UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K





þ
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934For
      the fiscal year ended December 31,
    2008ORo
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934





Commission
file number:  333-37504




ICON
Income Fund Eight B L.P.


(Exact
name of registrant as specified in its charter)




Delaware
            
            13-4101114(State
      or other jurisdiction of incorporation or organization)
            
            (I.R.S.
      Employer Identification No.)100
      Fifth Avenue, 4th
      Floor
              New York,
      New York
            
            10011(Address
      of principal executive offices)
            
            (Zip
      Code)





(212)
418-4700


(Registrant’s
telephone number, including area code)




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




Securities
registered pursuant to Section 12(g) of the Act:  Units of Limited Partnership
Interests




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.Yes     No þ




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act.Yes     No
þ




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes þ    No





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


Form
10-K.  Yes þ    No





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.


Large
accelerated filer       Accelerated filer
       Non-accelerated
filer  þ      Smaller
reporting company 




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).Yes     No þ




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 day of the registrant’s most recently completed second fiscal
quarter:  Not
applicable.




There is
no established market for limited partnership units of the
registrant.




Number of
outstanding units of limited partnership interests of the Registrant
on February 28, 2009 is 740,380.





DOCUMENTS
INCORPORATED BY REFERENCE




None.












Table of
      ContentsPagesPART
      I
            1Item 1.
      Business
            1Item 1A.
      Risk Factors
            4Item 1B.
      Unresolved Staff Comments
            16Item 2.
      Properties
            16Item 3.
      Legal Proceedings
            16Item 4.
      Submission of Matters to a Vote of Security
    Holders
            16PART
      II
            17Item 5.
      Market for the Registrant's Securities, Related Security Holder Matters
      and Issuer Purchases of Equity Securities
            17Item 6.
      Selected Financial Data
            18Item 7.
      General Partner's Discussion and Analysis of Financial Condition and
      Results of Operations
            19Item 7A.  Quantitative and Qualitative
      Disclosures About Market Risk
            34Item 8. Consolidated Financial Statements and
      Supplementary Data
            35Item 9. Changes in and Disagreements with
      Accountants on Accounting And Financial
      Disclosure
            60Item 9A(T). Controls and
      Procedures
            61Item 9B.
      Other Information
            61PART
      III
            62Item 10.
      Directors, Executive Officers of the Registrant's General Partner and
      Corporate Governance
            62Item 11.
      Executive Compensation
            64Item 12.
      Security Ownership of Certain Beneficial Owners and General Partner and
      Related Security Holder Matters
            64Item 13.
      Certain Relationships and Related Transactions, and Director
      Independence
            64Item 14.
      Principal Accounting Fees and Services
            65PART
      IV
            66Item 15.
      Exhibits, Financial Statement Schedules
            66SIGNATURES
            79








Table of Contents





PART I








Forward-Looking
Statements





Certain
statements within this Annual Report on Form 10-K may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (“PSLRA”).  These statements are being made pursuant to the
PSLRA, with the intention of obtaining the benefits of the “safe harbor”
provisions of the PSLRA, and, other than as required by law, we assume no
obligation to update or supplement such statements.  Forward-looking
statements are those that do not relate solely to historical
fact.  They include, but are not limited to, any statement that may
predict, forecast, indicate or imply future results, performance, achievements
or events.  You can identify these statements by the use of words such
as “may,” “will,” “could,” “anticipate,” “believe,” “estimate”, “expect”,
“continue,” “further,” “plan,” “seek,” “intend,” “predict” or “project” and
variations of these words or comparable words or phrases of similar
meaning.  These forward-looking statements reflect our current beliefs
and expectations with respect to future events and are based on assumptions and
are subject to risks and uncertainties and other factors outside our control
that may cause actual results to differ materially from those projected. We
undertake no obligation to update publicly or review any forward-looking
statement, whether as a result of new information, future developments or
otherwise.





Item 1. Business





Our
History





ICON
Income Fund Eight B L.P. (the “Partnership”) was formed on February 7, 2000 as a
Delaware limited partnership.  The Partnership will continue until
December 31, 2017, unless terminated sooner.  When used in this Annual
Report on Form 10-K, to the terms “we,” “us,” “our” or similar terms refer to
the Partnership and its consolidated subsidiaries.





Our
general partner is ICON Capital Corp. (our “General Partner”), a Delaware
corporation. Our General Partner manages and controls our business affairs,
including, but not limited to, our equipment leases and other financing
transactions, under the terms of our amended and restated limited partnership
agreement (our “LP Agreement”).





We are
currently in our liquidation period. Our maximum offering was $75,000,000 and we
commenced business operations on our initial closing date, June 14, 2000, when
we issued 15,816 units of limited partnership interests (“Units”) representing
$1,581,551 of capital contributions.  Between June 15, 2000 and
October 17, 2001, the date of our final closing, 734,184 additional Units were
sold representing $73,418,449 of capital contributions, bringing the total sale
of Units to 750,000 representing $75,000,000 of capital contributions. Through
December 31, 2008, we redeemed 9,620 Units, bringing the total number of
outstanding Units to 740,380.







1
 Table of Contents











Our
Business





We
operate as an equipment leasing program in which the capital our partners
invested was pooled together to make investments, pay fees and establish a small
reserve. We primarily acquired equipment subject to lease, purchased equipment
and leased it to third-party end users or financed equipment for third parties
and, to a lesser degree, acquired ownership rights to leased equipment at lease
expiration. Some of our equipment leases were acquired for cash and provided
current cash flow, which we refer to as “income” leases. For our other equipment
leases, we financed the majority of the purchase price through borrowings from
third parties. We refer to these leases as “growth” leases. These growth leases
generated little or no current cash flow because substantially all rental
payments received from the lessee were used to service the indebtedness
associated with acquiring or financing the lease. For these leases, we
anticipated that the future value of the leased equipment would exceed the cash
portion of the purchase price.





We divide
the life of the program into three distinct phases:





(1)
      Offering Period:
      We invested most of the net proceeds from the sale of
      Units in equipment leases  and other financing
      transactions.





(2)
      Reinvestment
      Period: After the close of the offering period, we reinvested and
      continued to reinvest the cash generated from our initial investments to
      the extent that cash was not needed for our expenses, reserves and
      distributions to partners.  The reinvestment period was
      anticipated to end on or about October 16, 2006.  However, on
      October 5, 2006, our General Partner determined that it was in the best
      interests of our partners to extend the reinvestment period until April
      16, 2007 and subsequently further extended the reinvestment period for an
      additional two months to June 17,
2007.





(3)
      Liquidation
      Period: We began our liquidation period on June 17, 2007.
      Since the beginning of the liquidation period, we have sold and will
      continue to sell our assets in the ordinary course of business.
      Our goal is to complete the liquidation period within three years
      from the end of the reinvestment period, but it may take longer to do
      so.





As
we sell our assets during the liquidation period, both rental income and finance
income will decrease over time as will expenses related to our assets such as
depreciation and amortization expense. Additionally, interest expense should
decrease as we reach the expiration of leases that were financed and the debt is
repaid to the lender.  As leased equipment is sold, we will incur
gains or losses on these sales. We will continue to liquidate our portfolio
during this period and we expect to see a reduction in revenue and expenses
accordingly.





At
December 31, 2008 and 2007, we had total assets of $53,205,647 and
$65,113,221, respectively.  For the year ended December 31, 2008, two
lessees accounted for 100% of our total rental and finance income of
$7,166,618. We had a net loss for the year ended December 31, 2008
of  $6,453,564.  For the year ended December 31, 2007, two
lessees accounted for approximately 85.8% of our total rental income and finance
income of $9,322,816. We had net income for the year ended
December 31, 2007 of $1,146,979.  For the year ended December 31,
2006, two lessees accounted for approximately 83.5% of our total rental and
finance income of $16,308,179. We had a net loss for the year ended
December 31, 2006 of $614,426.






2
 Table of Contents







At
December 31, 2008, our portfolio, which we hold either directly or through joint
ventures, consisted primarily of the following investments:





Telecommunications
Equipment





·
            We
      own telecommunications equipment subject to a lease to Global Crossing
      Telecommunications, Inc. (“Global
Crossing”).





Air
Transportation Equipment





·
            We
      own one Airbus A340-313X aircraft (“Aircraft 123”) and have a 50% interest
      through a joint venture with ICON Income Fund Nine, LLC (“Fund Nine”), an
      entity also managed by our General Partner, in a second Airbus A340-313X
      aircraft (“Aircraft 126”).  Both aircraft are on lease to Cathay
      Pacific Airways Limited (“Cathay”), which are currently in lease
      extensions that are scheduled to expire on October 1, 2011 and July 1,
      2011, respectively.





Energy
Equipment





·
            We
      have a 5.93% interest in the rights to the profits, losses and cash flows
      from an entity that owns a 50% interest in a mobile offshore drilling rig
      subject to a lease with Rowan Companies,
Inc.





For a
discussion of our lease and other significant transactions for the years ended
December 31, 2008, 2007 and 2006, please refer to “Item 7. General Partner’s
Discussion and Analysis of Financial Condition and Results of
Operations.”





Segment
Information





We have
only one operating segment: the business of leasing and financing equipment to
companies that we believe to be creditworthy.





Competition





The commercial leasing and financing
industry is highly competitive and is characterized by competitive factors that
vary based upon product and geographic region. When we made our investments, we
competed, and as we seek to liquidate our portfolio, we compete with a variety
of competitors including other equipment leasing and finance funds, hedge funds,
captive and independent finance companies, commercial and industrial banks,
manufacturers and vendors. Competition from both traditional competitors and new
market entrants has intensified in recent years due to growing marketplace
liquidity and increasing recognition of the attractiveness of the commercial
leasing and finance industry.  Our competitors may have been and/or
are in a position to offer equipment to prospective customers on financial terms
that were more favorable than those that we could offer or that we can offer in
liquidating our portfolio, which may have affected our ability to make
investments and may affect our ability to liquidate our portfolio, in each case,
in a manner that would enable us to achieve our investment
objectives.  For additional information about our competition and
other risks related to our operations, please see “Risk Factors” in Item
1A.





Employees





We have
no direct employees. Our General Partner has full and exclusive control over our
management and operations.







3
 Table of Contents







Available
Information




Our
Annual Report on Form 10-K, our most recent Quarterly Reports on Form 10-Q and
amendments to those reports, if any, and our Current Reports on Form 8-K and any
amendments to those reports are available free of charge on our General
Partner’s internet website at http://www.iconcapital.com as soon as reasonably
practicable after such reports are electronically filed with or furnished to the
Securities and Exchange Commission (the “SEC”). The information contained on our
General Partner’s website is not deemed part of this Annual Report on Form 10-K.
Our Reports are also available on the SEC’s website at http://www.sec.gov.





Financial
Information Regarding Geographic Areas





We have
long-lived assets, which include finance leases, operating leases and
revenues, within the United States and Asia. For additional information, see
Note 13 to our consolidated financial statements.





Item 1A. Risk Factors





We are
subject to a number of risks.  Careful consideration should be given
to the following risk factors, in addition to the other information included in
this Annual Report.  The risks and uncertainties described below are
not the only ones we may face.  Each of these risk factors could
adversely affect our business operating results and/or financial condition, as
well as adversely affect the value of an investment in our Units.  In
addition to the following disclosures, please refer to the other information
contained in this report including the consolidated financial statements and the
related notes.





General
Investment Risks





All
or a substantial portion of your distributions may be a return of capital and
not a return on capital, which will not necessarily be indicative of our
performance.





The
portion of total distributions that is a return of capital and the portion that
is economic return will depend upon a number of factors that cannot be
determined until all of our investments have been sold or otherwise matured. At
that time, you will be able to compare the total amount of all cash
distributions you receive to your total capital invested in order to determine
your economic return.





The
Internal Revenue Service may deem the majority of your distributions to be a
return of capital for tax purposes during our early years. Distributions would
be deemed to be a return of capital for tax purposes to the extent that we are
distributing cash in an amount greater than our taxable income. The fact that
the Internal Revenue Service deems distributions to be a return of capital in
part and we report an adjusted tax basis to you on Form K-1 is not an indication
that we are performing greater than or less than expectations and cannot be
utilized to forecast what your final return might be.





Your
ability to resell your Units is limited by the absence of a public trading
market and, therefore, you should be prepared to hold your Units for the life of
the Partnership, which is anticipated to be at least 10 years.





We do not
anticipate that a public market will develop for our Units, our Units will not
be listed on any national securities exchange at any time, and we will take
steps to assure that no public trading market develops for our Units. In
addition, our LP Agreement imposes significant restrictions on your right to
transfer your Units.  We have established these restrictions to comply
with federal and State securities laws and so that we will not be considered to
be a publicly traded partnership that is taxed as a corporation for federal
income tax purposes. Your ability to sell or otherwise transfer your Units is
extremely limited and will depend on your ability to identify a buyer. Thus, you
will probably not be able to sell or otherwise liquidate your Units in the event
of an emergency and if you were able to arrange a sale, the price you receive
would likely be at a substantial discount to the price you paid for your
Units.  As a result, you must view your investment in our Units as a
long-term, illiquid investment that may last for at least 10 years.






4
 Table of Contents





If
you choose to request that we repurchase your Units, you may receive
significantly less than you would receive if you were to hold your Units for the
life of the Partnership.





After you
have been admitted as a limited partner and have held your Units for at least
one year, you may request that we repurchase up to all of your Units. We are
under no obligation to do so, however, and will only have limited cash available
for this purpose. If we repurchase your Units, the repurchase price has been
unilaterally set and, depending upon when you request repurchase, the repurchase
price may be less than the unreturned amount of your investment. If your Units
are repurchased, the repurchase price may provide you a significantly lower
value than the value you would realize by retaining your Units for the duration
of the Partnership.





You
may not receive cash distributions every month and, therefore, you should not
rely on any income from your Units.





You
should not rely on the cash distributions from your Units as a source of income.
During the liquidation period, although we expect that lump sums will be
distributed from time to time if and when financially significant assets are
sold, regularly scheduled distributions will decrease because there will be
fewer investments available to generate cash flow.





Our
assets may be plan assets for ERISA purposes, which could subject our General
Partner to additional restrictions on its ability to operate our
business.





ERISA and
the Internal Revenue Code may apply what is known as the look-through rule to an
investment in our Units. Under that rule, the assets of an entity in which a
qualified plan or IRA has made an equity investment may constitute assets of the
qualified plan or IRA. If you are a fiduciary of a qualified plan or IRA, you
should consult with your advisors and carefully consider the effect of that
treatment if that were to occur. If the look-through rule were to apply, our
General Partner may be viewed as an additional fiduciary with respect to the
qualified plan or IRA to the extent of any decisions relating to the undivided
interest in our assets represented by the Units held by such qualified plan or
IRA. This could result in some restriction on our General Partner’s willingness
to engage in transactions that might otherwise be in the best interest of all
Unit holders due to the strict rules of ERISA regarding fiduciary
actions.




The
statements of value that we will include in our Annual Reports on Form 10-K and
that we will send to fiduciaries of plans subject to ERISA and to certain others
parties is only an estimate and may not reflect the actual value of our
Units.





The
statements of estimated value are based on the estimated value of each Unit (i)
as of the close of our fiscal year, for the annual statements included in our
Annual Reports on Form 10-K and (ii) as of September 30 of each fiscal year, for
annual statements sent to fiduciaries of plans subject to ERISA and certain
other parties. Management, in part, will rely upon third-party sources and
advice in arriving at this estimated value. No independent appraisals on the
particular value of our Units will be obtained and the value will be based upon
an estimated fair market value as of the referenced date for such value. Because
this is only an estimate, we may subsequently revise any valuation that is
provided. We cannot assure that:





·
            this
      estimate of value could actually be realized by us or by our limited
      partners upon liquidation;


·
            limited
      partners could realize this estimate of value if they were to attempt to
      sell their Units;


·
            this
      estimate of value reflects the price or prices that our Units would or
      could trade at if they were listed on a national stock exchange or
      included for quotation on a national market system, because no such market
      exists or is likely to develop; or


·
            the
      statement of value, or the method used to establish value, complies with
      any reporting and disclosure or valuation requirements under ERISA,
      Internal Revenue Code requirements or other applicable
  law.






5
 Table of Contents





You
have limited voting rights and are required to rely on our General Partner to
make all of our investment decisions and achieve our investment
objectives.





Our
General Partner will make all of our investment decisions, including determining
the investments we made and the dispositions we will make in the future. Our
success will depend upon the quality of the investment decisions our General
Partner makes, particularly relating to our investments in equipment and the
realization of such investments. You are not permitted to take part in managing,
establishing or changing our investment objectives or policies.





The
decisions of our General Partner may be subject to conflicts of
interest.





The
decisions of our General Partner may be subject to various conflicts of interest
arising out of its relationship to us and our affiliates. Our General Partner
could be confronted with decisions in which it will, directly or indirectly,
have an economic incentive to place its respective interests or the interests of
our affiliates above ours. As of December 31, 2008, our General Partner,
sponsored, and is currently managing, seven other equipment leasing and finance
funds. See “Item 13.  Certain Relationships and Related Transactions,
and Director Independence”.  These conflicts may include, but are not
limited to:





·
            our
      General Partner may have received more fees for making investments in
      which we incurred indebtedness to fund these investments than if
      indebtedness was not incurred;


·
            our
      LP Agreement does not prohibit our General Partner or any of our
      affiliates from competing with us for investments and engaging in other
      types of business;


·
            our
      General Partner may have had opportunities to earn fees for referring a
      prospective investment opportunity to
others;


·
            the
      lack of separate legal representation for us and our General Partner and
      lack of arm’s-length negotiations regarding compensation payable to our
      General Partner;


·
            our
      General Partner is our tax matters partner and is able to negotiate with
      the IRS to settle tax disputes that would bind us and our limited partners
      that might not be in your best interest given your individual tax
      situation; and


·
            our
      General Partner can make decisions as to when and whether to sell a
      jointly-owned asset when the co-owner is another business it
      manages.




The
Investment Committee of our General Partner is not independent.





Any
conflicts in determining and allocating investments between us and our General
Partner, or between us and another fund managed by our General Partner, were
resolved by our General Partner’s investment committee, which also serves as the
investment committee for other funds sponsored and managed by our General
Partner. Since all of the members of our General Partner’s investment committee
are officers of our General Partner and are not independent, matters determined
by such investment committee, including conflicts of interest between us and our
General Partner and our affiliates involving investment opportunities may not
have been as favorable to you and our other investors as they would be if
independent members were on the committee. Generally, if an investment was
appropriate for more than one fund our General Partner’s investment committee
allocated the investment to a fund (which includes us) after taking into
consideration at least the following factors:





·
            whether
      the fund had the cash required for the
  investment;


·
            whether
      the amount of debt to be incurred with respect to the investment was
      acceptable for the fund;


·
            the
      effect the investment would have on the fund’s cash
  flow;


·
            whether
      the investment would further diversify, or unduly concentrate, the fund’s
      investments in a particular lessee/borrower, class or type of equipment,
      location, industry, etc.;


·
            whether
      the term of the investment was within the term of the fund;
      and


·
            which
      fund had been seeking investments for the longest period of
      time.





Notwithstanding
the foregoing, our General Partner’s investment committee may have made
exceptions to these general policies when, in our General Partner’s judgment,
other circumstances made application of these policies inequitable or
economically undesirable. In addition, our LP Agreement permits our General
Partner and our affiliates to engage in equipment acquisitions, financing
secured loans, refinancing, leasing and releasing opportunities on their own
behalf or on behalf of other funds even if they compete with us.






6
 Table of Contents





Our
General Partner’s officers and employees manage other businesses and did not and
will not devote their time exclusively to managing us and our
business.





We do not
and will not employ our own full-time officers, managers or employees. Instead,
our General Partner will supervise and control our business affairs. Our General
Partner’s officers and employees will also be spending time supervising the
affairs of other equipment leasing and finance funds it manages. Therefore, such
officers and employees devoted and will devote the amount of time that they
think is necessary to conduct our business, which may not be the same amount of
time that would be devoted to us if we had separate officers and
employees.





Our
General Partner may have difficulty managing its growth, which may divert its
resources and limit its ability to expand its operations
successfully.





The
amount of assets that our General Partner manages has grown substantially since
our General Partner was formed in 1985 and our General Partner and its
affiliates intend to continue to sponsor and manage, as applicable, funds
similar to us that may be concurrent with us and they expect to experience
further growth in their respective assets under management. Our General
Partner’s future success will depend on the ability of its and its affiliates’
officers and key employees to implement and improve their operational, financial
and management controls, reporting systems and procedures, and manage a growing
number of assets and investment funds. They, however, may not implement
improvements to their management information and control systems in an efficient
or timely manner and they may discover deficiencies in their existing systems
and controls. Thus, our General Partner’s anticipated growth may place a strain
on its administrative and operations infrastructure, which could increase its
costs and reduce its efficiency and could negatively impact our operations,
business and financial condition.




Operational
risks may disrupt our business and result in losses.





We may
face operational risk from errors made in the execution, confirmation or
settlement of transactions. We may also face operational risk from our
transactions not being properly recorded, evaluated or accounted for. We rely
heavily on our General Partner’s financial, accounting, and other software
systems. If any of these systems fail to operate properly or become disabled, we
could suffer financial loss and a disruption of our business.  In
addition, we are highly dependent on our General Partner’s information systems
and technology. There can be no assurance that these information systems and
technology will be able to accommodate our General Partner’s growth or that the
cost of maintaining such systems will not increase from its current level. Such
a failure to accommodate growth, or an increase in costs related to such
information systems, could also negatively affect our liquidity and cash flows,
and could negatively affect our profitability.  Furthermore, we depend
on the headquarters of our General Partner, which are located in New York City,
for the operation of our business. A disaster or a disruption in the
infrastructure that supports our businesses, including a disruption involving
electronic communications or other services used by us or third parties with
whom we conduct business, or directly affecting our headquarters, may have an
adverse impact on our ability to continue to operate our business without
interruption that could have a material adverse effect on us. Although we have
disaster recovery programs in place, there can be no assurance that these will
be sufficient to mitigate the harm that may result from such a disaster or
disruption. In addition, insurance and other safeguards might only partially
reimburse us for any losses.  Finally, we rely on third-party service
providers for certain aspects of our business, including certain accounting and
financial services. Any interruption or deterioration in the performance of
these third parties could impair the quality of our operations and could
adversely affect our business and result in losses.





Our
internal controls over financial reporting may not be effective or our
independent registered public accounting firm may not be able to certify as to
their effectiveness, which could have a significant and adverse effect on our
business.





Our
General Partner is required to evaluate our internal controls over financial
reporting in order to allow management to report on, and if and when required,
our independent registered public accounting firm to attest to, our internal
controls over financial reporting, as required by Section 404 of the
Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations of the SEC
thereunder, which we refer to as “Section 404.” During the course of testing,
our General Partner may identify deficiencies that it may not be able to
remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for
compliance with the requirements of Section 404. In addition, if we fail to
achieve and maintain the adequacy of our internal controls, as such standards
are modified, supplemented or amended from time to time, we may not be able to
ensure that we can conclude on an ongoing basis that we have effective internal
controls over financial reporting in accordance with Section 404. We cannot be
certain as to the timing of completion of our evaluation, testing and any
remediation actions or the impact of the same on our operations. If we are not
able to implement the requirements of Section 404 in a timely manner or with
adequate compliance, we may be subject to sanctions or investigation by
regulatory authorities, such as the SEC. As a result, we may be required to
incur costs in improving our internal control system and the hiring of
additional personnel. Any such action could negatively affect our results of
operations and the achievement of our investment objectives.






7
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We
are subject to certain reporting requirements and are required to file certain
periodic reports with the SEC.





We are
subject to reporting requirements under the Securities Exchange Act of 1934,
including the filing of quarterly and annual reports. Prior public funds
sponsored by our Investment Manager have been and are subject to the same
requirements. Some of these funds have been required to amend previously filed
reports to, among other things, restate the audited or unaudited financial
statements filed in such reports. As a result, the prior funds have been
delinquent in filing subsequent quarterly and annual reports when they became
due. If we experience delays in the filing of our reports, our investors may not
have access to timely information concerning us, our operations, and our
financial results.





Your
ability to institute a cause of action against our General Partner and its
affiliates is limited by our LP Agreement.





Our LP
Agreement provides that neither our General Partner nor any of its affiliates
will have any liability to us for any loss we suffer arising out of any action
or inaction of our General Partner or an affiliate if the General Partner or
affiliate determined, in good faith, that the course of conduct was in our best
interests and did not constitute negligence or misconduct. As a result of these
provisions in our LP Agreement, your right to institute a cause of action
against our General Partner may be more limited than it would be without these
provisions.





Business
Risks





Our
business could be hurt by economic downturns.





Our
business is affected by a number of economic factors, including the level of
economic activity in the markets in which we operate. A decline in economic
activity in the United States or internationally could materially affect our
financial condition and results of operations. The equipment leasing and
financing industry is influenced by factors such as interest rates, inflation,
employment rates and other macroeconomic factors over which we have no control.
Any decline in economic activity as a result of these factors typically results
in a decrease in the number of transactions in which we participate and in our
profitability.





Uncertainties
associated with the equipment leasing and financing industry may have an adverse
effect on our business and may adversely affect our ability to give you any
economic return from our Units or a complete return of your
capital.





There are
a number of uncertainties associated with the equipment leasing and financing
industry that may have an adverse effect on our business and may adversely
affect our ability to make cash distributions to you that will, in total, be
equal to a return of all of your capital, or provide for any economic return
from our Units. These include:





·
            fluctuations
      in demand for equipment and fluctuations in interest rates and inflation
      rates;


·
            fluctuations
      in the availability and cost of
credit;


·
            the
      continuing economic life and value of equipment at the time our
      investments mature;


·
            the
      technological and economic obsolescence of
  equipment;


·
            potential
      defaults by lessees, borrowers or other
  counterparties;


·
            supervision
      and regulation by governmental authorities;
and


·
            increases
      in our expenses, including taxes and insurance
  expenses.





The
risks and uncertainties associated with the industries of our lessees,
borrowers, and other counterparties may indirectly affect our business,
operating results and financial condition.





We are
indirectly subject to a number of uncertainties associated with the industries
of our lessees, borrowers, and other counterparties. We invested in a pool of
equipment by, among other things, acquiring equipment subject to lease,
purchasing equipment and leasing equipment to third-party end users, financing
equipment for third-party end users, acquiring ownership rights to items of
leased equipment at lease expiration, and acquiring interests or options to
purchase interests in the residual value of equipment. The lessees, borrowers,
and other counterparties to these transactions operate in a variety of
industries. As such, we are indirectly subject to the various risks and
uncertainties that affect our lessees’, borrowers’, and other counterparties’
businesses and operations. If such risks or uncertainties were to affect our
lessees, borrowers, or other counterparties, we may indirectly suffer a loss on
our investment, lose future revenues or experience adverse consequences to our
business, operating results and financial condition.






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Because
we borrowed money to make our investments, losses as a result of lessee,
borrower or other counterparty defaults may be greater than if such borrowings
were not incurred.





Although
we acquired some of our investments for cash, we borrowed a substantial portion
of the purchase price of certain of our investments. While we believe the use of
leverage resulted in us being able to make more investments with less risk than
if leverage was not utilized, there can be no assurance that the benefits of
greater size and diversification of our portfolio will offset the heightened
risk of loss in an individual investment using leverage.  With respect
to non-recourse borrowings, if we are unable to pay our debt service obligations
because a lessee, borrower or other counterparty defaults, a lender could
foreclose on the investment securing the non-recourse indebtedness. This could
cause us to lose all or part of our investment or could force us to meet debt
service payment obligations so as to protect our investment subject to such
indebtedness and prevent it from being subject to
repossession.  Additionally, while the majority of our borrowings were
non-recourse, we are jointly and severally liable for recourse
indebtedness incurred under a revolving line of credit facility with
California Bank & Trust (“CB&T”) that is secured by certain of our
assets that are not otherwise pledged to other lenders. CB&T has a security
interest in such assets and the right to sell those assets to pay off the
indebtedness if we default on our payment obligations.  This recourse
indebtedness may increase our risk of loss because we must meet the debt service
payment obligations regardless of the revenue we receive from the investment
that is subject to such secured indebtedness.





Restrictions
imposed by the terms of our indebtedness may limit our financial
flexibility.





