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549








FORM
10-K





T ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE
REQUIRED) FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008 or





 ̈ TRANSITION REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934






Commission
File Number:   33-69996





COMMONWEALTH
INCOME & GROWTH FUND III


(Exact
name of registrant as specified in its charter)





Pennsylvania
            23-2895714(State
      or other jurisdiction ofIncorporation
      or organization)
            (I.R.S.
      Employer Identification Number)





Brandywine
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)





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





Title
      of each class
              Name
      of exchange which registeredNone
              N/A





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





Units of Limited Partnership
Interest


(Title
of Class)







Indicate
by check mark if the registrant is a well-known seasoned issuer, (as defined in
Rule 405 of the Act):  YES  ̈    NO
T





Indicate
by checkmark if the registrant is not required to file to file reports pursuant
to Section-13 or Section-15(d) of the Act. YES  ̈     NO
T





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 T     NO
 ̈





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, to the best of Registrant’s knowledge,
in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K:  T





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definition of "accelerated filer, “large accelerated filer" and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





Large
      accelerated filer  ̈
            Accelerated
      filer  ̈Non-accelerated
      filer  ̈
            Smaller
      reporting company T(Do
      not check if a smaller reporting company.)







Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act): YES  ̈     NO
T





State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the Registrant’s most recently completed second fiscal
quarter:  N/A





Documents
incorporated by reference: None.










1





FORM
10-K


DECEMBER
31, 2008





TABLE OF CONTENTS





PART
      IItem
      1.
                            Business
                            3Item
      1A.
                            Risk
      Factors
                            11Item
      1B.
                            Unresolved
      Staff Comments
                            11Item
      2.
                            Properties
                            11Item
      3.
                            Legal
      Proceedings
                            11Item
      4.
                            Submission
      of Matters to a Vote of Security Holders
                            11PART
      IIItem
      5.
                            Market
      for Registrant's Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                            11Item
      6.
                            Selected
      Financial Data
                            15Item
      7.
                            Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                            15Item
      7A.
                            Quantitative
      and Qualitative Disclosures About Market Risk
                            20Item
      8.
                            Financial
      Statements and Supplementary Data
                            20Item
      9.
                            Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                            20Item
      9A.
                            Controls
      and Procedures
                            20Item
      9A (T).
                            Controls
      and Procedures
                            20Item
      9B.
                            Other
      Information
                            21PART
      IIIItem
      10.
                            Directors
      and Executive Officers of the Registrant
                            21Item
      11.
                            Executive
      Compensation
                            25Item
      12.
                            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                            25Item
      13.
                            Certain
      Relationships and Related Transactions and Director
      Independence
                            26Item
      14.
                            Principal
      Accountant Fees and Services
                            31PART
      IVItem
      15.
                            Exhibits
      and Financial Statement Schedules
                            32Index
      to Exhibits










2








Forward-Looking
Statements




From time
to time, we and our representatives may provide information, whether orally or
in writing, including certain statements in this Annual Report on Form 10-K,
which are deemed to be “forward-looking” within the meaning of the Private
Securities Litigation Reform Act of 1995 (the “Litigation Reform Act”). 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.




The words
“anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and
similar expressions, as they relate to us, are intended to identify
forward-looking statements. Such statements reflect our current views with
respect to future events and are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those described herein as anticipated, believed, estimated,
expected or intended or using other similar expressions. We do not intend to
update these forward-looking statements, except as required by law.




In
accordance with the provisions of the Litigation Reform Act, we are making
investors aware that such forward-looking statements, because they relate to
future events, are by their very nature subject to many important factors that
could cause actual results to differ materially from those contemplated by the
forward-looking statements contained in this Annual Report on Form 10-K, any
exhibits to this Form 10-K and other public statements we make. Such factors
include, but are not limited to: the outcome of litigation and regulatory
proceedings to which we may be a party; actions of competitors; changes and
developments affecting our industry; quarterly or cyclical variations in
financial results; development of new products and services; interest rates and
cost of borrowing; our ability to maintain and improve cost efficiency of
operations; changes in economic conditions, political conditions, trade
protection measures, reliance on third parties for manufacturing of products and
provision of services; and other factors that are set forth in the “Legal
Proceedings” section, the “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” section and other sections of this Annual
Report on Form 10-K, as well as in our Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K.





PART
I





ITEM
1:                      BUSINESS





GENERAL





Commonwealth
Income & Growth Fund III (“CIGF3”) was formed on April 17, 1997, under the
Pennsylvania Revised Uniform Limited Partnership Act.  The Partnership
began offering $15,000,000 of units of Limited Partnership to the public on July
25, 1997.   On January 27, 1998, the Partnership received and
accepted subscription proceeds of $1,526,000, which exceeded the minimum
offering amount of $1,500,000 and the funds were released from
escrow.  The Partnership terminated its offering of units on July 31,
2000, with 151,178 units ($3,023,569) sold.   The Partnership was
scheduled to terminate on December 31, 2009, but the General Partner has decided
to amend the Partnership agreement and extend the life of the partnership, and
continue operations through the term of its currently owned leases.





See “The
Glossary” below for the definition of selected terms not otherwise defined in
the text of this report.




3




Table
of Contents


PRINCIPAL
INVESTMENT OBJECTIVES





The
Partnership was formed for the purpose of acquiring various types of equipment,
including computer information technology (I.T.) and other similar capital
equipment.  The Partnership utilized the net proceeds of the offering
to purchase IBM and IBM compatible computer I.T. and other similar capital
equipment.  The Partnership has utilized retained proceeds and debt
financing (not in excess of 30% of the aggregate cost of the equipment owned or
subject to conditional sales contracts by the Partnership at the time the debt
is incurred) to purchase additional equipment.  The Partnership
acquires and leases equipment principally to U.S. corporations and other
institutions pursuant to operating leases. The Partnership retains the
flexibility to enter into full payout net leases and conditional sales
contracts, but has not done so.





The
Partnership’s principal investment objectives are to:





(a)  acquire, lease and sell
equipment to generate revenues from operations sufficient to
provide quarterly cash distributions to Limited Partners;





(b)  preserve and protect
Limited Partners’ capital;





(c)  use a portion of cash flow
and net disposition proceeds derived from the sale,refinancing or other
disposition of equipment to purchase additional equipment; and





(d)  refinance, sell or
otherwise dispose of equipment in a manner that will maximize the proceeds
to the Partnership.





THERE CAN BE NO ASSURANCE THAT ANY OF
THESE OBJECTIVES WILL BE ATTAINED.





Limited
Partners do not have the right to vote on or otherwise approve or disapprove any
particular investment to be made by the Partnership.





Although
the Partnership generally acquires new equipment, the Partnership may purchase
used equipment.   Generally, equipment is acquired from
manufacturers, distributors, leasing companies, agents, owner-users,
owner-lessors, and other suppliers upon terms that vary depending upon the
equipment and supplier involved.   Manufacturers and distributors
usually furnish a limited warranty against defects in material and workmanship
and some purchase agreements for equipment provide for service and replacement
of parts during a limited period.   Equipment purchases are also
made through lease brokers and on an ad hoc basis to meet the needs of a
particular lessee.





As of
December 31, 2008, all equipment purchased by the Partnership was subject to an
operating lease or an operating lease was already entered into with a third
party when the Partnership acquired an item of equipment.   The
Partnership may also engage in sale/leaseback transactions, pursuant to which
the Partnership would purchase equipment from companies that would then
immediately lease the equipment from the Partnership.   The
Partnership may also purchase equipment which is leased under full payout net
leases or sold under conditional sales contracts at the time of acquisition or
the Partnership may enter into a full payout net lease or conditional sales
contract with a third party when the Partnership acquires an item of
equipment.





The
Partnership may enter into arrangements with one or more manufacturers pursuant
to which the Partnership purchases from such manufacturers equipment that has
previously been leased directly by the manufacturer to third parties (“vendor
leasing agreements”).   The Partnership and manufacturers may
agree to obtain nonrecourse loans from the manufacturers, to finance the
acquisition of equipment.  Such loans would be secured only by the
specific equipment financed and the receivables due to the manufacturers from
users of such equipment.  It is expected that the manufacturers of
equipment will provide maintenance, remarketing and other services for the
equipment subject to such agreements.   As of December 31, 2008,
the Partnership has not entered into any such agreements.





The
General Partner has the discretion, consistent with its fiduciary duty, to
change the investment objectives of the Partnership if it determines that such a
change is in the best interest of the Limited Partners and so long as such a
change is consistent with the partnership agreement.   The
General Partner will notify the Limited Partners if it makes such a
determination to change the Partnership’s investment objectives.





4




Table of
Contents




The
Partnership has suffered recurring losses from operations and had a deficit
partners’ capital of approximately $122,000 at December 31, 2008.  The
General Partner and Commonwealth Capital Corp. (CCC) have forgiven amounts
payable by the Partnership to them and have deferred payments on other amounts
to allow for distributions to limited partners.  CCC contributed cash
to the Partnership during 2008 and 2007. Additionally, CCC contributed equipment
to the Partnership during 2008.





The
General Partner and CCC have committed to fund, either through cash
contributions and/or forgiveness of indebtedness, any necessary cash shortfalls
of the Partnership through December 31, 2009. No fees will be charged to the
fund by CCC and its affiliates during 2009.  CCC has committed to fund
limited partner distributions through June 30, 2009, at which time CCC will
reassess the operations of the fund.  Thereafter, the General Partner
intends to review and reassess the Partnership’s business plan on a quarterly
basis through 2009.  Additional funds may be utilized to purchase
additional equipment during 2009 as available cash flow permits.





TYPES
OF EQUIPMENT





Computer Information Technology
Equipment.  Computer information technology (I.T.) equipment
consists of devices used to convey information into and out of a central
processing unit (or “mainframe”) of a computer system, such as tape drives, disk
drives, tape controllers, disk controllers, printers, terminals and related
control units, all of which are in some way related to the process of storing,
retrieving, and processing information by computer.





Computer
technology has developed rapidly in recent years and is expected to continue to
do so.   Technological advances have permitted continued
reductions in the cost of computer processing capacity, thereby permitting
applications not economically feasible a few years ago.   Much of
the older IBM and IBM compatible computer I.T. equipment has not been retired
from service, because software is generally interchangeable between older and
newer equipment, and older equipment is capable of performing many of the same
functions as newer equipment.   The General Partner believes that
historically, values of I.T. equipment have been affected less dramatically by
changes in technology than have the values of central processing
units.   An equipment user who upgrades to a more advanced
central processor generally can continue to use his existing I.T.
equipment.   I.T. equipment nevertheless is subject to declines
in value as new, improved models are developed and become
available.   Technological advances and other factors, discussed
below in Management’s Discussion and Analysis, have at times caused dramatic
reductions in the market prices of I.T. equipment from the prices at which they
were originally introduced.





Other
Equipment-Restrictions.  The Partnership generally acquires
I.T. equipment such as tape drives, disk drives, tape controllers, disk
controllers, printers, terminals and related control units, all of which are in
some way related to the process of storing, retrieving and processing
information by computer.  The General Partner is also authorized to
cause the Partnership to invest in other types of data processing,
telecommunication or medical technology equipment.  The Partnership
may not invest in any of such other types of equipment (i) to the extent that
the purchase price of such equipment, together with the aggregate purchase price
of all such other types of equipment then owned by the Partnership, is in excess
of 25% of the total cost of all of the assets of the Partnership at the time of
the Partnership’s commitment to invest therein; and (ii) unless the General
Partner determines that such purchase is in the best economic interest of the
Partnership at the time of the purchase.  There can be no assurance
that any equipment investments can be found which meet this
standard.  Accordingly, there can be no assurance that investments of
this type will be made by the Partnership.




5




Table
of Contents




DIVERSIFICATION





Diversification
is generally desirable to minimize the effects of changes in specific
industries, local economic conditions or similar risks.  However, the
extent of the Partnership’s diversification, in the aggregate and within each
category of equipment, depends in part upon the financing which can be assumed
by the Partnership or borrowed from third parties on satisfactory
terms.  The Partnership’s policy not to borrow on a recourse basis
will further limit its financing options.  Diversification also
depends on the availability of various types of equipment.  Through
December 31, 2008, the Partnership has acquired a diversified equipment
portfolio, which it has leased to 6 different companies located throughout the
United States.




The
equipment types comprising the portfolios at December 31, 2008 are as
follows:





Equipment
      Type
                      Approximate
      %Servers
                      6%Workstations
                      38%Printers
                      56%Total
                      100%








DESCRIPTION
OF LEASES





The
Partnership generally purchases only equipment that is subject to a lease or for
which a lease or similar agreement will be entered into contemporaneously with
the consummation of the Partnership’s acquisition of the
equipment.  The General Partner leases most of the equipment purchased
by the Partnership to third parties pursuant to operating
leases.  Operating leases are relatively short-term (12 to 36 month)
leases under which the aggregate noncancellable rental payments during the
original term of the lease are not sufficient to permit the lessor to recover
the purchase price of the subject equipment.  The equipment may also
be leased pursuant to full payout net leases.  Full payout net leases
are leases under which the aggregate noncancellable rental payments during the
original term of the lease are at least sufficient to recover the purchase price
of the subject equipment.  It is anticipated that the Partnership will
enter into few, if any, full payout net leases.  The General Partner
may also enter into conditional sales contracts for equipment.  A
conditional sales contract generally provides that the noncancellable payments
to the seller over the term of the contract are sufficient to recover the
investment in such equipment and to provide a return on such
investment.  Under a conditional sales contract, the seller reserve
title to, and retains, a security interest in, the equipment until the purchase
price of the equipment is paid.  As of December 31, 2008, the
Partnership has not entered into any full payout net leases or conditional sales
contracts for equipment and does not presently intend to do so.





In
general, the terms of the Partnership’s leases, whether the equipment is leased
pursuant to an operating lease or a full payout net lease, depend upon a variety
of factors, including:  the desirability of each type of lease from
both an investment and a tax point of view; the relative demand among lessees
for operating or full payout net leases; the type and use of equipment and its
anticipated residual value; the business of the lessee and its credit rating;
the availability and cost of financing; regulatory considerations; the
accounting treatment of the lease sought by the lessee or the Partnership; and
competitive factors.





An
operating lease generally represents a greater risk to the Partnership than a
full payout net lease, because in order to recover the purchase price of the
subject equipment and earn a return on such investment, it is necessary to renew
or extend the operating lease, lease the equipment to a third party at the end
of the original lease term, or sell the equipment.  On the other hand,
the term of an operating lease is generally much shorter than the term of a full
payout net lease, and the lessor is thus afforded an opportunity under an
operating lease to re-lease or sell the subject equipment at an earlier stage of
the equipment’s life cycle than under a full payout net lease.  Also,
the annual rental payments received under an operating lease are ordinarily
higher than those received under a full payout net lease.





The
Partnership’s policy is to generally enter into “triple net leases” (or the
equivalent, in the case of a conditional sales contract) which typically provide
that the lessee or some other party bear the risk of physical loss of the
equipment; pay taxes relating to the lease or use of the equipment; maintain the
equipment; indemnify the Partnership-lessor against any liability suffered by
the Partnership as the result of any act or omission of the lessee or its
agents; maintain casualty insurance in an amount equal to the greater of the
full value of the equipment and a specified amount set forth in the lease; and
maintain liability insurance naming the Partnership as an additional insured
with a minimum coverage which the General Partner deems
appropriate.  In addition, the Partnership may purchase “umbrella”
insurance policies to cover excess liability and casualty losses, to the extent
deemed practicable and advisable by the General Partner.  As of
December 31, 2008, all leases that have been entered into are triple net
leases.




6




Table of
Contents




The
General Partner has not established any standards for lessees to whom it will
lease equipment and, as a result, there is not an investment restriction
prohibiting the Partnership from doing business with any
lessees.  However, a credit analysis of all potential lessees will be
undertaken by the General Partner to determine the lessee’s ability to make
payments under the proposed lease.  The General Partner may refuse to
enter into an agreement with a potential lessee based on the outcome of the
credit analysis.





The terms
and conditions of the Partnership’s leases, or conditional sales contracts, are
each determined by negotiation and may impose substantial obligations upon the
Partnership.  Where the Partnership assumes maintenance or service
obligations, the General Partner generally causes the Partnership to enter into
separate maintenance or service agreements with manufacturers or certified
maintenance organizations to provide such services.  Such agreements
generally require annual or more frequent adjustment of service
fees.   As of December 31, 2008, the Partnership has not entered
into any such 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 a factor in the negotiation of the
fee.





