CAPITAL REALTY INVESTORS IV LIMITED PARTNERSHIP, 10-K, 1997-03-27

CAPITAL REALTY INVESTORS IV LIMITED PARTNERSHIP
10-K, 1997-03-27
OPERATORS OF APARTMENT BUILDINGS

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<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

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

For the fiscal year ended December 31, 1996
-----------------

Commission file number 0-13523
-----------------

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
- --------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

Maryland 52-1328767
- ----------------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

11200 Rockville Pike, Rockville, Maryland 20852
- ----------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)

(Registrant's telephone number,
including area code) (301) 468-9200
---------------------

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

Name of each exchange
Title of each class on which registered
- ----------------------------------------- ---------------------
NONE N/A

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

LIMITED PARTNERSHIP UNITS
- --------------------------------------------------------------------------
(Title of class)

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 [X] 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 (X)

The partnership interests of the Registrant are not traded in any market.
Therefore, the partnership interests had neither a market selling price nor an
average bid or asked price within the 60 days prior to the date of this filing.
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

1996 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

PART I
-------

Page
----

Item 1. Business . . . . . . . . . . . . . . . . . . . . . I-1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . I-8
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . I-8
Item 4. Submission of Matters to a Vote
of Security Holders . . . . . . . . . . . . . . I-8

PART II
-------

Item 5. Market for the Registrant's Partnership
Interests and Related Partnership Matters . . . II-1
Item 6. Selected Financial Data . . . . . . . . . . . . . II-2
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . II-3
Item 8. Financial Statements and Supplementary Data . . . II-15
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . II-15

PART III
--------

Item 10. Directors and Executive Officers
of the Registrant . . . . . . . . . . . . . . . III-1
Item 11. Executive Compensation . . . . . . . . . . . . . . III-2
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . III-4
Item 13. Certain Relationships and Related Transactions . . III-4

PART IV
-------

Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . IV-1

Signatures . . . . . . . . . . . . . . . . . . . . . . . . IV-4

Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . IV-36
<PAGE>
PART I
----------

ITEM 1. BUSINESS
--------

Capital Realty Investors-IV Limited Partnership (the Partnership) is a
limited partnership which was formed under the Maryland Revised Uniform Limited
Partnership Act on December 7, 1983. On June 13, 1984, the Partnership
commenced offering 75,000 limited partnership interests through a public
offering which was managed by Merrill Lynch, Pierce, Fenner & Smith Incorporated
(Merrill Lynch). The Partnership closed the offering on August 31, 1984 when
73,500 units of limited partnership interests became fully subscribed.

The General Partners of the Partnership are C.R.I., Inc. (CRI), which is
the Managing General Partner, and current and former shareholders of CRI. The
Initial Limited Partner of the Partnership is Rockville Pike Associates Limited
Partnership-IV, a limited partnership which includes certain officers and former
employees of CRI or its affiliates. The Special Limited Partner of the
Partnership is Two Broadway Associates-III, a limited partnership comprised of
an affiliate and employees of Merrill Lynch, Pierce, Fenner and Smith,
Incorporated. Services for the Partnership are performed by CRI, as the
Partnership has no employees of its own.

The Partnership was formed to invest in real estate, which is the
Partnership's principal business activity, by acquiring and holding a limited
partnership interest in limited partnerships (Local Partnerships). As of
December 31, 1996, the Partnership had investments in thirty-eight Local
Partnerships. Each of these Local Partnerships owns and operates a federal or
state government-assisted or conventionally financed apartment complex, which
provides housing principally to the elderly or to individuals and families of
low or moderate income. The original objectives of these investments, not
necessarily in order of importance, were to:

(1) preserve and protect the Partnership's capital;
(2) provide, during the early years of the Partnership's operations,
current tax benefits to the partners in the form of tax losses which
the partners may use to offset income from other sources;
(3) provide capital appreciation through increases in the value of the
Partnership's investments and increased equity through periodic
payments on the indebtedness on the apartment complexes; and
(4) provide cash distributions from sale or refinancing of the
Partnership's investments and, on a limited basis, from rental
operations.

See Part II, Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations, for a discussion of factors affecting the
original investment objectives.