We,
together with certain of our affiliates (entities sponsored and organized by our
General Partner), Fund Nine, ICON Income Fund Ten, LLC (“Fund Ten”), ICON
Leasing Fund Eleven, LLC (“Fund Eleven”) and ICON Leasing Fund Twelve, LLC
(“Fund Twelve”), are party to the revolving line of credit agreement with
CB&T. The terms of that agreement could restrict us from paying
distributions to our partners if such payments would cause us not to be in
compliance with our financial covenants in that agreement. For additional
information on the terms of our credit agreement, see “Item 7. General
Partner’s Discussion and Analysis of Financial Condition and Results of
Operations – Liquidity and Capital Resources.”





Guarantees
made by the guarantors of some of our lessees, borrowers and other
counterparties may be voided under certain circumstances and we may be required
to return payments received from such guarantors.





Under
federal bankruptcy law and comparable provisions of State fraudulent transfer
laws, a guarantee could be voided, or claims in respect of a guarantee could be
subordinated to all other debts of that guarantor if, among other things, the
guarantor, at the time it incurred the indebtedness evidenced by its
guarantee:





·
            received
      less than reasonably equivalent value or fair consideration for the
      incurrence of such guarantee; and


·
            was
      insolvent or rendered insolvent by reason of such incurrence;
      or


·
            was
      engaged in a business or transaction for which the guarantor’s remaining
      assets constituted unreasonably small capital;
  or


·
            intended
      to incur, or believed that it would incur, debts beyond its ability to pay
      such debts as they mature.





In
addition, any payment by that guarantor pursuant to its guarantee could be
voided and required to be returned to the guarantor, or to a fund for the
benefit of the creditors of the guarantor.








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The
measures of insolvency for purposes of these fraudulent transfer laws will vary
depending upon the law applied in any proceeding to determine whether a
fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if:





·
            the
      sum of its debts, including contingent liabilities, was greater than the
      fair saleable value of all of its
assets;


·
            if
      the present fair saleable value of its assets was less than the amount
      that would be required to pay its probable liability on its existing
      debts, including contingent liabilities, as they become absolute and
      mature; or


·
            it
      could not pay its debts as they become
due.





We cannot
assure you as to what standard a court would apply in making these
determinations or that a court would agree with our conclusions in this regard.
We also can not make any assurances as to the standards that courts in foreign
jurisdictions may use or that courts in foreign jurisdictions will take a
position similar to that taken in the United States.





If
the value of our investments declines more rapidly than we anticipate, our
financial performance may be adversely affected.





A
significant part of the value of a significant portion of the equipment that we
invested in is expected to be the potential value of the equipment once the
lease term expires (with respect to leased equipment) or when our interests in
or options to purchase interests in the residual value of equipment mature.
Generally, equipment is expected to decline in value over its useful life. In
making these types of investments, we assumed a residual value for the equipment
at the end of the lease or other investment that, at maturity, was expected to
be enough to return the cost of our investment in the equipment and provide a
rate of return despite the expected decline in the value of the equipment over
the term of the investment.





However,
the actual residual value of the equipment at maturity and whether that value
meets our expectations will depend to a significant extent upon the following
factors, many of which are beyond our control:





·
            our
      ability to acquire or enter into agreements that preserved or enhanced the
      relative value of the equipment;


·
            our
      ability to maximize the value of the equipment at maturity of our
      investment;


·
            market
      conditions prevailing at maturity;


·
            the
      cost of new equipment at the time we are remarketing used
      equipment;


·
            the
      extent to which technological or regulatory developments reduce the market
      for such used equipment;


·
            the
      strength of the economy; and


·
            the
      condition of the equipment at
maturity.





We cannot
assure you that our assumptions with respect to value will be accurate or that
the equipment will not lose value more rapidly than we anticipate.





If
equipment is not properly maintained, its residual value may be less than
expected.





If a
lessee or other counterparty fails to maintain equipment in accordance with the
terms of our agreements, we may have to make unanticipated expenditures to
repair the equipment in order to protect our investment. In addition, some of
the equipment we invested in was used equipment. While we planned to inspect
most used equipment prior to making an investment, there is no assurance that an
inspection of used equipment prior to purchasing it revealed any or all defects
and problems with the equipment that may occur after it was acquired by
us.






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We
typically obtained representations from the sellers and lessees of used
equipment that:





·
            the
      equipment has been maintained in compliance with the terms of applicable
      agreements;


·
            that
      neither the seller nor the lessee, was in violation of any material terms
      of such agreements; and


·
            the
      equipment was in good operating condition and repair and that, with
      respect to leases, the lessee had no defenses to the payment of rent for
      the equipment as a result of the condition of such
    equipment.





We have
rights against the seller of equipment for any losses arising from a breach of
representations made to us and against the lessee for a default under the lease.
However, we cannot assure you that these rights will make us whole with respect
to our entire investment in the equipment or our expected returns on the
equipment, including legal costs, costs of repair and lost revenue from the
delay in being able to sell or re-lease the equipment due to undetected problems
or issues. These costs and lost revenue could negatively affect our liquidity
and cash flows, and could negatively affect our profitability if we are unable
to recoup such costs from the lessee or other third parties.





If
a lessee, borrower or other counterparty defaults on its obligations to us, we
could incur losses.





We
entered into transactions with parties that had senior debt rated below
investment grade. We did not require such parties to have a minimum credit
rating. Lessees, borrowers, and other counterparties with such lower credit
ratings may default on payments to us more frequently than lessees, borrowers or
other counterparties with higher credit ratings. For example, if a lessee does
not make lease payments to us or to a lender on our behalf or a borrower does
not make loan payments to us when due, or violates the terms of its contract in
another important way, we may be forced to terminate our agreements with such
parties and attempt to recover the equipment. We may do this at a time when we
may not be able to arrange for a new lease or to sell our investment right away,
if at all. We would then lose the expected revenues and might not be able to
recover the entire amount or any of our original investment. The costs of
recovering equipment upon a lessee’s or borrower’s default, enforcing the
obligations under the contract, and transporting, storing, repairing, and
finding a new lessee or purchaser for the equipment may be high and may
negatively affect the value of our investment in the equipment. These costs
could also negatively affect our liquidity and cash flows, and could negatively
affect our profitability.





If
a lessee, borrower or other counterparty files for bankruptcy, we may have
difficulty enforcing the terms of the contract and may incur
losses.





If a
lessee, borrower or other counterparty files for protection under the bankruptcy
laws, the remaining term of the lease, loan or other financing contract could be
shortened or the contract could be rejected by the bankruptcy court, which could
result in, among other things, any unpaid pre-bankruptcy lease, loan or other
contractual payments being cancelled as part of the bankruptcy proceeding. We
may also experience difficulties and delays in recovering equipment from a
bankrupt lessee or borrower that is involved in a bankruptcy proceeding or has
been declared bankrupt by a bankruptcy court. If a contract is rejected in a
bankruptcy, we would bear the cost of retrieving and storing the equipment and
then have to remarket such equipment. In addition, the bankruptcy court would
treat us as an unsecured creditor for any amounts due under the lease, loan or
other contract. These costs and lost revenues could also negatively affect our
liquidity and cash flows and could negatively affect our
profitability.





Investing
in equipment in foreign countries may be riskier than domestic investments and
may result in losses.





We made
investments in equipment for use by domestic or foreign parties outside of the
United States. We may have difficulty enforcing our rights under foreign
transaction documents. In addition, we may have difficulty repossessing
equipment if a foreign party defaults and enforcement of our rights outside the
United States could be more expensive. Moreover, foreign jurisdictions may
confiscate our equipment. Use of equipment in a foreign country will be subject
to that country’s tax laws, which may impose unanticipated taxes. While we
sought to require lessees, borrowers, and other counterparties to reimburse us
for all taxes imposed on the use of the equipment and require them to maintain
insurance covering the risks of confiscation of the equipment, we cannot assure
you that we will be successful in doing so or that insurance reimbursements will
be adequate to allow for recovery of and a return on foreign
investments.






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In
addition, we invested in equipment that may travel to or between locations
outside of the United States. Regulations in foreign countries may adversely
affect our interest in equipment in those countries. Foreign courts may not
recognize judgments obtained in U.S. courts and different accounting or
financial reporting practices may make it difficult to judge the financial
viability of a lessee, borrower or other counterparty, heightening the risk of
default and the loss of our investment in such equipment, which could have a
material adverse effect on our results of operations and financial
condition.





In
addition to business uncertainties, our investments may be affected by
political, social, and economic uncertainty affecting a country or region. Many
financial markets are not as developed or as efficient as those in the U.S. and,
as a result, liquidity may be reduced and price volatility may be higher. The
legal and regulatory environment may also be different, particularly with
respect to bankruptcy and reorganization. Financial accounting standards and
practices may also differ and there may be less publicly available information
with respect to such companies. While our General Partner considered these when
making investment decisions, no assurance can be given that we will be able to
fully avoid these risks or generate sufficient risk-adjusted
returns.





Sellers
of leased equipment could use their knowledge of the lease terms for gain at our
expense.





We have
acquired equipment subject to lease from leasing companies that have an
ongoing relationship with the lessees. A seller could use its knowledge of the
terms of the lease, particularly the end of lease options and date the lease
ends, to compete with us. In particular, a seller may approach a lessee with an
offer to substitute similar equipment at lease end for lower rental amounts.
This may adversely affect our opportunity to maximize the residual value of the
equipment and potentially negatively affect our profitability.





Investment
in joint ventures may subject us to risks relating to our co-investors that
could adversely impact the financial results of such joint
ventures.





We
invested in joint ventures with other businesses our General Partner sponsors
and manages, as well as with unrelated third parties. Investing in joint
ventures involves additional risks not present when acquiring leased equipment
that will be wholly owned by us. These risks include the possibility that our
co-investors might become bankrupt or otherwise fail to meet financial
commitments, thereby obligating us to pay all of the debt associated with the
joint venture, as each party to a joint venture may be required to guarantee all
of the joint venture’s obligations. Alternatively, the co-investors may have
economic or business interests or goals that are inconsistent with our
investment objectives and want to manage the joint venture in ways that do not
maximize our return. Among other things, actions by a co-investor might subject
leases that are owned by the joint venture to liabilities greater than those
contemplated by the joint venture agreement. Also, when none of the joint owners
control a joint venture, there might be a stalemate on decisions, including when
to sell the equipment or the prices or terms of a lease. Finally, while we
typically have the right to buy out the other joint owner’s interest in the
equipment in the event of the sale, we may not have the resources available to
do so. These risks could negatively affect our profitability and could result in
legal and other costs, which would negatively affect our liquidity and cash
flows.




We
may not be able to obtain insurance for certain risks and would have to bear the
cost of losses from non-insurable risks.





Equipment
may be damaged or lost. Fire, weather, accidents, theft or other events can
cause damage or loss of equipment. While our transaction documents generally
require lessees and borrowers to have comprehensive insurance and assume the
risk of loss, some losses, such as from acts of war, terrorism or earthquakes
may either be uninsurable or not economically feasible to insure. Furthermore,
not all possible liability claims or contingencies affecting equipment can be
anticipated or insured against, and, if insured, the insurance proceeds may not
be sufficient to cover a loss. If such a disaster occurs to the equipment, we
could suffer a total loss of any investment in the affected equipment. In
investing in some types of equipment, we may have been exposed to environmental
tort liability. Although we used our best efforts to minimize the possibility
and exposure of such liability including by means of attempting to obtain
insurance, we cannot assure you that our assets will be protected against any
such claims. These risks could negatively affect our profitability and could
result in legal and other costs, which would negatively affect our liquidity and
cash flows.






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We
could suffer losses from failure to maintain our equipment registration and from
unexpected regulatory compliance costs.





Many
types of transportation assets are subject to registration requirements by U.S.
governmental agencies, as well as foreign governments if such equipment is to be
used outside of the United States. Failing to register the equipment, or losing
such registration, could result in substantial penalties, forced liquidation of
the equipment and/or the inability to operate and lease the equipment.
Governmental agencies may also require changes or improvements to equipment and
we may have to spend our own funds to comply if the lessee, borrower or other
counterparty is not required to do so under the transaction documents. These
changes could force the equipment to be removed from service for a period of
time. The terms of the transaction documents may provide for payment reductions
if the equipment must remain out of service for an extended period of time or
are removed from service. We may then have reduced income from our investment
for this equipment. If we do not have the funds to make a required change, we
might be required to sell the affected equipment. If so, we could suffer a loss
on our investment, lose future revenues and experience adverse tax
consequences.





If
any of our investments become subject to usury laws, we could have reduced
revenues or possibly a loss on such investments.





In
addition to credit risks, we may be subject to other risks in equipment
financing transactions in which we are deemed to be a lender. For example,
equipment leases have sometimes been held by U.S. courts to be loan transactions
subject to State usury laws, which limit the interest rate that can be charged.
Uncertainties in the application of some laws may result in inadvertent
violations that could result in reduced investment returns or, possibly, loss on
our investment in the affected equipment. Although part of our business strategy
was to enter into or acquire leases that we believe were structured so that they
avoid being deemed loans, and would therefore not be subject to usury laws, we
cannot assure you that we were successful in doing so. If an equipment lease is
held to be a loan with a usurious rate of interest, the amount of the lease
payment could be reduced and adversely affect our revenue.





State
laws determine what rates of interest are deemed usurious, when the applicable
rate of interest is determined, and how it is calculated. In addition, some U.S.
courts have also held that certain lease features, such as equity interests,
constitute additional interest. Although we generally sought assurances and/or
opinions to the effect that our transactions do not violate applicable usury
laws, a finding that our transactions violate usury laws, the interest
obligation to us could be declared void and we could be liable for damages and
penalties under applicable law. We cannot assure you as to what standard a court
would apply in making these determinations or that a court would agree with our
conclusions in this regard. We also cannot make any assurances as to the
standards that courts in foreign jurisdictions may use or that courts in foreign
jurisdictions will take a position similar to that taken in the United
States.





We
competed with a variety of financing sources for our investments, which may
affect our ability to achieve our investment objectives.





The
commercial leasing and financing industry is highly competitive and is
characterized by competitive factors that vary based upon product and geographic
region. Our competitors are varied and include other equipment leasing and
finance funds, hedge funds, captive and independent finance companies,
commercial and industrial banks, manufacturers and vendors. Competition from
both traditional competitors and new market entrants has intensified in recent
years due to growing marketplace liquidity and increasing recognition of the
attractiveness of the commercial leasing and finance industry.





When we
made our investments, we competed primarily on the basis of pricing, terms and
structure. To the extent that our competitors competed aggressively on any
combination of those factors, we could fail to achieve our investment
objectives.  In addition, our competitors may have been and/or are in
a position to offer equipment to prospective customers on financial terms that
were more favorable than those that we could offer or that we can offer in
liquidating our portfolio, which may have affected our ability to make
investments and may affect our ability to liquidate our portfolio, in each case,
in a manner that would enable us to achieve our investment
objectives.






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General
Tax Risks





If
the IRS classifies us as a corporation rather than a partnership, your
distributions would be reduced under current tax law.





We did
not and will not apply for an IRS ruling that we will be classified as a
partnership for federal income tax purposes. Although counsel rendered an
opinion to us that we will be taxed as a partnership and not as a corporation,
that opinion is not binding on the IRS and the IRS has not ruled on any federal
income tax issue relating to us. If the IRS successfully contends that we
should be treated as a corporation for federal income tax purposes rather than
as a partnership, then:





·
            our
      realized losses would not be passed through to
  you;


·
            our
      income would be taxed at tax rates applicable to corporations, thereby
      reducing our cash available to distribute to you;
  and


·
            your
      distributions would be taxed as dividend income to the extent of current
      and accumulated earnings and
profits.





In
addition, we could be taxed as a corporation if we are treated as a publicly
traded partnership by the IRS. To minimize this possibility, our LP Agreement
places significant restrictions on your ability to transfer our
Units.





We
could lose cost recovery or depreciation deductions if the IRS treats our leases
as sales or financings.





We expect
that, for federal income tax purposes, we will be treated as the owner and
lessor of the equipment that we leased. However, the IRS may challenge the
leases and instead assert that they are sales or financings. If the IRS
determines that we are not the owner of our leased equipment, we would not be
entitled to cost recovery, depreciation or amortization deductions, and our
leasing income might be deemed to be portfolio income instead of passive
activity income. The denial of such cost recovery or amortization deductions
could cause your tax liabilities to increase.




You
may incur tax liability in excess of the cash distributions you receive in a
particular year.





In any
particular year, your tax liability from owning our Units may exceed the cash
distributions you receive from this investment. While we expect that your net
taxable income from owning our Units for most years will be less than your cash
distributions in those years, to the extent any of our debt is repaid with
income or proceeds from equipment sales, taxable income could exceed the amount
of cash distributions you receive in those years. Additionally, a sale of our
investments may result in taxes in any year that are greater than the amount of
cash from the sale, resulting in a tax liability in excess of cash
distributions. Additionally, due to the operation of the various loss
disallowance rules, in a given tax year you may have taxable income when, on a
net basis, we have a loss, or you may recognize a greater amount of taxable
income than our net income because, due to a loss disallowance, income from some
of our activities cannot be offset by losses from some of our other
activities.





You
may be subject to greater income tax obligations than originally anticipated due
to special depreciation rules.





We may
have acquired equipment subject to lease that the Internal Revenue Code requires
us to depreciate over a longer period than the standard depreciation period.
Similarly, some of the equipment that we purchased was not be eligible for
accelerated depreciation under the Modified Accelerated Costs Recovery System,
which was established by the Tax Reform Act of 1986 to set forth the guidelines
for accelerated depreciation under the Internal Revenue Code. Further, if we
acquired equipment that the Internal Revenue Code deems to be tax-exempt use
property and the leases did not satisfy certain requirements, losses
attributable to such equipment are suspended and may be deducted only against
income we receive from such equipment or when we dispose of such equipment.
Depending on the equipment that we acquired and its eligibility for accelerated
depreciation under the Internal Revenue Code, we may have less depreciation
deductions to offset gross lease revenue, thereby increasing our taxable
income.






14
 Table of Contents





There
are limitations on your ability to deduct our losses.





Your
ability to deduct your share of our losses is limited to the amounts that you
have at risk from owning our Units. This is generally the amount of your
investment, plus any profit allocations and minus any loss allocation and
distributions. This determination is further limited by a tax rule that applies
the at-risk-rules on an activity by activity basis, further limiting losses from
a specific activity to the amount at risk in that activity. Additionally, your
ability to deduct losses attributable to passive activities is restricted. Some
of our operations will constitute passive activities and you can only use our
losses from such activities to offset passive activity income in calculating tax
liability. Furthermore, passive activity losses may not be used to offset
portfolio income.





The
IRS may allocate more taxable income to you than our LP Agreement
provides.





The IRS
might successfully challenge our allocations of taxable income or losses. If so,
the IRS would require reallocation of our taxable income and loss, resulting in
an allocation of more taxable income or less loss to you than our LP Agreement
allocates.





If
you are a tax-exempt organization, you will have unrelated business taxable
income from this investment.





Tax-exempt
organizations are subject to income tax on unrelated business taxable income
(“UBTI”). Such organizations are required to file federal income tax returns if
they have UBTI from all sources in excess of $1,000 per year. Our leasing income
will constitute UBTI. Furthermore, tax-exempt organizations in the form of
charitable remainder trusts will be subject to an excise tax equal to 100% of
their UBTI.




This
investment may cause you to pay additional taxes.





You may
be required to pay alternative minimum tax in connection with owning our Units,
since you will be allocated a proportionate share of our tax preference items.
Our General Partner’s operation of our business affairs may lead to other
adjustments that could also increase your alternative minimum tax. Alternative
minimum tax is treated in the same manner as the regular income tax for purposes
of making estimated tax payments.





You
may incur State tax and foreign tax liabilities and have an obligation to file
State or foreign tax returns.





You may
be required to file tax returns and pay foreign, State or local taxes, such as
income, franchise or personal property taxes, as a result of an investment in
our Units, depending upon the laws of the jurisdictions in which the equipment
that we own is located.






15
 Table of Contents





Any
adjustment to our tax return as a result of an audit by the IRS may result in
adjustment to your tax return.





If we
adjust our tax return as a result of an IRS audit, such adjustment may result in
an examination of other items in your returns unrelated to us, or an examination
of your tax returns for prior years. You could incur substantial legal and
accounting costs in contesting any challenge by the IRS, regardless of the
outcome. Further, because you will be treated for federal income tax purposes as
a partner in a partnership by investing in our Units, an audit of our tax return
could potentially lead to an audit of your individual tax return. Finally, under
certain circumstances, the IRS may automatically adjust your personal return
without the opportunity for a hearing if it adjusts our tax return.





Some
of the distributions on our Units will be a return of capital, in whole or in
part, which will complicate your tax reporting and could cause unexpected tax
consequences at liquidation.





As we
depreciated our investments in leased equipment over the term of our existence,
a portion of each distribution to you was likely considered a return of capital,
rather than income. Therefore, the dollar amount of each distribution should not
be considered as necessarily being all income to you. As your capital in our
Units is reduced for tax purposes over the life of your investment, you will not
receive a lump sum distribution upon liquidation that equals the purchase price
you paid for our Units, such as you might expect if you had purchased a bond.
Also, payments made upon our liquidation will be taxable to the extent that such
payments are not a return of capital.





As you
receive distributions throughout the life of your investment, you will not know
at the time of the distribution what portion of the distribution represents a
return of capital and what portion represents income. The Schedule K-1 statement
you received and continue to receive from us each year will specify the amounts
of capital and income you received throughout the prior year.





Item 1B. Unresolved Staff Comments





None.





Item 2. Properties





We
neither own nor lease office space or any other real property in our business at
the present time.





Item 3. Legal Proceedings





In the
ordinary course of conducting our business, we may be subject to certain claims,
suits, and complaints filed against us.  In our General Partner’s
opinion, the outcome of such matters, if any, will not have a material impact on
our consolidated financial position or results of operations. We are not aware
of any material legal proceedings that are currently pending against us or
against any of our assets.





Item 4. Submission of Matters to a Vote of Security
Holders





No
matters were submitted to a vote of security holders during the fourth quarter
of 2008.







16
 Table of Contents





PART II




Item 5. Market for Registrant's Securities, Related Security Holder
Matters and Issuer Purchases of Equity Securities





Our Units
are not publicly traded and there is no public market for our Units. It is
unlikely that any such market will develop.








Number
      of PartnersTitle of Class
                              
                              as of February 28, 2009General
      Partner
                              
                              1Limited
      partners
                              
                              2,848





We paid
monthly distributions to each of our partners beginning the first month after
each partner was admitted to the Partnership through the end of our reinvestment
period, which occurred on June 17, 2007. We paid distributions to our limited
partners totaling $1,827,002, $4,308,340, and $5,934,486 for the years ended
December 31, 2008, 2007 and 2006, respectively. Additionally, our General
Partner was paid distributions of $18,455, $43,519, and $59,944 for the years
ended December 31, 2008, 2007 and 2006, respectively. The terms of our loan
agreement with CB&T could restrict us from paying cash distributions to our
partners if such payment would cause us to not be in compliance with our
financial covenants. See “Item 7. General Partner’s Discussion and Analysis of
Financial Condition and Results of Operations – Liquidity and Capital
Resources.”





In order
for Financial Industry Regulatory Authority, Inc. (“FINRA”) members and their
associated persons to participate in the offering and sale of Units pursuant to
the offering or to participate in any future offering of our Units, we are
required pursuant to FINRA Rule 2810(b)(5) to disclose in each annual report
distributed to our limited partners a per Unit estimated value of our Units, the
method by which we developed the estimated value, and the date used to develop
the estimated value. In addition, our General Partner prepares statements of our
estimated Unit values to assist fiduciaries of retirement plans subject to the
annual reporting requirements of the Employee Retirement Income Security Act
(“ERISA”) in the preparation of their reports relating to an investment in our
Units.  For these purposes, the estimated value of our Units is deemed
to be $13.19 per Unit as of December 31, 2008.  This estimated value
is provided to assist plan fiduciaries in fulfilling their annual valuation and
reporting responsibilities and should not be used for any other
purpose.  Because this is only an estimate, we may subsequently revise
this valuation.





Following
the termination of the offering of our Units, the estimated value of our Units
is based on the estimated amount that a holder of a Unit would receive if all of
our assets were sold in an orderly liquidation as of the close of our fiscal
year and all proceeds from such sales, without reduction for transaction costs
and expenses, together with any cash held by us, were distributed to the
partners upon liquidation.  To estimate the amount that our partners
would receive upon such liquidation, we calculated the sum of:  (i)
the unpaid finance lease and note receivable payments on our existing finance
leases and notes receivable, discounted at the implicit yield for each such
transaction, (ii) the fair market value of our operating leases, equipment held
for sale or lease, and other assets, as determined by the most recent
third-party appraisals we have obtained for certain assets or our General
Partner’s  estimated values of certain other assets, as applicable,
and (iii) our cash on hand.  From this amount, we then subtracted our
total debt outstanding and then divided that sum by the total number of Units
outstanding.





The
foregoing valuation is an estimate only. The appraisals that we obtained and the
methodology utilized by our management in estimating our per Unit value were
subject to various limitations and were based on a number of assumptions and
estimates that may or may not be accurate or complete. No liquidity discounts or
discounts relating to the fact that we are currently externally managed were
applied to our estimated per Unit valuation, and no attempt was made to value us
as an enterprise.





As noted
above, the foregoing valuation was performed solely for the ERISA and FINRA
purposes described above and was based solely on our General Partner’s
perception of market conditions and the types and amounts of our assets as of
the reference date for such valuation and should not be viewed as an accurate
reflection of our Units or our assets. Except for independent third-party
appraisals of certain assets, no independent valuation was sought. In addition,
as stated above, as there is no significant public trading market for our Units
at this time and none is expected to develop, there can be no assurance that
limited partners could receive $13.19 per Unit if such a market did exist and
they sold their Units or that they will be able to receive such amount for their
Units in the future. Furthermore, there can be no assurance:





·
            as
      to the amount limited partners may actually receive if and when we seek to
      liquidate our assets or the amount of lease and note receivable payments
      and asset disposition proceeds we will actually receive over our remaining
      term; the total amount of distributions our limited partners may receive
      may be less than $1,000 per Unit primarily due to the fact that the funds
      initially available for investment were reduced from the gross offering
      proceeds in order to pay selling commissions, underwriting fees,
      organizational and offering expenses, and acquisition or formation
      fees;


·
            that
      the foregoing valuation, or the method used to establish value, will
      satisfy the technical requirements imposed on plan fiduciaries under
      ERISA; or


·
            that
      the foregoing valuation, or the method used to establish value, will not
      be subject to challenge by the Internal Revenue Services if used for any
      tax (income, estate, gift or otherwise) valuation purposes as an indicator
      of the current value of the Units.





The
redemption price we offer in our repurchase plan utilizes a different
methodology than that which we use to determine the current value of our Units
for the ERISA and FINRA purposes described above and, therefore, the $13.19 per
Unit does not reflect the amount that a limited partner would currently receive
under our repurchase plan.  In addition, there can be no assurance
that you will be able to redeem your Units under our repurchase
plan.







17
 Table of Contents





Item 6. Selected Financial Data


The
selected financial data should be read in conjunction with the consolidated
financial statements and related notes included in “Item 8. Consolidated
Financial Statements and Supplementary Data” contained elsewhere in this Annual
Report on Form 10-K.