BORROWING
POLICIES





The
General Partner, at its discretion, may cause the Partnership to incur debt in
the maximum aggregate amount of 30% of the aggregate cost of the equipment owned
by the Partnership, or subject to conditional sales contracts.  The
Partnership will incur only non-recourse debt that is secured by equipment and
lease income therefrom.  Such leveraging permits the Partnership to
increase the aggregate amount of its depreciable assets, and, as a result,
potentially increases both its lease revenues and its federal income tax
deductions above the levels that would be achieved without
leveraging.  There is no limit on the amount of debt that may be
incurred in connection with the acquisition of any single item of
equipment.  Any debt incurred is fully amortized over the term of the
initial lease or conditional sales contract to which the equipment securing the
debt is subject.  The precise amount borrowed by the Partnership
depends on a number of factors, including the types of equipment acquired by the
Partnership; the creditworthiness of the lessee; the availability of suitable
financing; and prevailing interest rates.  There can be no assurance
that credit will be available to the Partnership in the amount or at the time
desired or on terms considered reasonable by the General Partner.  As
of December 31, 2008, the aggregate non-recourse debt outstanding of
approximately $700 was approximately .006% of the aggregate cost of equipment
owned.





The
Partnership may purchase some items of equipment without leverage.  If
the Partnership purchases an item of equipment without leverage and thereafter
suitable financing becomes available, it may then obtain the financing, secure
the financing with the purchased equipment and invest any proceeds from such
financing in additional items of equipment, or it may distribute some or all of
such proceeds to the Limited Partners.  Any such financing will be on
terms consistent with the terms applicable to borrowings
generally.  As of December 31, 2008, the Partnership has not exercised
this option.





The
General Partner may cause the Partnership to borrow funds, to the fullest extent
practicable, at interest rates fixed at the time of
borrowing.  However, the Partnership may borrow funds at rates that
vary with the “prime” or “base” rate.  If lease revenues were fixed, a
rise in the “prime” or “base” rate would increase borrowing costs and reduce the
amount of the Partnership’s income and cash available for
distribution.  Therefore, the General Partner is permitted to borrow
funds to purchase equipment at fluctuating rates only if the lease for such
equipment provides for fluctuating rental payments calculated on a similar
basis.





Any
additional debt incurred by the Partnership must be
nonrecourse.  Nonrecourse debt means that the lender providing the
funds can look for security only to the equipment pledged as security and the
proceeds derived from leasing or selling such equipment.  Neither the
Partnership nor any Partner (including the General Partner) would be liable for
repayment of any non-recourse debt.




7


Table of
Contents


Loan
agreements may also require that the Partnership maintain certain reserves or
compensating balances and may impose other obligations upon the
Partnership.  Moreover, since a significant portion of the
Partnership’s revenues from the leasing of equipment will be reserved for
repayment of debt, the use of financing reduces the cash that might otherwise be
available for distributions until the debt has been repaid and may reduce the
Partnership’s cash flow over a substantial portion of the Partnership’s
operating life.  As of December 31, 2008, the Partnership has not
entered into any such agreements.





The
General Partner and any of its affiliates may, but are not required to, make
loans to the Partnership on a short-term basis.  If the General
Partner or any of its affiliates makes such a short-term loan to the
Partnership, the General Partner of affiliate may not charge interest at a rate
greater than the interest rate charged by unrelated lenders on comparable loans
for the same purpose in the same locality.  In no event is the
Partnership required to pay interest on any such loan at an annual rate greater
than three percent over the “prime rate” from time to time announced by PNC
Bank, Philadelphia, Pennsylvania.  All payments of principal and
interest on any financing provided by the General Partner or any of its
affiliates are due and payable by the Partnership within 12 months after the
date of the loan.





REFINANCING
POLICIES





Subject
to the limitations set forth in “Borrowing Policies” above, the Partnership may
refinance its debt from time to time.  With respect to a particular
item of equipment, the General Partner will take into consideration such factors
as the amount of appreciation in value, if any, to be realized, the possible
risks of continued ownership, and the anticipated advantages to be obtained for
the Partnership, as compared to selling such equipment.   As of
December 31, 2008, the Partnership has not refinanced any of its
debt.





Refinancing,
if achievable, may permit the Partnership to retain an item of equipment and at
the same time to generate additional funds for reinvestment in additional
equipment or for distribution to the Limited Partners.





LIQUIDATION
POLICIES





Particular
items of equipment may be sold at any time if, in the judgment of the General
Partner, it is in the best interest of the Partnership to do so.  The
determination of whether particular items of Partnership equipment should be
sold or otherwise disposed of is made by the General Partner after consideration
of all relevant factors (including prevailing general economic conditions,
lessee demand, the General Partner’s views of current and future market
conditions, the cash requirements of the Partnership, potential capital
appreciation, cash flow and federal income tax considerations), with a view
toward achieving the principal investment objectives of the
Partnership.  As partial payment for equipment sold, the Partnership
may receive purchase money obligations secured by liens on such
equipment.





MANAGEMENT
OF EQUIPMENT





Equipment
management services for the Partnership’s equipment are provided by the General
Partner and its affiliates and by persons employed by the General
Partner.  Such services will consist of collection of income from the
equipment, negotiation and review of leases, conditional sales contracts and
sales agreements, releasing and leasing-related services, payment of operating
expenses, periodic physical inspections and market surveys, servicing
indebtedness secured by equipment, general supervision of lessees to assure that
they are properly utilizing and operating equipment, providing related services
with respect to equipment, supervising, monitoring and reviewing services
performed by others with respect to equipment and preparing monthly equipment
operating statements and related reports.







8


Table of
Contents




COMPETITION




The
equipment leasing industry is highly competitive.  The Partnership
competes with leasing companies, equipment manufacturers and their affiliated
financing companies, distributors and entities similar to the Partnership
(including other programs sponsored by the General Partner), some of which have
greater financial resources than the Partnership and more experience in the
equipment leasing business than the General Partner.  Other leasing
companies and equipment manufacturers, their affiliated financing companies and
distributors may be in a position to offer equipment to prospective lessees on
financial terms that are more favorable than those that the Partnership can
offer.  They may also be in a position to offer trade-in privileges,
software, maintenance contracts and other services that the Partnership may not
be able to offer.  Equipment manufacturers and distributors may offer
to sell equipment on terms (such as liberal financing terms and exchange
privileges), which will afford benefits to the purchaser similar to those
obtained through leases. Other competitive factors include pricing,
technological innovation and methods of financing. Certain manufacturer-lessors
maintain advantages through patent protection, where applicable, and through a
policy that combines service and hardware with payment accomplished through a
single periodic charge.  As a result of the advantages that certain of
its competitors may have, the Partnership may find it necessary to lease its
equipment on a less favorable basis than certain of its
competitors.





The
dominant firms in the computer marketplace are Dell, IBM, Hewlett Packard, Sun
Microystems and Cisco.  Because of the substantial resources and
dominant position of these companies, revolutionary changes with respect to
computer systems, pricing, marketing practices, technological innovation and the
availability of new and attractive financing plans could occur at any
time.  Significant action in any of these areas by these firms might
materially adversely affect the partnership’s business or that of the other
manufacturers with whom the General Partner might negotiate purchase and other
agreements.  Any adverse affect on these manufacturers could be
reflected in the overall return realized by the Partnership on equipment from
those manufacturers.





Investments





The
Partnership, through CCC, participates in the purchase of equipment subject to
associated debt obligations and lease agreements.  The purchase price,
list price and monthly rentals presented below represent the Partnership’s share
of the total amounts, based on CCC’s allocation of the equipment to the
Partnership, and in some instances, other affiliated partnerships.





Through
March 10, 2009, the Partnership has purchased, or has made the commitment to
purchase, the following equipment:





Lessee
                        MFG
                        EQ Category Descripton
                        List Price
                        Purchase Price
                        Monthly Payment
                        Lease Term in MonthsAlliant
      Techsystems
                        Dell
                        Laptops
                        $5,442.87
                        $3,732.98
                        $185.55
                        12Alliant
      Techsystems
                        Dell
                        Laptops
                        $1,225.20
                        $1,249.70
                        $63.64
                        15Allstate
      Insurance Company
                        Sun
                        High
      End Sun Servers
                        $9,191.08
                        $5,680.09
                        $167.04
                        31Charleston Area Medical Center
                        Konica
      Minolta
                        Multifunction
      Printers
                        $7,285.66
                        $6,688.23
                        $189.50
                        35Charleston Area Medical Center
                        Canon
                        Multifunction
      Printers
                        $2,292.39
                        $1,870.59
                        $53.00
                        35Charleston Area Medical Center
                        Canon
                        Multifunction
      Printers
                        $8,339.10
                        $7,655.29
                        $216.90
                        35Charleston Area Medical Center
                        Canon
                        Multifunction
      Printers
                        $2,162.63
                        $1,764.70
                        $50.00
                        35Charleston Area Medical Center
                        Canon
                        Multifunction
      Printers
                        $2,292.39
                        $1,870.59
                        $53.00
                        35Charleston Area Medical Center
                        Canon
                        Multifunction
      Printers
                        $1,922.33
                        $1,764.70
                        $50.00
                        35Charleston Area Medical Center
                        Canon
                        Multifunction
      Printers
                        $2,292.39
                        $1,870.59
                        $53.00
                        35Charleston Area Medical Center
                        Canon
                        Multifunction
      Printers
                        $2,292.39
                        $1,870.59
                        $53.00
                        35Charleston Area Medical Center
                        Canon
                        Multifunction
      Printers
                        $2,162.63
                        $1,764.70
                        $50.00
                        35Charleston Area Medical Center
                        Canon
                        Multifunction
      Printers
                        $2,037.68
                        $1,870.59
                        $53.00
                        35Charleston Area Medical Center
                        Canon
                        Multifunction
      Printers
                        $7,439.44
                        $6,829.41
                        $193.50
                        35Charleston Area Medical Center
                        Canon
                        Multifunction
      Printers
                        $1,922.33
                        $1,764.70
                        $50.00
                        35Charleston Area Medical Center
                        Canon
                        Multifunction
      Printers
                        $2,037.68
                        $1,870.59
                        $53.00
                        35Charleston Area Medical Center
                        Canon
                        Multifunction
      Printers
                        $1,922.33
                        $1,764.70
                        $50.00
                        35Charleston Area Medical Center
                        Canon
                        Multifunction
      Printers
                        $2,162.63
                        $1,764.70
                        $50.00
                        35GE
      Aviation
                        Itronix
                        Laptops
                        $23,696.44
                        $17,644.37
                        $458.32
                        36GE
      Aviation
                        Itronix
                        Laptops
                        $5,924.11
                        $4,411.09
                        $114.58
                        36GE
      Aviation
                        Itronix
                        Laptops
                        $6,690.27
                        $4,981.58
                        $129.40
                        36GE
      Aviation
                        Itronix
                        Laptops
                        $6,808.08
                        $5,069.30
                        $131.68
                        36GE
      Aviation
                        Itronix
                        Laptops
                        $5,924.11
                        $4,411.09
                        $114.58
                        36IST
      Management Services
                        KonicaMinolta
                        Multifunction
      Printers
                        $2,018.89
                        $1,853.34
                        $58.49
                        35IST
      Management Services
                        KonicaMinolta
                        Multifunction
      Printers
                        $7,497.78
                        $6,882.96
                        $238.88
                        29IST
      Management Services
                        KonicaMinolta
                        Multifunction
      Printers
                        $2,987.22
                        $2,742.27
                        $86.55
                        35NBC
      Universal
                        Avid
                        Graphic
      Workstations
                        $4,278.71
                        $3,185.93
                        $107.24
                        24




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RESERVES





Because
the Partnership’s leases are on a “triple-net” basis, no permanent reserve for
maintenance and repairs has been established.   However, the
General Partner, in its sole discretion, may retain a portion of the cash flow
and net disposition proceeds available to the Partnership for maintenance,
repairs and working capital.   There are no limitations on the
amount of cash flow and net disposition proceeds that may be retained as
reserves.   Since no reserve will be established, if available
cash flow of the Partnership is insufficient to cover the Partnership’s
operating expenses and liabilities, it may be necessary for the Partnership to
obtain funds by refinancing its equipment or borrowing.





GENERAL
RESTRICTIONS





Under the
partnership agreement, the Partnership is not permitted, among other things,
to:





(a)
            invest
      in junior trust deeds unless received in connection with the sale of an
      item of equipment in an aggregate amount which does not exceed 30% of the
      assets of the Partnership on the date of the
  investment;


(b)
            invest
      in or underwrite the securities of other
  issuers;


(c)
            acquire
      any equipment for units;


(d)
            issue
      senior securities (except that the issuance to lenders of notes or other
      evidences of indebtedness in connection with the financing or refinancing
      of equipment or the Partnership’s business shall not be deemed to be the
      issuance of senior securities);


(e)
            make
      loans to any person, including the General Partner or any of its
      affiliates, except to the extent a  conditional sales contract
      constitutes a loan;


(f)
            sell
      or lease any equipment to, lease any equipment from, or enter into any
      sale-leaseback transactions with, the General Partner or any of its
      affiliates; or


(g)
            give
      the General Partner or any of its affiliates an exclusive right or
      employment to sell the Partnership’s
equipment.




The
General Partner has also agreed in the partnership agreement to use its best
efforts to assure that the Partnership shall not be deemed an “investment
company” as such term is detained in the Investment Company Act of
1940.




The
General Partner and its affiliates may engage in other activities, whether or
not competitive with the Partnership.   The partnership agreement
provides, however, that neither the General Partner nor any of its affiliates
may receive any rebate or “give up” in connection with the Partnership’s
activities or participate in reciprocal business arrangements that circumvent
the restrictions in the partnership agreement against dealings with
affiliates.




EMPLOYEES




The
Partnership had no employees during 2008 and receives administrative and other
services from a related party, CCC, which had 91 employees as of December 31,
2008.




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ITEM
1A:                      RISK
FACTORS





Changes
in economic conditions could materially and negatively affect our
business.




Our
business is directly impacted by factors such as economic, political, and market
conditions, broad trends in industry and finance, legislative and regulatory
changes, changes in government monetary and fiscal policies, and inflation, all
of which are beyond our control.  A deterioration in economic
conditions, whether caused by national or local concerns, especially within our
market area, could result in the following consequences, any of which could hurt
business materially: lease delinquencies may increase; problem leases and
defaults could increase; and demand for information technology products
generally may decrease as businesses attempt to reduce expenses.




ITEM
1B:                      UNRESOLVED
STAFF COMMENTS




NOT
APPLICABLE




ITEM
2:                      PROPERTIES




NOT
APPLICABLE




ITEM
3:                      LEGAL
PROCEEDINGS




NOT
APPLICABLE




ITEM
4:                      SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS




NOT
APPLICABLE




PART
II





ITEM
      5:
            MARKET
      FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES




There is
no public market for the units nor is it anticipated that one will
develop.  The units are not listed on any exchange or permitted to
trade on any over-the-counter market.  In addition, there are
substantial restrictions on the transferability of units.  As of
December 31, 2008, there were 175 holders of units.




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GENERAL
LIMITATIONS




Units
cannot be transferred without the consent of the General Partner, which may be
withheld in its discretion according to the partnership
agreement.  The General Partner monitors transfers of units in an
effort to ensure that all transfers are within certain safe harbors promulgated
by the IRS to furnish guidance regarding publicly traded
partnerships.   These safe harbors limit the number of transfers
that can occur in any one year.  The General Partner intends to cause
the Partnership to comply with the safe harbor that permits nonexempt transfers
and redemptions of Units of up to five percent of the total outstanding interest
in the Partnership’s capital or profits in any one year.