The Local Partnerships in which the Partnership has invested were organized
by private developers who acquired the sites, or options thereon, and applied
for applicable mortgage insurance and/or subsidies, and remain as the local
general partners in the Local Partnerships. The Partnership became the
principal limited partner in thirty-five of these Local Partnerships pursuant to
negotiations with these developers who act as the local general partners.
However, in the event of non-compliance with the Local Partnerships' partnership
agreements, the local general partner may be removed and replaced with another
local general partner or with an affiliate of the Partnership's Managing
General Partner. As a limited partner, the Partnership's legal liability for
obligations of the Local Partnership is limited to its investment. In three
Local Partnerships which are general partnerships, the Partnership has invested
as a limited partner in intermediary partnerships which, in turn, have invested
as general partners in the Local Partnerships. An affiliate of the Managing

I-1
<PAGE>
PART I
----------

ITEM 1. BUSINESS - Continued
--------

General Partner of the Partnership is also generally a general partner of the
thirty-five Local Partnerships and the three intermediary partnerships. In most
cases, the local general partners of the Local Partnerships retain
responsibility for developing, constructing, maintaining, operating and managing
the project. Additionally, the local general partners and affiliates of the
Managing General Partner may operate other apartment complexes which may be in
competition for eligible tenants with the Local Partnerships' apartment
complexes.

Although each of the Local Partnerships in which the Partnership has
invested owns an apartment complex which must compete in the market place for
tenants, interest subsidies and/or rent supplements from governmental agencies
generally make it possible to offer certain of these dwelling units to eligible
tenants at a cost significantly below the market rate for comparable
conventionally financed dwelling units. Based on available data, the General
Partners believe there to be no material risk of market competition in the
operations of the apartment complexes described below which would adversely
impact the Partnership, except in specific circumstances as described in Part
II, Item 7, Management's Discussion and Analysis of Financial Condition and
Results of Operations.

The following is a schedule of the apartment complexes owned by Local
Partnerships in which the Partnership has an investment:

I-2
<PAGE>
SCHEDULE OF PROJECTS OWNED BY LOCAL PARTNERSHIPS
IN WHICH CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
HAS AN INVESTMENT(1)

Units Expiration
Mortgage Authorized for of
Name and Location Payable at Financed and/or Insured Number of Rental Asst. Section 8
of Apartment Complex 12/31/96 (2) and/or Subsidized Under Rental Units Under Sec. 8 HAP Contract
- -------------------- ------------ ----------------------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
Asbury Tower $ 7,191,324 New Jersey Housing and 350 134 01/01/02
Asbury Park, NJ Mortgage Finance Agency
(NJHMFA)/236

Campbell Terrace 9,829,687 Illinois Housing Development 249 248 05/31/05
Chicago, IL Authority (IHDA)

Cannonsburg House 2,451,317 Pennsylvania Housing Finance 104 104 01/31/18
Cannonsburg, PA Agency (PHFA)

Cedar Point 2,436,388 IHDA/236 160 0 --
Springfield, IL

Char House 2,616,531 PHFA 104 104 06/30/19
Charleroi, PA

Chippewa County 1,699,829 Wisconsin Housing and Economic 109 108 07/14/98 (4)
Chippewa Falls, WI Development Authority (WHEDA)

Clearfield Hills II 1,500,108 Conventional Mortgage/FNMA 76 0 --
Clearfield, UT

Cottonwood Park 1,766,125 FNMA/236 126 6 06/30/98
Shawnee Mission, KS

Crescent Gardens 1,733,552 GMAC/Section 221(d)(4) of the 100 100 01/09/99
Wilson, NC National Housing Act (NHA)

De Angelis Manor 1,405,329 Rhode Island Housing and 96 96 12/01/08
West Warwick, RI Mortgage Finance Corporation
(RIHMFC)

Fairway Park Apt. 8,012,057 IHDA 210 42 06/30/04
Naperville, IL

Garden Court 6,165,443 Section 221 (d)(4) of the NHA/ 284 284 07/24/00
Springfield, IL Section 8

Glenridge Gardens 2,274,088 FNMA/236 120 24 05/31/99
Augusta, ME

Hale Ohana 1,483,115 Farmers Home Administration 30 29 12/12/16
Koloa, Kauai, HI (FHA)/515

Harborview 4,877,528 Section 221(d)(3) of the NHA 300 299 06/01/00
St. Croix, Virgin Islands

Highland Village 1,514,526 Massachusetts Housing Finance 111 53 03/01/17
Ware, MA Agency (MHFA)/236
</TABLE>

I-3
<PAGE>
SCHEDULE OF PROJECTS OWNED BY LOCAL PARTNERSHIPS
IN WHICH CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
HAS AN INVESTMENT(1) - Continued

Units Expiration
Mortgage Authorized for of
Name and Location Payable at Financed and/or Insured Number of Rental Asst. Section 8
of Apartment Complex 12/31/96 (2) and/or Subsidized Under Rental Units Under Sec. 8 HAP Contract
- -------------------- ------------ ----------------------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
Holiday Village $ 999,059 FHA/515 80 6 06/01/98 (4)
Park City, UT