Years Ended December 31,2008
                      
                      
                      2007
                      
                      
                      2006
                      
                      
                      2005
                      
                      
                      2004Total
      revenue  (a)
                      
                      $
                      4,998,410
                      
                      
                      $
                      9,606,325
                      
                      
                      $
                      16,252,505
                      
                      
                      $
                      25,926,526
                      
                      
                      $
                      21,591,797Net
      (loss) income (b)
                      
                      $
                      (6,453,564
                      )
                      
                      $
                      1,146,979
                      
                      
                      $
                      (614,426
                      )
                      
                      $
                      3,368,585
                      
                      
                      $
                      (4,609,006
                      )Net
      (loss) income allocable to limited partners
                      
                      $
                      (6,389,028
                      )
                      
                      $
                      1,135,509
                      
                      
                      $
                      (608,282
                      )
                      
                      $
                      3,334,899
                      
                      
                      $
                      (4,562,916
                      )Net
      (loss) income allocable to the General Partner
                      
                      $
                      (64,536
                      )
                      
                      $
                      11,470
                      
                      
                      $
                      (6,144
                      )
                      
                      $
                      33,686
                      
                      
                      $
                      (46,090
                      )Weighted
      average number of units oflimited
      partnership interests outstanding
                      
                      
                      740,411
                      
                      
                      
                      740,985
                      
                      
                      
                      741,752
                      
                      
                      
                      743,161
                      
                      
                      
                      744,463Net
      (loss) income per weighted average unitof
      limited partnership interests
                      
                      $
                      (8.63
                      )
                      
                      $
                      1.53
                      
                      
                      $
                      (0.82
                      )
                      
                      $
                      4.49
                      
                      
                      $
                      (6.13
                      )Distributions
      to limited partners
                      
                      $
                      1,827,002
                      
                      
                      $
                      4,308,340
                      
                      
                      $
                      5,934,486
                      
                      
                      $
                      5,945,540
                      
                      
                      $
                      5,955,151Distributions
      per weighted average unit oflimited
      partnership interests
                      
                      $
                      2.47
                      
                      
                      $
                      5.81
                      
                      
                      $
                      8.00
                      
                      
                      $
                      8.00
                      
                      
                      $
                      8.00Distributions
      to the General Partner
                      
                      $
                      18,455
                      
                      
                      $
                      43,519
                      
                      
                      $
                      59,944
                      
                      
                      $
                      60,056
                      
                      
                      $
                      60,155December 31,2008
                      
                      
                      2007
                      
                      
                      2006
                      
                      
                      2005
                      
                      
                      2004Total
      assets
                      
                      $
                      53,205,647
                      
                      
                      $
                      65,113,221
                      
                      
                      $
                      78,651,672
                      
                      
                      $
                      91,960,247
                      
                      
                      $
                      119,147,022Notes
      payable
                      
                      $
                      43,531,303
                      
                      
                      $
                      47,397,220
                      
                      
                      $
                      55,697,875
                      
                      
                      $
                      63,746,059
                      
                      
                      $
                      86,305,022Partners'
      equity
                      
                      $
                      8,744,478
                      
                      
                      $
                      17,046,972
                      
                      
                      $
                      20,277,150
                      
                      
                      $
                      26,937,141
                      
                      
                      $
                      29,597,291(a)
                      The
      decline in revenue is due to the winding down of our reinvestment period
      and the beginning of our liquidation period as of June 17, 2007. During
      our liquidation period, we are selling and will continue to sell our
      assets in the ordinary course of business. As we sell our assets,
      both rental income and finance income will continue to decrease over
      time.(b)
                      In
      2008, we recorded an impairment loss of approximately $3,900,000 on our
      investment in Aircraft 123 and approximately $1,950,000 related to our 50%
      investment in Aircraft 126. In 2007, we sold several of our assets that
      resulted in an approximately $3,000,000 decrease in depreciation and
      amortization expense as compared to 2006. In 2006, we recorded an
      impairment loss of $2,100,000 on an option that management decided to
      write-off. In 2005, we sold one of our leases that resulted in a gain
      of approximately $4,527,000.






18
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Item 7. General Partner's Discussion and Analysis of Financial
Condition and Results of Operations





Our General Partner’s Discussion and
Analysis of Financial Condition and Results of Operations relates to our
consolidated financial statements and should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this Annual Report
on Form 10-K. Statements made in this section may be considered
forward-looking.  These statements are not guarantees of future
performance and are based on current expectations and assumptions that are
subject to risks and uncertainties. Actual results could differ materially
because of these risks and assumptions, including, among other things, factors
discussed in “Part I. Forward-Looking Statements” and “Item 1A. Risk Factors”
located elsewhere in this Annual Report on Form
10-K.





Overview





We
operate as an equipment leasing program in which the capital our partners
invested was pooled together to make investments, pay fees and establish a small
reserve. We primarily acquired equipment subject to lease, purchased equipment
and leased it to third-party end users or financed equipment for third parties,
provided equipment and other financing and, to a lesser degree, acquired
ownership rights to items of leased equipment at lease expiration. Some of our
equipment leases were acquired for cash and provided current cash flow, which we
refer to as “income” leases. For the other equipment leases, we financed the
majority of the purchase price through borrowings from third-parties. We refer
to these leases as “growth” leases. These growth leases generated little or no
current cash flow because substantially all rental payments received from the
lessee were used to service the indebtedness associated with acquiring or
financing the lease. For these leases, we anticipated that the future value of
the leased equipment would exceed our cash portion of the purchase
price.





Our
General Partner manages and controls our business affairs, including, but
not limited to, our equipment leases and other financing transactions, under the
terms of our LP Agreement. We began our liquidation period on June 17,
2007.  During our liquidation period, we are selling and will continue
to sell our assets in the ordinary course of business. As we sell our assets,
both rental income and finance income will decrease over time as will expenses
related to our assets such as depreciation and amortization expense.
Additionally, interest expense should decrease as we reach the expiration of
leases that were financed and the debt is repaid to lenders. As leased equipment
is sold, we will experience both gains and losses on these sales. We will
continue to liquidate our assets during this period and we expect to see a
reduction in revenue and expenses accordingly.




Current
Business Environment and Outlook




In the
second half of the twentieth century, financing became one of the most popular
methods by which domestic and many global businesses satisfied their capital
equipment needs.  We believe that domestic and, as global finance
markets continue to develop, global equipment leasing and financing volume is
correlated to overall business investments in equipment. According to the 2007 − 2008 U.S. Equipment Finance
Market Study, which was prepared by Global Insight, Inc., a global
forecasting company, and the Equipment Leasing and Finance Foundation, a
non-profit foundation dedicated to providing research regarding the equipment
leasing and finance industry, total domestic business investment in
equipment and software has increased annually from approximately $868
billion in 2002 to approximately $1,088 billion in 2006, with total investments
of approximately $1,106 billion estimated for 2007. Similarly, during the
same period, total domestic equipment leasing and financing volume
increased from approximately $483 billion in 2002 to approximately
$598 billion in 2006, with financing volume of approximately $625 billion
estimated for 2007. In 2008, domestic business investment in equipment and
software is forecasted to reach an estimated $1,159 billion with
a corresponding increase in equipment leasing and finance volume to an
estimated $657 billion.




As
illustrated above, approximately 53% to 57% of all domestic business investment
in equipment and software was financed. Global Insight estimates that
approximately 56.5% of such investment during 2007 was financed, up from
approximately 55% during 2006. In particular, Global Insight
estimates, based on the latest full year information available, that
lease financing represented approximately 17% and term loans represented
approximately 9% of equipment and software financing in 2007, while line of
credit financing represented approximately 29% of equipment and
software financing in 2007, of which more than 50% was interim
financing.






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 Table of Contents






According
to the World Leasing Yearbook
2009, which was published by Euromoney Institutional Investor PLC, global
equipment leasing volume has increased annually from approximately $462 billion
in 2002 to approximately $760 billion in 2007.  The most significant
source of that increase was due to increased volume in Europe, Asia, and South
America.  For example, during the same period, total equipment leasing
volume in Europe increased from approximately $162 billion in 2002 to
approximately $367 billion in 2007, total equipment leasing volume in Asia
increased from approximately $71 billion in 2002 to approximately $119 billion
in 2007, and total equipment leasing volume in South America increased from
approximately $3 billion in 2002 to approximately $41 billion in
2007.  We believe that global business investment in equipment and
global equipment financing volume has increased as well during the same
period.




The
volume of equipment financing typically reflects general economic conditions. As
the economy slows or builds momentum, the demand for productive equipment
generally slows or builds and equipment financing volume generally
decreases or increases. The economy in the United States experienced a downturn
from 2001 through 2003, resulting in a decrease in equipment leasing and
financing volume during that period. Since then, the economy in the United
States, including business investment in equipment and equipment leasing
financing volume, had recovered as noted above.




In
general, the global credit markets have deteriorated significantly over the past
year.  The U.S. economy entered into a recession in December 2007 and
the global credit markets continue to experience dislocation and
tightening.  Recent statistical data on the domestic leasing market
provided by the Equipment Leasing and Finance Association, a trade association
representing financial services companies and manufacturers in the U.S.
equipment finance sector and an affiliate of the Equipment Leasing and Finance
Foundation, indicates that domestic equipment leasing volume has generally
deteriorated over the past year.




A
significant portion of the statistical data regarding the equipment leasing
market’s performance, however, is provided by the leasing divisions of
commercial and industrial banks, large independent leasing and finance
companies, and captive and vendor leasing and finance companies. These
institutions (i) generally provide financing to companies seeking to lease small
ticket and micro ticket equipment, (ii) use credit scoring methodologies to
underwrite a lessee’s creditworthiness, and (iii) rely heavily on the issuance
of commercial paper and/or lines of credit from other financial institutions to
finance new business. Our investment objectives and strategy, on the other hand,
(i) focused on financing middle- to large-ticket, business-essential equipment
and other capital assets, (ii) we generally underwrote and structured such
financing in a manner similar to providers of senior indebtedness (i.e., our
underwriting includes both creditworthiness and asset due diligence and
considerations and our structuring often includes guarantees, equity pledges,
warrants, liens on related assets, etc.), and (iii) we were not reliant on
receiving outside financing through the issuance of commercial paper or from
lines of credit to finance new business or meet our investment objectives.
Accordingly, the performance of the overall equipment leasing market is not
directly correlated to our performance and our General Partner does not expect
that there will be any material adverse impact on the demand for equipment (and
the related residuals) that we own.




Other
factors that may negatively affect the leasing and financing industry are: (i)
the proposed legal and regulatory changes that may affect tax benefits of
leasing, and (ii) the continued misperception by potential lessees, stemming
from published issues at Enron, WorldCom and others, that leasing should not
play a central role as a financing alternative. However, as companies tend to
preserve cash and lease or otherwise finance (rather than purchase) equipment in
recessionary economies, we are optimistic that equipment leasing and finance
volume will continue to increase over the long term.








20
 Table of Contents





Lease
and Other Significant Transactions





We
entered into the following leases and other significant transactions during
the years ended December 31, 2008, 2007 and 2006:





Acquisition
of Telecommunications Equipment





On March
30, 2007, we, through our wholly-owned subsidiary, ICON Global Crossing
III, LLC (“ICON Global Crossing III”), purchased telecommunications equipment
subject to a lease with Global Crossing. The purchase price of the equipment was
approximately $7,755,000 and we also incurred initial direct costs of
approximately $124,000. The lease is scheduled to expire on March 31, 2011. Our
General Partner did not receive any acquisition fees in connection with this
transaction.





Sale
of two McDonnell Douglas DC10-30F Aircraft and Engines





During
March 2003, we and Fund Nine formed a joint venture, ICON Aircraft 47820, LLC
(“Aircraft 47820”), in which we and Fund Nine had ownership interests of 90% and
10%, respectively. Aircraft 47820 was formed for the purpose of acquiring an
investment in a McDonnell Douglas DC10-30F aircraft and two spare engines (the
“Aircraft and Engines”) on lease to Federal Express Corporation (“FedEx”). On
March 11, 2003, Aircraft 47820 acquired the Aircraft and Engines for
approximately $27,288,000, including approximately $24,211,000 of non-recourse
debt. Our portion of the cash purchase price was approximately $2,769,000. On
March 30, 2007, Aircraft 47820 sold the Aircraft and Engines to FedEx for
$5,475,000 and recognized a loss on the sale of approximately
$1,025,000.





During
December 2002, we and Fund Nine formed a joint venture, ICON Aircraft 46835, LLC
(“Aircraft 46835”), in which we and Fund Nine had ownership interests of 15% and
85%, respectively. Aircraft 46835 was formed for the purpose of acquiring a
McDonnell Douglas DC10-30F aircraft on lease to FedEx. On December 27, 2002, the
joint venture acquired the aircraft for approximately $25,292,000, including
approximately $22,292,000 of non-recourse debt. Our portion of the cash purchase
price was approximately $450,000. On March 30, 2007, Aircraft 46835 sold the
aircraft to FedEx for $4,260,000 and recognized a loss on the sale of
approximately $640,000.





Investment
in Option





At
December 31, 2006, our General Partner determined that our investment in an
option to purchase a 1994 Boeing 737-524 aircraft, together with two engines,
was impaired and, accordingly, we recorded an impairment loss of $2,100,000. Our
General Partner’s decision was based upon the fact that the option was currently
out of the money and the probability that we would not exercise the option,
which expires May 5, 2012.





Sale
of Digital Mini-Labs





At
January 1, 2006, we held four lease schedules consisting of 128 Noritsu
Optical/Digital photo processing mini-labs that were subject to lease with
K-Mart Corporation (“K-Mart”). On April 30, 2006 and May 31, 2006, two of
the four lease schedules expired and, pursuant to the terms of the
schedules, the schedules were extended for an additional 90 days. These
extensions ended on or before September 30, 2006, and we reclassified the net
book value of the equipment of approximately $269,000 to equipment held for
sale. The remaining two lease schedules with K-Mart expired during 2006 and we
reclassified the net book value of this equipment of $37,120 and $67,295,
respectively, to equipment held for sale.  We also sold equipment for
proceeds of $9,360 during the fourth quarter of 2006. Our General Partner
determined, based upon negotiations with potential buyers, that the Noritsu
Optical/Digital equipment held by K-Mart was impaired.  Accordingly,
for the year ended December 31, 2006, we recorded an impairment loss of
approximately $393,000, net of estimated selling costs. At December 31, 2006,
the four K-Mart lease schedules represented equipment held for sale totaling
$140,400. On February 9, 2007, we sold all of the remaining equipment previously
on lease to K-Mart for approximately $254,100 and recognized a gain on the sale
of this equipment of approximately $111,000.






21
 Table of Contents





Lease
Extensions and Non-Recourse Debt Refinancing of Two Airbus Aircraft





During
February 2002, we formed a wholly owned subsidiary, ICON Aircraft 123, LLC
(“ICON 123”), for the purpose of acquiring Aircraft 123, which was subject to a
lease with Cathay. Aircraft 123 was purchased for approximately $75,000,000,
including the assumption of approximately $70,500,000 of non-recourse debt. On
March 14, 2006, we entered into a lease extension with Cathay with respect to
the aircraft, which extended the lease to October 1, 2011. Effective March 14,
2006, in connection with the Cathay lease extension, the outstanding
non-recourse debt of approximately $52,850,000 was refinanced after applying
$282,000 from a reserve account established in connection with the original
lease with Cathay. The non-recourse debt matures on October 1, 2011 and has a
balloon payment of approximately $32,000,000. The interest rate of the
refinanced non-recourse debt was fixed at 6.1095% under the terms of the debt
agreement, effective October 3, 2006. At December 31, 2008, the fair market
value of the non-recourse debt was approximately $44,738,000.





ICON 123
had a commitment with respect to Aircraft 123 to pay certain maintenance costs
that were incurred on or prior to March 14, 2006. ICON 123 had established,
under the original lease, a maintenance reserve cash account to pay for its
portion of these costs. This account was funded by free cash from the lease
payments in accordance with the terms of the original lease. For the year ended
December 31, 2006, ICON 123 accrued approximately $1,157,000 relating to the
maintenance costs. In January 2007, ICON 123 repaid outstanding maintenance
costs of approximately $1,546,000.  The balance in its maintenance
reserve cash account was approximately $1,403,000. As discussed below,
approximately $143,000 of the remaining costs were borrowed and will be repaid
when Aircraft 123 is sold at the end of the lease.





During
February 2002, we and Fund Nine formed ICON Aircraft 126 LLC (“ICON 126”) for
the purpose of acquiring all of the outstanding shares of Delta Aircraft Leasing
Limited (“D.A.L.”), a Cayman Islands registered company that owns, through an
owner trust, Aircraft 126. Aircraft 126 was subject to a lease with Cathay
at the time of purchase, which was consummated during March 2002. The lease was
initially scheduled to expire in March 2006, but has been extended until July 1,
2011. We and Fund Nine each have ownership interests of 50% in ICON 126. ICON
126 consolidates the financial position and operations of D.A.L. in its
consolidated financial statements.





Effective
March 27, 2006, in connection with the lease extension, approximately
$52,850,000 of non-recourse debt associated with Aircraft 126 was
refinanced after applying $583,000 from a reserve account established in
connection with the original lease with Cathay. The refinanced non-recourse
debt matures on July 1, 2011 and requires a balloon payment of approximately
$33,000,000 at maturity. The interest rate of the refinanced debt was fixed at
6.104% under the terms of the debt agreement, effective October 3,
2006.





ICON 126
had a commitment with respect to Aircraft 126 to pay certain maintenance costs
that were incurred on or prior to March 27, 2006. ICON 126 had established a
maintenance reserve cash account under the original lease to pay for its portion
of these costs. This account was funded by free cash from the lease payments in
accordance with the terms of the original lease. During 2006, ICON 126 received
$182,021 of capital contributions from both of its members, of which $50,000 was
for amounts relating to the maintenance reserve cash account and $132,021 was
related to costs paid by its members relating to the refinancing of the
non-recourse debt. During September 2006, approximately $1,153,000 was paid for
maintenance costs. The maintenance account for Aircraft 126 was
cross-collateralized with the maintenance account for ICON 123. Under the terms
of this agreement, ICON 126 was required to pay on behalf of ICON 123, any
maintenance cost shortfalls incurred by the affiliate. On January 30, 2007, ICON
126 paid approximately $143,000 in maintenance costs from its maintenance
account on behalf of ICON 123.  The maintenance account and related
security interests were then terminated.   ICON 123 will
reimburse ICON 126 when the aircraft is sold. The excess cash remaining in ICON
126’s account of approximately $97,000 includes interest accreted in the amount
of approximately $38,000 through December 31, 2008.






22
 Table of Contents





In
connection with the purchase of Aircraft 123, the owner trustee entered into two
first priority charge on cash deposit agreements pursuant to which, as discussed
above, the maintenance reserve cash account for Aircraft 126 was
cross-collateralized with the maintenance reserve cash account for Aircraft 123.
In addition, ICON 123 and ICON 126 are parties to a residual sharing agreement
with respect to the aircraft. See Note 12 in “Part II, Item 8. Consolidated
Financial Statements and Supplementary Information”.





In light
of recent, unprecedented high fuel prices during 2008 and the related impact on
the airline industry, our General Partner reviewed our investments in Aircraft
123 and Aircraft 126 at the beginning of the third quarter of
2008.  In accordance with the provisions of Financial Accounting
Standards Board(“FASB”) Statement No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets” (“SFAS No. 144”) and based upon recent changes in the airline
industry, our General Partner determined that each of Aircraft 123 and Aircraft
126 were impaired.





Based on
our General Partner’s review, the residual values of Aircraft 123 and Aircraft
126 exceeded the expected undiscounted future cash flows of Aircraft 123 and
Aircraft 126 and, as a result, we recorded an impairment charge
representing the difference between the residual value and the expected
discounted future cash flows of Aircraft 123 and Aircraft 126.  The
expected discounted future cash flows of Aircraft 123 and Aircraft 126 were
determined using a market approach, a recent appraisal for Aircraft 123 and
Aircraft 126 and recent sales of similar aircraft, as well as other factors,
including those discussed below.  As a result, we recorded an
impairment loss on Aircraft 123 of $3,888,367 as of June 30, 2008. In addition,
as of June 30, 2008, ICON 126 recorded an impairment loss on Aircraft 126 of
approximately $3,900,000, of which our share was approximately
$1,950,000.





The
following factors, among others, indicated that the full residual values of
Aircraft 123 and Aircraft 126 might not be recoverable: (i) indications
that lenders were willing to finance less of the acquisition cost of four-engine
aircraft, which increased with each dollar rise of the price of fuel, thereby
undermining the residual value expectations of such aircraft; (ii) the rising
cost of fuel was increasing the operating costs of four-engine aircraft and
similar capacity twin-engine aircraft, thereby making such aircraft less
attractive investments at the time and thereby depressing the market for
Aircraft 123 and Aircraft 126; and (iii) the likelihood of aircraft operators
switching to more efficient aircraft, thereby depressing the market for Aircraft
123 and Aircraft 126.





Sale
of five Pratt and Whitney 2037 Aircraft Engine Modules





We owned
five Pratt and Whitney 2037 aircraft engine modules (the “Engine Modules”) on
lease to American Airlines, Inc., formerly TWA Airlines, LLC
(“TWA”).  On August 8, 2007, we sold all the Engine Modules to an
unaffiliated third-party for a gross sales price of $6,050,000. In connection
with the sale, we recorded net proceeds of approximately $5,547,000 and a gain
on sale of approximately $1,042,000.





Sale
of Over the Road Rolling Stock, Manufacturing and Materials Handling
Equipment





ICON
Cheyenne, LLC (“ICON Cheyenne”) was a joint venture among us, ICON Cash Flow
Partners L.P. Seven (“L.P. Seven”) and ICON Income Fund Eight A L.P. (“Fund
Eight A”), entities also managed by our General Partner, which had ownership
interests of 97.73%, 1.27% and 1.00%, respectively. The portfolio consisted of,
among other things, over the road rolling stock, manufacturing equipment and
materials handling equipment. During 2006, ICON Cheyenne sold various pieces of
its equipment portfolio for approximately $583,000 and recognized a gain of
approximately $582,000 on these sales. During the second quarter of 2007, ICON
Cheyenne sold all of the remaining equipment to a third-party for total sales
proceeds of approximately $111,000.  A total gain on sale of
approximately $110,000 was recognized by ICON Cheyenne.





On
December 1, 2004, we transferred our entire 5.00% interest in ICON/Kenilworth,
LLC (“Kenilworth”), which owned a 25 MW co-generation facility on lease to
Schering-Plough Corporation, to Fund Nine, in exchange for a 25.87% interest in
ICON SPK 2023-A, LLC (“ICON SPK”).  Following the exchange, we had no
interest in Kenilworth and we and Fund Nine had ownership interests of 74.87%
and 25.13%, respectively, in ICON SPK.






23
 Table of Contents





The ICON
SPK portfolio consisted of various equipment leases, including materials
handling, telecommunications and computer equipment. During 2006, ICON SPK sold
various pieces of its portfolio for approximately $460,000 in cash and
recognized a loss of approximately $106,000 on those sales. During the second
quarter of 2007, ICON SPK sold all of its remaining equipment to a third-party
for sales proceeds of approximately $348,000.  A gain on sale of
approximately $264,000 was recognized by ICON SPK.





Assignment
of Rowan Cash Flow





On
February 23, 2005, L.P. Seven assigned to us 2.69% of its rights to the profits,
losses, and cash flows from its limited partnership interest in an entity that
owns a 100% interest in a mobile offshore drilling rig that is subject to lease
with Rowan Companies, Inc. L.P. Seven assigned the rights to us as repayment of
its approximately $673,000 outstanding debt obligation to us pursuant to a
contribution agreement that we had with Comerica Bank. This assignment increased
our rights to the profits, losses, and cash flows from L.P. Seven’s limited
partnership interest from 3.24%, which were assigned to us in November 2004, to
5.93%. The repayment amount represented our General Partner’s estimated fair
value of L.P. Seven's interest in the mobile offshore drilling rig at February
23, 2005. The fair value of the mobile offshore drilling rig was determined
using an appraisal and cash flow analysis. During the year ended December 31,
2006, we received approximately $267,000 in cash distributions related to this
assignment. No cash distributions were received from these rights in the two
years ended December 31, 2008.





Recent
Accounting Pronouncements





In
December 2007, the FASB issued Statement of Financial Accounting Standards
(“SFAS”) No. 160, “Noncontrolling Interests in Consolidated Financial
Statements — an Amendment of ARB No. 51” (“SFAS No. 160”). SFAS No. 160
establishes accounting and reporting standards for the noncontrolling interest
in a subsidiary and for the retained interest and gain or loss when a subsidiary
is deconsolidated. This statement is effective for financial statements issued
for fiscal years beginning on or after December 15, 2008 with earlier
adoption prohibited. Our General Partner is currently evaluating the impact of
SFAS No. 160 on our consolidated financial statements.





In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 157,
“Accounting for Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 defines
fair value, establishes a framework for measuring fair value, and enhances fair
value measurement disclosure. In February 2008, the FASB issued FASB Staff
Position (“FSP”) No. 157-2, “Effective Date of FASB Statement No. 157”
(“FSP 157-2”). FSP 157-2 delays the effective date of SFAS No. 157
for all non-financial assets and non-financial liabilities, except
for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually), until the beginning of the
first quarter of 2009. The measurement and disclosure requirements related to
financial assets and financial liabilities were effective for us beginning in
the first quarter of 2008. The adoption of SFAS No. 157 for financial
assets and financial liabilities did not have a significant impact on our
consolidated financial statements.  Our General Partner is currently
evaluating the impact that SFAS No. 157 will have on our consolidated financial
statements when it is applied to non-financial assets and non-financial
liabilities beginning in the first quarter of 2009. The resulting fair values
calculated under SFAS No. 157 after adoption may be different from the fair
values that would have been calculated under previous
guidance.







24
 Table of Contents








Critical
Accounting Policies





An
understanding of our critical accounting policies is necessary to understand our
financial results. The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires our General Partner to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, and the disclosure of contingent assets and liabilities as of the
date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Significant estimates
primarily include the determination of allowance for doubtful accounts,
depreciation and amortization, impairment losses, estimated useful lives and
residual values.  Actual results could differ from those estimates. We
applied our critical accounting policies and estimation methods consistently in
all periods presented.  We consider the following accounting policies to be
critical to our business:





·
            Lease
      classification and revenue
recognition;


·
            Asset
      impairments;


·
            Depreciation;
      and


·
            Initial
      direct costs.





Lease
Classification and Revenue Recognition





Each
equipment lease we entered into is classified either as a finance or an
operating lease, which is determined based upon the terms of each
lease. For a finance lease, the initial direct costs were capitalized and
amortized over the lease term.  For an operating lease, the initial direct
costs were included as a component of the cost of the equipment and depreciated
over the estimated useful life of the equipment.





For
finance leases, we recorded, at lease inception, the total minimum lease
payments receivable from the lessee, the estimated unguaranteed residual value
of the equipment at lease termination, the initial direct costs related to the
lease and the related unearned income.  Unearned income represents the
difference between the sum of the minimum lease payments receivable plus the
estimated unguaranteed residual value minus the cost of the leased equipment.
 Unearned income is recognized as finance income over the term of the lease
using the effective interest rate method.





For
operating leases, rental income is recognized on a straight-line basis
over the lease term.  Billed operating lease receivables are included
in accounts receivable until collected.  Deferred income is the
difference between the timing of the cash payments and the income recognized on
a straight-line basis.





Our
General Partner has an investment committee that approved each new equipment
lease and  other financing transaction. As part of its process it
determined the residual value, if any, to be used once the investment was
approved.  The factors considered in determining the residual value
included, but were not limited to, the creditworthiness of the potential lessee,
the type of equipment considered, how the equipment was integrated into the
potential lessee’s business, the length of the lease and the industry in which
the potential lessee operated. Residual values are reviewed for impairment in
accordance with our impairment review policy.





The
residual value assumed, among other things, that the asset would be utilized
normally in an open, unrestricted and stable market. Short-term fluctuations in
the market place were disregarded and it was assumed that there was no necessity
either to dispose of a significant number of the assets, if held in quantity,
simultaneously or to dispose of the asset quickly.  The residual value
was calculated using information from various external sources, such as trade
publications, auction data, equipment dealers, wholesalers and industry experts,
as well as inspection of the physical asset and other economic
indicators.








25
 Table of Contents








Asset
Impairments





The
significant assets in our portfolio are periodically reviewed, no less
frequently than annually, to determine whether events or changes in
circumstances indicate that the carrying value of an asset may not be
recoverable. An impairment loss will be recognized only if the carrying value of
a long-lived asset is not recoverable and exceeds its fair market value. If
there is an indication of impairment, we will estimate the future cash flows
(undiscounted and without interest charges) expected from the use of the asset
and its eventual disposition. Future cash flows are the future cash inflows
expected to be generated by an asset less the future outflows expected to be
necessary to obtain those inflows.  If an impairment is determined to
exist, the impairment loss will be measured as the amount by which the carrying
value of a long-lived asset exceeds its fair value and recorded in the
consolidated statements of operations in the period the determination is
made.