REDEMPTION
PROVISION




On a
semi-annual basis, the General Partner, at its discretion, may establish an
amount for redemption, generally not to exceed two percent of the outstanding
units per year, subject to the General Partner’s good faith determination that
such redemptions will not (a) cause the Partnership to be taxed as a corporation
under Section 7704 of the Code or (b) impair the capital or operations of the
Partnership.  (The Partnership may redeem units in excess of the two
percent limitation if, in the good faith judgment of the General Partner, the
conditions imposed in the preceding sentence would remain
satisfied.)  The redemption price for units will be 105% of the
selling Limited Partner’s adjusted capital contributions attributable to the
units for sale.   Following the determination of the annual
redemption amount, redemptions will occur on a semi-annual basis and all
requests for redemption, which must be made in writing, must be on file as of
the record date with respect to which the redemption is to
occur.   The General Partner will maintain a master list of
requests for redemption with priority being given to units owned by estates,
followed by IRAs and qualified plans.   All other requests will
be considered in the order received.  Redemption requests made by or
on behalf of Limited Partners who are not affiliated with the General Partner or
its affiliates will be given priority over those made by Limited Partners who
are affiliated with the General Partner or its affiliates.  All
redemption requests will remain in effect until and unless canceled, in writing,
by the requesting Limited Partner(s).




There
will be no limitations on the period of time that a redemption request may be
pending prior to its being granted.   Limited Partners will not
be required to hold their interest in the Partnership for any specified period
prior to their making a redemption request.




In order
to make a redemption request, Limited Partners will be required to advise the
General Partner in writing of such request.   Upon receipt of
such notification, the Partnership will provide detailed forms and instructions
to complete the request.




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EXEMPT
TRANSFERS




The
following seven categories of transfers are exempt transfers for purposes of
calculating the volume limitations imposed by the IRS and will generally be
permitted by the General Partner:




(1)
            transfers
      in which the basis of the unit in the hands of the transferee is
      determined, in whole or in part, by reference to its basis in the hands of
      the transferor (for example, units acquired by corporations in certain
      reorganizations, contributions to capital, gifts of units, units
      contributed to another partnership, and non-liquidating as well as
      liquidating distributions by a parent partnership to its partners of
      interests in a sub partnership);




(2)
            transfers
      at death;




(3)
            transfers
      between members of a family (which include brothers and sisters, spouse,
      ancestors, and lineal descendants);




(4)
            transfers
      resulting from the issuance of units by the Partnership in exchange for
      cash, property, or services;




(5)
            transfers
      resulting from distributions from qualified
  plans;




(6)
            any
      transfer by a Limited Partner in one or more transactions during any
      30-day period of units representing in the aggregate more than five
      percent of the total outstanding interests in capital or profits of the
      Partnership; and




(7)
            transfer
      by one or more partners representing in the aggregate fifty percent (50%)
      or more of the total interests in partnership’s capital or profits in one
      transaction or a series of related
transactions.




ADDITIONAL
RESTRICTIONS ON TRANSFER




Limited
Partners who wish to transfer their units to a new beneficial owner are required
to pay the Partnership up to $50 for each transfer to cover the Partnership’s
cost of processing the transfer application and take such other actions and
execute such other documents as may be reasonably requested by the General
Partner.  There is no charge for re-registration of a unit in the
event of a marriage, divorce, death, or transfer to a trust so long as the
transfer is not a result of a sale of the Units.




In
addition, the following restrictions apply to each transfer: (i) no transfer may
be made if it would cause 25% or more of the outstanding units to be owned by
benefit plans; and (ii) no transfer is permitted unless the transferee obtains
such governmental approvals as may reasonably be required by the General
Partner, including without limitation, the written consents of the Pennsylvania
Securities Commissioner and of any other securities agency or commission having
jurisdiction over the transfer.




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ALLOCATION
AND DISTRIBUTION BETWEEN THE GENERAL PARTNER AND THE LIMITED
PARTNERS




Cash
distributions, if any, are made quarterly on March 31, June 30, September 30 and
December 31 of each year.  Distributions are made 99% to the Limited
Partners and one percent to the General Partner until the Limited Partners have
received an amount equal to their capital contributions plus the cumulative
return; thereafter, cash distributions will be made 90% to Limited Partners and
10% to the General Partner.  Distributions made in connection with the
liquidation of the Partnership or a partner’s units will be made in accordance
with the partner’s positive capital account balance as determined under the
partnership agreement and Treasury Regulations.




The
cumulative return is calculated on the Limited Partners’ adjusted capital
contributions for their units.  The adjusted capital contributions
will initially be equal to the amount paid by the Limited Partners for their
units.  If distributions at any time exceed the cumulative return, the
adjusted capital contributions will be reduced by the excess, decreasing the
base on which the cumulative return is calculated.




If the
proceeds resulting from the sale of any equipment are reinvested in equipment,
sufficient cash will be distributed to the Partners to pay the additional
federal income tax resulting from such sale for a Partner in a 35% federal
income tax bracket or, if lower, the maximum federal income tax rate in effect
for individuals for such taxable year.




Generally,
the General Partner is allocated net profits equal to its cash distributions
(but not less than one percent of net profits) and the balance is allocated to
the Limited Partners.   Net profits arising from transactions in
connection with the termination or liquidation of the Partnership are allocated
in the following order: (1) First, to each partner in an amount equal to the
negative amount, if any, of his capital account; (2) Second, an amount equal to
the excess of the proceeds which would be distributed to the partners based on
the operating distributions to the partners over the aggregate capital accounts
of all the partners, to the partners in proportion to their respective shares of
such excess, and (3) Third, with respect to any remaining net profits, to the
partners in the same proportions as if the distributions were operating
distributions.   Net losses, if any, are in all cases allocated
99% to the Limited Partners and one percent to the General Partner.




Net
profits and net losses are computed without taking into account, in each taxable
year of the Partnership, any items of income, gain, loss or deduction required
to be specially allocated pursuant to Section 704(b) of the Code and the
Treasury Regulation promulgated thereunder.  No Limited Partner is
required to contribute cash to the capital of the Partnership in order to
restore a closing capital account deficit, and the General Partner has only a
limited deficit restoration obligation under the partnership
agreement.




Quarterly
distributions in the following amounts were declared and paid to the Limited
Partners during 2008 and 2007:




Quarter
      Ended
                      
                      2008
                      
                      
                      2007March
      31
                      
                      $
                      14,968
                      
                      
                      $
                      14,968June
      30
                      
                      
                      14,968
                      
                      
                      
                      14,968September
      30
                      
                      
                      14,968
                      
                      
                      
                      14,968December
      31
                      
                      
                      14,968
                      
                      
                      
                      14,968$
                      59,872
                      
                      
                      $
                      59,872




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ALLOCATIONS
AND DISTRIBUTIONS AMONG THE LIMITED PARTNERS




Cash
available for distribution, which is allocable to the Limited Partners, is
apportioned among and distributed to them solely with reference to the number of
units owned by each as of the record date for each such
distribution.




Net
profits, net losses and cash available for distribution allocable to the Limited
Partners is apportioned among them in accordance with the number of units owned
by each.




In
addition, where a Limited Partner transfers units during a taxable year, the
Limited Partner may be allocated net profits for a period for which such Limited
Partner does not receive a corresponding cash distribution.




ITEM
6:                      SELECTED
FINANCIAL DATA




NOT
APPLICABLE




ITEM
7:                      MANAGEMENT
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF
OPERATIONS





CRITICAL
ACCOUNTING POLICIES AND ESTIMATES




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.




15


Table of
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COMPUTER
EQUIPMENT





CCC, on
behalf of the Partnership and other affiliated partnerships, acquires computer
equipment subject to associated debt obligations and lease agreements and
allocates a participation in the cost, debt and lease revenue to the various
partnerships based on certain risk factors.





REVENUE
RECOGNITION





Through
December 31, 2008, 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 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
impairment exists.  The amount of the impairment is determined based
on the difference between the carrying value and the fair value.  Fair
value is determined based on estimated discounted cash flows to be generated by
the asset.  The Partnership determined that no impairment occurred in
2008 and 2007.




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





REIMBURSABLE
EXPENSES





Reimbursable
expenses, which are charged to the Partnership by CCC in connection with the
administration and operation of the Partnership, are allocated to the
Partnership based upon several factors including, but not limited to, the number
of investors, compliance issues, and the number of existing leases.  For
example, if the Partnership has more investors than another program sponsored by
CCC, then higher amounts of expenses related to investor services, mailing and
printing costs will be allocated to the Partnership.  Also, while the
Partnership is in its offering stage, higher compliance costs are allocated to
it than to a program not in its offering stage, as compliance resources are
utilized to review incoming investor suitability and proper documentation. 
Finally, lease related expenses, such as due diligence, correspondence,
collection efforts and analysis staff costs, increase as programs purchase more
leases, and decrease as leases terminate and equipment is sold. All of these
factors contribute to CCC’s determination as to the amount of expenses to
allocate to the Partnership or to other sponsored programs.  For the
Partnership, all reimbursable expenses are expensed as they are
incurred.




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Table of
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RECENT
ACCOUNTING PRONOUNCEMENTS





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial
Assets and Liabilities, including an amendment of FASB Statement No. 115”
(“SFAS No. 159”). SFAS No. 159 permits entities to choose, at specified election
dates, to measure many financial instruments and certain other items at fair
value that are not currently required to be measured at fair value. Unrealized
gains and losses will be reported on items for which the fair value option has
been elected in earnings at each subsequent reporting date. SFAS No. 159 is
effective for fiscal years beginning after November 15, 2007. Early adoption is
permitted as of the beginning of a fiscal year that begins on or before November
15, 2007, provided the entity also elects to apply the provisions of SFAS No.
157 “Fair Value
Measurements”.   As of January 1, 2008 the Partnership adopted SFAS
No.159. The Partnership has not elected the fair value option for any financial
assets or financial liabilities.




In
September 2006, the FASB issued Statement of Financial Accounting Standards 157,
“Fair Value Measurements”(“SFAS 157”), which provides guidance on measuring the fair value of
assets and liabilities. SFAS 157 applies to other accounting pronouncements that
require or permit assets or liabilities to be measured at fair value but does
not expand the use of fair value to any new circumstances. This standard also
requires additional disclosures in both annual and quarterly reports. In
February 2008, the FASB issued two Staff Positions on SFAS 157: (1) FASB Staff
Position No. FAS 157-1    (FAS 157-1), “Application of FASB Statement
No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That
Address Fair Value Measurements for Purposes of Lease Classification or
Measurement Under Statement 13,” and (2) FASB Staff Position No. FAS
157-2 (FAS 157-2), “Effective
Date of FASB Statement No. 157.”FAS 157-1 excludes FASB Statement No.
13, Accounting for Leases, as well as other accounting pronouncements that
address fair value measurements on lease classification or measurement under
Statement 13, from SFAS 157’s scope. FAS157-2 partially defers Statement 157’s
effective date.  As of January 1, 2008 the Partnership adopted SFAS No. 157
for all financial assets.  Adoption of this pronouncement did not impact
the 2008 financial statements of the Partnership. In October 2008, the FASB
issued FSP SFAS 157-3 "Determining the Fair Value of a
Financial Asset When the Market for That Asset is Not Active" ("FSP SFAS
157-3"), which is effective upon issuance for all financial statements that have
not been issued. FSP SFAS 157-3 clarifies the application of SFAS 157, in a
market that is not active. Adoption of FSP SFAS 157-3 did not impact the 2008
financial statements of the Partnership.





LIQUIDITY
AND CAPITAL RESOURCES





For the
year ended December 31, 2008, the Partnership generated cash flow from operating
activities ofapproximately $22,000which includes a net loss of approximately $20,000 and
depreciation and amortization expenses of approximately $25,000. Other non-cash
activities included in the determination of net loss include direct payments of
lease income by lessees to banks of approximately
$1,000.For the year ended December 31, 2007, the
Partnership generated cash flow from operating activities of $33,000 which
includes a net loss of $8,000 and depreciation and amortization expenses of
$21,000. Other non-cash activities included in the determination of net income
include direct payments of lease income by lessees to banks of
$12,000.




The
Partnership’s primary sources of cash for
the year ended December 31, 2008 was cash from operations of approximately $22,000
and contributions of approximately $58,000. Of this amount, $600 was contributed
in the form of equipment by CCC during 2008.  The Partnership’s
primary sources of cash for the year ended December 31, 2007 was cash from
operations of approximately $33,000, proceeds from the sale of computer
equipment of  approximately $12,000 and contributions of approximately
$91,000.




The primary uses of cash for the years ended
December 31, 2008 and 2007 were the payment of distributions to partners
totaling approximately $60,000, for each year.  Capital expenditures
for the years ended 2008 and 2007 were approximately $33,000
and $67,000, respectively.




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The Partnership considers all highly liquid investments with a maturity
of three months or less to be cash equivalents. At December 31, 2008
cash was held in one checking account maintained at one financial institution.
At times, the balance may have exceeded federally insured limits.  At
December 31, 2008, the total cash balance in this institution was approximately
$17,000 which does not exceed federally insured limits of $250,000. At
December 31, 2007 cash was held in one checking account at one institution and,
the total cash balance in this institution was approximately $27,000 which also
did not exceed federally insured limits of $100,000. The Partnership can
mitigate this risk by depositing funds with more than one institution and by
only depositing funds with major financial institutions. The Partnership has not
experienced any losses in such accounts, and believes it is not exposed to any
significant credit risk.




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
December 31, 2008, the Partnership had future minimum rentals on noncancellable
operating leases of approximately $38,000 for the year ending 2009 and $23,000
thereafter. At December 31, 2008, the Partnership had one outstanding note in
the amount of $700 with an interest rate of 6.00 % and will be payable through
October 2009.   At December 31, 2007, the Partnership’s
outstanding debt was $1,000 with an interest rate of 5.5% and was paid in
January 2008.





CCC, on
behalf of the Partnership and other affiliated partnerships, acquires computer
equipment subject to associated debt obligations and lease agreements and
allocates a participation in the cost, debt and lease revenue to the various
partnerships based on certain risk factors.   The Partnership’s
share of the computer equipment in which it participates with other partnerships
at December 31, 2008 was approximately $17,000 and is included in the
Partnership’s fixed assets on its balance sheet. The total cost of the equipment
shared by the Partnership with other partnerships at December 31, 2008 was
approximately $1,158,500. There was no outstanding debt associated with this
shared equipment for the years ended December 31, 2008 and 2007. As of December
31, 2007 the Partnership did not have any equipment in which it participated
with other partnerships.





The
Partnership has suffered recurring losses from operations and had a deficit
partners’ capital of approximately $122,000 at December 31,
2008.  During the years ended December 31, 2008 and 2007, the General
Partner and one of its affiliates, CCC, forgave payables owed to them by the
Partnership in the amount of approximately $36,000 and $49,000, respectively,
and have deferred payments on other amounts owed to allow for distributions to
limited partners.  Such amounts have been recorded as contributions to
capital.  Also, CCC has contributed cash in the amount of
approximately $57,000 and $91,000 in 2008 and 2007, respectively. Additionally
CCC contributed equipment to the Partnership in the amount of approximately $600
during 2008.





The
General Partner and CCC have committed to fund, either through cash
contributions and/or forgiveness of indebtedness, any necessary cash shortfalls
of the Partnership through December 31, 2009. No fees will be charged to the
fund by CCC and its affiliates during 2009.  CCC has committed to fund
limited partner distributions through June 30, 2009, at which time CCC will
reassess the operations of the fund.  Thereafter, the General Partner
intends to review and reassess the Partnership’s business plan on a quarterly
basis through 2009.  Additional funds may be utilized to purchase
additional equipment during 2009 as available cash flow permits. The Partnership
was scheduled to terminate on December 31, 2009, but the General Partner has
decided to amend the Partnership agreement and extend the life of the
partnership, and continue operations through the term of its currently owned
leases.





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RESULTS
FROM OPERATIONS




For the
years ended December 31, 2008 and 2007 the Partnership recognized revenue of
approximately $43,000 and $42,000 and expenses of approximately $63,000 and
$51,000, resulting in net losses of approximately $20,000 and $8,000,
respectively.




Lease
income increased to approximately $43,000 in 2008 from approximately $34,000 in
2007, primarily due to the Partnership’s acquisition of additional lease
agreements during 2008.





The
Partnership sold computer equipment with a net book value of approximately
$6,000 during the year ended December 31, 2008, for a net loss of approximately
$1,000.  The Partnership sold computer equipment with a net book value
of approximately $4,000 during the year ended December 31, 2007, for a net gain
of approximately $8,000.




Operating
expenses, excluding depreciation, consist of accounting, legal, outside service
fees and reimbursement of expenses to CCC for administration and operation of
the Partnership. These expenses increased to approximately $37,000 for the
year ended December 31, 2008 from $29,000 during the year ended December 31,
2007. This increase is primarily attributable to an increase in remarketing
fees, accounting fees and fees for outside office services during
2008.