The
events or changes in circumstances that generally indicate that an asset may be
impaired are (i) the estimated fair value of the underlying equipment is less
than its carrying value or (ii) the lessee is experiencing financial
difficulties and it does not appear likely that the estimated proceeds from the
disposition of the asset will be sufficient to satisfy the residual position in
the asset and, if applicable, the remaining obligation to the non-recourse
lender. Generally in the latter situation, the residual position relates to
equipment subject to third-party non-recourse debt where the lessee remits its
rental payments directly to the lender and we do not recover its residual
position until the non-recourse debt is repaid in full. The preparation of the
undiscounted cash flows requires the use of assumptions and estimates, including
the level of future rents, the residual value expected to be realized upon
disposition of the asset, estimated downtime between re-leasing events and the
amount of re-leasing costs. Our General Partner’s review for impairment
includes a consideration of the existence of impairment indicators including
third-party appraisals, published values for similar assets, recent transactions
for similar assets, adverse changes in market conditions for specific asset
types and the occurrence of significant adverse changes in general industry and
market conditions that could affect the fair value of the asset.





Depreciation





We record
depreciation expense on leased equipment classified as an operating lease. 
In order to calculate depreciation, we first determined the depreciable
equipment cost, which is the cost less the estimated residual value.  The
estimated residual value is our estimate of the value of the equipment at lease
termination.  Depreciation expense is recorded by applying the
straight-line method of depreciation to the depreciable equipment cost over the
lease term.





Initial
Direct Costs





We
capitalized initial direct costs associated with the origination and funding of
leased assets and other financing transactions in accordance with SFAS
No. 91 “Accounting for Nonrefundable Fees and Costs Associated with
Originating or Acquiring Loans and Initial Direct Costs of Leases.” The costs
were amortized on a lease by lease basis based on actual lease term using a
straight-line method for operating leases and the effective interest rate method
for direct finance leases. Costs related to leases or other financing
transactions that were not consummated were expensed as an acquisition
expense.








26
 Table of Contents







Results
of Operations for the Years Ended December 31, 2008 (“2008”) and 2007
(“2007”)





We are
currently in our liquidation period, which began on June 17, 2007. During our
liquidation period, we are selling and will continue to sell our assets in the
ordinary course of business.  As we sell our assets, both rental
income and finance income will decrease over time as will expenses related to
our assets, such as depreciation and amortization expense. Additionally,
interest expense should decrease as we reach the expiration of leases that were
financed and the debt is repaid to the lender.  As leased equipment is
sold, we will incur gains or losses on these sales. We will continue to
liquidate our assets during this period and we expect to see a reduction in
revenue and expenses accordingly.





Revenue
for 2008 and 2007 are summarized as follows:





Years ended December 31,2008
                
                
                2007
                
                
                ChangeRental
      income
                
                $
                6,376,364
                
                
                $
                8,580,752
                
                
                $
                (2,204,388
                )Finance
      income
                
                
                790,254
                
                
                
                742,064
                
                
                
                48,190Loss
      from investments in joint ventures
                
                
                (2,168,613
                )
                
                
                (282,582
                )
                
                
                (1,886,031
                )Net
      gain on sales of equipment
                
                
                -
                
                
                
                493,196
                
                
                
                (493,196
                )Interest
      and other income
                
                
                405
                
                
                
                72,895
                
                
                
                (72,490
                )Total
      revenue
                
                $
                4,998,410
                
                
                $
                9,606,325
                
                
                $
                (4,607,915
                )





Total
revenue for 2008 decreased $4,607,915, or 48.0%, as compared to
2007.  The decrease in rental income was primarily due to (i) the sale
of the Aircraft and Engines on March 30, 2007, (ii) the sale of the Engine
Modules on August 8, 2007, and (iii) the sale of assets by ICON SPK and ICON
Cheyenne during the second quarter of 2007.  The sale of the Aircraft
and Engines in March 2007 resulted in a reduction of total rental payments of
approximately $1,624,000 in 2008. The sale of the Engine Modules accounted for
approximately $424,000 of the reduction in rental income.  The sale of
all the remaining equipment in the ICON SPK and ICON Cheyenne portfolios
resulted in a reduction of the total rental payments of approximately $128,000
and $23,000, respectively.  The increase in loss from investments in
joint ventures was primarily due to the impairment loss of approximately
$1,950,000 recorded as of June 30, 2008 on our investment in Aircraft 126. There
was no impairment loss recorded in 2007.





Expenses
for 2008 and 2007 are summarized as follows:





Years ended December 31,2008
                
                
                2007
                
                
                ChangeDepreciation
      and amortization
                
                $
                3,860,671
                
                
                $
                4,557,064
                
                
                $
                (696,393
                )Impairment
      loss
                
                
                3,888,367
                
                
                
                -
                
                
                
                3,888,367Interest
                
                
                2,881,300
                
                
                
                3,326,807
                
                
                
                (445,507
                )General
      and administrative
                
                
                821,636
                
                
                
                405,470
                
                
                
                416,166Total
      expenses
                
                $
                11,451,974
                
                
                $
                8,289,341
                
                
                $
                3,162,633





Total
expenses for 2008 increased $3,162,633 or 38.2%, as compared to 2007. The
increase in impairment loss was due to the impairment loss recorded on Aircraft
123 as of June 30, 2008. The decrease in depreciation and amortization expense
was due to: (i) the sale of the Aircraft and Engines on March 30, 2007, (ii) the
sale of the Engine Modules on August 8, 2007 and (iii) the sales of the
remaining assets in the ICON SPK portfolio. The sale of the Aircraft and Engines
resulted in a total decrease in depreciation and amortization expense of
approximately $540,000 in 2008. The sale of the Engine Modules resulted in a
total decrease in depreciation and amortization expense of approximately
$123,000 in 2008. The sale of the remaining assets in the ICON SPK portfolio
resulted in a decrease of approximately $21,000 in depreciation and amortization
expense in 2008. The decrease in interest expense is due to the pay down of the
non-recourse debt in 2008. The increase in general and administrative expense
was primarily due to professional fees.






27
 Table of Contents





Minority
Interest





Minority
interest expense for 2008 decreased $170,005, or 100%, as compared to 2007. The
decrease in minority interest expense was due to the sale of all remaining
assets in the ICON SPK and ICON Cheyenne portfolios and the Aircraft and
Engines.





Net
(Loss) Income





As a
result of the foregoing changes from 2007 to 2008, net loss for 2008 was
$6,453,564 as compared to net income for 2007 of $1,146,979.  The net loss
per weighted average Unit for 2008 was $8.63 as compared to net income per
weighted average Unit for 2007 of $1.53.






28
 Table of Contents







Results
of Operations for the Years Ended December 31, 2007 (“2007”) and 2006
(“2006”)





Revenue
for 2007 and 2006 are summarized as follows:





Years ended December 31,2007
                
                
                2006
                
                
                ChangeRental
      income
                
                $
                8,580,752
                
                
                $
                16,174,323
                
                
                $
                (7,593,571
                )Finance
      income
                
                
                742,064
                
                
                
                133,856
                
                
                
                608,208Loss
      from investments in joint ventures
                
                
                (282,582
                )
                
                
                (778,423
                )
                
                
                495,841Net
      gain on sales of equipment
                
                
                493,196
                
                
                
                476,020
                
                
                
                17,176Interest
      and other income
                
                
                72,895
                
                
                
                246,729
                
                
                
                (173,834
                )Total
      revenue
                
                $
                9,606,325
                
                
                $
                16,252,505
                
                
                $
                (6,646,180
                )





Total
revenue for 2007 decreased $6,646,180, or 40.9%, as compared to 2006 primarily
due to the decrease in rental income.  The decrease in rental income
was due to: (i) the sale of the Aircraft and Engines on March 30, 2007, (ii) the
sale of equipment on lease to K-Mart during the first quarter of 2007, (iii) the
extension of our lease for Aircraft 123 during March 2006, (iv) the sale of the
remaining assets in the ICON SPK and ICON Cheyenne portfolios during the second
quarter of 2007 and (v) the sale of the Engine Modules on August 8, 2007. The
sale of the Aircraft and Engines in March 2007 resulted in a reduction of total
rental payments of approximately $4,900,000 in 2007. The sale of the equipment
on lease to K-Mart resulted in a decrease of total rental payments of
approximately $907,000. The extension of our lease with Cathay included a
reduction in the monthly rental payment, which resulted in a decrease to total
rental payments of approximately $744,000 in 2007. The sale of all the remaining
assets in the ICON SPK and ICON Cheyenne portfolios during the second quarter of
2007 resulted in a reduction of total rental payments of approximately $445,000
and $330,000, respectively. The sale of the Engine Modules in August 2007
resulted in a reduction of total rental payments of approximately $302,000 in
2007. The decrease in total revenue was partly offset by an increase in finance
income primarily due to the addition of the Global Crossing lease that commenced
in April 2007 and the reduction in our net loss from investments in joint
ventures, which was primarily due to the lease extension completed during March
2006 for Aircraft 126.





Expenses for 2007 and 2006 are
summarized as follows:





Years ended December 31,2007
                
                
                2006
                
                
                ChangeManagement
      fees - General Partner
                
                $
                -
                
                
                $
                410,842
                
                
                $
                (410,842
                )Administrative
      expense reimbursements - General Partner
                
                
                -
                
                
                
                161,980
                
                
                
                (161,980
                )General
      and administrative
                
                
                405,470
                
                
                
                657,832
                
                
                
                (252,362
                )Interest
                
                
                3,326,807
                
                
                
                3,582,860
                
                
                
                (256,053
                )Depreciation
      and amortization
                
                
                4,557,064
                
                
                
                7,577,104
                
                
                
                (3,020,040
                )Impairment
      loss
                
                
                -
                
                
                
                2,493,108
                
                
                
                (2,493,108
                )Maintenance
      expense
                
                
                -
                
                
                
                1,546,456
                
                
                
                (1,546,456
                )Total
      expenses
                
                $
                8,289,341
                
                
                $
                16,430,182
                
                
                $
                (8,140,841
                )





Total
expenses for 2007 decreased $8,140,841, or 49.5%, as compared to 2006. The
change was from a decrease in all expense categories. The decrease in
depreciation and amortization expense was due to: (i) the sale of the Aircraft
and Engines on March 30, 2007, (ii) the extension of our lease with Cathay in
March 2006 and (iii) the sale of the remaining assets in the ICON SPK portfolio
during the second quarter of 2007. The sale of the Aircraft and Engines resulted
in a total decrease in depreciation and amortization expense of approximately
$1,600,000 in 2007. The lease extension with Cathay for Aircraft 123 increased
the overall number of total rental payments, but simultaneously decreased the
monthly depreciation and amortization expense by approximately $564,000 in 2007.
The sale of the remaining assets in the ICON SPK portfolio resulted in a
decrease of approximately $379,000 in depreciation and amortization expense in
2007. The impairment loss in 2006 was due to the following: (i) $2,100,000
recognized on our investment in an option to purchase a Boeing 737-524 aircraft
on lease to a United States based commercial airline and (ii) approximately
$393,000 from our optical/digital equipment previously on lease to K-Mart. The
decrease in general and administrative expense was primarily due to the
approximately $1,546,000 one-time maintenance charge incurred with respect to
Aircraft 123 in 2006; there was no charge for 2007. The decrease in both
management fees – General Partner and administrative expense reimbursements –
General Partner was due to our General Partner’s decision, effective May 1,
2006, to waive all future management fees and administrative expense
reimbursements, although the General Partner continues to provide these
services. The decrease in interest expense was due to the reduction in the
outstanding balance on our non-recourse debt obligation and the March 2006
refinancing of our non-recourse debt on the Cathay lease by ICON
123.






29
 Table of Contents





Minority
Interest





Minority
interest expense for 2007 decreased by $266,744, or 61.1%, as compared to 2006.
The decrease in minority interest expense was due to the sale of the Aircraft
and Engines and all remaining assets in the ICON SPK and ICON Cheyenne
portfolios during 2007.





Net
Income (Loss)





As a
result of the foregoing changes from 2006 to 2007, net income for 2007 was
$1,146,979 as compared to a net loss for 2006 of $614,426.  The net income
per weighted average Unit for 2007 was $1.53 as compared to a net loss per
weighted average Unit for 2006 of $0.82.





Financial
Condition


This
section discusses the major balance sheet variances from 2008 compared to
2007.








Total
Assets


Total
assets decreased $11,907,574, from $65,113,221 at December 31, 2007 to
$53,205,647 at December 31, 2008. The decrease was predominantly due to an
impairment charge on Aircraft 123 and our 50% share of the impairment
charge on Aircraft 126 during 2008.  These charges represented
approximately $5,838,000 of the decrease in total assets.  Also
contributing to the decrease in total assets was the depreciation of our leased
equipment of approximately $3,818,000 and distributions paid to our partners of
approximately $1,845,000.








Current
Assets


Current
assets increased $43,996, from $2,201,058 at December 31, 2007 to
$2,245,054 at December 31, 2008. The increase was primarily due to an
increase in the accounts receivable balance related to the finance lease
with Global Crossing.





Total
Liabilities





Total
liabilities decreased $3,605,080, from $48,066,249 at December 31, 2007 to
$44,461,169 at December 31, 2008. The decrease was mainly due to the
repayment of a portion of the outstanding balance on the non-recourse debt
obligation related to Aircraft 123.





Current
Liabilities





Current
liabilities increased $424,190, from $5,719,946 at December 31,
2007 to $6,144,136 at December 31, 2008.  The increase was
primarily due to an increase of approximately $233,000 in the current portion of
the non-recourse debt obligation and an increase of approximately $164,000
in deferred revenue related to Aircraft 123.




Partners’
Equity





Partners’ equity decreased
$8,302,494, from $17,046,972 at December 31, 2007 to
$8,744,478 at December 31, 2008.  The decrease was largely
attributable to the net loss reported during 2008.  In addition,
during our liquidation period, we distributed substantially all of the
distributable cash from operations and equipment sales to our
partners.






30
 Table of Contents








Liquidity
and Capital Resources


Sources and Uses of
Cash





At
December 31, 2008 and 2007, we had cash and cash equivalents of $167,128 and
$414,156, respectively. During our liquidation period, our main source of cash
is expected to be from operating and investing activities from the sale or
disposal of our assets. Our main use of cash during the liquidation period is
expected to be from financing activities, in the form of cash distributions to
our partners.





Operating
Activities





Sources
of Cash





Sources
of cash from operating activities decreased $116,173, from $1,810,575 in 2007 to
$1,694,402 in 2008. The decrease was primarily due to the reduction in overall
lease activity expected during our liquidation period.





Investing
Activities





Sources
of Cash





Sources
of cash from investing activities decreased from $12,422,785 in 2007 to $0 in
2008. The decrease was due to no sales of equipment during
2008.  During 2007, our sources of cash resulted from the sales of (i)
the Engine Modules, (ii) the assets owned by ICON SPK and ICON Cheyenne, (iii)
the equipment previously on lease to K-Mart, (iv) the Aircraft and Engines, and
(v) a McDonnell Douglas DC 10-30F aircraft in which we had a 15% ownership
interest.





Uses
of Cash





Uses of
cash in investing activities decreased $7,743,658, from $7,766,158 in 2007 to
$22,500 in 2008. During 2007, we purchased the telecommunications equipment
currently on lease to Global Crossing.  We did not purchase any
additional equipment during 2008 as we are in our liquidation
period.





Financing
Activities





Sources
of Cash





Sources
of cash from financing activities decreased from $3,630,000 in 2007 to $0 in
2008.  During 2007, we borrowed $3,630,000 from our revolving line of
credit.  There were no borrowings in 2008.





Uses of Cash





Uses of
cash in financing activities decreased $8,526,717, from $10,445,647 in 2007 to
$1,918,930 in 2008. The repayment of $5,500,000 on the revolving line of credit
was the principal use of cash in financing activities during 2007.  We
repaid $70,000 of the revolving line of credit in 2008.  A reduction
in the distributions paid to our partners in 2008 also contributed to the
decrease.  During 2008 and 2007, we paid distributions to our partners
of $1,845,457, and $4,351,859, respectively.  In addition, there were
no distributions to minority interest holders in 2008 as the assets owned by our
majority-owned subsidiaries were sold in 2007.






31
 Table of Contents





Financings
and Borrowings





Non-Recourse
Debt





At
December 31, 2008, we had a non-recourse debt obligation that was being paid
directly to the lender by the lessee and was accruing interest at 6.1095% per
year. The outstanding balance of our non-recourse debt was $42,346,303 at
December 31, 2008. At December 31, 2007 and 2006, we had two non-recourse debt
obligations that were being paid directly to the lenders by the lessees that
accrued interest at 6.1095% and 4.035% per year. The outstanding balance of our
non-recourse debt at December 31, 2007 and 2006 was $46,142,220 and $52,572,875,
respectively.





Effective
March 14, 2006, in connection with the Cathay lease extension for Aircraft 123,
the outstanding non-recourse debt of approximately $52,568,000 was refinanced.
The debt matures on October 1, 2011, has a balloon payment of approximately
$32,000,000 and has an interest rate that was fixed at 6.1095% under the terms
of the debt agreement, effective October 3, 2006.




Revolving
Line of Credit, Recourse





We, along
with Fund Nine, Fund Ten, Fund Eleven and Fund Twelve (entities sponsored and
managed by our General Partner) (collectively, the “Borrowers”), are parties to
a Commercial Loan Agreement, as amended (the “Loan Agreement”), with CB&T.
The Loan Agreement provides for a revolving line of credit of up to $30,000,000
pursuant to a senior secured revolving loan facility (the “Facility”), which is
secured by all assets of the Borrowers not subject to a first priority lien, as
defined in the Loan Agreement. Each of the Borrowers is jointly and severally
liable for all amounts borrowed under the Facility. Amounts available under the
Facility are subject to a borrowing base that is determined, subject to certain
limitations, on the present value of the future receivables under certain lease
agreements in which the Borrowers have a beneficial interest.





The
Facility expires on April 30, 2010 and the Borrowers may request a one year
extension to the revolving line of credit within 390 days of the expiration
date, but CB&T has no obligation to extend. The interest rate for general
advances under the Facility is CB&T’s prime rate and the interest rate on up
to five separate advances that are permitted to be made under the Facility is
the rate at which U.S. dollar deposits can be acquired by CB&T in the
London Interbank Eurocurrency Market plus 2.5% per year. The interest rate at
December 31, 2008 was 3.25%. In addition, the Borrowers are obligated to pay a
quarterly commitment fee of 0.25% on unused commitments under the
Facility.





Aggregate
borrowings by all Borrowers under the Facility amounted to $6,185,000 at
December 31, 2008. We had $1,185,000 in borrowings outstanding under the
Facility as of such date, the remaining balance of $5,000,000 was borrowed by
Fund Eleven. On February 26, 2009, Fund Eleven borrowed an additional $600,000
under the Facility. For additional information, see Note 8 to our consolidated
financial statements.





Our
General Partner believes that with the cash we currently have available, the
cash being generated from our remaining leases, and the proceeds from equipment
and asset sales, we have sufficient cash to continue our operations into the
foreseeable future. We have the ability to borrow additional funds under the
Facility if necessary. However, our ability to generate cash in the future is
subject to general economic, financial, competitive, regulatory and other
factors that affect us and our lessees’ businesses that are beyond our
control.  See “Part I, Item 1A.  Risk Factors.” At December
31, 2008, we had current assets of $2,245,054 and current liabilities of
$6,144,136, which results in a $3,899,082 working capital deficit. Of this
amount, $4,029,270 consisted of direct payments to a lender made by our lessee.
These direct payments are for a debt that had no corresponding current asset due
to the classification of these transactions as operating leases. Therefore, when
considering our overall working capital, direct payments should be excluded. The
exclusion of these payments yields a positive working capital of $130,188 at
December 31, 2008.






32
 Table of Contents





Distributions





We, at
our General Partner’s discretion, paid monthly distributions to each of our
partners beginning the first month after each such partner was admitted through
the end of our reinvestment period, which was on June 17, 2007. During the
liquidation period, we plan to make distributions in accordance with the terms
of our LP Agreement. We expect that distributions made during the liquidation
period will vary, depending on the timing of the sale of our assets, our receipt
of rental income, and income from our investments. We paid distributions to our
limited partners for the years ended December 31, 2008, 2007 and 2006 of
$1,827,002, $4,308,340 and $5,934,486, respectively. We paid distributions to
our General Partner for the years ended December 31, 2008, 2007 and 2006 of
$18,455, $43,519 and $59,944, respectively.





Commitments
and Contingencies and Off-Balance Sheet Transactions





Commitments
and Contingencies





At
December 31, 2008, we had both non-recourse and recourse debt obligations. The
lender has a security interest in equipment relating to each non-recourse debt
instrument and an assignment of the rental payments under the lease associated
with the equipment. In that case, the lender is being paid directly by the
lessee. If the lessee defaults on the lease, the equipment would be returned to
the lender in extinguishment of the non-recourse debt. At December 31, 2008, our
outstanding non-recourse debt obligations were $42,346,303. We are a party to
the Facility, as discussed in the Financing and Borrowings section above. We had
$1,185,000 of borrowings under the Facility at December 31, 2008.





Principal
maturities of our debt and related interest consisted of the following at
December 31, 2008:




Payments Due by PeriodLess
      Than 1
                  
                  
                  1 -
      3Total
                  
                  
                  Year
                  
                  
                  YearsNon-recourse
      debt
                  
                  $
                  42,346,303
                  
                  
                  $
                  4,029,270
                  
                  
                  $
                  38,317,033Non-recourse
      interest
                  
                  
                  6,489,907
                  
                  
                  
                  2,510,724
                  
                  
                  
                  3,979,183Revolving
      line of credit
                  
                  
                  1,185,000
                  
                  
                  
                  1,185,000
                  
                  
                  
                  -$
                  50,021,210
                  
                  
                  $
                  7,724,994
                  
                  
                  $
                  42,296,216




We had a
commitment with regards to Aircraft 123 to pay certain maintenance costs that
were incurred on or prior to March 14, 2006. We had established, under the
original lease, a maintenance reserve cash account to pay for our portion of
these costs. In January 2007, the outstanding maintenance cost of approximately
$1,546,000 was repaid with the balance in the reserve cash account of
approximately $1,403,000. The remaining balance of approximately $143,000 was
borrowed from ICON 126 and will be reimbursed when Aircraft 123 is
sold.





We
entered into residual sharing agreements with various third parties. In
connection with these agreements, residual proceeds received in excess of
specific amounts will be shared with these third parties based on specific
formulas.





Off-Balance
Sheet Transactions





None.









33
 Table of Contents




Inflation
and Interest Rates


The
potential effects of inflation on us are difficult to predict.  If the
general economy experiences significant rates of inflation, however, it could
affect us in a number of ways.  We do not currently have rent escalation
clauses tied to inflation in our leases. The anticipated residual values to be
realized upon the sale or re-lease of equipment upon lease termination (and thus
the overall cash flow from our leases) may be expected to increase with
inflation as the cost of similar new and used equipment increases.





If
interest rates increase significantly, leases already in place would generally
not be affected.





Item 7A.  Quantitative and Qualitative Disclosures About
Market Risk





We, like
most other companies, are exposed to certain market risks, which include changes
in interest rates and the demand for equipment (and the related residuals) owned
by us.  We believe that our exposure to other market risks, including
foreign currency exchange rate risk, commodity risk and equity price risk, are
insignificant, at this time, to both our financial position and our results of
operations.





We
currently have two outstanding notes payable, one of which is non-recourse debt
and the other is associated with our recourse revolving line of
credit.  Due to the fixed nature of the non-recourse debt, the
conditions in the credit markets as of December 31, 2008 have not had any impact
on us.  With respect to our revolving line of credit, which is subject
to a variable interest rate, our General Partner has evaluated the impact of the
condition of the credit markets on the outstanding balance and has determined
that it will not have any material impact on us.  Furthermore, we are
currently in our liquidation period and, therefore, as we have no current
intentions of obtaining additional external financing or refinancing our
existing indebtedness, we do not expect any adverse impact on our cash flows
should credit conditions in general remain the same or deteriorate
further.





In
general, we managed our exposure to interest rate risk by obtaining fixed rate
debt. The fixed rate debt was structured so as to match the cash flows required
to service the debt to the payment streams under fixed rate lease receivables.
The payments under each lease are assigned to the lender in satisfaction of the
debt.





We manage
our exposure to equipment and residual risk by monitoring the markets our leased
equipment is in and maximizing remarketing proceeds through the re-lease or sale
of equipment.







34
 Table of Contents





Item 8. Consolidated Financial Statements and Supplementary
Data
 
 PageReports of Independent Registered Public Accounting
      Firms
                36Consolidated Balance Sheets
                38Consolidated Statements of Operations
                39Consolidated Statements of Changes in Partners’
      Equity
                40Consolidated Statements of Cash Flows
                41Notes to Consolidated Financial Statements
                43
 
 35
 Table of Contents
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
 
 The
Partners
 ICON
Income Fund Eight B L.P.
 
 
 We have
audited the accompanying consolidated balance sheets of ICON Income Fund Eight B
L.P. (the “Company”) as of December 31, 2008 and 2007, and the related
consolidated statements of operations, changes in partners' equity, and cash
flows for each of the two years in the period ended December 31, 2008. These
financial statements are the responsibility of the Company's management. 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. We were not engaged to perform an
audit of the Company’s 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
Company'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, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of ICON Income Fund Eight
B L.P. at December 31, 2008 and 2007, and the consolidated results of its
operations and its cash flows for each of the two years in the period ended
December 31, 2008, in conformity with U.S. generally accepted accounting
principles.
 
 
 /s/ Ernst & Young,
LLP
 
 March 20,
2009
 New York,
New York
 
 
 
  36
 Table of Contents
 
  The
Partners
 ICON
Income Fund Eight B L.P.
 
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 We have
audited the accompanying consolidated statements of operations, changes in
partners’ equity and cash flows of ICON Income Fund Eight B L.P. (a Delaware
limited Partnership) and subsidiaries for the year ended
December 31, 2006.  These consolidated financial statements
are the responsibility of the Partnership’s management.  Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
 
 We
conducted our audit 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 audit 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 audit provides a reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated results of operations and cash flows
of ICON Income Fund Eight B L.P. and subsidiaries for the year ended
December 31, 2006, in conformity with accounting principles generally
accepted in the United States of America.
 /s/ Hays
& Company LLP
 
 April 2,
2007
 New York,
New York
 
  
 37
 Table of Contents
 
 ICON Income Fund Eight B L.P.(A
      Delaware Limited Partnership)Consolidated
      Balance SheetsAssetsDecember 31,2008
                      
                      
                      2007Current
      assetsCash
      and cash equivalents
                      
                      $
                      167,128
                      
                      
                      $
                      414,156Current
      portion of net investment in finance leases
                      
                      
                      2,009,175
                      
                      
                      
                      1,764,772Other
      current assets
                      
                      
                      68,751
                      
                      
                      
                      22,130Total
      current assets
                      
                      
                      2,245,054
                      
                      
                      
                      2,201,058Non-current
      assetsNet
      investment in finance leases, less current portion
                      
                      
                      2,911,511
                      
                      
                      
                      4,920,687Leased
      equipment at cost (less accumulated depreciationof
      $29,921,414 and $26,103,232, respectively)
                      
                      
                      45,495,306
                      
                      
                      
                      53,201,855Investments
      in joint ventures
                      
                      
                      1,267,392
                      
                      
                      
                      3,413,505Other
      non-current assets, net
                      
                      
                      1,286,384
                      
                      
                      
                      1,376,116Total
      non-current assets
                      
                      
                      50,960,593
                      
                      
                      
                      62,912,163Total
      Assets
                      
                      $
                      53,205,647
                      
                      
                      $
                      65,113,221Liabilities
      and Partners' EquityCurrent
      liabilitiesCurrent
      portion of non-recourse long-term debt
                      
                      $
                      4,029,270
                      
                      
                      $
                      3,795,917Revolving
      line of credit, recourse
                      
                      
                      1,185,000
                      
                      
                      
                      1,255,000Deferred
      revenue
                      
                      
                      450,000
                      
                      
                      
                      286,364Due
      to affiliates
                      
                      
                      143,070
                      
                      
                      
                      143,070Accrued
      expenses and other current liabilities
                      
                      
                      336,796
                      
                      
                      
                      239,595Total
      current liabilities
                      
                      
                      6,144,136
                      
                      
                      
                      5,719,946Non-current
      liabilitiesNon-recourse
      long-term debt, net of current portion
                      
                      
                      38,317,033
                      
                      
                      
                      42,346,303Total
      Liabilities
                      
                      
                      44,461,169
                      
                      
                      
                      48,066,249Commitments
      and contingencies (Note 12)Partners'
      EquityGeneral
      Partner
                      
                      
                      (561,615
                      )
                      
                      
                      (478,624
                      )Limited
      Partners
                      
                      
                      9,306,093
                      
                      
                      
                      17,525,596Total
      Partners' Equity
                      
                      
                      8,744,478
                      
                      
                      
                      17,046,972Total
      Liabilities and Partners' Equity
                      
                      $
                      53,205,647
                      
                      
                      $
                      65,113,221




See
accompanying notes to the consolidated financial statements.
 38
 Table of Contents
 
 
 ICON Income Fund Eight B L.P.(A
      Delaware Limited Partnership)Consolidated
      Statements of OperationsYears Ended December 31,2008
                  
                  
                  2007
                  
                  
                  2006Revenue:Rental
      income
                  
                  $
                  6,376,364
                  
                  
                  $
                  8,580,752
                  
                  
                  $
                  16,174,323Finance
      income
                  
                  
                  790,254
                  
                  
                  
                  742,064
                  
                  
                  
                  133,856Loss
      from investments in joint ventures
                  
                  
                  (2,168,613
                  )
                  
                  
                  (282,582
                  )
                  
                  
                  (778,423
                  )Net
      gain on sales of equipment
                  
                  
                  -
                  
                  
                  
                  493,196
                  
                  
                  
                  476,020Interest
      and other income
                  
                  
                  405
                  
                  
                  
                  72,895
                  
                  
                  
                  246,729Total
      revenue
                  
                  
                  4,998,410
                  
                  
                  
                  9,606,325
                  
                  
                  
                  16,252,505Expenses:Management
      fees - General Partner
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  410,842Administrative
      expense reimbursements - General Partner
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  161,980Depreciation
      and amortization
                  
                  
                  3,860,671
                  
                  
                  
                  4,557,064
                  
                  
                  
                  7,577,104Impairment
      loss
                  
                  
                  3,888,367
                  
                  
                  
                  -
                  
                  
                  
                  2,493,108Interest
                  
                  
                  2,881,300
                  
                  
                  
                  3,326,807
                  
                  
                  
                  3,582,860General
      and administrative
                  
                  
                  821,636
                  
                  
                  
                  405,470
                  
                  
                  
                  657,832Maintenance
      expense
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,546,456Total
      expenses
                  
                  
                  11,451,974
                  
                  
                  
                  8,289,341
                  
                  
                  
                  16,430,182(Loss)
      income before minority interest
                  
                  
                  (6,453,564
                  )
                  
                  
                  1,316,984
                  
                  
                  
                  (177,677
                  )Minority
      interest
                  
                  
                  -
                  
                  
                  
                  (170,005
                  )
                  
                  
                  (436,749
                  )Net
      (loss) income
                  
                  $
                  (6,453,564
                  )
                  
                  $
                  1,146,979
                  
                  
                  $
                  (614,426
                  )Net
      (loss) income allocable to:Limited
      Partners
                  
                  $
                  (6,389,028
                  )
                  
                  $
                  1,135,509
                  
                  
                  $
                  (608,282
                  )General
      Partner
                  
                  
                  (64,536
                  )
                  
                  
                  11,470
                  
                  
                  
                  (6,144
                  )$
                  (6,453,564
                  )
                  
                  $
                  1,146,979
                  
                  
                  $
                  (614,426
                  )Weighted
      average number of units of limitedpartnership
      interests outstanding
                  
                  
                  740,411
                  
                  
                  
                  740,985
                  
                  
                  
                  741,752Net
      (loss) income per weighted averageunit
      of limited partnership interests
                  
                  $
                  (8.63
                  )
                  
                  $
                  1.53
                  
                  
                  $
                  (0.82
                  )
 See
accompanying notes to the consolidated financial statements.
 39
 Table of Contents
 
 ICON Income Fund Eight B L.P.(A
      Delaware Limited Partnership)Consolidated
      Statements of Changes in Partners' EquityUnits
      of Limited
                  
                  
                  
                  
                  
                  
                  
                  
                  TotalPartnership
                  
                  
                  Limited
                  
                  
                  General
                  
                  
                  Partners'Interests
                  
                  
                  Partners'
                  
                  
                  Partner
                  
                  
                  EquityBalance,
      January 1, 2006
                  
                  
                  742,830
                  
                  
                  $
                  27,317,628
                  
                  
                  $
                  (380,487
                  )
                  
                  $
                  26,937,141Units
      of limited partnership interests redeemed
                  
                  
                  (1,300
                  )
                  
                  
                  (51,135
                  )
                  
                  
                  -
                  
                  
                  
                  (51,135
                  )Cash
      distributions to partners
                  
                  
                  -
                  
                  
                  
                  (5,934,486
                  )
                  
                  
                  (59,944
                  )
                  
                  
                  (5,994,430
                  )Net
      loss
                  
                  
                  -
                  
                  
                  
                  (608,282
                  )
                  
                  
                  (6,144
                  )
                  
                  
                  (614,426
                  )Balance,
      December 31, 2006
                  
                  
                  741,530
                  
                  
                  
                  20,723,725
                  
                  
                  
                  (446,575
                  )
                  
                  
                  20,277,150Units
      of limited partnership interests redeemed
                  
                  
                  (1,000
                  )
                  
                  
                  (25,298
                  )
                  
                  
                  -
                  
                  
                  
                  (25,298
                  )Cash
      distributions to partners
                  
                  
                  -
                  
                  
                  
                  (4,308,340
                  )
                  
                  
                  (43,519
                  )
                  
                  
                  (4,351,859
                  )Net
      income
                  
                  
                  -
                  
                  
                  
                  1,135,509
                  
                  
                  
                  11,470
                  
                  
                  
                  1,146,979Balance,
      December 31, 2007
                  
                  
                  740,530
                  
                  
                  
                  17,525,596
                  
                  
                  
                  (478,624
                  )
                  
                  
                  17,046,972Units
      of limited partnership interests redeemed
                  
                  
                  (150
                  )
                  
                  
                  (3,473
                  )
                  
                  
                  -
                  
                  
                  
                  (3,473
                  )Cash
      distributions to partners
                  
                  
                  -
                  
                  
                  
                  (1,827,002
                  )
                  
                  
                  (18,455
                  )
                  
                  
                  (1,845,457
                  )Net
      loss
                  
                  
                  -
                  
                  
                  
                  (6,389,028
                  )
                  
                  
                  (64,536
                  )
                  
                  
                  (6,453,564
                  )Balance,
      December 31, 2008
                  
                  
                  740,380
                  
                  
                  $
                  9,306,093
                  
                  
                  $
                  (561,615
                  )
                  
                  $
                  8,744,478
 
 
 See
accompanying notes to the consolidated financial statements.
 40
 Table of Contents
 
 
 ICON Income Fund Eight B L.P.(A
      Delaware Limited Partnership)Consolidated
      Statements of Cash FlowsYears Ended December 31,2008
                  
                  
                  2007
                  
                  
                  2006Cash
      flows from operating activities:Net
      (loss) income
                  
                  $
                  (6,453,564
                  )
                  
                  $
                  1,146,979
                  
                  
                  $
                  (614,426
                  )Adjustments
      to reconcile net (loss) income to net cash provided byoperating
      activities:Rental
      income paid directly to lenders by lessees
                  
                  
                  (6,540,000
                  )
                  
                  
                  (8,129,490
                  )
                  
                  
                  (13,614,988
                  )Finance
      income
                  
                  
                  (790,254
                  )
                  
                  
                  (742,064
                  )
                  
                  
                  (133,856
                  )Net
      gain on sales of equipment
                  
                  
                  -
                  
                  
                  
                  (493,196
                  )
                  
                  
                  (476,020
                  )Loss
      from investments in joint ventures
                  
                  
                  2,168,613
                  
                  
                  
                  282,582
                  
                  
                  
                  778,423Depreciation
      and amortization
                  
                  
                  3,860,671
                  
                  
                  
                  4,557,064
                  
                  
                  
                  7,577,104Impairment
      loss
                  
                  
                  3,888,367
                  
                  
                  
                  -
                  
                  
                  
                  2,493,108Interest
      expense on non-recourse financing paid directly to lenders by
      lessees
                  
                  
                  2,739,131
                  
                  
                  
                  3,021,752
                  
                  
                  
                  3,470,390Interest
      expense from amortization of debt financing costs
                  
                  
                  73,665
                  
                  
                  
                  4,299
                  
                  
                  
                  60,572Minority
      interest
                  
                  
                  -
                  
                  
                  
                  170,005
                  
                  
                  
                  436,749Changes
      in operating assets and liabilities:Collection
      of finance leases
                  
                  
                  2,512,538
                  
                  
                  
                  1,952,376
                  
                  
                  
                  823,007Accounts
      receivable
                  
                  
                  -
                  
                  
                  
                  293,255
                  
                  
                  
                  -Due
      to General Partner and affiliates, net
                  
                  
                  -
                  
                  
                  
                  143,070
                  
                  
                  
                  92,836Other
      assets
                  
                  
                  (30,552
                  )
                  
                  
                  1,399,999
                  
                  
                  
                  18,043Deferred
      revenue
                  
                  
                  163,636
                  
                  
                  
                  148,343
                  
                  
                  
                  (359,282
                  )Accrued
      expenses and other current liabilities
                  
                  
                  102,151
                  
                  
                  
                  (1,844,599
                  )
                  
                  
                  1,612,826Distributions
      to/from minority interest holders and joint ventures
                  
                  
                  -
                  
                  
                  
                  (99,800
                  )
                  
                  
                  -Net
      cash provided by operating activities
                  
                  
                  1,694,402
                  
                  
                  
                  1,810,575
                  
                  
                  
                  2,164,486Cash
      flows from investing activities:Distributions
      received from joint ventures
                  
                  
                  -
                  
                  
                  
                  639,000
                  
                  
                  
                  -Proceeds
      from sales of equipment
                  
                  
                  -
                  
                  
                  
                  11,783,785
                  
                  
                  
                  1,052,969Purchase
      of leased equipment
                  
                  
                  -
                  
                  
                  
                  (7,754,746
                  )
                  
                  
                  -Cash
      investment in joint ventures
                  
                  
                  (22,500
                  )
                  
                  
                  (11,412
                  )
                  
                  
                  (91,011
                  )Net
      cash (used in) provided by investing activities
                  
                  
                  (22,500
                  )
                  
                  
                  4,656,627
                  
                  
                  
                  961,958Cash
      flows from financing activities:Cash
      distributions to partners
                  
                  
                  (1,845,457
                  )
                  
                  
                  (4,351,859
                  )
                  
                  
                  (5,994,430
                  )Proceeds
      from revolving line of credit
                  
                  
                  -
                  
                  
                  
                  3,630,000
                  
                  
                  
                  3,125,000Repayment
      of revolving line of credit
                  
                  
                  (70,000
                  )
                  
                  
                  (5,500,000
                  )
                  
                  
                  -Distributions
      to minority interest holders in joint ventures
                  
                  
                  -
                  
                  
                  
                  (568,490
                  )
                  
                  
                  (291,943
                  )Units
      of limited partnership interests redeemed
                  
                  
                  (3,473
                  )
                  
                  
                  (25,298
                  )
                  
                  
                  (51,135
                  ).Net
      cash used in financing activities
                  
                  
                  (1,918,930
                  )
                  
                  
                  (6,815,647
                  )
                  
                  
                  (3,212,508
                  )Net
      decrease in cash and cash equivalents
                  
                  
                  (247,028
                  )
                  
                  
                  (348,445
                  )
                  
                  
                  (86,064
                  )Cash
      and cash equivalents, beginning of the year
                  
                  
                  414,156
                  
                  
                  
                  762,601
                  
                  
                  
                  848,665Cash
      and cash equivalents, end of the year
                  
                  $
                  167,128
                  
                  
                  $
                  414,156
                  
                  
                  $
                  762,601
 See
accompanying notes to the consolidated financial statements.
 41
 Table of Contents
 
 
 ICON
      Income Fund Eight B L.P.(A
      Delaware Limited Partnership)Consolidated
      Statements of Cash FlowsYears Ended December 31,2008
                  
                  
                  2007
                  
                  
                  2006Supplemental
      disclosure of cash flow information:Cash
      paid during the period for interest
                  
                  $
                  68,504
                  
                  
                  $
                  380,594
                  
                  
                  $
                  112,470Supplemental
      disclosure of non-cash investing and financing activities:Principal
      and interest paid on non-recourse long-term debt directly
    tolenders
      by lessees
                  
                  $
                  6,540,000
                  
                  
                  $
                  9,421,608
                  
                  
                  $
                  14,572,355Escrow
      utilized to pay non-recourse long-term debt
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  281,868Transfer
      of leased equipment to direct finance lease
                  
                  $
                  -
                  
                  
                  $
                  7,743,990
                  
                  
                  $
                  403,565Transfer
      of leased equipment to equipment held for sale
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  239,043Transfer
      of equipment from direct finance lease to equipment held for
      sale
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  104,360Payment
      of maintenance costs
                  
                  $
                  -
                  
                  
                  $
                  1,546,000
                  
                  
                  $
                  -
   See
accompanying notes to the consolidated financial statements.
 42
 Table of Contents
 ICON Income Fund Eight B L.P.
 (A
Delaware Limited Partnership)
 Notes to
Consolidated Financial Statements
 December
31, 2008
 
 (1)
              Organization
 
 ICON
Income Fund Eight B L.P. (the “Partnership”) was formed on February 7, 2000 as a
Delaware limited partnership. The Partnership is engaged in one business
segment, the business of purchasing equipment and leasing it to third parties,
providing equipment and other financing and, to a lesser degree, acquiring
ownership rights to items of leased equipment at lease expiration. The
Partnership will continue until December 31, 2017, unless terminated
sooner.
 
 The
Partnership’s principal investment objective is to obtain the maximum economic
return from its investments for the benefit of its partners. To achieve this
objective the Partnership: (i) acquired a diversified portfolio of equipment
leases and financing transactions, (ii) made monthly cash distributions to its
partners commencing with each partner's admission through the liquidation
period, which commenced on June 17, 2007, (iii) re-invested substantially all
undistributed cash from operations and cash from sales of equipment and
financing transactions during the reinvestment period, and (iv) began to dispose
of its investments and distribute the excess cash from sales of such investments
to its partners with the commencement of the liquidation period.
 
 The
Partnership’s reinvestment period ended and the Partnership commenced its
liquidation period on June 17, 2007. During the liquidation period, the
Partnership is distributing substantially all of its distributable cash from
operations and equipment sales to the partners and will continue the orderly
termination of its operations and affairs. The Partnership will not invest in
any additional finance or lease transactions during the liquidation
period.
 
 The
general partner of the Partnership is ICON Capital Corp. (the “General
Partner”), a Delaware corporation. The General Partner manages and controls the
business affairs of the Partnership, including, but not limited to, the
equipment leases and other financing transactions that the Partnership entered
into pursuant to the terms of the Partnership’s limited partnership agreement,
as amended (the “LP Agreement”).  Additionally, the General Partner
has a 1% interest in the profits, losses, cash distributions and liquidation
proceeds of the Partnership.
 
 The
Partnership's maximum offering was $75,000,000. The Partnership commenced
business operations on its initial closing date, June 14, 2000, with the
admission of investors holding 15,816 units of limited partnership interests
(“Units”) representing $1,581,551 of capital contributions.  Between
June 15, 2000 and October 17, 2001, the final closing date, 734,184 additional
Units were sold representing $73,418,449 of capital contributions, bringing the
total sale of Units to 750,000 representing $75,000,000 of capital
contributions.  Through December 31, 2008, the Partnership redeemed 9,620
Units, leaving 740,380 Units outstanding at December 31, 2008.
 
 The
Partnership invested most of the net proceeds from its offering in equipment
subject to leases, other financing transactions and residual ownership rights in
leased equipment. After the net offering proceeds were invested, additional
investments were made with the cash generated from the Partnership’s initial
investments to the extent that cash was not needed for expenses, reserves and
distributions to partners. The investment in additional equipment in this manner
is called “reinvestment.”
 
 Partners’
capital accounts are increased for their initial capital contribution plus their
proportionate share of earnings and decreased by their proportionate share of
losses and distributions. Profits, losses, cash distributions and liquidation
proceeds are allocated 99% to the limited partners and 1% to the General Partner
until each limited partner has (a) received cash distributions and liquidation
proceeds sufficient to reduce their adjusted capital account to zero and (b)
received, in addition, other distributions and allocations that would provide an
8% per year cumulative return on their
outstanding adjusted capital account. After such time, distributions will be
allocated 90% to the limited partners and 10% to the General
Partner.
   43
 Table of Contents
 ICON
Income Fund Eight B L.P.
 (A
Delaware Limited Partnership)
 Notes to
Consolidated Financial Statements
 December
31, 2008
  (2)
              Summary
      of Significant Accounting Policies
 
 Basis of
Presentation and Consolidation
 
 The
accompanying consolidated financial statements of the Partnership have been
prepared in accordance with U.S. generally accepted accounting principles (“US
GAAP”).
 
 The
consolidated financial statements include the accounts of the Partnership and
its majority-owned subsidiaries. All intercompany accounts and transactions have
been eliminated in consolidation.
 
 The
Partnership accounts for its noncontrolling interests in joint ventures where
the Partnership has influence over financial and operational matters, generally
50% or less ownership interest, under the equity method of accounting. In such
cases, the Partnership's original investments are recorded at cost and adjusted
for its share of earnings, losses and distributions.  The Partnership
accounts for investments in joint ventures where the Partnership has virtually
no influence over financial and operational matters using the cost method of
accounting.  In such cases, the Partnership's original investments are
recorded at cost and any distributions received are recorded as
revenue.  All of the Partnership's investments in joint ventures are
subject to its impairment review policy.
 
 In joint
ventures where the Partnership’s interest is majority owned, the financial
condition and results of operations of the joint venture are
consolidated.  Minority interest represents the minority owner’s
proportionate share of its equity in the joint venture. The minority interest is
adjusted for the minority owner’s share of the earnings, losses and
distributions of the joint venture.
 
 Cash and
cash equivalents
 
 Cash and
cash equivalents include cash in banks and highly liquid investments with
original maturity dates of three months or less.
 
 The
Partnership's cash and cash equivalents are held principally at two financial
institutions and at times may exceed insured limits. The Partnership has placed
these funds in high quality institutions in order to minimize risk relating
to exceeding insured limits.
 
 Risks and
Uncertainties
 
 In the
normal course of business, the Partnership is exposed to two significant types
of economic risk: credit and market.  Credit risk is the risk of a
lessee’s inability or unwillingness to make contractually required
payments.  Concentrations of credit risk with respect to lessees are
dispersed across different industry segments within the United States of America
and throughout the world.  Although the Partnership does not currently
foresee a concentrated credit risk associated with these customers, lease
payments are dependent upon the financial stability of the industry segments in
which they operate.  See Note 11 for concentration of
risk.
 
 Market
risk reflects the change in the value of debt instruments and credit
facilities due to change in interest rate spreads or other market
factors.  The Partnership believes that the carrying value of its
investments is reasonable taking into consideration these risks, along with
estimated collateral values, payment history and other relevant
information.
  44
 Table of Contents
 ICON
Income Fund Eight B L.P.
 (A
Delaware Limited Partnership)
 Notes to
Consolidated Financial Statements
 December
31, 2008
 (2)
                Summary
      of Significant Accounting Policies –
continued
 
 Allowance
for Doubtful Accounts
 
 When
evaluating the adequacy of the allowance for doubtful accounts, the Partnership
estimates the uncollectibility of receivables by analyzing lessee, borrower and
other counterparty concentrations, creditworthiness and current economic
trends. The Partnership records an allowance for doubtful accounts when the
analysis indicates that the probability of full collection is
unlikely.  No allowance was deemed necessary at December 31, 2008 and
2007.
 
 Debt
Financing Costs
 
 Expenses
associated with the incurrence of debt are capitalized and amortized over the
term of the debt instrument using the effective interest rate
method.  These costs are included in other current assets and other
non-current assets.
 
 Leased
Equipment at Cost
 
 Investments
in leased equipment are stated at cost less accumulated
depreciation.  Leased equipment is depreciated on a straight-line
basis over the lease term, which ranges from 4 to 5 years to the asset’s
residual value.
 
 The
General Partner has an investment committee that approved each new equipment
lease and other financing transaction.  As part of its
process, it determined the residual value, if any, to be used once the
investment was approved.  The factors considered in determining the
residual value included, but were not limited to, the creditworthiness of the
potential lessee, the type of equipment considered, how the equipment was
integrated into the potential lessee’s business, the length of the lease and the
industry in which the potential lessee operated.  Residual values are
reviewed for impairment in accordance with the Partnership’s impairment review
policy.
 
 The
residual value assumes, among other things, that the asset is utilized normally
in an open, unrestricted and stable market. Short-term fluctuations in the
market place are disregarded and it is assumed that there is no necessity either
to dispose of a significant number of the assets, if held in quantity,
simultaneously or to dispose of the asset quickly.  The residual value
is calculated using information from various external sources, such as trade
publications, auction data, equipment dealers, wholesalers and industry experts,
as well as inspection of the physical asset and other economic
indicators.
 
 Asset
Impairments
 
 The significant assets in the
Partnership’s portfolio are periodically reviewed, no less frequently than
annually, to determine whether events or changes in circumstances indicate that
the carrying value of an asset may not be recoverable. An impairment loss will
be recognized only if the carrying value of a long-lived asset is not
recoverable and exceeds its fair market value.  If there is an
indication of impairment, the Partnership will estimate the future cash flows
(undiscounted and without interest charges) expected from the use of the asset
and its eventual disposition. Future cash flows are the future cash inflows
expected to be generated by an asset less the future outflowsexpected to
be necessary to obtain those inflows.  If an impairment is determined to
exist, the impairment loss will be measured as the amount by which the carrying
value of a long-lived asset exceeds its fair value and recorded in the
consolidated statement of operations in the period the determination is
made.
   45
 Table of Contents
 ICON
Income Fund Eight B L.P.
 (A
Delaware Limited Partnership)
 Notes to
Consolidated Financial Statements
 December
31, 2008
  (2)
                  Summary
      of Significant Accounting Policies –
continued
  The
events or changes in circumstances that generally indicate that an asset may be
impaired are (i) the estimated fair value of the underlying equipment is less
than its carrying value or (ii) the lessee is experiencing financial
difficulties and it does not appear likely that the estimated proceeds from the
disposition of the asset will be sufficient to satisfy the residual position in
the asset and, if applicable, the remaining obligation to the non-recourse
lender. Generally in the latter situation, the residual position relates to
equipment subject to third-party non-recourse debt where the lessee remits its
rental payments directly to the lender and the Partnership does not recover its
residual position until the non-recourse debt is repaid in full. The preparation
of the undiscounted cash flows requires the use of assumptions and estimates,
including the level of future rents, the residual value expected to be realized
upon disposition of the asset, estimated downtime between re-leasing events and
the amount of re-leasing costs. The General Partner’s review for impairment
includes a consideration of the existence of impairment indicators including
third-party appraisals, published values for similar assets, recent transactions
for similar assets, adverse changes in market conditions for specific asset
types and the occurrence of significant adverse changes in general industry and
market conditions that could affect the fair value of the asset.
 
 Revenue
Recognition
 
 The
Partnership leased equipment to third parties and each such lease is classified
as either a finance lease or an operating lease, which is based upon the terms
of each lease.  For a finance lease, initial direct costs are
capitalized and amortized over the term of the related lease.  For an
operating lease, initial direct costs are included as a component of the cost of
the equipment and depreciated.
 
 For
finance leases, the Partnership recorded, at lease inception, the total minimum
lease payments receivable from the lessee, the estimated unguaranteed residual
value of the equipment at lease termination, the initial direct costs related to
the lease and the related unearned income.  Unearned income represents
the difference between the sum of the minimum lease payments receivable plus the
estimated unguaranteed residual value, minus the cost of the leased
equipment.  Unearned income is recognized as finance income over the
term of the lease using the effective interest rate method.
 
 For
operating leases, rental income is recognized on a straight-line basis over the
lease term.  Billed operating lease receivables are included in
accounts receivable until collected.  Accounts receivable is stated at
its estimated net realizable value.  Deferred income is the
difference between the timing of the cash payments and the income recognized on
a straight-line basis.
 
 Initial
Direct Costs
 
 The
Partnership capitalized initial direct costs associated with the origination and
funding of lease assets in accordance with Statement of Financial Accounting
Standards (“SFAS”) No. 91 “Accounting for Nonrefundable Fees and Costs
Associated with Originating or Acquiring Loans and Initial Direct Costs of
Leases”. The costs were amortized on a lease by lease basis based on actual
lease term using a straight-line method for operating leases and the effective
interest rate method for finance leases. Costs related to leases that were not
consummated were expensed as an acquisition expense.
  
 46
 Table of Contents
 ICON
Income Fund Eight B L.P.
 (A
Delaware Limited Partnership)
 Notes to
Consolidated Financial Statements
 December
31, 2008
  (2)
                  Summary
      of Significant Accounting Policies –
continued
 
 Income
Taxes
 
 The
Partnership is taxed as a partnership for federal and State income tax
purposes.  No provision for income taxes has been recorded since the
liability for such taxes is that of each of the individual partners rather than
the Partnership. The Partnership's income tax returns are subject to examination
by the federal and State taxing authorities, and changes, if any, could adjust
the individual income tax of the partners.
 
 Per Unit
Data
 
 Net
income (loss) per Unit is based upon the weighted average number of Units
outstanding during the year.
 
 Units
Redemptions
 
 The
Partnership may, at its discretion, redeem Units from a limited number of its
limited partners, as provided for in its LP Agreement. The redemption price for
any Units approved for redemption is based upon a formula, as provided in the LP
Agreement.  Limited partners are required to hold their Units for at
least one year before redemptions will be permitted.
 
 Use of
Estimates
 
 The
preparation of financial statements in conformity with US GAAP requires the
General Partner to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities as of the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period.
Significant estimates primarily include the determination of allowance for
doubtful accounts, depreciation and amortization, impairment losses, estimated
useful lives and residual values.  Actual results could differ from
those estimates.
 
 Reclassifications
 
 Certain
reclassifications have been made to the accompanying consolidated financial
statements in prior years to conform to the current presentation.
 
 Recent
Accounting Pronouncements
 
 In
December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 160, “Noncontrolling Interests in Consolidated Financial Statements —
an amendment of ARB No. 51” (“SFAS No. 160”). SFAS No. 160 establishes
accounting and reporting standards for the noncontrolling interest in a
subsidiary and for the retained interest and gain or loss when a subsidiary is
deconsolidated. This statement is effective for financial statements issued for
fiscal years beginning on or after December 15, 2008 with earlier adoption
prohibited. The General Partner is currently evaluating the impact of SFAS No.
160 on the Partnership's consolidated financial statements.
 