The
equipment management fee is equal to approximately 5% of the gross lease revenue
attributable to equipment that is subject to operating
leases.   The equipment management fee of approximately $2,000
was waived by the General Partner for the year ended December 31, 2008. This fee
was approximately $2,000 for the year ended December 31, 2007, of which the
General Partner waived $800.




Interest
expense decreased by $400 during 2008 as a result of certain notes being
satisfied during 2007.





Depreciation
and amortization expenses consist of depreciation on computer equipment,
impairment charges, and amortization of equipment acquisition fees and debt
placement fees. Depreciation and amortization during 2008 increased to
approximately $25,000 from $21,000 for the year ended December 31, 2007. This
increase is primarily attributable to the Partnership’s acquisition of
additional computer equipment agreements during 2008.




Acquisition
fees are the total of all fees and commissions paid by any party in connection
with the initial purchase of equipment acquired by the
Partnership.   Included in the computation of such fees or
commissions is the equipment acquisition fee, any commission, selection fee,
construction supervision fee, finance fee, non-recurring management fee of a
similar nature, however designated. For 2008 and 2007 the General Partner chose
to waive these fees of approximately $1,300 and $2,000,
respectively.




NET
LOSS




Net loss
increased to approximately $20,000 for the year ended December 31, 2008 from
approximately $8,000 for the year ended December 31, 2007. The changes in net
loss were attributable to the changes in revenue and expenses as discussed
above.




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ITEM
7.A:                      QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK





NOT
APPLICABLE




ITEM
8:                      FINANCIAL
STATEMENTS





Our
financial statements for the fiscal years ended December 31, 2008 and 2007, and
the reports thereon of Asher & Company, Ltd. are included in this annual
report.




ITEM
      9:
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE





NOT
APPLICABLE




ITEM
      9A:
            CONTROLS
      AND PROCEDURES




Our
management, under the supervision and with the participation of the principal
executive officer and principal financial offer, have evaluated the
effectiveness of our controls and procedures related to our reporting and
disclosure obligations as of December 31, 2008, which is the end of the period
covered by this Annual Report on Form 10-K.  Based on that evaluation,
the principal executive officer and principal financial officer have concluded
that our disclosure controls and procedures are effective to provide that (a)
material information relating to us, including our consolidated affiliates is
made known to these officers by us and our consolidated affiliates’ other
employees, particularly material information related to the period for which
this periodic report is being prepared; and (b) this information is recorded,
processed, summarized, evaluated and reported, as applicable, within the time
periods specified in the rules and forms promulgated by the Securities and
Exchange Commission.  There have been no significant changes in the
General Partner’s internal controls or in other factors that could significantly
affect our disclosure controls and procedures in the fourth quarter of 2008 or
subsequent to the date of the evaluation.




ITEM
      9A (T):
            CONTROLS
      AND PROCEDURES





Management's Report on Internal
Control over Financial Reporting.     It is the
responsibility of the General Partner to establish and maintain adequate
internal control over financial reporting, as such term is defined in Rules
13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended. The
General Partner’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 purposes in
accordance with accounting principles generally accepted in the United States of
America. Internal control over financial reporting includes policies and
procedures that (i) pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of the Partnership; (ii) 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 Partnership are being made
only in accordance with authorizations of management and directors of the
General Partner; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of the Partnership’s assets that could have a material effect on the financial
statements.





Because
of its 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.





Management
assessed the effectiveness of the Partnership’s internal control over financial
reporting at December 31, 2008. Management based this assessment on criteria for
effective internal control over financial reporting described in “Internal
Control – Integrated Framework” issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Management’s assessment included an
evaluation of the design of the Partnership’s internal control over financial
reporting and testing of the operational effectiveness of its internal control
over financial reporting. Management reviewed the results of its assessment with
the board of directors.





Based on
our assessment, management determined that, at December 31, 2008, the
Partnership maintained effective internal control over financial reporting and
the preparation of financial statements for external reporting purposes in
accordance with generally accepted accounting principles.





This
annual report does not include an attestation report of the company's registered
public accounting firm regarding internal control over financial reporting.
Management's report 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 management's
report in this annual report.




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ITEM
9B:                      OTHER
INFORMATION




NOT
APPLICABLE




ITEM
10:                      DIRECTORS
AND EXECUTIVE OFFICERS OF THE REGISTRANT




GENERAL




The
Partnership does not have any Directors or executive officers.




The
General Partner, a wholly owned subsidiary of Commonwealth of Delaware, Inc., a
Delaware corporation, which is in turn a wholly-owned subsidiary of CCC, a
Pennsylvania corporation, was incorporated in Pennsylvania on August 26,
1993.  The General Partner also acts as the General Partner for
Commonwealth Income & Growth Fund IV, Commonwealth Income & Growth Fund
V, Commonwealth Income & Growth Fund VI and Commonwealth Income & Growth
Fund VII.  The principal business office of the General Partner is
Brandywine One, Suite 200, 2 Christy Drive, Chadds Ford, PA 19317, and its
telephone number is 610-594-9600.  The General Partner manages and
controls the affairs of the Partnership and has sole responsibility for all
aspects of the Partnership’s operations.  The officers of the General
Partner devote such time to the affairs of the Partnership as in the opinion of
the General Partner is necessary to enable it to perform its function as General
Partner.  The officers of the General Partner are not required to
spend their full time in meeting their obligations to the
Partnership.




The
directors and officers of the General Partner and key employees of CCC and its
subsidiary Commonwealth Capital Securities Corp. ("CCSC"), are as
follows:




NAME
                TITLEKimberly
      A. Springsteen-Abbott
                Chairman
      of the Board, Chief Executive Officer and Chief Compliance Officer of
      CCC,CCSC,
      & CIGF, IncHenry
      J. Abbott
                Director
      of CCC, CCSC & CIGF, Inc., Executive Vice President of CCSC
      andPresident
      of CCC and CIGF, Inc.William
      Pieranunzi III
                President
      of CCSC, Director of CCC and CCSC, and Senior Vice
    PresidentOf
      CCCLynn
      A. Franceschina
                Executive
      Vice President, Chief Operating Officer, and Director of
    CCC,CCSC
      & CIGF, Inc.Jay
      Dugan
                Executive
      Vice President and Chief Technology Officer  and Director of
      CCC,Senior
      Vice President and Chief Technology Officer of CIGF,
  Inc.Peter
      Daley
                Director
      of CCCJames
      Pruett
                Senior
      Vice President and Compliance Officer of CCC, CCSC, & CIGF,
      Inc.Mark
      Hershenson
                Senior
      Vice President and Broker-Dealer Relations Manager of
  CCC,CCSC
      & CIGF, IncRichard
      G. Devlin III
                Vice
      President and General Counsel of CCC, CCSC & CIGF,
  Inc.David
      W. Riggleman
                Vice
      President and Portfolio Manager of CCC and CIGF, Inc.Edmond
      J. Enderle
                Vice
      President and Controller of CCC, CCSC, & CIGF, Inc.Donna
      Abbott
                Vice
      President and Investor Services Manager of CCC, CCSC & CIGF,
      Inc.Lisa
      Renshaw
                Vice
      President, National Sales Manager of CCC and CIGF Inc.Joseph
      Neill
                Vice
      President and Broker Services Manager of CCC, CCSC and CIGF,
      Inc.





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Kimberly
A. Springsteen-Abbott, Kimberly A.
Springsteen-Abbott, age 49, joined Commonwealth in 1997 as a founding registered
principal and Chief Compliance Officer of its broker/dealer, Commonwealth
Capital Securities Corp. Ms. Springsteen-Abbott is the Chief Executive Officer
and Chairman of the Board of Directors of Commonwealth Capital Corp. (the parent
corporation); Commonwealth Capital Securities Corp. (the broker/dealer); and
Commonwealth Income & Growth Fund, Inc. (the General Partner). Ms.
Springsteen-Abbott is responsible for general operations of the equipment
leasing/portfolio management side of the business. Ms. Springsteen-Abbott
oversees all CCC operations, as well as CCSC SEC/FINRA compliance. For the
broker/dealer, she oversees securities policies, company
procedures/operations.  Ms. Springsteen-Abbott oversees all corporate daily
operations and training, as well as develops long-term corporate growth
strategies. Ms. Springsteen-Abbott has over 27 years of experience in the
financial services industry, specifically in the real estate, energy and leasing
sectors of alternative investments. Ms. Springsteen-Abbott is the sole
shareholder of Commonwealth Capital Corp.  Ms. Springsteen-Abbott was
elected to the Board of Directors of the parent corporation in 1997 and has also
served as its Executive Vice President and COO.  Also in 1997, she founded
Commonwealth Capital Securities Corp., where she was elected to the Board of
Directors and appointed President, COO and Chief Compliance Officer. Her
responsibilities included business strategy, product development, broker/dealer
relations development, due diligence, and compliance.  From 1980 through
1997, Ms. Springsteen-Abbott was employed with Wheat First Butcher Singer, a
regional broker/dealer located in Richmond, Virginia.  At Wheat, she served
as Senior Vice President & Marketing Manager for the Alternative Investments
Division.  Ms. Springsteen-Abbott holds her FINRA Series 7, 63 and 39
licenses.  She is a member of the Equipment Leasing and Finance
Association, the National Equipment Finance Association (formerly, the Eastern
Association of Equipment Lessors), the Financial Planners Association, the
National Association of Equipment Leasing Brokers and has served on the Board of
Trustees for the Investment Program Association. Ms. Springsteen-Abbott is a
member of the Executive Committee and the Disaster Recovery Committee.  Ms.
Springsteen-Abbott is the wife of Henry J. Abbott.





Henry J.
Abbott,
age 58, joined Commonwealth in 1998 as a Portfolio Manager.  Mr. Abbott
serves as President of CCC and CIGF, Inc., as Executive Vice President of CCSC,
and as a Director of CCC and its affiliates.  Mr. Abbott is a registered
principal of the broker/dealer.  Mr. Abbott is responsible for lease
acquisitions, equipment dispositions and portfolio review. Additionally, Mr.
Abbott is also responsible for oversight of residual valuation, due diligence,
equipment inspections, negotiating renewal and purchase options and remarketing
off-lease equipment. Mr. Abbott serves as senior member on the Disaster Recovery
Committee and the Facilities Committee, and was appointed to the Executive
Committee in 2008.  Prior to Commonwealth, Mr. Abbott has been active in
the commercial lending industry, working primarily on asset-backed transactions
for more than 30 years.  Mr. Abbott attended St. John’s University and
holds his FINRA Series 7, 63 and 24 licenses.  Mr. Abbott was a founding
partner of Westwood Capital LLC in New York, a Senior Vice President for IBJ
Schroeder Leasing Corporation and has managed a group specializing in the
provision of operating lease finance programs in the high technology
sector.  Mr. Abbott brings extensive knowledge and experience in leasing
and has managed over $1.5 billion of secured transactions. Mr. Abbott is a
member of the Equipment Leasing and Finance Association, the National Equipment
Finance Association (formerly, the Eastern Association of Equipment Lessors),
the National Association of Equipment Leasing Brokers and the Investment Program
Association.  Mr. Abbott is the husband of Kimberly A.
Springsteen-Abbott.





William
Pieranunzi III, age 51, joined
Commonwealth in 2007 as President of CCSC, the broker/dealer affiliate. 
Mr. Pieranunzi also serves as a Director of CCC and CCSC.  Mr. Pieranunzi
is responsible for managing due diligence and broker/dealer development, as well
as coordination of the national marketing effort, syndication and product
development.  Mr. Pieranunzi was elected to the Board of Directors of the
parent and its affiliates on January 1, 2008.  Mr. Pieranunzi serves on the
Disaster Recovery Committee and the Website committee.  Mr. Pieranunzi
currently holds his FINRA series 22 and 63 licenses.  Prior to
Commonwealth, Mr. Pieranunzi in 2005 co-founded and was Chief Executive Officer
and President of Jing Tsai Entertainment Company, Ltd. in Foshan, Guangdong
Province, China; Foshan’s premiere entertainment company through multiple 99KTV
Store Locations.  He retains his titles and continues to serve on the board
of Jung Tsai.  Prior to that, from 1996-2004, Mr. Pieranunzi was a private
investor. From 1984-1995, Mr. Pieranunzi worked at PLM International, then a
$1.4 billion publicly traded worldwide provider of transportation equipment and
related financial services. He joined PLM as a junior wholesaler and in 1994
became Executive Vice President.  Prior to that, from 1981 to 1984 Mr.
Pieranunzi worked at Mutual Benefit Financial Services Company, the registered
broker/dealer of Mutual Benefit Life Insurance Company where he was manager of
the mutual funds and pension divisions.  Mr. Pieranunzi is a Magna Cum
Laude, Beta Gamma Sigma graduate of Boston College’s School of Management. Mr.
Pieranunzi is a member of the Equipment Leasing and Finance Association, the
Eastern Association of Equipment Lessors, the Investment Program Association,
the National Association of Equipment Leasing Brokers, and the Financial
Planners Association.





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Lynn
Franceschina, age 37, joined Commonwealth in 2001 and serves as Executive
Vice President of CCC and CIGF, Inc., Senior Vice President of CCSC, and Chief
Operations Officer and Director of CCC, CCSC, and CIGF, Inc. and certain of its
affiliates.  Ms. Franceschina is responsible for daily operations,
including oversight of all accounting, financial reporting and tax functions,
investor communications, and human resources. During the period of March 2004 to
October 2004, Ms. Franceschina was employed at Wilmington Trust Corp. where she
was part of the policies and procedures team responsible for Sarbanes-Oxley
documentation.  Prior to joining Commonwealth, Ms. Franceschina was the
Business Controls Manager for Liquent, Inc., a leading software developer, where
she was responsible for managing corporate forecasting and analysis, as well as
the budgeting for the sales and marketing division. From 1999 to 2000, she
served as a Senior Financial Analyst for Environ Products, and from 1994 to
1999, she was a Senior Accountant with Duquesne University.  Prior to
joining Duquesne University, Ms. Franceschina was an accountant with the public
accounting firm of Horovitz, Rudoy, & Roteman.  Ms. Franceschina is a
Sigma Beta Delta graduate of Robert Morris University, during which time she
also served as treasurer of her Alpha Chi national honor society chapter. 
Ms. Franceschina holds her FINRA Series 22, 63, and 39 licenses.  She is a
member of the Disaster Recovery Committee, the Equipment Leasing and Finance
Association, Investment Program Association, and the Institute of Management
Accountants.





Jay
Dugan, age 60, joined Commonwealth in 2002 and serves as Chief Technology
Officer of the parent and its affiliates. Mr. Dugan is also Executive Vice
President of CCC and Senior Vice President of CIGF, Inc.  Mr. Dugan is
responsible for the information technology vision, security, operation and
ongoing development, including network configurations, protection of corporate
assets and maximizing security and efficiency of information flow.  Prior
to Commonwealth, Mr. Dugan founded First Securities USA, a FINRA member firm, in
1988 and operated that firm through 1998. From 1999 until 2002, Mr. Dugan was an
independent due diligence consultant until he came to Commonwealth to develop
that area of the firm. Mr. Dugan attended St. Petersburg College and holds an AS
Degree in Computer Networking Technology.  Mr. Dugan is a Microsoft
Certified Systems Engineer, Microsoft Certified Database Administrator and
Comp-Tia Certified Computer Technician.  Mr. Dugan is a senior member of
the Disaster Recovery Committee, as well as oversight member of the Website
Committee.