 
 47
 Table of Contents
 ICON
Income Fund Eight B L.P.
 (A
Delaware Limited Partnership)
 Notes to
Consolidated Financial Statements
 December
31, 2008
  (2)
                  Summary
      of Significant Accounting Policies –
continued
 
 In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 157,
“Accounting for Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 defines
fair value, establishes a framework for measuring fair value, and enhances fair
value measurement disclosure. In February 2008, the FASB issued FASB Staff
Position (“FSP”) No. 157-2, “Effective Date of FASB Statement No. 157”
(“FSP 157-2”). FSP 157-2 delays the effective date of SFAS No. 157
for all non-financial assets and non-financial liabilities, except
for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually), until the beginning of the
first quarter of 2009. The measurement and disclosure requirements related to
financial assets and financial liabilities were effective for the Partnership
beginning in the first quarter of 2008. The adoption of SFAS No. 157 for
financial assets and financial liabilities did not have a significant impact on
the consolidated financial statements.  The General Partner is
currently evaluating the impact that SFAS No. 157 will have on the Partnership's
consolidated financial statements when it is applied to non-financial assets and
non-financial liabilities beginning in the first quarter of 2009. The resulting
fair values calculated under SFAS No. 157 after adoption may be different from
the fair values that would have been calculated under previous
guidance.
 (3)
              Net
      Investment in Finance Leases
 
 Net
investment in finance leases consisted of the following at December 31, 2008 and
2007:
 
 2008
                  
                  
                  2007Minimum
      rents receivable
                  
                  $
                  5,653,209
                  
                  
                  $
                  8,165,747Estimated
      residual value
                  
                  
                  1
                  
                  
                  
                  1Initial
      direct costs, net
                  
                  
                  41,624
                  
                  
                  
                  84,113Unearned
      income
                  
                  
                  (774,148
                  )
                  
                  
                  (1,564,402
                  )Net
      investment in finance leases
                  
                  
                  4,920,686
                  
                  
                  
                  6,685,459Less:  Current
      portion of netinvestment
      in finance leases
                  
                  
                  2,009,175
                  
                  
                  
                  1,764,772Net
      investment in finance leases,less
      current portion
                  
                  $
                  2,911,511
                  
                  
                  $
                  4,920,687
 
 Non-cancelable
minimum annual amounts due on investments in finance leases over the next three
years were as follows at December 31, 2008:
 
 Years
      EndingDecember 31,2009
                  
                  $
                  2,512,5382010
                  
                  
                  2,512,5382011
                  
                  
                  628,133$
                  5,653,209
   48
 Table of Contents
 ICON
Income Fund Eight B L.P.
 (A
Delaware Limited Partnership)
 Notes to
Consolidated Financial Statements
 December
31, 2008
  (3)
                  Net
      Investment in Finance Leases -
continued
  Digital  Mini-Labs
 
 At
January 1, 2006, the Partnership held four lease schedules consisting of
128 Noritsu Optical/Digital photo processing mini-labs that were subject to
lease with K-Mart Corporation (“K-Mart”). On April 30, 2006 and May 31, 2006,
two of the four lease schedules expired and, pursuant to the terms
of the schedules, the schedules were extended for an additional 90 days. These
extensions ended on or before September 30, 2006, and the Partnership
reclassified the net book value of the equipment of approximately $269,000
to equipment held for sale. The remaining two lease schedules with K-Mart
expired during 2006 and the Partnership reclassified the net book value of this
equipment of $37,120 and $67,295, respectively, to equipment held for
sale.  The Partnership also sold equipment for proceeds of $9,360
during the fourth quarter of 2006. The General Partner determined, based upon
negotiations with potential buyers, that the equipment held by K-Mart was
impaired.  Accordingly, for the year ended December 31, 2006, the
Partnership recorded an impairment loss of approximately $393,000, net of
estimated selling costs. At December 31, 2006, the four K-Mart lease schedules
represented equipment held for sale totaling $140,400. On February 9,
2007, the Partnership sold all of the remaining equipment previously on
lease to K-Mart for approximately $254,100 and recognized a gain on the sale of
this equipment of approximately $111,000.
 
 Office,
Telecommunications and Computer Equipment
 
 The
Partnership had an investment in a finance lease with Regus Business Centre
Corp. ("Regus"), which leased office, telecommunications and computer equipment
from the Partnership under the terms of a finance lease entered into in August
2000. Regus filed for bankruptcy protection under Chapter 11 of the United
States Bankruptcy Code on January 14, 2003. The Partnership negotiated an
amended lease with Regus, which was approved when Regus emerged from bankruptcy
protection.  Under the amended lease, Regus commenced making payments
at a reduced rental rate, with an extension for 48 months, effective March 15,
2003.  At December 31, 2006, Regus was current on its payments under
the amended lease. At December 31, 2006, Regus had one remaining rental payment
that was received in January 2007. On February 28, 2007, the lease expired and
Regus purchased the equipment for $1, as provided for in the lease.
 
 On
March 30, 2007, the Partnership, through its wholly-owned subsidiary, ICON
Global Crossing III, LLC (“ICON Global Crossing III”),
purchased telecommunications equipment subject to a lease with Global
Crossing Telecommunications, Inc. (“Global Crossing”).  The purchase
price of the equipment was approximately $7,755,000 and the Partnership also
incurred initial direct costs of approximately $124,000. The lease is scheduled
to expire on March 31, 2011. The General Partner did not receive any acquisition
fees in connection with this transaction.
  (4)
                  Leased
      Equipment at Cost
 Leased
equipment at cost consisted of the following at December 31, 2008 and
2007:
 
 2008
                  
                  
                  2007Aircraft
      and aircraft related equipment
                  
                  $
                  79,305,087
                  
                  
                  $
                  79,305,087Less:
      Accumulated depreciation
                  
                  
                  (29,921,414
                  )
                  
                  
                  (26,103,232
                  )Less:
      Asset impairment
                  
                  
                  (3,888,367
                  )
                  
                  
                  -$
                  45,495,306
                  
                  
                  $
                  53,201,855
 
 Depreciation expense was $3,818,182,
$4,512,816 and $7,279,941 for the years ended December 31, 2008, 2007 and 2006,
respectively.
 
 
 49
 Table of Contents
 ICON
Income Fund Eight B L.P.
 (A
Delaware Limited Partnership)
 Notes to
Consolidated Financial Statements
 December
31, 2008
  (4)
                    Leased
      Equipment at Cost -
continued
  Aircraft
and Aircraft Related Equipment
 
 McDonnell
Douglas DC 10-30F Aircraft and Engines
 
 During
March 2003, the Partnership and ICON Income Fund Nine, LLC (“Fund Nine”), an
entity also managed by the General Partner, formed a joint venture, ICON
Aircraft 47820, LLC (“Aircraft 47820”), in which the Partnership and Fund Nine
had ownership interests of 90% and 10%, respectively. Aircraft 47820 was formed
for the purpose of acquiring an investment in a McDonnell Douglas DC10-30F
aircraft and two spare engines (the “Aircraft and Engines”) on lease to Federal
Express Corporation (“FedEx”). On March 11, 2003, Aircraft 47820 acquired the
Aircraft and Engines for approximately $27,288,000, including approximately
$24,211,000 of non-recourse debt. The Partnership’s portion of the cash purchase
price was approximately $2,769,000. On March 30, 2007, Aircraft 47820 sold the
Aircraft and Engines to FedEx for $5,475,000 and recognized a loss on the sale
of approximately $1,025,000.
 
 Airbus
A340-313X Aircraft
 
 During
February 2002, the Partnership formed a wholly-owned subsidiary, ICON Aircraft
123, LLC (“ICON 123”) for the purpose of acquiring an Airbus A340-313X aircraft
(“Aircraft 123”), which was subject to a lease with Cathay. Aircraft 123 was
purchased for approximately $75,000,000, including the assumption of
approximately $70,500,000 of non-recourse debt. On March 14, 2006, the
Partnership entered into a lease extension with Cathay with respect to the
aircraft, which extended the lease to October 1, 2011. Effective March 14, 2006,
in connection with the Cathay lease extension, the outstanding non-recourse debt
of approximately $52,850,000 was refinanced after applying $282,000 from a
reserve account established in connection with the original lease with Cathay.
The non-recourse debt matures on October 1, 2011 and has a balloon payment of
approximately $32,000,000. The interest rate of the refinanced non-recourse debt
was fixed at 6.1095% under the terms of the debt agreement, effective October 3,
2006.
 
 In light
of recent, unprecedented high fuel prices during 2008 and the related impact on
the airline industry, the General Partner reviewed our investment in Aircraft
123 as of June 30, 2008.  In accordance with the provisions of
Financial Accounting Standards Board (“FASB”) Statement No. 144, “Accounting for
the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”) and based upon
recent changes in the airline industry, the General Partner determined that
Aircraft 123 was impaired.
 
 Based on
the General Partner’s review, the residual value of Aircraft 123 exceeded the
expected undiscounted future cash flows of Aircraft 123 and, as a result, the
Partnership recorded an impairment charge representing the difference between
the residual value and the expected discounted future cash flows of
Aircraft 123.  The expected discounted future cash flows of Aircraft 123
was determined using a market approach, a recent appraisal for Aircraft 123 and
recent sales of similar aircraft, as well as other factors, including those
discussed below.  As a result, the Partnership recorded an impairment
loss on Aircraft 123 of $3,888,367 as of June 30, 2008.
 
 The
following factors, among others, indicated that the full residual values of
Aircraft 123 might not be recoverable: (i) indications that lenders were willing
to finance less of the acquisition cost of four-engine aircraft, which increased
with each dollar rise of the price of fuel, thereby undermining the residual
value expectations of such aircraft; (ii) the rising cost of fuel was increasing
the operating costs of four-engine aircraft and similar capacity twin-engine
aircraft, thereby making such aircraft less attractive investments at the time
and thereby depressing the market for Aircraft 123; and (iii) the likelihood of
aircraft operators switching to more efficient aircraft, thereby depressing the
market for Aircraft 123.
   50
 Table of Contents
 ICON
Income Fund Eight B L.P.
 (A
Delaware Limited Partnership)
 Notes to
Consolidated Financial Statements
 December
31, 2008
  (4)
                    Leased
      Equipment at Cost -
continued
  Five
Pratt and Whitney 2037 Aircraft Engine Modules
 
 The
Partnership owned five Pratt and Whitney 2037 aircraft engine modules (the
“Engine Modules”) on lease to American Airlines, Inc., formerly TWA Airlines,
LLC (“TWA”).  On August 8, 2007, The Partnership sold all the Engine
Modules to an unaffiliated third-party for a gross sales price of $6,050,000. In
connection with the sale, the Partnership recorded net proceeds of approximately
$5,547,000 and a gain on sale of approximately $1,042,000.
 
 Over
the Road Rolling Stock, Manufacturing and Materials Handling
Equipment
 
 On
September 1, 2000, the Partnership, along with ICON Cash Flow Partners L.P. Six
(“L.P. Six”), ICON Cash Flow Partners L.P. Seven (“L.P. Seven”) and ICON Income
Fund Eight A L.P. (“Fund Eight A”), entities also managed by the General
Partner, formed ICON Cheyenne, LLC (“ICON Cheyenne”) for the purpose of
acquiring and managing a portfolio of equipment leases consisting of, among
other things, over the road rolling stock, manufacturing equipment and materials
handling equipment. The original transaction involved acquiring from Cheyenne
Leasing Company a portfolio of 119 leases with various expiration dates through
September 2007.
 
 At
December 31, 2006, the Partnership, L.P. Seven and Fund Eight A had ownership
interests of 97.73%, 1.27%, and 1.00%, respectively, in ICON
Cheyenne.  The outstanding balance of the non-recourse debt secured by
these assets was paid in full during 2006. During 2006, ICON Cheyenne sold
various pieces of its equipment portfolio for approximately $583,000 in cash and
recognized a gain of approximately $582,000 on these sales. During the second
quarter of 2007, ICON Cheyenne sold all of its remaining equipment to a
third-party for total sales proceeds of approximately $111,000.  ICON
Cheyenne recognized a total gain on the sale of approximately
$110,000.
 
 On
December 31, 2001, the Partnership, along with Fund Nine, formed ICON SPK
2023-A, LLC (“ICON SPK”) for the purpose of acquiring and managing a portfolio
of equipment leases consisting of materials handling, telecommunication and
computer equipment.  The original transaction involved acquiring a
portfolio of 32 leases with various lease expiration dates through April 2008.
During 2006, ICON SPK sold various pieces of its equipment portfolio for
approximately $460,000 in cash and recognized a loss of approximately $106,000
on these sales. During the second quarter of 2007, ICON SPK sold all of its
remaining equipment to a third-party for total sales proceeds of approximately
$348,000.  ICON SPK recognized a gain on the sale of approximately
$264,000.
 
 Aggregate
annual minimum future rentals receivable from the Partnership’s non-cancelable
lease consisted of the following at December 31, 2008:
 
 Years
      EndingDecember 31,2009
                        
                        $
                        6,540,0002010
                        
                        $
                        6,090,0002011
                        
                        $
                        4,455,000
 (5)
                  Investments
      in Joint Ventures
 
 The
Partnership and certain of its affiliates, entities also managed and controlled
by the General Partner, formed two joint ventures, discussed below, for the
purpose of acquiring and managing various assets.  The Partnership and
these affiliates have substantially identical investment objectives and
participate on the same terms and conditions.  The Partnership and the
other members have a right of first refusal to purchase the equipment, on a
pro-rata basis, if any of the other members desire to sell their interests in
the equipment or joint venture.
 
 ICON
Aircraft 126, LLC
 
 During
February 2002, the Partnership and Fund Nine formed ICON Aircraft 126 LLC (“ICON
126”) for the purpose of acquiring all of the outstanding shares of Delta
Aircraft Leasing Limited (“D.A.L.”), a Cayman Islands registered company that
owns, through an owner trust, an Airbus A340-313X aircraft (“Aircraft 126”).
Aircraft 126 was subject to a lease with Cathay at the time of purchase, which
was consummated during March 2002. The lease was initially scheduled to expire
in March 2006, but has been extended to July 1, 2011. The Partnership and Fund
Nine each have ownership interests of 50.0% in ICON 126. ICON 126 consolidates
the financial position and operations of D.A.L. in its consolidated financial
statements.
 
 Effective
March 27, 2006, in connection with the lease extensions, the approximately
$52,850,000 of non-recourse debt associated with Aircraft 126 was refinanced
after applying $583,000 from a reserve account established in connection with
the original lease with Cathay. The refinanced non-recourse debt matures on July
1, 2011 and requires a balloon payment of approximately $33,000,000 at maturity.
The interest rate of the refinanced debt was fixed at 6.104% under the terms of
the debt agreement, effective October 3, 2006.
 
 ICON 126
had a commitment with respect to Aircraft 126 to pay certain maintenance costs
that were incurred on or prior to March 27, 2006. ICON 126 had established a
maintenance reserve cash account under the original lease to pay for its portion
of these costs. This account was funded by free cash from the lease payments in
accordance with the terms of the original lease. During 2006, ICON 126
received $182,021 of capital contributions from both of its members, of which
$50,000 was for amounts relating to the maintenance reserve cash account and
$132,021 was related to costs paid by its members relating to the refinancing of
the non-recourse debt. During September 2006, approximately $1,153,000 was paid
for the maintenance costs. The maintenance account for Aircraft 126 was
cross-collateralized with the maintenance account for ICON 123. Under the terms
of this agreement, ICON 126 was required to pay on behalf of ICON 123, any
maintenance cost shortfalls incurred by the affiliate. On January 30, 2007, ICON
126 paid approximately $143,000 in maintenance costs from its maintenance
account on behalf of ICON 123.  The maintenance account and related
security interests were then terminated.   ICON 123 will
reimburse ICON 126 when the aircraft is sold. The excess cash remaining in ICON
126’s account of approximately $97,000 includes interest accreted in the amount
of approximately $38,000 through December 31, 2008.
 
 In
connection with the purchase of Aircraft 123, the owner trustee entered into two
first priority charge on cash deposit agreements pursuant to which, as discussed
above, the maintenance reserve cash account for Aircraft 126 was
cross-collateralized with the maintenance reserve cash account for Aircraft 123.
In addition, ICON 123 and ICON 126 are parties to a residual sharing agreement
with respect to the aircraft. See Note 12 – Commitments and Contingencies and
Off-Balance Sheet Transactions.
  
 51
 Table of Contents
 ICON
Income Fund Eight B L.P.
 (A
Delaware Limited Partnership)
 Notes to
Consolidated Financial Statements
 December
31, 2008
  (5)
                    Investments
      in Joint Ventures -
continued
  In light
of recent, unprecedented high fuel prices during 2008 and the related impact on
the airline industry, the General Partner reviewed the investment in Aircraft
126 as of June 30, 2008.  In accordance with the provisions of
FASB Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets” (“SFAS No. 144”) and based upon recent changes in the airline industry,
the General Partner determined that Aircraft 126 was impaired.
 
 Based on
the General Partner’s review, the residual value of Aircraft 126 exceeded the
expected undiscounted future cash flows of Aircraft 126 and, as a result, the
Partnership recorded an impairment charge representing the difference between
the residual value and the expected discounted future cash flows of Aircraft
126.  The expected discounted future cash flows of Aircraft 126 was
determined using a market approach, a recent appraisal for Aircraft 126 and
recent sales of similar aircraft, as well as other factors, including those
discussed below. As a result, as of June 30, 2008, ICON 126 recorded an
impairment loss on Aircraft 126 of approximately $3,900,000, of which the
Partnership’s share was approximately $1,950,000.
 
 The
following factors, among others, indicated that the full residual values of
Aircraft 126 might not be recoverable: (i) indications that lenders were willing
to finance less of the acquisition cost of four-engine aircraft, which increased
with each dollar rise of the price of fuel, thereby undermining the residual
value expectations of such aircraft; (ii) the rising cost of fuel was increasing
the operating costs of four-engine aircraft and similar capacity twin-engine
aircraft, thereby making such aircraft less attractive investments at the time
and thereby depressing the market for Aircraft 126; and (iii) the likelihood of
aircraft operators switching to more efficient aircraft, thereby depressing the
market for Aircraft 126.
 
 ICON
Aircraft 46835, LLC
 
 During
December 2002, the Partnership and Fund Nine formed a joint venture, ICON
Aircraft 46835, LLC (“Aircraft 46835”), in which the Partnership and Fund Nine
had ownership interests of 15% and 85%, respectively. Aircraft 46835 was formed
for the purpose of acquiring a McDonnell Douglas DC10-30F aircraft on lease to
FedEx. On December 27, 2002, the joint venture acquired the aircraft for
approximately $25,292,000, including approximately $22,292,000 of non-recourse
debt. The Partnership’s portion of the cash purchase price was approximately
$450,000. On March 30, 2007, Aircraft 46835 sold the aircraft to FedEx for
$4,260,000 and recognized a loss on the sale of approximately
$640,000.
 (6)
                  Investment
      in Option
 During
the fourth quarter of 2001, the Partnership invested $2,100,000 in an option to
purchase a 1994 Boeing 737-524 aircraft together with two engines (the “Boeing
Aircraft and Engines”) on lease to a United States based commercial
airline.  The purchase price of the option included a $400,000
promissory note, which was to mature in May 2012. On August 29, 2003, the
promissory note and all accrued interest were paid in full. At December 31,
2006, the General Partner determined that the Partnership’s investment in the
option to purchase the Boeing Aircraft and Engines was impaired and,
accordingly, the Partnership recognized an impairment loss of $2,100,000, which
reduced the carrying value of the option to zero. The General Partner’s decision
was based upon the fact that the option was currently out of the money and the
probability that the Partnership would not exercise the option, which expires
May 5, 2012.
   52
 Table of Contents
 ICON
Income Fund Eight B L.P.
 (A
Delaware Limited Partnership)
 Notes to
Consolidated Financial Statements
 December
31, 2008
 (7)
              Non-Recourse
      Long-Term Debt
 
 On March
14, 2006, the Partnership entered into a lease extension with Cathay with
respect to Aircraft 123 which extended the lease to October 1, 2011. Effective
March 14, 2006, in connection with the Cathay lease extension, the outstanding
non-recourse debt of approximately $52,850,000 was refinanced after applying
$282,000 from a reserve account established in connection with the original
lease with Cathay. The interest rate of the refinanced non-recourse long-term
debt was fixed at 6.1095% under the terms of the debt agreement, effective
October 3, 2006.
 
 The
Partnership had another non-recourse long-term debt obligation in connection
with Aircraft 47820. The debt accrued interest at 4.035% per year. The final
lease payment of approximately $2,900,000 was paid to the lender of the
non-recourse long-term debt upon the sale of the Aircraft and Engines on March
30, 2007, satisfying all remaining debt obligations.
 
 As of
December 31, 2008 and 2007, the Partnership had net debt financing costs of
$86,364 and $122,881, respectively.  For the years ended December 31,
2008 and 2007, the Partnership recognized amortization expense of $69,112 and
$11,948, respectively.
 
 The
aggregate maturities of non-recourse long-term debt, including the effects of
refinancing discussed above, consisted of the following at December 31,
2008:
 
 Years
      EndingDecember 31,2009
                      
                      $
                      4,029,2702010
                      
                      
                      3,826,7972011
                      
                      
                      34,490,236$
                      42,346,303
 (8)
                Revolving
      Line of Credit, Recourse
  On August
31, 2005, the Partnership, together with certain of its affiliates (entities
sponsored and organized by the General Partner) Fund Nine, ICON Income Fund
Ten, LLC (“Fund Ten”) and ICON Leasing Fund Eleven, LLC (“Fund
Eleven”), (collectively, the “Borrowers”) entered into a Commercial Loan
Agreement (the “Loan Agreement”), with California Bank & Trust (“CB&T”).
The Loan Agreement provided for a revolving line of credit of up to $17,000,000
pursuant to a senior secured revolving loan facility (the “Facility”) which is
secured by all assets of the Borrowers not subject to a first priority lien, as
defined in the Loan Agreement. Each of the Borrowers is jointly and severally
liable for all amounts borrowed under the Facility. Amounts available under the
Facility are subject to a borrowing base that is determined, subject to certain
limitations, on the present value of the future receivables under certain lease
agreements in which the Borrowers have a beneficial interest.
 
 As part
of the Loan Agreement, the Borrowers are required to comply with certain
financial covenants, including a minimum debt coverage ratio, a tangible net
worth covenant, a leverage ratio and a minimum liquidity covenant. The Loan
Agreement prohibits any Borrower from declaring or paying any distribution to
investors if such a payment would cause such Borrower to become non-compliant
with the financial covenants in the Loan Agreement.  The Borrowers
were obligated to pay a quarterly commitment fee of 0.5% on unused commitments
under the Facility.
 
 In
addition, the Borrowers entered into a Contribution Agreement (the “Contribution
Agreement”), pursuant to which the Borrowers agreed to certain restrictions on
the amounts and terms of their respective borrowings under the Facility in order
to minimize the risk that a Borrower would be unable to repay its portion of the
outstanding obligations under the Facility at any time. The Contribution
Agreement also provides that, in the event a Borrower pays an amount under the
Contribution Agreement in excess of its share of the total obligations under the
Facility, whether by reason of an event of default or otherwise, the other
Borrowers will immediately make a contribution payment to such Borrower in such
amount that the aggregate amount paid by each Borrower reflects its allocable
share of the aggregate obligations under the Facility. The Borrowers’
obligations to each other under the Contribution Agreement are collateralized by
a subordinate lien on the assets of each Borrower.
  53
 Table of Contents
 ICON
Income Fund Eight B L.P.
 (A
Delaware Limited Partnership)
 Notes to
Consolidated Financial Statements
 December
31, 2008
 (8)
              Revolving
      Line of Credit, Recourse –
continued
  On
December 26, 2006, the Borrowers entered into a Loan Modification Agreement (the
“Loan Modification”) to the Loan Agreement. The Loan Modification extended the
Facility from August 31, 2007 to September 30, 2008 and lowered (i) the interest
rate for advances under the Facility from CB&T’s prime rate plus 0.25% to
CB&T’s prime rate and (ii) the interest rate on the five separate advances
that are permitted to be made under the Facility at the rate at which United
States dollar deposits can be acquired by CB&T in the London Interbank
Eurocurrency Market (the “LIEM Rate”) plus 2.75% per year to the LIEM Rate plus
2.5% per year. In addition, pursuant to the terms of the Loan Modification, the
Borrowers no longer had to maintain a cash reserve.
 
 On June
20, 2007, the Loan Agreement, the Contribution Agreement and the Loan
Modification were modified to add Fund Twelve as a Borrower.
 
 On May 1,
2008, the Borrowers entered into an additional loan modification agreement. The
agreement increased the revolving line of credit to up to $30,000,000 and
extended the expiration date to April 30, 2010. The Borrowers may request a one
year extension to the revolving line of credit within 390 days of the expiration
date, but CB&T has no obligation to extend. In addition, the quarterly
unused commitment fee of 0.5% was reduced to 0.25% on unused commitments under
the Facility. The interest rate at December 31, 2008 was 3.25%.
 
 The
Borrowers were in compliance with the covenants under the Loan Agreement at
December 31, 2008 and 2007.  The Borrowers were also in compliance
with the Contribution Agreement at December 31, 2008 and 2007 and no amounts
were due to or payable by the Partnership under the Contribution Agreement as of
such date.
 
 Aggregate
borrowings by all Borrowers under the Facility amounted to $6,185,000 at
December 31, 2008. The balances of $1,185,000 and $5,000,000 were borrowed by
the Partnership and Fund Eleven, respectively. On February 26, 2009, Fund Eleven
borrowed an additional $600,000 under the Facility.
 
 (9)
              Transactions
      with Related Parties
 
 In
accordance with the terms of the LP Agreement, the Partnership paid the General
Partner (i) management fees ranging from 1% to 7% based on a percentage of the
rentals recognized either directly by the Partnership or through its joint
ventures and (ii) acquisition fees, through the end of the reinvestment period,
of 3% of the gross value of the Partnership’s investments.  In
addition, the General Partner was reimbursed for certain administrative expenses
incurred in connection with the Partnership’s operations.
 
 The
General Partner performs certain services relating to the management of the
Partnership’s equipment leasing and other financing activities.  Such
services include, but are not limited to, the collection of lease payments from
the lessees of the equipment, re-leasing services in connection with equipment
which is off-lease, inspections of the equipment, liaising with and general
supervision of lessees to assure that the equipment is being properly operated
and maintained, monitoring performance by the lessees of their obligations under
the leases and the payment of operating expenses.
 54
 Table of Contents
 ICON
Income Fund Eight B L.P.
 (A
Delaware Limited Partnership)
 Notes to
Consolidated Financial Statements
 December
31, 2008
  (9)
              Transactions
      with Related Parties - continued
  Administrative
expense reimbursements are costs incurred by the General Partner or its
affiliates that are necessary to the Partnership’s operations.  These costs
include the General Partner’s and its affiliates’ legal, accounting, investor
relations and operations personnel, as well as professional fees and other costs
that are charged to the Partnership based upon the percentage of time such
personnel dedicate to the Partnership.  Excluded are salaries and related
costs, travel expenses and other administrative costs incurred by individuals
with a controlling interest in the General Partner.
 
 Although
the General Partner continues to provide these services, effective May 1, 2006,
the General Partner waived its rights to all future management fees and
administrative expense reimbursements.
 
 The
General Partner also has a 1% interest in the Partnership’s profits, losses,
cash distributions and liquidation proceeds. The Partnership paid distributions
to the General Partner of $18,455, $43,519 and $59,944, for the years ended
December 31, 2008, 2007 and 2006, respectively. Additionally, the General
Partner’s interest in the Partnership’s net (loss) income was $(64,536), $11,470
and $(6,144), for the years ended December 31, 2008, 2007 and 2006,
respectively.
 
 In
January 2007, ICON 123 repaid outstanding maintenance costs of approximately
$1,546,000 with the balance in its maintenance reserve cash account of
approximately $1,403,000. The remaining balance of approximately $143,000 was
borrowed from ICON 126 and will be reimbursed when Aircraft 123 is sold. At
December 31, 2008, ICON 126’s balance in its reserve account was approximately
$97,000, inclusive of accreted interest.
 
 Fees and
other expenses charged to operations by the Partnership and paid to the General
Partner or its affiliates for the year ended December 31, 2006 were as
follows:
 
 Entity
                          
                          Capacity
                          
                          Description
                          
                          2006ICON
      Capital Corp.
                          
                          General
      Partner
                          
                          Management
      fees
                          
                          $
                          410,842ICON
      Capital Corp.
                          
                          General
      Partner
                          
                          Administrative
      fees
                          
                          $
                          161,980
 
 There
were no charges during the years ended December 31, 2008 and 2007 since the fees
were waived effective May 1, 2006. However, if the charges were made the total
management fees for the years ended December 31, 2008 and 2007 would have been
approximately $358,000 and $466,000, respectively. If the charges were made the
total administrative expense reimbursements for the years ended December 31,
2008 and 2007 would have been approximately $315,000 and $401,000,
respectively.
  (10)
              Fair
      Value of Financial Instruments
 
 Fair
value information with respect to the Partnership's leased assets and
liabilities is not separately provided since (i) SFAS No. 107, “Disclosures
About Fair Values of Financial Instruments,” does not require fair value
disclosures of lease arrangements and (ii) the carrying value of financial
assets, other than lease related investments, and the recorded value of recourse
debt approximates fair value due to their short-term maturities and variable
interest rates. The fair value of the Partnership's non-recourse debt of
approximately $44,738,000 at December 31, 2008, is estimated using a discounted
cash flow analysis, based on the current incremental borrowing rate of the most
recent borrowings by the Partnership and the other programs sponsored by the
General Partner.
 