Peter
Daley, age 70, joined Commonwealth in 2006 as a director.  Mr. Daley
is an Accredited Senior Appraiser for the discipline of Machinery and Equipment
with a specialty in High-Technology for the valuation of computer
equipment.  Mr. Daley has been in the computer business since 1965, first
with IBM as a computer broker/lessor and then with Daley Marketing Corporation
(DMC), a firm he founded in July 1980 to publish reports about computer
equipment, including “Market Value Reports” and “Residual Value
Reports.”   In January 2001 Mr. Daley acquired Computer Economics,
merged DMC into CEI and in April 2005 sold the IT Management Company and created
a new company focused on the fair market value business.  Additionally, Mr.
Daley remains President of DMC Consulting Group, a separate company that
specializes in writing Appraisals, Portfolio Analysis and Property Tax Valuation
from Fair Market Value to Residual Value valuations. Mr. Daley has developed a
database of “Fair Market Value” equipment values from 1980 to the present,
utilizing a variety of reports and publications along with the DMC and CEI
Market Value Reports.  This database has been successfully used in the
valuation of computer equipment in the settlement of a number of Virginia tax
cases.  He has also previously testified in California, Minnesota,
Michigan, New York, and the Virginia Courts as an expert in the field of
valuation of computer equipment.  Mr. Daley has a full repertoire of
lectures, seminars, presentations, and publications that he has conceived and
shared with the public.  From 1994 to present he has been writing computer
appraisals and reports for Fortune 500 companies.  From 2005 to present as
president of DMC Valuations Group, Mr. Daley has been publishing, both on the
web and in print, fair market values, residual values, and manufacturer’s price
lists to existing valuation clients around the world. Mr. Daley graduated from
Pepperdine University in 1991 with a Masters of Business Administration, and
from Cal State Northridge with a Bachelor of Science in Business Administration
in 1965.  Mr. Daley is also an Accredited Senior Appraiser with the
American Society of Appraisers.





Mark
Hershenson,age
43, joined Commonwealth in 2002 and serves as Senior Vice President and Broker
Dealer Relations Manager of the parent and its affiliates.  Mr. Hershenson
is responsible for management of all broker/dealer relationships, and over-sees
the Due Diligence, Marketing, and Broker Services Departments.  Prior to
Commonwealth, Mr. Hershenson served as part of a financial planning practice at
American United Life from 1999 through 2002.  He has written a book for the
Florida Insurance Commissioner on how to sell insurance products. 
Additionally, in 1991 through 1998, Mr. Hershenson served as sales trainer at
MetLife for over 100 registered representatives.  Mr. Hershenson attended
Stonehill College and holds a Bachelor’s degree in Psychology, with a
concentration in Marketing/Organizational Behaviorism and engaged in Master’s
level coursework in Financial Planning though American College.  He holds
his FINRA Series 6, 7, 39 and 63 licenses.  Mr. Hershenson is a member of
the Equipment Leasing and Finance Association and the Investment Program
Association.





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James
Pruett,
age 43, joined Commonwealth in 2002 and serves as Senior Vice President and
Compliance Officer of the parent and its affiliates, and is Secretary to the
parent’s board of directors.  Mr. Pruett is responsible for management of
regulatory policies and procedures, assisting in compliance internal audit,
associate regulatory filings, broker/dealer registrations, state and
broker/dealer financial regulatory reporting requirements.  Mr. Pruett
assists in the management of shareholder records and updates.  Mr. Pruett
is a member of the Website Committee and the Disaster Recovery Committee. 
Mr. Pruett holds his FINRA Series 22, 63 and 39 licenses.  Prior to joining
Commonwealth, Mr. Pruett served as Managing Editor/Associate Publisher for
Caliber Entertainment, a publishing and entertainment licensing company. 
Mr. Pruett’s responsibilities included oversight of production of publishing
library, as well as serving as Editor-in-Chief for all publications and
additionally served as Media Relations Liaison.  Mr. Pruett is a member of
the Equipment Leasing Association and the Investment Program
Association.





Richard
G. Devlin, age 37, joined
Commonwealth in October 2006 and serves as Vice President and General
Counsel.  Mr. Devlin is responsible for all syndication and Blue Sky
activities, FINRA and SEC registrations, contract administration and general
legal matters as head of the Legal Department.  Mr. Devlin also assists
with broker-dealer compliance functions. Prior to joining Commonwealth, Mr.
Devlin was employed since December 2000 as an associate with the law firm Reed
Smith, LLP in Philadelphia, where he was responsible for all elements of public
and private securities offerings as issuer’s counsel.  Mr. Devlin has
developed programs and advised clients regarding compliance with the
Sarbanes-Oxley Act of 2002 and related corporate governance and disclosure
regulations.  Mr. Devlin has advised both foreign and domestic entities on
US securities law compliance in the context of IPOs, exchange listing, private
placements, mergers, and employee benefit plans.  In 1997 Mr. Devlin
graduated Magna Cum Laude from the University of Pittsburgh School of Law with a
Juris Doctorate and in 1994 he completed his Bachelor of Science in Business
Administration and Finance at The American University in Washington, DC. 
Mr. Devlin is admitted to the bar in New Jersey and Pennsylvania, and holds his
FINRA Series 22 and 63 Licenses.  Mr. Devlin is also a member of the
Website Committee and the Disaster Recovery Committee.





David W.
Riggleman, age 46, joined Commonwealth in 2007 and serves as Vice
President and Portfolio Manager of CCC and CIGF, Inc.  Mr. Riggleman is
responsible for lease acquisitions, equipment research and evaluation, lease
pricing, portfolio analysis, and asset remarketing and disposition.  Prior
to joining Commonwealth, Mr. Riggleman served from January 2005 to July 2007 as
Vice President, Investments for Raymond James and Associates in Cumberland,
Maryland.  At Raymond James, he served as a Branch Owner in the Advisor
Select Program.  He managed branch associates in addition to managing
private client accounts with more than $75 million in assets under
management.  From July 1994 to December 2004, Mr. Riggleman was Vice
President, Investments and Branch Manager at Legg Mason.  While there, he
opened and managed a branch while also managing private client and institutional
assets with assets under management of more than $65 million.  He served as
a member of Legg Mason President’s Council in 1998 and served consecutive terms
as member of Legg Mason’s Financial Services Advisory Panel in 1999 and
2000.  From January 1987 to June 1994, he was Vice President, Investments
of Wheat First Securities, where he managed private client and institutional
assets totaling more than $40 million.  Mr. Riggleman studied Economics at
the University of Richmond, and also Business Administration at Frostburg State
University.





Edmond J.
Enderle,age
62, joined Commonwealth in 2006 and serves as Vice President and
Controller.  Mr. Enderle is responsible for regulatory filings, internal
controls, budgeting, forecasting, cash flow projections and all accounting
related to syndication.  Mr. Enderle also functions as the Audit
Liaison.  Prior to Commonwealth, Mr. Enderle worked at Sunoco Logistics
Partners LP located in Philadelphia.  This company boasted $4.5 billion in
revenue, and here Mr. Enderle served as the Accounting Manager, responsible for
SEC reporting, financial accounting, reporting and analysis, preparation of
annual revenue and expense budgets and managing the monthly close process
ensuring adherence to GAAP. Mr. Enderle also conducted environmental and legal
reserve analysis, wrote, reviewed and certified various Sarbanes Oxley
procedures and system narratives, and reported to management for strategic
planning and executive presentations. Prior to Sunoco Logistics, Mr. Enderle
worked at Sunoco Inc. (GP of Sunoco Logistics an Operator of 5 Oil Refineries)
as the Accounting Manager in the Supply Chain department where his
responsibilities included management of the Crude and Refined Oil Pools,
departmental budgeting, monthly closing processes, and financial analysis and
reporting.  Mr. Enderle attended St. Josephs University in Philadelphia and
holds a BS in Accounting and also attended Widener University in Chester,
Pennsylvania and holds an MBA in Finance/Taxation




24
 
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  Donnamarie
D. Abbott, age 50, joined Commonwealth in 2001 and serves as Vice
President and Investor Services Manager of the parent and its affiliates. 
Ms. Abbott is responsible for management of daily operations in Investor
Services, from pre-formation stage through issuance of investors’ final
distribution, communication, audited financial report, including fund masters,
blue sky coordination, subscription processing, distributions, transfers of
interest, redemptions, reporting and tax reporting.  Ms. Abbott is a member
of the Office Development Committee, the Website Committee and the Disaster
Recovery Committee.  Ms. Abbott holds her FINRA Series 22 and 63
licenses.  Prior to joining Commonwealth, Ms. Abbott served as a
Pennsylvania licensed realtor.  Ms. Abbott is a member of the Equipment
Leasing and Finance Association and a member of the Investment Program
Association.




Lisa
Renshaw,
age 52, joined Commonwealth in 2006 and serves as Vice President and National
Sales Manager of CCC. Ms. Renshaw, based in Wilmington, North Carolina, brings
over twenty years of leasing experience to CCC and is responsible for
spearheading lease acquisitions efforts and is the primary liaison with Lessors
in the Eastern United States. Ms Renshaw will continue to strengthen CCC’s
relationships and customer base on the east coast. Previously, Ms. Renshaw was
employed by IBM Global Finance from 2002 to 2006 with responsibilities for
pricing lease transactions. She supported IGF sales representatives in the East
and Central region as well as third party business partners and IBM Global
Services by structuring FMV leases, upgrades, extensions, hybrids and
migrations.  Prior to IGF, Ms. Renshaw owned her own company, Carrier
Capital Resources, from 1992 to 2002, where she brokered lease transactions
between lessors and funding sources on a nationwide basis.  During this
time, Ms. Renshaw also served on the Board of Directors of the National
Equipment Finance Association (formerly, the Eastern Association of Equipment
Lessors).  Prior to 1992, Ms. Renshaw was employed by IBJ Schroeder Bank
and Trust (1987 – 1992);  PKFinans (1985-1987); Citibank (1981-1985);
Playtex (1979 to 1981); Penn Life Insurance (1977-1979); and Greenbelt CARES
(1976-1977).  Married with two children, Ms. Renshaw earned her BA in
psychology from American University, graduating Cum Laude in 1976.





Joseph W.
Neill,
age 61, joined Commonwealth in January 2006 and now serves as our Broker
Services Manager. Joe is responsible for the management of all custodial
relationships, broker services in the area of product education and production
goals, wholesaler scheduling/support and the internal sales staff. Prior to
Commonwealth, he served as a Regional Vice President from 1995 until 2003 with
State Street Research, after which he spent approximately one year in
retirement. Mr. Neill then served as an insurance consultant with Amerilife from
July 2003 until July 2004. In July 2004 he joined Allstate Financial as an
investment advisor, where he worked until January 2006. He also has a broad and
diverse background in investment and insurance company operations after serving
more than 30 years in that area. Mr. Neill attended Temple University and holds
a science degree. He is a military veteran who received a Bronze
Star





The
directors and officers of the General Partner are required to spend only such
time on the Partnership’s affairs as is necessary in the sole discretion of the
directors of the General Partner for the proper conduct of the Partnership’s
business.  A substantial amount of time of such directors and officers
is expected to be spent on matters unrelated to the Partnership, particularly
after the Partnership’s investments have been selected.  Under certain
circumstances, such directors and officers are entitled to indemnification from
the Partnership.





The
Partnership has no audit committee financial expert, as defined in item 401 of
Regulation S-K (17 CFR § 229.401) under the Exchange Act, serving on its audit
committee.  An audit committee is not required because the Partnership
is not a listed security (as defined by 17 CFR § 240.10A-3); therefore, no audit
committee financial expert is required.





CODE
OF ETHICS





In view
of the fiduciary obligation that the General Partner has to the Partnership, the
General Partner believes an adoption of a formal code of ethics is unnecessary
and would not benefit the Partnership, particularly in light of Partnership's
limited business activities.




ITEM
11:                      EXECUTIVE
COMPENSATION





The
Partnership does not have any directors or executive officers.




ITEM
12:                      SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT




NONE




25


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ITEM
13:                      CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS




The
following table summarizes the types, amounts and recipients of compensation to
be paid by the Partnership directly or indirectly to the General Partner and its
affiliates.  Some of these fees are paid regardless of the success or
profitability of the Partnership’s operations and investments.  While
such compensation and fees were established by the General Partner and are not
based on arm’s-length negotiations, the General Partner believes that such
compensation and fees are comparable to those that would be charged by an
unaffiliated entity or entities for similar services.  The partnership
agreement limits the liability of the General Partner and its affiliates to the
Partnership and the Limited Partners and provides indemnification to the General
Partner and its affiliates under certain circumstances.





AMOUNT
                                AMOUNTENTITY
      RECEIVING
                                
                                INCURRED
                                INCURREDCOMPENSATION
                                TYPE
      OF COMPENSATION
                                DURING
      2008
                                DURING
      2007The
      General Partner and its Affiliates
                                Reimbursable Expenses.
      The General Partner and its affiliates are entitled to reimbursement by
      the Partnership for the cost of goods, supplies or 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 of certain expenses incurred by the General
      Partner and its affiliates in connection with the administration and
      operation of the Partnership. The amounts set forth on this table do not
      include expenses incurred in the offering of units.
                                $6,000
                                $31,000The
      General Partner
                                Equipment Acquisition
      Fee. An equipment acquisition fee of four percent of the purchase
      price of each item of equipment purchased as compensation for the
      negotiation of the acquisition of the equipment and the lease thereof or
      sale under a conditional sales contract. The fee was paid upon each
      closing of the Offering with respect to the equipment purchased by the
      Partnership with the net proceeds of the offering available for investment
      in equipment. If the Partnership acquires equipment in an amount exceeding
      the net proceeds of the offering available for investment in equipment,
      the fee will be paid when such equipment is acquired. For 2008 and 2007
      the General Partner chose to waive these fees of approximately $1,300 and
      $2,000, respectively.
                                $
      -
                                $
      -


The
      General Partner
                      Equipment Management
      Fee. 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) five
      percent of the gross lease revenues attributable to equipment which is
      subject to operating leases. The General Partner earned and waived $2,000
      in equipment management fees for 2008.
                      $-
                      $800The
      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.
      The payment of such fee is subordinated to the receipt by the Limited
      Partners of (i) a return of their capital contributions and 10% annum
      cumulative return, compounded daily, on adjusted capital contributions and
      (ii) the net disposition proceeds from such sale in accordance with the
      partnership agreement. Such fee is reduced to the extent any liquidation
      or resale fees are paid to unaffiliated parties.
                      $150
                      $400The
      General Partner
                      Partnership Income and
      Distribution. The General Partner has a present and continuing one
      percent interest of $1,000 in the Partnership’s item of income, gain,
      loss, deduction, credit, and tax preference. In addition, the General
      Partner receives one percent of cash available for distribution until the
      Limited Partners have received distributions of cash available for
      distribution equal to their capital contributions plus the 10% cumulative
      return and thereafter, the General Partner will receive 10% of cash
      available for distribution.
                      $600
                      $600





26


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CONFLICTS
OF INTEREST




The
Partnership is subject to various conflicts of interest arising out of its
relationships with the General Partner and its affiliates.  These
conflicts include the following:




COMPETITION
WITH GENERAL PARTNER AND AFFILIATES:  COMPETITION FOR MANAGEMENT’S
TIME




The
General Partner and its affiliate sponsor other investor programs that are
potentially in competition with the Partnership in connection with the purchase
of equipment as well as opportunities to lease and sell such
equipment.  Competition for equipment has occurred and is likely to
occur in the future.  The General Partner and its affiliates may also
form additional investor programs that may be competitive with the
Partnership.




If one or
more investor programs and the Partnership are in a position to acquire the same
equipment, the General Partner will determine which program will purchase the
equipment based upon the objectives of each and the suitability of the
acquisition in light of those objectives.  The General Partner will
generally afford priority to the program or entity that has had funds available
to purchase equipment for the longest period of time.  If one or more
investor programs and the Partnership are in a position to enter into lease with
the same lessee or sell equipment to the same purchaser, the General Partner
will generally afford priority to the equipment which has been available for
lease or sale for the longest period of time.




Certain
senior executives of the General Partner and its affiliates also serve as
officers and directors of the other programs and are required to apportion their
time among these entities.  The Partnership is, therefore, in
competition with the other programs for the attention and management time of the
General Partner and affiliates.  The officers and directors of the
General Partner are not required to devote all or substantially all of their
time to the affairs of the Partnership.




ACQUISITIONS




CCC and
the General Partner or other affiliates of the General Partner may acquire
equipment for the Partnership provided that (i) the Partnership has insufficient
funds at the time the equipment is acquired, (ii) the acquisition is in the best
interest of the partnership and (iii) no benefit to the General Partner or its
affiliates arises from the acquisition except for compensation paid to CCC, the
General Partner or such other affiliate as disclosed in this report. CCC, the
General Partner or their affiliates will not hold equipment for more than 60
days prior to transfer to the Partnership.  If sufficient funds become
available to the Partnership within such 60 day period, such equipment may be
resold to the Partnership for a price not in excess of the sum of the cost of
the equipment to such entity and any accountable acquisition expenses payable to
third parties which are incurred by such entity and interest on the purchase
price from the date of purchase to the date of transfer to the
Partnership.  CCC, the General Partner or such other affiliate will
retain any rent or other payments received for the equipment, and bear all
expenses and liabilities, other than accountable acquisition expenses payable to
third parties with respect to such equipment, for all periods prior to the
acquisition of the equipment by the Partnership.  Except as described
above, there will be no sales of equipment to or from any affiliate of
CCC.




27


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In
certain instances, the Partnership may find it necessary, in connection with the
ordering and acquisition of equipment, to make advances to manufacturers or
vendors with funds borrowed from the General Partner for such
purpose.  The Partnership does not borrow money from the General
Partner or any of its affiliates with a term in excess of twelve
months.  Interest is paid on loans or advances (in the form of
deposits with manufacturers or vendors of equipment or otherwise) from the
General Partner of its affiliates from their own funds at a rate equal to that
which would be charged by third party financing institutions on comparable loans
from the same purpose in the same geographic area, but in no event in excess of
the General Partner’s or affiliate’s own cost of funds.  In addition,
if the General Partner or its affiliates borrow money and loan or advance it on
a short-term basis to or on behalf of the Partnership, the General Partner or
such affiliates shall receive no greater interest rate and financing charges
from the Partnership than that which unrelated lenders charge on comparable
loans.  The Partnership will not borrow money from the General Partner
or any of its affiliates for a term in excess of twelve months.




If the
General Partner or any of its affiliates purchases equipment in its own name and
with its own funds in order to facilitate ultimate purchase by the Partnership,
the purchaser is entitled to receive interest on the funds expended for such
purchase on behalf of the Partnership.  Simple interest on any such
temporary purchases is charged on a floating rate basis not in excess of three
percent over the “prime rate” from time to time announced by PNC Bank, from the
date of initial acquisition to the date of repayment by the Partnership and
ownership transfer.




The
Partnership does not invest in equipment limited partnerships, general
partnerships or joint ventures, except that (a) the Partnership may invest in
general partnerships or joint ventures with persons other than equipment
Programs formed by the General Partner or its affiliates, which partnerships or
joint ventures invest in specific equipment; provided that (i) the Partnership
has or acquires a controlling interest in such ventures or partnerships, (ii)
the non-controlling interest is owned by a non-affiliate, and (iii) there are no
duplicate fees; and (b) the Partnership may invest in joint venture arrangements
with other equipment programs formed by the General Partner or its affiliates if
such action is in the best interest of  all Programs and if all the
following conditions are met: (i) all the Programs have substantially identical
investment objectives; (ii) there are no duplicate fees; (iii) the sponsor
compensation is substantially identical in each program; (iv) the Partnership
has a right of first refusal to buy another program’s interest in a joint
venture if the other program wishes to sell equipment held in the joint venture;
(v) the investment of each program is on substantially the same terms and
conditions; and (vi) the joint venture is formed either for the purpose of
effecting appropriate diversification for the programs or for the purpose of
relieving the General Partner or its affiliates from a commitment entered into
pursuant to certain provisions of the partnership agreement.




GLOSSARY




The
following terms used in this report shall (unless otherwise expressly provided
herein or unless the context otherwise requires) have the meanings set forth
below.




“Acquisition
Expenses” means expenses relating to the prospective selection and acquisition
of or investment in equipment, whether or not actually acquired, including, but
not limited to, legal fees and expenses, travel and communication expenses,
costs of appraisals, accounting fees and expenses and miscellaneous
expenses.




“Acquisition
Fee” means the total of all fees and commissions paid by any party in connection
with the initial purchase of equipment acquired by the
Partnership.   Included in the computation of such fees or
commissions shall be the equipment acquisition fee, any commission, selection
fee, construction supervision fee, finance fee, non-recurring management fee of
a similar nature, however designated.




“Adjusted
Capital Contributions” means capital contributions of the Limited Partners
reduced to not less than zero by any cash distribution received by the Limited
Partners pursuant to Sections 4.1 or 8.1 of the partnership agreement, to the
extent such distributions exceed any unpaid cumulative return as of the date
such distributions were made.




“Affiliate”
means, when used with reference to a specified person, (i) any person that
directly or indirectly through one or more intermediaries controls or is
controlled by or is under common control with the specified person, (ii) any
person that is a director or an executive officer of, partner in, or serves in a
similar capacity to, the specified person, or any person which the specified
person is an executive officer of partner or with respect to which the specified
person serves in a similar capacity, (iii) any person owning or controlling 10%
or more of the outstanding voting securities of such specified person, or (iv)
if such person is an officer, director or partner, any entity for which such
person acts in such capacity.




“Capital
Account” means the separate account established for each partner pursuant to
Section 4.1.




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“Capital
Contributions” means, in the case of the General Partner, the total amount of
money contributed to the Partnership by the General Partner, and, in the case of
the Limited Partners, $20 for each unit or where the context requires, the total
capital contributions of all the partners.




“Cash
Available for Distribution” means cash flow plus net disposition proceeds plus
cash funds available for distribution from Partnership reserves, less such
amounts as the General Partner, in accordance with the partnership agreement,
causes the Partnership to reinvest in equipment or interests therein, and less
such amounts as the General Partner, in its sole discretion, determines should
be set aside for the restoration or enhancement of Partnership
reserves.




“Cash
Flow” for any fiscal period means the sum of (i) cash receipts from operations,
including, but not limited to, rents or other revenues arising from the leasing
or operation of the equipment and interest, if any, earned on funds on deposit
for the Partnership, but not including net disposition proceeds, minus (ii) all
cash expenses and costs incurred and paid in connection with the ownership,
lease, management, use and/or operation of the equipment, including, but not
limited to, fees for handling and storage; all interest expenses paid and all
repayments of principal regarding borrowed funds; maintenance; repair costs;
insurance premiums; accounting and legal fees and expenses; debt collection
expenses; charges, assessments or levies imposed upon or against the equipment;
ad valorem, gross receipts and other property taxes levied against the
equipment; and all costs of repurchasing units in accordance with the
partnership agreement; but not including depreciation or amortization of fees or
capital expenditures, or provisions for future expenditures, including, without
limitation, organizational and offering expenses.




“Code”
means the Internal Revenue Code of 1986, as amended, and as may be amended from
time to time by future federal tax statues.




“Competitive
Equipment Sale Commission” means that brokerage fee paid for services rendered
in connection with the purchase or sale of equipment that is reasonable,
customary, and competitive in light of the size, type, and location of the
equipment.




“Conditional
Sales Contract” means an agreement to sell equipment to a buyer in which the
seller reserves title to, and retains a security interest in, the equipment
until the purchase price of the equipment is paid.




“Cumulative
Return” means an amount equal to a return at a rate of 10% per annum, compounded
daily, on the adjusted capital contribution for all outstanding units, which
amount shall begin accruing at the end of the calendar quarter in which such
units are sold by the Partnership.




“Equipment”
means each item of and all of the computer I.T. and other similar capital
equipment purchased, owned, operated, and/or leased by the Partnership or in
which the Partnership has acquired a direct or indirect interest, as more fully
described in the partnership agreement, together with all appliances, parts,
instruments, accessories, furnishings, or other equipment included therein and
all substitutions, renewals, or replacements of, and all additions,
improvements, and accessions to, any and all thereof.




“Full
Payout Net Lease” means an initial net lease of the equipment under which the
non-cancelable rental payments due (and which can be calculated at the
commencement of the net lease) during the initial noncancellable fixed term (not
including any renewal or extension period) of the lease or other contract for
the use of the equipment are at least sufficient to recover the purchase price
of the equipment.




“General
Partner” means Commonwealth Income & Growth Fund, Inc. and any additional,
substitute or successor general partner of the Partnership.




“Gross
Lease Revenues” means Partnership gross receipts from leasing or other operation
of the equipment, except that, to the extent the Partnership has leased the
equipment from an unaffiliated party, it shall mean such receipts less any lease
expense.




“IRA”
means an Individual Retirement Arrangement as described in Section 408 of the
Code.




“IRS”
means the Internal Revenue Service.




“Limited
Partner” means a Person who acquires units and who is admitted to the
Partnership as a limited partner in accordance with the terms of the partnership
agreement.




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“Net
Disposition Proceeds” means the net proceeds realized by the Partnership from
the refinancing, sale or other disposition of equipment, including insurance
proceeds or lessee indemnity payments arising from the loss or destruction of
equipment, less such amounts as are used to satisfy Partnership
liabilities.




“Net
Lease” means a lease or other contract under which the owner provides equipment
to a lessee or other operator in return for a payment, and the lessee assumes
all obligations and pays for the operation, repair, maintenance, taxes and
insuring of the equipment, so that the non-cancelable rental payments under the
lease are absolutely net to the lessor.




“Net
Profits” or “Net Losses” shall be computed in accordance with Section 703(a) of
the Code (including all items of income, gain, loss or deduction required to be
stated separately pursuant to Section 703(a) (1) of the Code) for each taxable
year of the Partnership or shorter period or subsequent to an interim closing of
the Partnership’s books with the following adjustments: (i) any income of the
Partnership that is exempt from federal income tax and not otherwise taken into
account in computing net profits and net loss pursuant to this definition shall
be added to such taxable income of shall reduce such taxable loss; (ii) any
expenditure of the Partnership described in Code Section 705(a) (2) (B) or
treated as Code Section 705(a) (2) (B) expenditures pursuant to Treasury
Regulations Section 1.704-1(b) (2) (iv) (I) and not otherwise taken into account
in computing net profits and net losses pursuant to this definition shall be
subtracted from such taxable income or loss; (iii) items of income, gain, loss
and deduction specially allocated pursuant to Section 7.3 of the partnership
agreement shall not be included in the computation of net profits or net loss;
and if property is reflected on the books of the Partnership at a book value
that differs from the adjusted tax basis of the property in accordance with
Treasury Regulation Section 1.704-1 (b) (2) (iv) (d) or (f), depreciation,
amortization, and gain or loss with respect to such property shall be determined
by reference to such book value in a manner consistent with Treasury Regulation
Section 1.704-1 (b) (2) (iv) (g).   The terms “net profit” or
“net losses” shall include the Partnership’s distributive share of the profit or
loss of any partnership or joint venture in which it is a partner or joint
venturer.




“Offering”
means the initial public offering of the units in the Partnership.




“Operating
Distributions” means the quarterly distributions made to the Partners pursuant
to Article 8 of the   partnership agreement.




“Operating
Lease” means a lease or other contractual arrangement under which an
unaffiliated party agrees to pay the Partnership, directly or indirectly, for
the use of the equipment, and which is not a full payout net lease.




“Organizational
and Offering Expenses” means the expenses incurred in connection with the
organization of the Partnership and in preparation of the offering for
registration and subsequently offering and distributing it to the public,
including underwriting commissions, listing fees and advertising expenses except
advertising expenses related to the leasing of the program’s
equipment.




“Partners”
means any one or more of the General Partner and the Limited
Partners.




“Partnership”
means Commonwealth Income & Growth Fund III, a Pennsylvania Limited
Partnership.




“Person”
means an individual, partnership, joint venture, corporation, trust, estate or
other entity.




“Proceeds”
means proceeds from the sale of the units.




“Program”
means a limited or general partnership, joint venture, unincorporated
association or similar organization, other than a corporation formed and
operated for the primary purpose of investment in and the operation of or gain
from an interest in equipment.




30


Table of
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“Purchase
Price” means, with respect to any equipment, an amount equal to the sum of (i)
the invoice cost of such equipment or any other such amount paid to the seller,
(ii) any closing, delivery and installation charges associated therewith not
included in such invoice cost and paid by or on behalf of the Partnership, (iii)
the cost of any capitalized modifications or upgrades paid by or on behalf of
the Partnership in connection with its purchase of the equipment, and (iv) the
amount of the equipment acquisition fee and any other acquisition fees, but
excluding points and prepaid interest.




“Term
Debt” means debt of the Partnership with a term in excess of twelve months,
incurred with respect to acquiring or investing in equipment, or refinancing
non-term debt, but not debt incurred with respect to refinancing existing
partnership term debt.




“Underwriting
Commissions” mean selling commissions and dealer-manager fees paid to
broker-dealers by the Partnership in connection with the offer and sale of
units.




“Unit”
means a limited partnership interest in the Partnership.




ITEM
14:                      PRINCIPAL
ACCOUNANT FEES AND SERVICES





AUDIT
FEES





The
aggregate fees billed for each of the fiscal years ended December 31, 2008 and
2007 for professional services rendered by the Partnership’s independent
registered public accounting firm for the audit of our annual financial
statements and review of the financial statements included in our Form 10-K or
services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements for those fiscal years were
approximately $17,000 and $13,000 respectively.





AUDIT-RELATED
FEES





There
were no aggregate fees billed in the fiscal years ended December 31, 2008 and
2007 for assurance and related services by the Partnership’s independent
registered public accounting firm that are reasonably related to the performance
of the audit or review of the registrant's financial statements and are not
reported under the paragraph captioned “Audit Fees.”





TAX
FEES





The
aggregate fees billed in the fiscal years ended December 31, 2008 for
professional services rendered by the Partnership’s independent registered
public accounting firm for tax compliance, tax advice and tax planning were
approximately $2,000. In 2007 the Partnership paid a separate independent
accounting firm approximately $3,000 for tax compliance, tax advice and tax
planning services.





ALL
OTHER FEES





The were
no aggregate fees billed in the fiscal years ended December 31, 2008 and 2007
for products and services provided by the Partnership’s independent registered
public accounting firm, other than the services reported above under other
captions of this Item 14.





PRE-APPROVAL
POLICIES AND PROCEDURES





All audit
related services, tax planning and other services were pre-approved by the Board
of Directors of the General Partner, which concluded that the provision of such
services by the Partnership’s independent registered public accounting firm was
compatible with the maintenance of that firm's independence in the conduct of
its auditing functions. The policy of the General Partner provides for
pre-approval of these services and all audit related, tax or other services not
prohibited under Section 10A(g) of the Securities Exchange Act of 1934, as
amended to be performed for us by our independent auditors, subject to the de
minimus exception described in Section 10A(i)(1)(B) of the Exchange Act on an
annual basis and on individual engagements if minimum thresholds are
exceeded.





There
were no other fees approved by the Board of Directors of the General Partner, or
paid by the Partnership during 2008 besides fees related to audit or tax
compliance.





31


Table of
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PART
IV




ITEM
15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
10-K




(a)
      (1)
              Financial
      StatementsReport
      of Independent Registered Public Accounting Firm
              F-1Balance
      Sheets as of December 31, 2008 and 2007
              F-2Statements
      of Operations for the years ended December 31, 2008 and
    2007
              F-3Statements
      of Partners’ Capital (Deficit) for the years ended December 31, 2008 and
      2007
              F-4Statements
      of Cash Flows for the years ended December 31, 2008 and
    2007
              F-5Notes
      to Financial Statements
              F-6(a)
      (2)
              Schedules




Schedules are omitted because they are
not applicable, not required, or because the requiredinformation is included in
the financial statements and notes thereto.




(a)
      (3)
              Exhibits*3.1
              Certificate
      of Limited Partnership*3.2
              Agreement
      of Limited Partnership31.1
              Rule
      13a-14(a)/15d-14(a) Certifications by the Principal Executive
      Officer31.2
              Rule
      13a-14(a)/15d-14(a) Certifications by the Principal Financial
      Officer32
              Section
      1350 Certifications by the Principal Executive Officer and Principal
      Financial Officer*Incorporated
      by reference from the Partnership’s Registration Statement on Form S-1
      (Registration No. 333-26933)





SIGNATURES




Pursuant
to the requirements of Section 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf on March 27,
2009 by the undersigned thereunto duly authorized.


COMMONWEALTH
      INCOME & GROWTH FUND IIIBy:  COMMONWEALTH
      INCOME & GROWTH FUND,INC., General PartnerBy:  /s/ Kimberly A.
      Springsteen-AbbottKimberly
      A. Springsteen-AbbottChief
      Executive Officer




Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities indicated on March 27, 2009.




SIGNATURE
              CAPACITY/s/ Kimberly A.
      Springsteen-Abbott
              Chairman,
      Chief Executive Officer,Kimberly
      A. Springsteen-Abbott
              Commonwealth
      Income & Growth Fund,
Inc.