 (11)
              Concentrations
      of Risk
 
 The
Partnership's cash and cash equivalents are held principally at two financial
institutions and at times may exceed insured limits. The Partnership has placed
these funds in high quality institutions in order to minimize the risk of loss
relating to exceeding insured limits.
 
 Concentrations
of credit risk with respect to lessees are dispersed across different industry
segments within the United States of America and throughout the world.
Accordingly, the Partnership maybe exposed to business and economic risk.
Although the Partnership does not currently foresee a concentrated credit risk
associated with these lessees, lease payments are dependent upon the financial
stability of the lessees.
 
 The
Partnership has approximately 85.5% of its assets and approximately 95.2% of its
liabilities concentrated in the airline industry at December 31, 2008 and had
approximately 81.7% of its assets and approximately 96.0% of its liabilities
concentrated in the airline industry at December 31, 2007.
 
 For the
years ended December 31, 2008, 2007 and 2006, the Partnership had two lessees
that accounted for approximately 100%, 85.8% and 83.5%, respectively, of its
rental income and finance income.
  55
 Table of Contents
 ICON
Income Fund Eight B L.P.
 (A
Delaware Limited Partnership)
 Notes to
Consolidated Financial Statements
 December
31, 2008
 
 (12)
              Commitments
      and Contingencies and Off-Balance Sheet
  Transactions
 
 The
Partnership has entered into residual sharing agreements with various third
parties.  In connection with these agreements residual proceeds
received in excess of specific amounts will be shared with these third parties
based on specific formulas.
 
 ICON 123
had a commitment with respect to Aircraft 123 to pay certain maintenance costs
that were incurred on or prior to March 14, 2006. ICON 123 had established,
under the original lease, a maintenance reserve cash account to pay for its
portion of these costs. For the year ended December 31, 2006, the Partnership
accrued approximately $1,157,000 relating to the maintenance costs. In January
2007, ICON 123 repaid outstanding maintenance costs of approximately
$1,546,000.  The balance in its maintenance reserve cash account was
approximately $1,403,000. As discussed in Note 9 above, approximately $143,000
of the remaining costs were borrowed and will be repaid when Aircraft 123 is
sold at the end of the lease.
 
 Pursuant
to the terms of the Airtrade Residual Sharing Agreement, all proceeds received
in connection with sales or lease renewals of Aircraft 123 and Aircraft 126 in
excess of $8,500,000 of the applicable loan balance associated with each
aircraft will be allocated 55% to ICON 126 or 123, as applicable, and 45% will
be allocated to Airtrade.
  The
Partnership has rights to 5.93% of the profits, losses, and cash flows from ICON
Cash Flow Partners L.P. Seven’s limited partnership interest in an entity that
owns a 100% interest in a mobile offshore drilling rig that is subject to lease
with Rowan Companies, Inc. The fair value of this interest was determined using
an appraisal and cash flow analysis.  During the year ended December
31, 2006, the Partnership received approximately $267,000 in cash distributions
related to this interest. There were no cash distributions related to these
rights for the two years ended December 31, 2008.
 
 At the
time the Partnership acquires or divests of its interest in an equipment lease
or other financing transaction, the Partnership may, under very limited
circumstances, agree to indemnify the seller or buyer for specific contingent
liabilities. The General Partner believes that any liability of the Partnership
that may arise as a result of any such indemnification obligation will not have
a material adverse effect on the consolidated financial condition of the
Partnership taken as a whole.
 
 At
December 31, 2008, the Partnership had both non-recourse and recourse debt
obligations. The lender has a security interest in equipment relating to each
non-recourse debt instrument and an assignment of the rental payments under the
lease associated with the equipment. In that case, the lender is being paid
directly by the lessee. If the lessee defaults on the non-recourse debt, the
equipment would be returned to the lender in extinguishment of the non-recourse
debt. At December 31, 2008, the Partnership’s outstanding non-recourse debt
obligations were $42,346,303. The Partnership is a party to the Facility, as
discussed in Note 8 above. The Partnership had $1,185,000 of borrowings under
this Facility at December 31, 2008.
 
 56
 Table of Contents
 ICON
Income Fund Eight B L.P.
 (A
Delaware Limited Partnership)
 Notes to
Consolidated Financial Statements
 December
31, 2008
  (13)
              Geographic
      Information
 
 Geographic
information for revenue, based on the country of origin, and long-lived assets,
which includes finance leases, operating leases, net of accumulated depreciation
and investments in joint ventures is as follows:
 
 Year Ended December 31,
2008UnitedStates
                  
                  
                  Asia
                  
                  
                  TotalRevenue:Rental
      income
                  
                  $
                  -
                  
                  
                  $
                  6,376,364
                  
                  
                  $
                  6,376,364Finance
      income
                  
                  $
                  790,254
                  
                  
                  $
                  -
                  
                  
                  $
                  790,254Loss
      from investments in joint ventures
                  
                  $
                  -
                  
                  
                  $
                  (2,168,613
                  )
                  
                  $
                  (2,168,613
                  )At December 31, 2008UnitedStates
                  
                  
                  Asia
                  
                  
                  TotalLong-lived
      assets:Net
      investment in finance leases
                  
                  $
                  4,920,686
                  
                  
                  $
                  -
                  
                  
                  $
                  4,920,686Equipment
      on operating leases, net
                  
                  $
                  -
                  
                  
                  $
                  45,495,306
                  
                  
                  $
                  45,495,306Investments
      in joint ventures
                  
                  $
                  -
                  
                  
                  $
                  1,267,392
                  
                  
                  $
                  1,267,392Year Ended December 31,
2007UnitedStates
                  
                  
                  Asia
                  
                  
                  TotalRevenue:Rental
      income
                  
                  $
                  2,204,389
                  
                  
                  $
                  6,376,363
                  
                  
                  $
                  8,580,752Finance
      income
                  
                  $
                  742,064
                  
                  
                  $
                  -
                  
                  
                  $
                  742,064Income
      (loss) from investments in joint ventures
                  
                  $
                  5,815
                  
                  
                  $
                  (288,397
                  )
                  
                  $
                  (282,582
                  )At December 31, 2007UnitedStates
                  
                  
                  Asia
                  
                  
                  TotalLong-lived
      assets:Net
      investment in finance leases
                  
                  $
                  6,685,459
                  
                  
                  $
                  -
                  
                  
                  $
                  6,685,459Equipment
      on operating leases, net
                  
                  $
                  -
                  
                  
                  $
                  53,201,855
                  
                  
                  $
                  53,201,855Investments
      in joint ventures
                  
                  $
                  -
                  
                  
                  $
                  3,413,505
                  
                  
                  $
                  3,413,505
  (14)
              Unit
      Redemptions
 
 The
Partnership redeemed 150, 1,000 and 1,300 Units for the years ended December 31,
2008, 2007 and 2006, respectively. The redemption amounts are calculated
according to a specified redemption formula pursuant to the LP Agreement.
Redeemed Units have no voting rights and do not share in distributions. The LP
Agreement limits the number of Units that can be redeemed in any one year and
redeemed Units may not be reissued. Redeemed Units are accounted for as a
reduction of partners' equity.
 
 57
 Table of Contents
 ICON
Income Fund Eight B L.P.
 (A
Delaware Limited Partnership)
 Notes to
Consolidated Financial Statements
 December
31, 2008
 
 (15)
              Selected
      Quarterly Financial Data
 
 The
following table is a summary of selected financial data, by
quarter:
 
 (unaudited)Quarters Ended in 2008
                  
                  
                  Year
      EndedMarch 31,
                  
                  
                  June 30,
                  
                  
                  September 30,
                  
                  
                  December 31,
                  
                  
                  December 31, 2008Total
      revenue
                  
                  $
                  1,772,581
                  
                  
                  $
                  (209,709
                  )
                  
                  $
                  1,732,941
                  
                  
                  $
                  1,702,597
                  
                  
                  $
                  4,998,410Net
      loss allocable to limited partners
                  
                  $
                  (256,691
                  )
                  
                  $
                  (5,817,161
                  )
                  
                  $
                  (166,661
                  )
                  
                  $
                  (148,515
                  )
                  
                  $
                  (6,389,028
                  )Weighted
      average number of units oflimited
      partnership interests outstanding
                  
                  
                  740,503
                  
                  
                  
                  740,380
                  
                  
                  
                  740,380
                  
                  
                  
                  740,380
                  
                  
                  
                  740,411Net
      loss per weighted averageunit
      of limited partnership interests
                  
                  $
                  (0.35
                  )
                  
                  $
                  (7.86
                  )
                  
                  $
                  (0.23
                  )
                  
                  $
                  (0.19
                  )
                  
                  $
                  (8.63
                  )(unaudited)Quarters Ended in 2007Year
      EndedMarch 31,
                  
                  
                  June 30,
                  
                  
                  September 30,
                  
                  
                  December 31,
                  
                  
                  December 31, 2007Total
      revenue
                  
                  $
                  2,516,098
                  
                  
                  $
                  2,364,321
                  
                  
                  $
                  2,890,568
                  
                  
                  $
                  1,835,338
                  
                  
                  $
                  9,606,325Net
      (loss) income allocable to limited partners
                  
                  $
                  (119,821
                  )
                  
                  $
                  281,986
                  
                  
                  $
                  957,940
                  
                  
                  $
                  15,404
                  
                  
                  $
                  1,135,509Weighted
      average number of units oflimited
      partnership interests outstanding
                  
                  
                  741,530
                  
                  
                  
                  741,365
                  
                  
                  
                  740,530
                  
                  
                  
                  740,985
                  
                  
                  
                  740,985Net
      (loss) income per weighted averageunit
      of limited partnership interests
                  
                  $
                  (0.16
                  )
                  
                  $
                  0.38
                  
                  
                  $
                  1.29
                  
                  
                  $
                  0.02
                  
                  
                  $
                  1.53
  (16)
                Income
      Tax Reconciliation (unaudited)
 No
provision for income taxes has been recorded by the Partnership since the
liability for such taxes is the responsibility of each of the individual
partners rather than the Partnership. The Partnership's income tax returns are
subject to examination by the federal and State taxing authorities, and changes,
if any, could adjust the individual income taxes of the partners.
 
 At
December 31, 2008 and 2007, the partners’ capital accounts included in the
consolidated financial statements totaled $8,744,478 and $17,046,972,
respectively, compared to the partners’ capital accounts for federal income tax
purposes of $22,237,949 and $29,216,797, respectively. The differences arise
primarily from sales and offering expenses reported as a reduction in the
limited partners’ capital accounts for financial reporting purposes, but not for
federal income tax reporting purposes, and differences in depreciation and
amortization between financial reporting purposes and federal income tax
purposes.
 
  58
 Table of Contents
 ICON
Income Fund Eight B L.P.
 (A
Delaware Limited Partnership)
 Notes to
Consolidated Financial Statements
 December
31, 2008
  (16)
              Income
      Tax Reconciliation (unaudited) –
continued
 
 The
following table reconciles net (loss) income for financial statement reporting
purposes to the net (loss) income for federal income tax purposes, for the years
ended December 31, 2008, 2007 and 2006:
 
 2008
                  
                  
                  2007
                  
                  
                  2006Net
      (loss) income per consolidated financial statements
                  
                  $
                  (6,453,564
                  )
                  
                  $
                  1,146,979
                  
                  
                  $
                  (614,426
                  )Adjustments
      for direct finance lease
                  
                  
                  -
                  
                  
                  
                  1,470,400
                  
                  
                  
                  2,047,705Deferred
      (loss) income
                  
                  
                  (7,473,035
                  )
                  
                  
                  -
                  
                  
                  
                  169,685Depreciation
      and impairments
                  
                  
                  8,386,304
                  
                  
                  
                  6,249,533
                  
                  
                  
                  8,807,781Tax
      (loss) income from consolidated joint venture
                  
                  
                  (2,591,796
                  )
                  
                  
                  (8,122,961
                  )
                  
                  
                  544,659(Loss)
      gain on sale of equipment
                  
                  
                  (73,810
                  )
                  
                  
                  5,456,803
                  
                  
                  
                  (491,734
                  )Other
      items
                  
                  
                  3,075,985
                  
                  
                  
                  (954,177
                  )
                  
                  
                  (6,696,038
                  )Net
      (loss) income for federal income tax purposes
                  
                  $
                  (5,129,916
                  )
                  
                  $
                  5,246,577
                  
                  
                  $
                  3,767,632
 
 
 59
 Table of Contents
  
 Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
 
 On
November 26, 2007, ICON Income Fund Eight B L.P. (the “Registrant”) terminated
the services of Hays & Company LLP (“Hays”) as its independent registered
public accounting firm for the fiscal year ended December 31,
2007.  The decision to dismiss Hays was recommended and approved by
the board of directors of ICON Capital Corp. (the “General Partner”), the
General Partner of the Registrant (“Board of Directors”). The audit report of
Hays on the balance sheet as of December 31, 2006 contained no adverse opinion
or disclaimer of opinion and was not qualified or modified as to uncertainty,
audit scope or accounting principle.
 
 During
the Registrant’s fiscal year ended December 31, 2006, and the subsequent interim
period through November 26, 2007, (i) there were no “disagreements” (as defined
in Item 304(a)(1)(iv) of Regulation S-K and related instructions) with Hays on
any matter of accounting principle or practice, financial statement disclosure,
or auditing scope or procedure that, if not resolved to the satisfaction of
Hays, would have caused Hays to make reference to the subject matter of the
disagreement in connection with its report and (ii) there were no “reportable
events” (as defined in Item 304(a)(1)(v) of Regulation S-K and related
instructions), except the following with regard to the internal controls of the
Registrant’s General Partner:
  While
evaluating the General Partner’s disclosure controls and procedures during 2006,
Hays advised the General Partner and the General Partner recognized that greater
internal controls were needed to aid in a more efficient closing of the
Registrant’s financial statements, thereby requiring the General Partner to hire
additional skilled accounting staff. In response, the General Partner hired
seven additional accounting staff members, two tax staff members, including a
director of tax, and replaced the accounting management team over the past two
years.  The most senior accountants are certified public accountants and/or
have significant experience with public reporting entities and make up the
accounting management team, including the Senior Vice President and Chief
Financial Officer.  These accountants have more than 18, 17, 17, and 12
years, respectively, of experience with public reporting entities. The director
of tax has more than 35 years of experience with public reporting
entities.
  The
Registrant provided Hays with a copy of this disclosure and Hays furnished the
Registrant with a letter dated November 30, 2007, addressed to the Securities
and Exchange Commission (the “SEC”) stating whether or not it agrees with the
above statements.  A copy of Hays’ letter dated November 30, 2007, is
attached as Exhibit 16.1 to the Form 8-K that was filed with the SEC on November
30, 2007.
 
 On
November 26, 2007, the Board of Directors engaged Ernst & Young LLP (“Ernst
& Young”) as the Registrant’s independent registered public accounting firm
for the fiscal years ended December 31, 2007 and 2008. During the Registrant’s
fiscal year ended December 31, 2006 and the subsequent interim period through
November 26, 2007, neither the Registrant nor anyone acting on its behalf
consulted with Ernst & Young regarding (i) the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Registrant’s consolidated
financial statements and no written report or oral advice was provided by Ernst
& Young to the Registrant that Ernst & Young concluded was an important
factor considered by the Registrant in reaching a decision as to the accounting,
auditing or financial reporting issue or (ii) any matter that was either the
subject of a “disagreement” (as defined in Item 304(a)(1)(iv) of Regulation S-K
and related instructions) or (iii) a “reportable event” (as defined in Item
304(a)(1)(v) of Regulation S-K and related instructions).
 
  60
 Table of Contents
  
 Item 9A(T). Controls and Procedures
 
 Evaluation of disclosure controls
and procedures
 
 In
connection with the preparation of this Annual Report on Form 10-K for the
period ended December 31, 2008, as well as the financial statements for our
General Partner, our General Partner carried out an evaluation, under the
supervision and with the participation of the management of our General Partner,
including its Co-Chief Executive Officers and Chief Financial Officer, of the
effectiveness of the design and operation of our General Partner’s disclosure
controls and procedures as of the end of the period covered by this Report
pursuant to the Securities Exchange Act of 1934. Based on the foregoing
evaluation, the Co-Chief Executive Officers and the Chief Financial Officer
concluded that our General Partner’s disclosure controls and procedures were
effective.
 
 In
designing and evaluating our General Partner’s disclosure controls and
procedures, our General Partner recognized that disclosure controls and
procedures, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the disclosure
controls and procedures are met. Our General Partner’s disclosure controls and
procedures have been designed to meet reasonable assurance standards. Disclosure
controls and procedures cannot detect or prevent all error and fraud. Some
inherent limitations in disclosure controls and procedures include costs of
implementation, faulty decision-making, simple error and mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the controls. The
design of any system of controls is based, in part, upon certain assumptions
about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all anticipated and
unanticipated future conditions. Over time, controls may become inadequate
because of changes in conditions, or the degree of compliance with established
policies or procedures.
 
 Our
General Partner’s Co-Chief Executive Officers and Chief Financial Officer have
determined that no weakness in disclosure controls and procedures had any
material effect on the accuracy and completeness of our financial reporting and
disclosure included in this Annual Report on Form 10-K.
 
 Evaluation
of internal control over financial reporting
 
 Our
General Partner is responsible for establishing and maintaining adequate
internal control over financial reporting. Internal control over financial
reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities
Exchange Act of 1934, as amended, as 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 generally
accepted accounting principles and includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of the company's assets that could have a material effect on the financial
statements.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of effectiveness
to future periods are subject to the risks that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
 
 Our
General Partner assessed the effectiveness of its internal control over
financial reporting as of December 31, 2008. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in “Internal Control —
Integrated Framework.” Based on its assessment, our General Partner believes
that, as of December 31, 2008, its internal control over financial reporting is
effective.
 
 This
Annual Report does not include an attestation report of the Partnership’s
registered public accounting firm pursuant to the temporary rules of the
Securities and Exchange Commission that permits the Partnership to only provide
management’s report in this Annual Report.
 
 Item 9B. Other Information
 
 Not
applicable.
  
 61
 Table of Contents
 PART III
 
 Item 10. Directors, Executive Officers of the Registrant's General
Partner and Corporate Governance
 
 Our
General Partner, ICON Capital Corp., a Delaware corporation (“ICON”), was formed
in 1985.  Our General Partner's principal offices are located at 100
Fifth Avenue, 4th Floor, New York, New York 10011, and the telephone number
is (212) 418-4700.
 
 In
addition to the primary services related to our disposing of investments,
our General Partner provides services relating to the day-to-day management
of our equipment. These services include collecting payments due from lessees,
remarketing equipment that is off-lease, inspecting equipment, serving as a
liaison with lessees, supervising equipment maintenance, and monitoring
performance by lessees of their obligations, including payment of rent and all
operating expenses.
  Name
              
              Age
              
              TitleThomas
      W. Martin
              
              55
              
              Chairman
      and DirectorMichael
      A. Reisner
              
              38
              
              Co-Chief
      Executive Officer, Co-President, and DirectorMark
      Gatto
              
              36
              
              Co-Chief
      Executive Officer, Co-President, and DirectorJoel
      S. Kress
              
              36
              
              Executive
      Vice President — Business and Legal AffairsAnthony
      J. Branca
              
              40
              
              Senior
      Vice President and Chief Financial OfficerH.
      Daniel Kramer
              
              57
              
              Senior
      Vice President and Chief Marketing OfficerDavid
      J. Verlizzo
              
              36
              
              Senior
      Vice President — Business and Legal AffairsCraig
      A. Jackson
              
              50
              
              Senior
      Vice President — Remarketing and Asset ManagementHarry
      Giovani
              
              34
              
              Senior
      Vice President — Risk
 
 Thomas W.
Martin, Chairman, has been a Director since August 1996.  Prior
to joining ICON, Mr. Martin was the Executive Vice President, Chief Financial
Officer, and a co-founder of Griffin Equity Partners, Inc. from October 1993 to
August 1996.  Prior to that, Mr. Martin was Senior Vice President of Gemini
Financial Holdings, Inc. from April 1992 to October 1993 and he held the
position of Vice President at Chancellor Corporation (an equipment leasing
company) for 7 years. Mr. Martin has a B.S. degree from University of New
Hampshire. Mr. Martin has been in the equipment leasing business since
1983.
 
 Michael A.
Reisner, Co-Chief Executive Officer, Co-President, and Director
joined ICON in 2001. Mr. Reisner was previously Executive Vice President, Chief
Financial Officer, and Director.  In addition, Mr. Reisner was formerly
General Counsel and he also formerly held the position of Executive Vice
President – Acquisitions.  Previously, from 1996 to 2001, Mr.
Reisner was an attorney with Brodsky Altman & McMahon, LLP in New York,
concentrating on commercial transactions.  Mr. Reisner received a J.D. from
New York Law School and a B.A. from the University of
Vermont.
 
 Mark
Gatto, Co-Chief Executive Officer, Co-President, and Director
originally joined ICON in 1999 and was previously Executive Vice President,
Chief Acquisitions Officer and Director.  Mr. Gatto was formerly Executive
Vice President – Business Development from February 2006 to May 2007 and
Associate General Counsel from November 1999 through October 2000.  Mr.
Gatto is responsible for business and corporate development, including the
acquisition of equipment subject to lease.  Before serving as Associate
General Counsel, Mr. Gatto was an attorney with Cella & Goldstein in New
Jersey, concentrating on commercial transactions and general litigation matters.
From November 2000 to June 2003, Mr. Gatto was Director of Player Licensing for
the Topps Company and, in July 2003, he co-founded a specialty business
consulting firm in New York City and served as its managing partner before
re-joining ICON in April 2005.  Mr. Gatto received an M.B.A from the W.
Paul Stillman School of Business at Seton Hall University, a J.D. from
Seton Hall University School of Law, and a B.S. from
Montclair State University.
   62
 Table of Contents
 
 Joel S.
Kress, Executive Vice President – Business and Legal Affairs, started his
tenure with ICON in August 2005 as Vice President and Associate General Counsel.
 In February 2006, he was promoted to Senior Vice President and General
Counsel, and in May 2007 he was promoted to his current position.
 Previously, from 2001 to 2005, Mr. Kress was an attorney with Fried,
Frank, Harris, Shriver & Jacobson LLP in New York and London, England,
concentrating on mergers and acquisitions, corporate finance and financing
transactions (including debt and equity issuances) and private equity
investments.  Mr. Kress received a J.D. from Boston University School of
Law and a B.A. from Connecticut College.
 
 Anthony J.
Branca,Chief Financial
Officer, originally joined ICON in January 2007 and was previously Senior Vice
President – Accounting and Finance. Mr. Branca was Director of Corporate
Reporting & Analysis for The Nielsen Company (formerly VNU) from May 2005
until January 2007, and held various other management positions with The Nielsen
Company from July 1997 through May 2005.  Previously, from 1994 through
1997, Mr. Branca was employed as a senior accountant at Fortune Brands and
started his career as an auditor with KPMG Peat Marwick in 1991.
 Mr. Branca received a B.B.A. from Pace University.
 
 H. Daniel
Kramer, Senior Vice President and Chief Marketing Officer, joined ICON in
2008.  Mr. Kramer has more than 30 years of equipment leasing and
structured finance experience. Most recently, from 2006 to 2008, Mr. Kramer was
part of CIT Commercial Finance, Equipment Finance Division offering equipment
leasing and financing solutions to complement public and private companies’
capital structure.  Prior to that role, from 2003 to 2006, Mr. Kramer was
Senior Vice President, National Sales Manager with GMAC Commercial Equipment
Finance leading a direct sales origination team, from 2001 to 2003, Senior
Vice President and National Sales Manager for ORIX Commercial Structured
Equipment Finance division, and President of Kramer, Clark & Company
for 12 years providing financial consulting services to private and public
companies, including structuring and syndicating private placements, equipment
leasing and recapitalizations.
 
 David J.
Verlizzo has been Senior Vice President – Business and Legal
Affairs since July 2007.  Mr. Verlizzo was formerly Vice
President and Deputy General Counsel from February 2006 to July 2007 and was
Assistant Vice President and Associate General Counsel from May 2005 until
January 2006.  Previously, from 2001 to 2005, Mr. Verlizzo was an
attorney with Cohen Tauber Spievack & Wagner LLP in New York,
concentrating on public and private securities offerings, securities law
compliance and corporate and commercial transactions.  Mr. Verlizzo
received a J.D. from Hofstra University School of Law and a B.S. from The
University of Scranton.
 
 Craig A.
Jackson has been Senior Vice President – Remarketing and Asset
Management since March 2008. Mr. Jackson was previously Vice President –
Remarketing and Portfolio Management from February 2006 through March 2008.
Previously, from October 2001 to 2006, Mr. Jackson was President and
founder of Remarketing Services, Inc., a transportation equipment remarketing
company. Prior to 2001, Mr. Jackson served as Vice President of Remarketing
and Vice President of Operations for Chancellor Fleet Corporation (an equipment
leasing company).  Mr. Jackson received a B.A. from
Wilkes University.
 
 Harry
Giovani, Senior Vice President – Risk, joined ICON in April 2008. Most
recently, from 2007 to 2008, he was Vice President for FirstLight Financial
Corporation, responsible for underwriting and syndicating middle market
leveraged loan transactions. Previously, from 2004 to 2007, he spent three years
at GE Commercial Finance, initially as an Assistant Vice President in the
Intermediary Group, where he was responsible for executing middle market
transactions in a number of industries including manufacturing, steel, paper,
pharmaceutical, technology, chemicals and automotive, and later as a Vice
President in the Industrial Project Finance Group where he originated highly
structured project finance transactions. He started his career at Citigroup’s
Citicorp Securities and CitiCapital divisions, where he spent six years in a
variety of roles of increasing responsibility including underwriting,
origination and strategic marketing/business development. Mr. Giovani graduated
from Cornell University in 1996 with a B.S. in Finance.
  
 63
 Table of Contents
 
 Code
of Ethics
 
 Our
General Partner, on our behalf, has adopted a code of ethics for its Co-Chief
Executive Officers and Chief Financial Officer. The Code of Ethics is available
free of charge by requesting it in writing from our General Partner. Our General
Partner's address is 100 Fifth Avenue, 4th Floor,
New York, New York 10011.
 
 Item 11. Executive Compensation
 
 We have
no directors or officers.  Our General Partner and its affiliates were
paid or accrued the following compensation and reimbursement for costs and
expenses for the year ended December 31, 2006.
 
 Effective
May 1, 2006, our General Partner waived its rights to all future management fees
and administrative expense reimbursements.
 
 Entity
                          
                          Capacity
                          
                          Description
                          
                          2006ICON
      Capital Corp.
                          
                          General
      Partner
                          
                          Management
      fees
                          
                          $
                          410,842ICON
      Capital Corp.
                          
                          General
      Partner
                          
                          Administrative
      fees
                          
                          $
                          161,980
 
 Our
General Partner also has a 1% interest in our profits, losses, cash
distributions and liquidation proceeds. We paid distributions to our General
Partner of $18,455, $­­­­43,519 and $59,944, for the years ended
December 31, 2008, 2007 and 2006, respectively. Our General Partner’s interest
in our net (loss) income was $(64,536), 11,470 and $(6,144), for the years ended
December 31, 2008, 2007 and 2006, respectively.
 
 
 Item 12. Security Ownership of Certain Beneficial Owners and the
General Partner and Related Security Holder Matters
 (a)
              We
      do not have any securities authorized for issuance under any equity
      compensation plan. No person of record owns, or is known by us to own,
      beneficially more than 5% of any class of our
  securities.
 
 (b)
              As
      of February 28, 2009, Directors and Officers of our General Partner do not
      own any of our equity securities.
 
 (c)
              Neither
      we nor our General Partner are aware of any arrangements with respect to
      our securities, the operation of which may at a subsequent date result in
      a change of control of us.
 
 Item 13. Certain Relationships and Related Transactions, and
Director Independence
 
 See Item
11 for a discussion of our related party transactions. See Notes 5, 9 and 12 to
our consolidated financial statements for a discussion of our investments in
joint ventures and transactions with related parties.
 