/s/Henry J.
      Abbott
              Director,
      President,Henry
      J. Abbott
              Commonwealth
      Income & Growth Fund,
Inc.




32
   
 Commonwealth
Income
 &
Growth Fund III
 
 
 Financial Statements  Years
ended December 31, 2008 and 2007
  Commonwealth Income
 &
Growth Fund III
 Contents
 
 Report
      of Independent Registered Public Accounting Firm
                  F-1Financial
      statementsBalance
      sheets
                  F-2Statements
      of operations
                  F-3Statements
      of partners’ capital (deficit)
                  F-4Statements
      of cash flows
                  F-5Notes
      to financial statements
                  F-6
 Report of Independent
Registered Public Accounting Firm
   The
Partners
 Commonwealth
Income & Growth Fund III
 Chadds
Ford, Pennsylvania
  
   We have
audited the accompanying balance sheets of Commonwealth Income & Growth Fund
III (“Partnership”) as of December 31, 2008 and 2007, and the related statements
of operations and Partners’ capital and cash flows for each of the years in the
two-year period ended December 31, 2008. The Partnership’s management is
responsible for these financial statements. Our responsibility is to express an
opinion on these financial statements based on our audits.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Partnership is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
  As
discussed in Note 2 to the accompanying financial statements, the Partnership
has suffered recurring losses from operations and has a deficit partners’
capital of approximately $122,000 at December 31, 2008.  The General
Partner and its parent company have committed to fund, either through cash
contributions and/or forgiveness of indebtedness, any operating cash shortfalls
of the Partnership through December 31, 2009.
  In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Commonwealth Income & Growth
Fund III as of December 31, 2008 and 2007, and the results of its operations and
its cash flows for each of the years in the two year period ended December 31,
2008 in conformity with accounting principles generally accepted in the United
States of America.
  
  /s/ ASHER
& COMPANY, Ltd.
  Philadelphia,
Pennsylvania
 March 27,
2009
     F-1
  Commonwealth Income &
Growth Fund III
 Balance
Sheets
 
 December
      31,
                                                                                
                                                                                2008
                                                                                
                                                                                
                                                                                2007AssetsCash
                                                                                
                                                                                $
                                                                                1,591
                                                                                
                                                                                
                                                                                $
                                                                                10,925Lease
      income receivable, net of reserve of $0 at December31, 2008 and
      2007
                                                                                
                                                                                
                                                                                1,652
                                                                                
                                                                                
                                                                                
                                                                                9,8693,243
                                                                                
                                                                                
                                                                                
                                                                                20,794Computer equipment, at
      cost
                                                                                
                                                                                
                                                                                118,739
                                                                                
                                                                                
                                                                                
                                                                                109,296Accumulated
      depreciation
                                                                                
                                                                                
                                                                                (47,786
                                                                                )
                                                                                
                                                                                
                                                                                (42,358
                                                                                )70,953
                                                                                
                                                                                
                                                                                
                                                                                66,938Equipment acquisition costs and
      deferred expenses, net ofaccumulated
      amortization of $0 and $374, atDecember
      31, 2008 and 2007, respectively
                                                                                
                                                                                
                                                                                -
                                                                                
                                                                                
                                                                                
                                                                                9Total
      assets
                                                                                
                                                                                $
                                                                                74,196
                                                                                
                                                                                
                                                                                $
                                                                                87,741Liabilities
      and Partners' Capital (deficit)LiabilitiesAccounts
      payable
                                                                                
                                                                                $
                                                                                14,121
                                                                                
                                                                                
                                                                                $
                                                                                13,933Accounts
      payable, Commonwealth Capital Corp.
                                                                                
                                                                                
                                                                                37,521
                                                                                
                                                                                
                                                                                
                                                                                32,875Accounts
      payable, General Partner
                                                                                
                                                                                
                                                                                85,216
                                                                                
                                                                                
                                                                                
                                                                                100,943Accounts
      payable, affiliated limited partnerships
                                                                                
                                                                                
                                                                                53,501
                                                                                
                                                                                
                                                                                
                                                                                68,750Unearned
      lease income
                                                                                
                                                                                
                                                                                113
                                                                                
                                                                                
                                                                                
                                                                                -Other
      accrued expenses
                                                                                
                                                                                
                                                                                5,243
                                                                                
                                                                                
                                                                                
                                                                                5,243Notes
      payable
                                                                                
                                                                                
                                                                                745
                                                                                
                                                                                
                                                                                
                                                                                1,068Total
      liabilities
                                                                                
                                                                                
                                                                                196,460
                                                                                
                                                                                
                                                                                
                                                                                222,812Partners'
      capital (deficit)General
      partner
                                                                                
                                                                                
                                                                                1,000
                                                                                
                                                                                
                                                                                
                                                                                1,000Limited
      partners
                                                                                
                                                                                
                                                                                (123,264
                                                                                )
                                                                                
                                                                                
                                                                                (136,071
                                                                                )Total
      partners' capital (deficit)
                                                                                
                                                                                
                                                                                (122,264
                                                                                )
                                                                                
                                                                                
                                                                                (135,071
                                                                                )Total
      liabilities and partners' capital
                                                                                
                                                                                $
                                                                                74,196
                                                                                
                                                                                
                                                                                $
                                                                                87,741


see
accompanying notes to financial statements
  F-2
   Commonwealth Income &
Growth Fund III
  Statements
of
Operations
 
 Years
      ended December 31,
                                                                        
                                                                        2008
                                                                        
                                                                        
                                                                        2007RevenueLease
                                                                        
                                                                        $
                                                                        42,542
                                                                        
                                                                        
                                                                        $
                                                                        34,101Interest
      and other
                                                                        
                                                                        
                                                                        194
                                                                        
                                                                        
                                                                        
                                                                        -Gain
      on sale of computer equipment
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        8,045Total
      revenue
                                                                        
                                                                        
                                                                        42,736
                                                                        
                                                                        
                                                                        
                                                                        42,146ExpensesOperating,
      excluding depreciation
                                                                        
                                                                        
                                                                        36,998
                                                                        
                                                                        
                                                                        
                                                                        28,669Equipment
      management fee, General Partner
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        823Depreciation
                                                                        
                                                                        
                                                                        24,521
                                                                        
                                                                        
                                                                        
                                                                        19,998Amortization
      of equipment acquisition costsand
      deferred expenses
                                                                        
                                                                        
                                                                        10
                                                                        
                                                                        
                                                                        
                                                                        645Interest
                                                                        
                                                                        
                                                                        5
                                                                        
                                                                        
                                                                        
                                                                        433Other
                                                                        
                                                                        
                                                                        381
                                                                        
                                                                        
                                                                        
                                                                        -Loss
      on sale of computer equipment
                                                                        
                                                                        
                                                                        1,241
                                                                        
                                                                        
                                                                        
                                                                        -Total
      expenses
                                                                        
                                                                        
                                                                        63,156
                                                                        
                                                                        
                                                                        
                                                                        50,568Net
      loss
                                                                        
                                                                        $
                                                                        (20,420
                                                                        )
                                                                        
                                                                        $
                                                                        (8,422
                                                                        )Net
      loss allocated to limited partners
                                                                        
                                                                        $
                                                                        (21,024
                                                                        )
                                                                        
                                                                        $
                                                                        (9,026
                                                                        )Net
      loss per equivalent  partnership unit
                                                                        
                                                                        $
                                                                        (0.14
                                                                        )
                                                                        
                                                                        $
                                                                        (0.06
                                                                        )Weighted
      average number of equivalent limited partnership units outstanding during
      the year
                                                                        
                                                                        
                                                                        151,178
                                                                        
                                                                        
                                                                        
                                                                        151,178
  see accompanying notes to financial statements
 
 F-3
 
 Commonwealth Income &
Growth Fund III
  Statements
of Partners' Capital
(Deficit)
  
 General
                              
                              
                              LimitedPartner
                              
                              
                              Partner
                              
                              
                              General
                              
                              
                              LimitedUnits
                              
                              
                              Units
                              
                              
                              Partner
                              
                              
                              Partners
                              
                              
                              TotalBalance,
      January 1, 2007
                              
                              
                              50
                              
                              
                              
                              151,178
                              
                              
                              $
                              1,000
                              
                              
                              $
                              (206,748
                              )
                              
                              $
                              (205,748
                              )Net
      income (loss)
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              604
                              
                              
                              
                              (9,026
                              )
                              
                              
                              (8,422
                              )Contributions
      - Cash
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              90,697
                              
                              
                              
                              -
                              
                              
                              
                              90,697Contributions
      - Forgiveness of Fees
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              48,878
                              
                              
                              
                              -
                              
                              
                              
                              48,878Transfer
      of partners' capital
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (139,575
                              )
                              
                              
                              139,575
                              
                              
                              
                              -Distributions
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (604
                              )
                              
                              
                              (59,872
                              )
                              
                              
                              (60,476
                              )Balance,
      December 31, 2007
                              
                              
                              50
                              
                              
                              
                              151,178
                              
                              
                              
                              1,000
                              
                              
                              
                              (136,071
                              )
                              
                              
                              (135,071
                              )Net
      income (loss)
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              604
                              
                              
                              
                              (21,024
                              )
                              
                              
                              (20,420
                              )Contributions
      -Cash
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              57,897
                              
                              
                              
                              -
                              
                              
                              
                              57,897Contributions
      - Forgiveness of Fees
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              15,879
                              
                              
                              
                              -
                              
                              
                              
                              15,879Contributions
      - Forgiveness of expenses
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              19,927
                              
                              
                              
                              -
                              
                              
                              
                              19,927Transfer
      of partners' capital
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (93,703
                              )
                              
                              
                              93,703
                              
                              
                              
                              -Distributions
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (604
                              )
                              
                              
                              (59,872
                              )
                              
                              
                              (60,476
                              )Balance,
      December 31, 2008
                              
                              
                              50
                              
                              
                              
                              151,178
                              
                              
                              $
                              1,000
                              
                              
                              $
                              (123,264
                              )
                              
                              $
                              (122,264
                              )


see accompanying notes to financial
statements
   F-4
    Commonwealth Income &
Growth Fund III
  Statements
of Cash
Flows
  
 Years
      ended December 31,
                                                            
                                                            2008
                                                            
                                                            
                                                            2007Cash
      flows from operating activitiesNet
      loss
                                                            
                                                            $
                                                            (20,420
                                                            )
                                                            
                                                            $
                                                            (8,422
                                                            )Adjustments
      to reconcile net loss tonet
      cash provided by operating activitiesDepreciation
      and amortization
                                                            
                                                            
                                                            24,531
                                                            
                                                            
                                                            
                                                            20,643(Gain)
      loss on sale of computer equipment
                                                            
                                                            
                                                            1,241
                                                            
                                                            
                                                            
                                                            (8,045
                                                            )Other
      noncash activities included indetermination
      of net loss
                                                            
                                                            
                                                            (1,068
                                                            )
                                                            
                                                            
                                                            (12,443
                                                            )Changes
      in assets and liabilitiesLease
      income receivable
                                                            
                                                            
                                                            8,217
                                                            
                                                            
                                                            
                                                            (5,584
                                                            )Other
      receivable- General Partner
                                                            
                                                            
                                                            152
                                                            
                                                            
                                                            
                                                            -Prepaid
      items
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            363Accounts
      payable
                                                            
                                                            
                                                            15,222
                                                            
                                                            
                                                            
                                                            24,944Accounts
      Payable, Commonwealth Capital Corp.
                                                            
                                                            
                                                            24,575
                                                            
                                                            
                                                            
                                                            (4,224
                                                            )Accounts
      Payable, General Partner
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            44,001Accounts
      Payable, affiliated limited partnerships
                                                            
                                                            
                                                            (30,280
                                                            )
                                                            
                                                            
                                                            (18,055
                                                            )Unearned
      lease income
                                                            
                                                            
                                                            109
                                                            
                                                            
                                                            
                                                            (122
                                                            )Net
      cash provided by operating activities
                                                            
                                                            
                                                            22,279
                                                            
                                                            
                                                            
                                                            33,056Cash
      flows from investing activitiesCapital
      expenditures
                                                            
                                                            
                                                            (33,326
                                                            )
                                                            
                                                            
                                                            (67,026
                                                            )Net
      proceeds from sale of computer equipment
                                                            
                                                            
                                                            4,923
                                                            
                                                            
                                                            
                                                            11,796Net
      cash (used in) provided by investing activities
                                                            
                                                            
                                                            (28,403
                                                            )
                                                            
                                                            
                                                            (55,230
                                                            )Cash
      flows from financing activitiesContributions
                                                            
                                                            
                                                            57,266
                                                            
                                                            
                                                            
                                                            90,697Distributions
      to partners
                                                            
                                                            
                                                            (60,476
                                                            )
                                                            
                                                            
                                                            (60,476
                                                            )Net
      cash provided by (used in) financing activities
                                                            
                                                            
                                                            (3,210
                                                            )
                                                            
                                                            
                                                            30,221Net
      increase (decrease) in cash
                                                            
                                                            
                                                            (9,334
                                                            )
                                                            
                                                            
                                                            8,047Cash
      at beginning of year
                                                            
                                                            
                                                            10,925
                                                            
                                                            
                                                            
                                                            2,878Cash
      at end of year
                                                            
                                                            $
                                                            1,591
                                                            
                                                            
                                                            $
                                                            10,925




see accompanying notes to financial
statements




F-5
 
 Commonwealth Income &
Growth Fund III
  Notes to
Financial
Statements








1.  The
Partnership
 
 Commonwealth
Income & Growth Fund III (the “Partnership”) is a limited partnership
organized in the Commonwealth of Pennsylvania.  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 offering was terminated
at the close of business on July 31, 2000 by the General
Partner.  The Partnership used the proceeds of the offering to
acquire, own and lease various types of computer I.T. (information technology)
equipment and other similar capital equipment, which is leased primarily to U.S.
corporations and institutions.  Commonwealth Capital Corp (“CCC”), on
behalf of the Partnership and other affiliated partnerships, acquires computer
equipment subject to associated debt obligations and lease agreements and
allocates a participation in the cost, debt and lease revenue to the various
partnerships that it manages based on certain risk factors. The Partnership’s
General Partner is Commonwealth Income & Growth Fund, Inc. (the “General
Partner”), a Pennsylvania corporation that is an indirect wholly owned
subsidiary of CCC. The Partnership’s objective was to sell or otherwise dispose
of all of its computer equipment, make final distributions to partners, and to
dissolve approximately ten years after the commencement of operations. The
Partnership was scheduled to terminate on December 31, 2009, but the General
Partner has decided to amend the Partnership agreement and extend the life of
the partnership, and continue operations through the term of its currently owned
leases.
 
 Allocations
of income and distributions of cash are based on the Partnership’s Limited
Partnership Agreement (the “Agreement”).  The various allocations
under the Agreement prevent any limited partner’s capital account from being
reduced below zero and ensure the capital accounts reflect the anticipated
sharing ratios of cash distributions, as defined in the
Agreement.  During 2008 and 2007, the Partnership distributed $59,872
to the limited partners for each year. The 2008 and 2007 distributions were at
an annual rate of 2% of the limited partners’ original contributed
capital.  Distributions during 2008 and 2007 reflect an annual return
of capital in the amount of approximately $0.40 per limited partnership
unit.
 
 2.  Business
Plan
 
 The
Partnership has suffered recurring losses from operations and has a deficit
partners’ capital of approximately $122,000 at December 31, 2008.  The
General Partner and CCC have forgiven amounts payable by the Partnership to them
and have deferred payments on other amounts to allow for distributions to
limited partners. In addition, CCC contributed cash to the Partnership during
2008 and 2007. (See note 5)
 
 The
General Partner and CCC have committed to fund, either through cash
contributions and/or forgiveness of indebtedness, any necessary operational cash
shortfalls of the Partnership through December 31, 2009. No fees will be charged
to the Partnership during 2009.  CCC has committed to fund limited
partner distributions through June 30, 2009, at which time CCC will reassess the
operations of the Partnership.  CCC will continue to reassess the
operations on a quarterly basis throughout 2009.
   F-6
 
 3.  Summary
of Significant Accounting Policies
  Revenue
Recognition
 
 For
the year ended December 31, 2008 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 before extending credit and may
establish a provision for uncollectible accounts receivable based upon the
credit risk of specific customers, historical trends and other
information.
 
 Use
of Estimates
 
 The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from those
estimates.
 
 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 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
impairment exists.  The amount of the impairment is determined based
on the difference between the carrying value and the fair value.  Fair
value is determined based on estimated discounted cash flows to be generated by
the asset. The Partnership determined that no impairment occurred in 2008 and
2007.
 
 Depreciation
on computer equipment for financial statement purposes is based on the
straight-line method estimated generally over useful lives of three or four
years.
 
 Intangible
Assets
 
 Equipment
acquisition costs and deferred expenses are amortized on a straight-line basis
over two- to-four year lives.  Unamortized acquisition fees and
deferred expenses are charged to amortization expense when the associated leased
equipment is sold.
 
  F-7
  Cash
 
 The
Partnership considers all highly liquid investments with an initial maturity of
three months or less to be cash equivalents. At December 31, 2008 cash was
held in one checking account maintained at one financial institution. At times,
the balance may have exceeded federally insured limits.  At December
31, 2008, the total cash balance in this institution was approximately $17,000
which does not exceed federally insured limits of $250,000. At December 31,
2007 cash was held in one checking account at one institution and, the total
cash balance in this institution was approximately $27,000 which also did not
exceed federally insured limits of $100,000. The Partnership can mitigate this
risk by depositing funds with more than one institution and by only depositing
funds with major financial institutions. The Partnership has not experienced any
losses in such accounts, and believes it is not exposed to any significant
credit risk.
 
 Accounts
Receivable
 
 Accounts
receivable includes current accounts receivable, net of allowances and other
accruals.  The Partnership regularly reviews the collectability of its
receivables and the creditworthiness of its customers and adjusts its allowance
for doubtful accounts accordingly.  The Partnership determined that no
allowance was necessary at December 31, 2008 and 2007.
 
 Income
Taxes
 
 The
Partnership is not subject to federal income taxes; instead, any taxable
income/(loss) is passed through to the partners and included on their respective
income tax returns.
 
 Taxable
income differs from financial statement net income as a result of reporting
certain income and expense items for tax purposes in periods other than those
used for financial statement purposes, principally relating to depreciation,
amortization, and lease revenue.
 
 Net
Loss Per Equivalent Limited Partnership Unit
 
 The
net loss per equivalent limited partnership unit is computed based upon net loss
allocated to the limited partners and the weighted average number of equivalent
limited partner units outstanding during the year.
 
 Reimbursable
Expenses
 
 Reimbursable
expenses, which are charged to the Partnership by CCC in connection with the
administration and operation of the Partnership, are allocated to the
Partnership based upon several factors including, but not limited to, the number
of investors, compliance issues, and the number of existing leases.  For
example, if the Partnership has more investors than another program sponsored by
CCC, then higher amounts of expenses related to investor services, mailing and
printing costs will be allocated to the Partnership.  Also, while the
Partnership is in its offering stage, higher compliance costs are allocated to
it than to a program not in its offering stage, as compliance resources are
utilized to review incoming investor suitability and proper documentation. 
Finally, lease related expenses, such as due diligence, correspondence,
collection efforts and analysis staff costs, increase as programs purchase more
leases, and decrease as leases terminate and equipment is sold. All of these
factors contribute to CCC’s determination as to the amount of expenses to
allocate to the Partnership or to other sponsored programs.  For the
Partnership, all reimbursable expenses are expensed as they are
incurred.
 
  F-8
  Forgiveness
of Related Party Payables
 
 In
accordance with Accounting Principles Board Opinion No. 26, Early
Extinguishment of Debt, the Partnership accounts for forgiveness of
related party payables as partner’s capital transactions.
 
 Recent
Accounting Pronouncements
 
 In
February 2007, the FASB issued SFAS No. 159, “The
Fair Value Option for Financial Assets and Liabilities, including an amendment
of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 permits
entities to choose, at specified election dates, to measure many financial
instruments and certain other items at fair value that are not currently
required to be measured at fair value. Unrealized gains and losses will be
reported on items for which the fair value option has been elected in earnings
at each subsequent reporting date. SFAS No. 159 is effective for fiscal years
beginning after November 15, 2007. Early adoption is permitted as of the
beginning of a fiscal year that begins on or before November 15, 2007, provided
the entity also elects to apply the provisions of SFAS No. 157 “Fair
Value Measurements”.   As of January 1, 2008 the Partnership adopted
SFAS No.159. The Partnership has not elected the fair value option for any
financial assets or financial liabilities.
  In
September 2006, the FASB issued Statement of Financial Accounting Standards 157,
“Fair
Value Measurements”(“SFAS 157”), which provides guidance on measuring
the fair value of assets and liabilities. SFAS 157 applies to other accounting
pronouncements that require or permit assets or liabilities to be measured at
fair value but does not expand the use of fair value to any new circumstances.
This standard also requires additional disclosures in both annual and quarterly
reports. In February 2008, the FASB issued two Staff Positions on SFAS 157: (1)
FASB Staff Position No. FAS 157-1    (FAS 157-1),
“Application of FASB Statement No. 157 to FASB Statement No. 13 and Other
Accounting Pronouncements That Address Fair Value Measurements for Purposes of
Lease Classification or Measurement Under Statement 13,” and (2) FASB
Staff Position No. FAS 157-2 (FAS 157-2), “Effective
Date of FASB Statement No. 157.”FAS 157-1 excludes FASB Statement No.
13, Accounting for Leases, as well as other accounting pronouncements that
address fair value measurements on lease classification or measurement under
Statement 13, from SFAS 157’s scope. FAS157-2 partially defers Statement 157’s
effective date.  As of January 1, 2008 the Partnership adopted SFAS No. 157
for all financial assets.  Adoption of this pronouncement did not impact
the 2008 financial statements of the Partnership. In October 2008, the FASB
issued FSP SFAS 157-3 "Determining
the Fair Value of a Financial Asset When the Market for That Asset is Not
Active" ("FSP SFAS 157-3"), which is effective upon issuance for all
financial statements that have not been issued. FSP SFAS 157-3 clarifies the
application of SFAS 157, in a market that is not active. Adoption of FSP SFAS
157-3 did not impact the 2008 financial statements of the
Partnership.
 
 4.  Computer
Equipment
 
 The
Partnership is the lessor of equipment under operating leases with periods
ranging from 12 to 36 months.  In general, associated costs such as
repairs and maintenance, insurance and property taxes are paid by the
lessee.
  F-9
  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.  For the years ended December 31, 2008 and 2007 the Partnership
incurred approximately $6,000 and $1,000, respectively, in remarketing
fees.
 
 The
Partnership participates in leases that are shared with other affiliated
partnerships. The
Partnership’s share of the computer equipment in which it participates with
other partnerships at December 31, 2008 was approximately $17,000 and is
included in the Partnership’s fixed assets on its balance sheet. The total cost
of the equipment shared by the Partnership with other partnerships at December
31, 2008 was approximately $1,158,000. There was no outstanding debt associated
with this shared equipment for the years ended December 31, 2008. At December
31, 2007 the Partnership did not have any equipment in which it participated
with other partnerships.
 
 The
following is a schedule of future minimum rentals on noncancelable operating
leases at December 31, 2008:
 
 Year
      Ending December 31,
                              
                              Amount2009
                              
                              $
                              38,4602010
                              
                              
                              20,1622011
                              
                              
                              3,050$
                              61,672
 
 Significant
Customers
 
 Lessees
exceeding 10% of lease income for the years ended:
 
 Lessee
                    
                    2008
                    
                    
                    2007Leasee
      A
                    
                    
                    10
                    %
                    
                    
                    0
                    %Leasee
      B
                    
                    
                    29
                    %
                    
                    
                    0
                    %Lessee
      C
                    
                    
                    0
                    %
                    
                    
                    38
                    %Leasee
      D
                    
                    
                    31
                    %
                    
                    
                    0
                    %Lessee
      E
                    
                    
                    0
                    %
                    
                    
                    28
                    %Leasee
      H
                    
                    
                    27
                    %
                    
                    
                    25
                    %Total
      % of Lease Income
                    
                    
                    97
                    %
                    
                    
                    91
                    %
 
  F-10
   Lessees
exceeding 10% of accounts receivable at December 31:
 
 Lessee
                  
                  2008
                  2007Lessee
      A
                  
                  10%
                  0%Lessee
      B
                  
                  12%
                  14%Lessee
      C
                  
                  77%
                  0%Lessee
      E
                  
                  0%
                  86%Total
      % of Accounts Receivable
                  99%
                  100%
 
 
 5.  Related
Party Transactions
  Forgiveness
of Related Party Payables
 
 During
the year ended December 31, 2008 and 2007 the General Partner and one of its
affiliates, CCC, in their discretion, forgave payables owed to them by the
Partnership in the amount of approximately $36,000 and $49,000
respectively.  These amounts have been recorded as contributions to
capital.  Cash was also contributed by CCC in the amount of
approximately $57,000 and $91,000 in 2008 and 2007, respectively. Additionally
CCC contributed equipment to the Partnership in the amount of approximately $600
during 2008.
 
 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 2008 and 2007, expenses were incurred by the General Partner
and its affiliates on behalf of the Partnership in the amounts of approximately
$6,000 and $31,000, respectively.
 
 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.  The fee was paid upon each closing of
the offering with respect to the equipment to be purchased by the Partnership
with the net proceeds for the offering available for investment in
equipment.  If the Partnership acquires equipment in an amount
exceeding the net proceeds of the offering available for investment in
equipment, the fee will be paid when such equipment is acquired.  In
2008 and 2007, the General Partner chose to waive acquisition fees of
approximately $1,300 and $2,000, respectively.
 
 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.  No debt placement fees were earned by the General Partner
in 2008 and 2007.
 
   F-11
  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
leases.  The equipment management fee totaling approximately $2,000
was earned and waived by the General Partner for the year ended December 31,
2008. This fee was approximately $1,700, as determined pursuant to section (ii)
above, for the year ended December 31, 2007, of which the General Partner waived
approximately $900.
 
 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 2008 and 2007
equipment liquidation fees of approximately $150 and $400 respectively, were
earned by the General Partner.
  6.  Notes
Payable
 
 Notes
payable consisted of the following:
  December
      31,
                                            
                                            2008
                                            
                                            
                                            2007Installment
      note payable tobanks;
      interest at 5.5%, due in
                                              monthly
      installments of$1,073,
      including interest withfinalpayment
      in January 2008.
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            1,068Installment
      note payable tobanks;
      interest at 6.0%, due in
                                              monthly
      installments of$191,
      including interest withfinal
      payment in October 2009.
                                            
                                            
                                            745
                                            
                                            
                                            
                                            -$
                                            745
                                            
                                            
                                            $
                                            1,068
  This
note is secured by specific computer equipment and is a nonrecourse liability of
the Partnership.  As such, this note does not contain any debt
covenants with which we must comply on either an annual or quarterly
basis.  Aggregate maturities of notes payable for each of the periods
subsequent to December 31, 2008 are as follows:
 
 Year
      Ending December 31,2009
                            
                            $
                            745
 
  F-12
 
 7.  Supplemental
Cash Flow Information
 
 Other
noncash activities included in the determination of net income are as
follows:
 
 Year
      ended December 31,
                        
                        2008
                        
                        
                        2007Lease
      income, net of interest expense on notes payable realized as a result of
      direct payment of principal by lessee to bank
                        
                        $
                        1,068
                        
                        
                        $
                        12,443
 
 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:
 
 Year
      ended December 31,
                              
                              2008
                              
                              
                              2007Forgiveness
      of payables by related parties recorded as capital contributions (see Note
      5)
                              
                              $
                              35,806
                              
                              
                              $
                              48,878Capital
      contribution – equipment transfer from CCC
                              
                              $
                              631
                              
                              
                              $
                              -
 
 
  F-13
  8.  Reconciliation
of Net (Loss) Reported for Financial Reporting Purposes to Taxable Income (Loss)
on the Federal Partnership Return
 
 
 Year
      Ended December 31,
                  
                  2008
                  
                  
                  2007Net
      (loss) for financial reportingpurposes
      to taxable (loss)
                  
                  $
                  (20,420
                  )
                  
                  $
                  (8,422
                  )AdjustmentsGain
      on sale of computer equipment
                  
                  
                  120
                  
                  
                  
                  1,243Depreciation
                  
                  
                  (21,899
                  )
                  
                  
                  7,645Amortization
                  
                  
                  (8
                  )
                  
                  
                  525Unearned
      lease income
                  
                  
                  109
                  
                  
                  
                  (120
                  )Other
                  
                  
                  9,682Taxable
      income (loss) on the FederalPartnership
      Return
                  
                  $
                  (32,416
                  )
                  
                  $
                  871
 
 The
“Adjustments – Other” includes financial statement adjustments reflected on the
tax return in the subsequent year.
 
 Adjustment
or gain on sale of equipment is due to longer useful lives for tax reporting
purpose.
 
 
 F-14
  9.  Quarterly
Results of Operation (Unaudited)
 
 Summarized
quarterly financial data for the years ended December 31, 2008 is as
follows:
 
 Quarter
      endedMarch
      31
                  
                  
                  June
      30
                  
                  
                  September
      30
                  
                  
                  December
      312008RevenuesLease
      and other
                  
                  $
                  7,538
                  
                  
                  $
                  10,627
                  
                  
                  $
                  10,869
                  
                  
                  $
                  13,508Other
      income (*)
                  
                  
                  155
                  
                  
                  
                  38
                  
                  
                  
                  -
                  
                  
                  
                  -Loss
      gain on sale ofcomputer
      equipment
                  
                  
                  -
                  
                  
                  
                  (1,241
                  )
                  
                  
                  -
                  
                  
                  
                  -Total
      revenues (*)
                  
                  
                  7,693
                  
                  
                  
                  9,424
                  
                  
                  
                  10,869
                  
                  
                  
                  13,508Total
      costs and expenses
                  
                  
                  16,492
                  
                  
                  
                  22,996
                  
                  
                  
                  11,483
                  
                  
                  
                  10,944Net
      (loss) income (*)
                  
                  $
                  (8,799
                  )
                  
                  $
                  (13,572
                  )
                  
                  $
                  (614
                  )
                  
                  $
                  2,564Net
      (loss) income allocated to limited partners (*)
                  
                  $
                  (8,950
                  )
                  
                  $
                  (13,723
                  )
                  
                  $
                  (765
                  )
                  
                  $
                  2,412Net
      (loss) income per limited partner unit (*)
                  
                  $
                  (0.06
                  )
                  
                  $
                  (0.09
                  )
                  
                  $
                  (0.01
                  )
                  
                  $
                  0.02
 
 (*)
Amounts have been restated from previously filed interim financial reports to
include an adjustment to other income of approximately $7,000.
 
 Summarized
quarterly financial data for the year ended December 31, 2007 is as
follows:
 
 Quarter
      endedMarch
      31
                  
                  
                  June
      30
                  
                  
                  September
      30
                  
                  
                  December
      312007RevenuesLease
      and other
                  
                  $
                  6,869
                  
                  
                  $
                  9,594
                  
                  
                  $
                  9,377
                  
                  
                  $
                  8,394(Loss)
      gain on sale of computer equipment
                  
                  
                  (262
                  )
                  
                  
                  546
                  
                  
                  
                  7,760
                  
                  
                  
                  -Total
      revenues
                  
                  
                  6,607
                  
                  
                  
                  10,140
                  
                  
                  
                  17,137
                  
                  
                  
                  8,394Total
      costs and expenses
                  
                  
                  18,020
                  
                  
                  
                  16,321
                  
                  
                  
                  10,341
                  
                  
                  
                  6,018Net
      (loss) income
                  
                  $
                  (11,413
                  )
                  
                  $
                  (6,181
                  )
                  
                  $
                  6,796
                  
                  
                  $
                  2,376Net
      (loss) income allocated to limited partners
                  
                  $
                  (11,564
                  )
                  
                  $
                  (6,332
                  )
                  
                  $
                  6,645
                  
                  
                  $
                  2,225Net
      (loss) income per limited partner unit
                  
                  $
                  (0.08
                  )
                  
                  $
                  (0.04
                  )
                  
                  $
                  0.04
                  
                  
                  $
                  0.01
 
 The
cumulative gain or loss on sale of equipment is included in revenue or cost, as
appropriate.