  64
 Table of Contents
  
 Item 14. Principal Accounting Fees and Services
 
 During
the years ended December 31, 2008 and 2007, our auditors provided audit services
relating to our Annual Report on Form 10-K and our Quarterly Reports on Form
10-Q.  Additionally, our auditors provided other services in the form of
tax compliance work.
 
 Hays
& Company LLP (“Hays”) was our independent registered public accounting firm
in 2006 and 2007.  On November 26, 2007, the Board of Directors of our
General Partner terminated the services of Hays as our independent registered
public accounting firm.  As a result of Hays’ termination, Hays did
not complete the audit of our financial statements for the year ended December
31, 2007.   On November 26, 2007, the Board of Directors engaged
Ernst & Young LLP as the Registrant’s independent registered public
accounting firm for the fiscal year ending December 31, 2007.  The
following table presents the fees for both audit and non–audit services rendered
for the years ended December 31, 2008 and 2007:
 
 Principal
      Audit Firm - Ernst & Young LLP2008
                  
                  
                  2007Audit
      fees
                  
                  $
                  191,038
                  
                  
                  $
                  298,669Tax
      fees
                  
                  
                  56,750
                  
                  
                  
                  74,050$
                  247,788
                  
                  
                  $
                  372,719Predecessor
      Audit Firm - Hays & Company LLP2008
                  
                  
                  2007Audit
      fees
                  
                  $
                  4,000
                  
                  
                  $
                  66,937Tax
      fees
                  
                  
                  -
                  
                  
                  
                  837$
                  4,000
                  
                  
                  $
                  67,774




65
 Table of Contents








PART IV




Item 15. Exhibits, Financial Statement Schedules





(a)
                            1.
      Financial StatementsSee
      index to financial statements included as Item 8 to this Annual Report on
      Form 10-K hereof.2. Financial
      Statement SchedulesSchedules not listed above have been omitted because they are not
      applicable or the information required to be set forth therein is included
      in the financial statements or notes
  thereto.3.
      Exhibits:3.1    Amended
      and Restated Agreement of Limited Partnership of Registrant (Incorporated
      by reference to Exhibit 4.1 to Registrant’s Post-Effective Amendment No. 6
      to Form S-1 Registration Statement No. 333-54011 dated May 19,
      2000).4.1    Certificate
      of Limited Partnership of Registrant (Incorporated by reference to Exhibit
      4.3 to Registrant’s Post-Effective Amendment No. 6 Form S-1 Registration
      Statement No. 333-54011 dated May 19, 2000).10.1Commercial
      Loan Agreement, by and between California Bank & Trust, ICON Income
      Fund Eight B L.P., ICON Income Fund Nine, LLC; ICON Income Fund Ten, LLC
      and ICON Leasing Fund Eleven, LLC, dated August 31, 2005 (Incorporated by
      reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated
      August 31, 2005).10.2Loan
      Modification Agreement, by and between California Bank & Trust and
      ICON Income Fund Eight B L.P., ICON Income Fund Nine, LLC, ICON Income
      Fund Ten, LLC and ICON Leasing Fund Eleven, LLC, dated December 26, 2006
      (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report
      on Form 8-K dated December 29, 2006).10.3  Loan
      Modification Agreement dated as of May 1, 2008 between California Bank
      & Trust and ICON Income Fund Eight B L.P., ICON Income Fund Nine, LLC,
      ICON Income Fund Ten, LLC and ICON Leasing Fund Eleven, LLC and ICON
      Leasing Fund Twelve, LLC (Incorporated by reference to Exhibit 10.4 to
      Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31,
      2008, filed May 15, 2008).31.1  Rule
      13a-14(a)/15d-14(a). Certification of Co-Chief Executive
      Officer.31.2  Rule
      13a-14(a)/15d-14(a). Certification of Co-Chief Executive
      Officer.31.3  Rule
      13a-14(a)/15d-14(a). Certification of Chief Financial
    Officer.32.1  Certification
      of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2  Certification
      of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.3  Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.(b)
                            1.
      Consolidated Financial Statements of ICON Aircraft 126
  LLC.








66
 Table of Contents




ICON
Aircraft 126 LLC
 (A
Delaware Limited Liability Company)
 
 
 Table of
Contents
 
  PageReports of Independent Registered Public Accounting
      Firms
                      68Consolidated Balance Sheets
                      70Consolidated Statements of
Operations
                      71Consolidated Statements of Changes in Members’
      Equity
                      72Consolidated Statements of Cash Flows
                      73Notes to Consolidated Financial
      Statements
                      74
  
  67
 Table of Contents
  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
 
 The
Members
 ICON
Aircraft 126 LLC
 
 We have
audited the accompanying balance sheets of ICON Aircraft 126 LLC (the “Company”)
as of December 31, 2008 and 2007, and the related statements of operations,
changes in members’ equity, and cash flows for the each of the two years in the
period ended December 31, 2008. These financial statements are the
responsibility of the Company's management. 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. We were not engaged to perform an
audit of the Company's 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
Company'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, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of ICON Aircraft 126 LLC at December
31, 2008 and 2007, and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 2008 in conformity with U.S.
generally accepted accounting principles.
 
 
 /s/ Ernst & Young,
LLP
 
 March 24,
2009
 New York,
New York
 
 
  68
 Table of Contents
  The
Members
 ICON
Aircraft 126, LLC
 
 REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
  We have
audited the consolidated statements of operations, changes in members’ equity
and cash flows of ICON Aircraft 126 LLC (a Delaware limited liability company)
and subsidiary, for the year ended December 31, 2006. These consolidated
financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
   We
conducted our audit 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.  An audit includes
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 Company’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
audit provides a reasonable basis for our opinion.
  In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated results of operations and cash flows
of ICON Aircraft 126 LLC and subsidiary for the year ended December 31, 2006, in
conformity with accounting principles generally accepted in the United States of
America.
  /s/ Hays
& Company LLP
 
 August
20, 2007
 New York,
New York
  69
 Table of Contents
  
 
 ICON Aircraft 126 LLC(A
      Delaware Limited Liability Company)Consolidated
      Balance SheetsAssetsDecember 31,2008
                      
                      
                      2007Leased
      equipment at cost, net (less accumulated depreciation of$28,543,495
      and $24,556,920, respectively)
                      
                      $
                      45,080,089
                      
                      
                      $
                      52,966,664Other
      non-current assets, net
                      
                      
                      304,823
                      
                      
                      
                      354,159Total
      Assets
                      
                      $
                      45,384,912
                      
                      
                      $
                      53,320,823Liabilities
      and Members' EquityCurrent
      liabilitiesCurrent
      portion of non-recourse long-term debt
                      
                      $
                      4,044,096
                      
                      
                      $
                      3,810,027Deferred
      rental income
                      
                      
                      471,428
                      
                      
                      
                      300,000Accrued
      interest
                      
                      
                      228,697
                      
                      
                      
                      233,783Total
      current liabilities
                      
                      
                      4,744,221
                      
                      
                      
                      4,343,810Non-current
      liabilitiesNon-recourse
      long-term debt, net of current portion
                      
                      
                      38,105,910
                      
                      
                      
                      42,150,006Total
      Liabilities
                      
                      
                      42,850,131
                      
                      
                      
                      46,493,816Commitments
      and contingenciesMembers'
      Equity
                      
                      
                      2,534,781
                      
                      
                      
                      6,827,007Total
      Liabilities and Members' Equity
                      
                      $
                      45,384,912
                      
                      
                      $
                      53,320,823
 See
accompanying notes to the consolidated financial statements.
 70
 Table of Contents
 ICON Aircraft 126 LLC(A
      Delaware Limited Liability Company)Consolidated
      Statements of OperationsYears Ended December 31,2008
                  
                  
                  2007
                  
                  
                  2006Revenue:Rental
      income
                  
                  $
                  6,368,571
                  
                  
                  $
                  6,368,571
                  
                  
                  $
                  6,753,785Interest
      and other income
                  
                  
                  2,328
                  
                  
                  
                  5,615
                  
                  
                  
                  62,883Total
      revenue
                  
                  
                  6,370,899
                  
                  
                  
                  6,374,186
                  
                  
                  
                  6,816,668Expenses:General
      and administrative
                  
                  
                  45,000
                  
                  
                  
                  22,829
                  
                  
                  
                  50,002Interest
                  
                  
                  2,772,778
                  
                  
                  
                  2,924,382
                  
                  
                  
                  3,089,780Depreciation
      and amortization
                  
                  
                  3,990,347
                  
                  
                  
                  4,003,772
                  
                  
                  
                  4,148,392Impairment
      loss
                  
                  
                  3,900,000
                  
                  
                  
                  -
                  
                  
                  
                  -Aircraft
      maintenance
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,152,698Total
      expenses
                  
                  
                  10,708,125
                  
                  
                  
                  6,950,983
                  
                  
                  
                  8,440,872Net
      loss
                  
                  $
                  (4,337,226
                  )
                  
                  $
                  (576,797
                  )
                  
                  $
                  (1,624,204
                  )
  See
accompanying notes to the consolidated financial statements.
 71
 Table of Contents
  
 ICON Aircraft 126 LLC(A
      Delaware Limited Liability Company)Consolidated
      Statements of Changes in Members' EquityMembers'EquityBalance,
      January 1, 2006
                  
                  $
                  8,823,158Net
      loss
                  
                  
                  (1,624,204
                  )Investment
      from members
                  
                  
                  182,021Balance,
      December 31, 2006
                  
                  
                  7,380,975Net
      loss
                  
                  
                  (576,797
                  )Investment
      from members
                  
                  
                  22,829Balance,
      December 31, 2007
                  
                  
                  6,827,007Net
      loss
                  
                  
                  (4,337,226
                  )Investment
      from members
                  
                  
                  45,000Balance,
      December 31, 2008
                  
                  $
                  2,534,781
 
  See
accompanying notes to the consolidated financial statements.
 72
 Table of Contents
  ICON Aircraft 126 LLC(A
      Delaware Limited Liability Company)Consolidated
      Statements of Cash FlowsYears Ended December 31,2008
                  
                  
                  2007
                  
                  
                  2006Cash
      flows from operating activities:Net
      loss
                  
                  $
                  (4,337,226
                  )
                  
                  $
                  (576,797
                  )
                  
                  $
                  (1,624,204
                  )Adjustments
      to reconcile net loss to net cashused
      in operating activities:Rental
      income paid directly to lenders by lessees
                  
                  
                  (6,540,000
                  )
                  
                  
                  (6,540,000
                  )
                  
                  
                  (6,753,785
                  )Interest
      and other income on maintenance reserve
                  
                  
                  (2,328
                  )
                  
                  
                  (5,615
                  )
                  
                  
                  (55,784
                  )Depreciation
      and amortization
                  
                  
                  3,990,347
                  
                  
                  
                  4,003,772
                  
                  
                  
                  4,148,392Impairment
      loss
                  
                  
                  3,900,000
                  
                  
                  
                  -
                  
                  
                  
                  -Interest
      expense from amortization of debt financing costs
                  
                  
                  47,892
                  
                  
                  
                  (6,737
                  )
                  
                  
                  16,031Interest
      expense on non-recourse financing paiddirectly
      to lenders by lessees
                  
                  
                  2,729,973
                  
                  
                  
                  2,948,336
                  
                  
                  
                  3,060,190Change
      in operating assets and liabilities:Other
      non-current assets
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  868,978Deferred
      rental income
                  
                  
                  171,429
                  
                  
                  
                  171,429
                  
                  
                  
                  128,571Accrued
      interest
                  
                  
                  (5,087
                  )
                  
                  
                  (17,217
                  )
                  
                  
                  29,590Net
      cash used in operating activities
                  
                  
                  (45,000
                  )
                  
                  
                  (22,829
                  )
                  
                  
                  (182,021
                  )Cash
      flows from financing activities:Contributions
      received
                  
                  
                  45,000
                  
                  
                  
                  22,829
                  
                  
                  
                  182,021Net
      increase in cash
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Cash,
      beginning of the year
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Cash,
      end of the year
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
 Years Ended December 31,2008
                        
                        
                        2007
                        
                        
                        2006Supplemental
      disclosure of non-cash investing and financing activities:Principal
      and interest paid on non-recourse long-term debtdirectly
      to lenders by lessee
                        
                        $
                        6,540,000
                        
                        
                        $
                        6,540,000
                        
                        
                        $
                        6,753,785Other
      assets used to pay down non-recourse long-term debt
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        582,509
 
  See
accompanying notes to the consolidated financial statements.
 73
 Table of Contents
  ICON Aircraft 126 LLC
 (A
Delaware Limited Liability Company)
 Notes to
Consolidated Financial Statements
 December
31, 2008
 
 (1)
                Organization
 ICON
Aircraft 126 LLC (the “LLC”) was formed on February 15, 2002 as a Delaware
limited liability company. The LLC is a joint venture between two affiliated
entities, ICON Income Fund Eight B L.P. (“Fund Eight B”) and ICON Income Fund
Nine, LLC (“Fund Nine”) (collectively, the “LLC’s Members”). Fund Eight B and
Fund Nine each have a 50% ownership interest in the LLC’s profits, losses and
cash distributions.
 
 On March
4, 2002, the LLC acquired all of the outstanding shares of Delta Aircraft
Leasing Limited (“D.A.L.”), a Cayman Islands registered company, for
approximately $75,288,000, which was largely comprised of approximately
$4,250,000 of cash and the assumption of approximately $70,280,000 of
non-recourse debt. D.A.L. owns, through an owner trust, an Airbus A340-313X
aircraft that is on lease to Cathay Pacific Airways Limited (“Cathay”). The
lender has a security interest in the aircraft and an assignment of the rental
payments under the lease. The lease was initially scheduled to expire in March
2006, but was extended to July 1, 2011.
 
 The
Manager of the LLC’s Members is ICON Capital Corp. (the “Manager”), a Delaware
corporation. The Manager manages and controls the business affairs of the LLC,
including, but not limited to, the equipment leases and other financing
transactions that the LLC entered into pursuant to the terms of the respective
limited partnership and limited liability company agreements with the LLC’s
Members.
 
 (2)
              Summary
      of Significant Accounting Policies
 
 Basis of
Presentation and Consolidation
 
 The
accompanying consolidated financial statements of the LLC have been prepared in
accordance with U.S. generally accepted accounting principles (“US
GAAP”).
 
 The
consolidated financial statements include the accounts of the LLC and its
wholly-owned subsidiary.  All intercompany accounts and transactions
have been eliminated in consolidation.
 
 Debt
Financing Costs
 
 Expenses
associated with the issuance of debt are capitalized and amortized over the term
of the debt instrument using the effective interest rate
method.  These costs are included in other non-current
assets.
 
 Leased
Equipment at Cost
 
 Investments
in leased equipment are stated at cost less accumulated depreciation. Leased
equipment is depreciated on a straight-line basis over the lease term, which
ranges from 4 to 5 years to the asset’s residual value.
 
 The
Manager has an investment committee that approved each new equipment
lease and other financing transaction. As part of its process, it
determined the residual value, if any, to be used once the investment was
approved.  The factors considered in determining the residual value
included, but were not limited to, the creditworthiness of the potential lessee,
the type of equipment considered, how the equipment was integrated into the
potential lessee’s business, the length of the lease and the industry in which
the potential lessee operated. Residual values are reviewed for impairment in
accordance with each LLC’s Member’s impairment review policy.
 
 
 74
 Table of Contents
  ICON Aircraft 126 LLC
 (A
Delaware Limited Liability Company)
 Notes to
Consolidated Financial Statements
 December
31, 2008
 
 
 (2)
              Summary
      of Significant Accounting Policies -
continued
 
 The
residual value assumes, among other things, that the asset is utilized normally
in an open, unrestricted and stable market. Short-term fluctuations in the
marketplace are disregarded and it is assumed that there is no necessity either
to dispose of a significant number of the assets, if held in quantity,
simultaneously or to dispose of the asset quickly.  The residual value
is calculated using information from various external sources, such as trade
publications, auction data, equipment dealers, wholesalers and industry experts,
as well as inspection of the physical asset and other economic
indicators.
 
 Asset
Impairments
 
 The asset
in the LLC’s portfolio is periodically reviewed, no less frequently than
annually, to determine whether events or changes in circumstances indicate
that the carrying value of an asset may not be recoverable. An impairment loss
will be recognized only if the carrying value of a long-lived asset is not
recoverable and exceeds its fair market value. If there is an indication of
impairment, the LLC will estimate the future cash flows (undiscounted and
without interest charges) expected from the use of the asset and its eventual
disposition. Future cash flows are the future cash inflows expected to be
generated by an asset less the future outflows expected to be necessary to
obtain those inflows.  If an impairment is determined to exist, the
impairment loss will be measured as the amount by which the carrying value of a
long-lived asset exceeds its fair value and recorded in the consolidated
statement of operations in the period the determination is made.
 
 The
events or changes in circumstances that generally indicate that an asset may be
impaired are (i) the estimated fair value of the underlying equipment is less
than its carrying value or (ii) the lessee is experiencing financial
difficulties and it does not appear likely that the estimated proceeds from the
disposition of the asset will be sufficient to satisfy the residual position in
the asset and, if applicable, the remaining obligation to the non-recourse
lender.  Generally in the latter situation, the residual position relates
to equipment subject to third party non-recourse debt where the lessee remits
its rental payments directly to the lender and the LLC does not recover its
residual position until the non-recourse debt is repaid in full. The preparation
of the undiscounted cash flows requires the use of assumptions and estimates,
including the level of future rents, the residual value expected to be realized
upon disposition of the asset, estimated downtime between re-leasing events and
the amount of re-leasing costs. The Manager’s review for impairment includes a
consideration of the existence of impairment indicators including third party
appraisals, published values for similar assets, recent transactions for similar
assets, adverse changes in market conditions for specific asset types and the
occurrence of significant adverse changes in general industry and market
conditions that could affect the fair value of the asset.
 
 Revenue
Recognition
 
 Each
equipment lease the LLC enters into is classified as either a finance lease or
an operating lease, which is based upon the terms of each lease.  For
a finance lease, initial direct costs are capitalized and amortized over the
term of the related lease.  For an operating lease, initial
direct costs are included as a component of the cost of the equipment and
depreciated. The LLC has not entered into any finance leases.
   75
 Table of Contents
  ICON Aircraft 126 LLC
 (A
Delaware Limited Liability Company)
 Notes to
Consolidated Financial Statements
 December
31, 2008
 
 (2)
              Summary
      of Significant Accounting Policies -
continued
 
 For
operating leases, rental income is recognized on a straight-line basis over the
lease term.  Billed operating lease receivables are included in
accounts receivable until collected.  Accounts receivable is stated at
its estimated net realizable value.  Deferred income is the
difference between the timing of the cash payments and the income recognized on
a straight-line basis.
 
 Initial
Direct Costs
 
 The LLC
capitalized initial direct costs associated with the origination and funding of
lease assets in accordance with Statement of Financial Accounting Standards
(“SFAS”) No. 91 “Accounting for Nonrefundable Fees and Costs Associated
with Originating or Acquiring Loans and Initial Direct Costs of Leases”. The
costs are amortized on a lease by lease basis based on the actual lease term
using a straight-line method for operating leases and the effective interest
rate method for finance leases. Costs related to leases that are not consummated
are expensed as an acquisition expense.
 
 Income
Taxes
 
 The LLC
is taxed as a partnership for federal and State income tax
purposes.  No provision for income taxes has been recorded since the
liability for such taxes is that of each of the members of the LLC’s Members
rather than the LLC. The LLC's income tax returns are subject to examination by
the federal and State taxing authorities, and changes, if any, could adjust the
individual income tax of the members of the LLC’s Members.
 
 Use of
Estimates
 
 The
preparation of financial statements in conformity with US GAAP requires the
Manager to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
as of the date of the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period. Significant estimates
primarily include the determination of allowance for doubtful accounts,
depreciation and amortization, impairment losses, estimated useful lives and
residual values.  Actual results could differ from those
estimates.
 
 (3)
              Leased
      Equipment at Cost
 
 The LLC’s
sole investment at December 31, 2008 and 2007 is an Airbus A340-313X aircraft
(“Aircraft 126”) on lease to Cathay. The lease was initially scheduled to expire
in March 2006, but was extended to July 1, 2011.
 
 The LLC
had a commitment with respect to the Aircraft 126 to pay certain maintenance
costs that were incurred on or prior to March 27, 2006. The LLC had established
a maintenance reserve cash account under the original lease to pay for its
portion of these costs. This account was funded by free cash from the lease
payments in accordance with the terms of the original lease. During 2006, the
LLC received $182,021 of capital contributions from the LLC’s Members, of which
$50,000 was for amounts relating to the maintenance reserve cash account and
$132,021 was related to costs paid by its members relating to the refinancing of
the non-recourse debt. During September 2006, approximately $1,153,000 was paid
for the maintenance costs. The maintenance account for Aircraft 126 was
cross-collateralized with the maintenance account for ICON Aircraft 123 LLC
(“ICON 123”). Under the terms of this agreement, the LLC was required to pay on
behalf of ICON 123, any maintenance cost shortfalls incurred by the affiliate.
On January 30, 2007, the LLC paid approximately $143,000 in maintenance costs
from its maintenance account on behalf of ICON 123.  The maintenance
account and related security interests were then terminated. ICON 123 will
reimburse the LLC when the Airbus A340-313X aircraft (“Aircraft 123”), also on
lease to Cathay and owned by ICON 123, is sold. The excess cash remaining in the
LLC’s account of approximately $97,000 includes interest accreted in the amount
of approximately $38,000 through December 31, 2008.
 
  76
 Table of Contents
 ICON Aircraft 126 LLC
 (A
Delaware Limited Liability Company)
 Notes to
Consolidated Financial Statements
 December
31, 2008
 
 (3)
              Leased
      Equipment at Cost - continued
  In
connection with the purchase of the aircraft, the owner trustee entered into two
first priority charge on cash deposit agreements pursuant to which, as discussed
above, the maintenance reserve cash account for the aircraft was
cross-collateralized with the maintenance reserve cash account for Aircraft 123.
In addition, ICON 123 and the LLC are parties to a residual sharing agreement
with respect to the aircraft.
 
 In light
of recent, unprecedented high fuel prices during 2008 and the related impact on
the airline industry, the Manager reviewed the LLC’s Members investments in
Aircraft 126 as of June 30, 2008. In accordance with the provisions of  the
Financial Accounting Standards Board (“FASB”)
Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets” (“SFAS No. 144”) and based upon recent changes in the airline industry,
the Manager determined that Aircraft 126 was impaired.
 
 Based on
the Manager’s review, the residual value of Aircraft 126 exceeded the expected
undiscounted future cash flows of Aircraft 126 and, as a result, the LLC
recorded an impairment charge representing the difference between the residual
value and the expected discounted future cash flows of Aircraft
126.  The expected discounted future cash flows of Aircraft 126
was determined using a market approach, a recent appraisal for Aircraft 126 and
recent sales of similar aircraft, as well as other factors, including those
discussed below.  As a result, as of June 30, 2008, the LLC recorded
an impairment loss on Aircraft 126 of approximately $3,900,000.
 
 The
following factors, among others, indicated that the full residual value of
Aircraft 126 might not be recoverable: (i) indications that lenders were willing
to finance less of the acquisition cost of four-engine aircraft, which increased
with each dollar rise of the price of fuel, thereby undermining the residual
value expectations of such aircraft; (ii) the rising cost of fuel was increasing
the operating costs of four-engine aircraft and similar capacity twin-engine
aircraft, thereby making such aircraft less attractive investments at the time
and thereby depressing the market for Aircraft 126; and (iii) the likelihood of
aircraft operators switching to more efficient aircraft, thereby depressing the
market for Aircraft 126.
 
 Depreciation
expense was $3,986,575, $4,000,000, and $4,115,432 for the years ended December
31, 2008, 2007, and 2006, respectively.
 
 Aggregate
annual minimum future rentals receivable from the LLC’s non-cancelable lease
consisted of the following at December 31, 2008:
 
 Years
      EndingDecember 31,2009
                  
                  $
                  6,540,0002010
                  
                  $
                  5,940,0002011
                  
                  $
                  2,970,000
 
 
 77
 Table of Contents
  ICON Aircraft 126 LLC
 (A
Delaware Limited Liability Company)
 Notes to
Consolidated Financial Statements
 December
31, 2008
 
 (4)
              Non-recourse
      Long-Term Debt
 
 Effective
March 27, 2006, in connection with the lease extension, approximately
$52,850,000 of non-recourse debt associated with Aircraft 126 was refinanced
after applying $583,000 from a reserve account established in connection with
the original lease with Cathay. The refinanced non-recourse debt matures on July
1, 2011 and requires a balloon payment of approximately $33,000,000 at maturity.
The interest rate of the refinanced debt was fixed at 6.104% under the terms of
the debt agreement, effective October 3, 2006.
  The
aggregate maturities of non-recourse long-term debt, including the effects of
refinancing discussed above, consisted of the following at December 31,
2008:
 
 Years
      EndingDecember 31,2009
                        
                        $
                        4,044,0962010
                        
                        
                        3,684,4492011
                        
                        
                        34,421,461$
                        42,150,006
 
 (5)
              Residual
      Sharing Agreement
 
 The LLC
is a party to a residual sharing agreement (the “Airtrade Residual Sharing
Agreement”) with ICON 123 and Airtrade Capital Corp. (“Airtrade”), a
third-party. Pursuant to the terms of the Airtrade Residual Sharing Agreement,
all proceeds received in connection with the sale or lease extension of the
aircraft owned by the LLC and ICON 123 in excess of $8,500,000 (in the
aggregate) of the debt associated with each aircraft (net of expenses) will be
allocated 55% to the LLC or ICON 123, as applicable, and 45% will be allocated
to Airtrade.
 
 (6)
              Fair
      Value of Financial Instruments
 
 Fair
value information with respect to the LLC's leased assets and liabilities is not
separately provided since (i) SFAS No. 107, “Disclosures About Fair Values of
Financial Instruments,” does not require fair value disclosures of lease
arrangements and (ii) the carrying value of financial assets, other than lease
related investments, and the recorded value of recourse debt, if any,
approximates fair value due to their short-term maturities and variable interest
rates. The fair value of the LLC's non-recourse debt of approximately
$44,375,000 at December 31, 2008, is estimated using a discounted cash flow
analysis, based on the current incremental borrowing rate of the most recent
borrowings by the LLC and the other programs sponsored by the
Manager.
 
 (7)
                Transactions
      with Related Parties
 The LLC
does not maintain a separate bank account and, therefore, in the normal course
of operations, the LLC’s Members will pay certain operating and general and
administrative expenses on behalf of the LLC in proportion with their membership
interests.
 
 The financial condition and results of
operations of the LLC, as reported, are not necessarily indicative of the
results that would have been reported had the LLC operated completely
independently.
 
 (8)
              Concentrations
      of Risk
 
 For the
years ended December 31, 2008, 2007, and 2006, the LLC had one lessee that
accounted for 100% of total rental income and one lender that accounted for 98%
of total liabilities.
  78
 Table of Contents







SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, we have duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.





File No.
333-37504


ICON
Capital Corp.


General
Partner of the Registrant





March 25,
2009





/s/
      Michael A. ReisnerMichael
      A. ReisnerCo-Chief
      Executive Officer and Co-President
              (Co-Principal
      Executive Officer)





/s/
      Mark GattoMark
      GattoCo-Chief
      Executive Officer and Co-President
              (Co-Principal
      Executive Officer)




/s/
      Anthony BrancaAnthony
      BrancaChief
      Financial Officer
                (Principal Accounting
      and Financial 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
capacity and on the dates indicated.





ICON
Capital Corp.


General
Partner of the Registrant





March 25,
2009





/s/
      Michael A. ReisnerMichael
      A. ReisnerCo-Chief
      Executive Officer and Co-President
              (Co-Principal
      Executive Officer)





March 25,
2009





/s/
      Mark GattoMark
      GattoCo-Chief
      Executive Officer and Co-President
              (Co-Principal
      Executive Officer)





March 25,
2009





/s/
      Thomas W. MartinThomas
      W. MartinChairman
      and Director





Supplemental
Information to be furnished with reports filed pursuant to Section 15(d) of the
Act by Registrant which have not registered securities pursuant to Section 12 of
the Act. No annual
report or proxy material has been sent to security holders.









79