Hometown Villages 1,869,629 WHEDA 178 178 06/01/05
Various cities, WI

Jewish Federation 4,146,090 NJHMFA/236 145 144 01/28/18
Cherry Hill, NJ

Lakes of Northdale 9,610,000 Florida Housing Finance 216 0 --
Tampa, FL Authority

Liberty Tower 2,475,375 PHFA 104 104 12/09/10
California, PA

Madison Square 4,058,412 Michigan State Housing Deve- 133 133 09/30/13
Grand Rapids, MI lopment Authority

Mary Allen West Tower 2,800,000 City of Galesburg 154 153 03/01/09
Galesburg, IL

Matthew XXV 1,415,491 RIHMFC 95 95 06/18/98
Warwick, RI

Northridge Park 5,319,476 California Housing Finance 104 0 --
Salinas, CA Agency (CHFA)

Pilgrim Tower East 5,649,300 CHFA 158 157 10/17/99
Pasadena, CA

Pilgrim Tower North 4,530,369 FNMA/236 258 205 10/31/97 (4)
Pasadena, CA

Redden Gardens 2,247,818 FNMA/236 150 29 09/30/98 (4)
Dover, NH

Riverview Manor 1,216,009 WHEDA 76 76 08/15/12
Fort Atkinson, WI

Scoville Center 3,048,459 WHEDA 151 151 08/31/18
Beloit, WI

Second Lakewood 3,143,487 Section 221(d)(4) of the NHA 219 0 --
Schaumburg, IL

Thornwood House 3,672,937 IHAD/236 183 73 01/31/16
University Park, IL
</TABLE>

I-4
<PAGE>
SCHEDULE OF PROJECTS OWNED BY LOCAL PARTNERSHIPS
IN WHICH CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
HAS AN INVESTMENT(1) - Continued

Units Expiration
Mortgage Authorized for of
Name and Location Payable at Financed and/or Insured Number of Rental Asst. Section 8
of Apartment Complex 12/31/96 (2) and/or Subsidized Under Rental Units Under Sec. 8 HAP Contract
- -------------------- ------------ ----------------------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
Tradewinds Terrace $ 1,647,491 FNMA/236 122 52 09/30/98 (4)
Traverse City, MI

Valley View 2,622,826 IHDA/236 179 0 --
Rockford, IL

Valley Vista 2,477,634 New York State Urban Development 124 76 05/01/14
Syracuse, NY Corporation/236

Wellington Woods 2,070,308 FHA/515 109 73 10/19/99
Clarkson, NY

Westport Village 1,765,365 IHDA/236 121 12 01/01/97 (4)
Freeport, IL

Wollaston Manor 3,756,186 MHFA/236 164 41 04/11/15
Quincy, MA
- -------------------- ------------ -------- ------
Totals(3) 38 $127,498,668 5,752 3,389
============ ======== ======

</TABLE>

I-5
<PAGE>
SCHEDULE OF PROJECTS OWNED BY LOCAL PARTNERSHIPS
IN WHICH CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
HAS AN INVESTMENT(1) - Continued

<TABLE>
<CAPTION>
Average Effective Annual
Units Occupied As Rental Per Unit
Percentage of Total Units for the Years Ended
As of December 31, December 31,
Name and Location ------------------------------------ -----------------------------------------------------
of Apartment Complex 1996 1995 1994 1993 1992 1996 1995 1994 1993 1992
- -------------------- ---- ---- ---- ---- ---- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asbury Tower 94% 94% 92% 94% 98% $ 5,373 $ 5,272 $ 5,053 $ 5,139 $ 5,221
Asbury Park, NJ

Campbell Terrace 100% 100% 100% 100% 100% 11,294 10,989 10,816 10,476 10,289
Chicago, IL

Cannonsburg House 99% 96% 97% 98% 99% 8,631 8,600 8,357 8,147 7,960
Cannonsburg, PA

Cedar Point 96% 97% 95% 99% 99% 4,446 4,477 4,340 4,281 4,116
Springfield, IL

Char House 99% 100% 99% 98% 94% 8,287 8,181 8,073 7,821 7,704
Charleroi, PA

Chippewa County 94% 92% 94% 95% 99% 5,097 5,063 5,059 6,787 4,990
Chippewa Falls, WI

Clearfield Hills II 93% 100% 97% 99% 99% 5,535 5,173 5,128 4,653 4,094
Clearfield, UT

Cottonwood Park 98% 99% 99% 100% 98% 4,207 4,213 4,218 4,018 3,741
Shawnee Mission, KS

Crescent Gardens 99% 100% 100% 99% 100% 4,980 4,980 4,873 4,759 4,665
Wilson, NC

De Angelis Manor 100% 100% 100% 100% 100% 8,457 8,838 8,335 8,193 7,843
West Warwick, RI

Fairway Park Apt. 96% 94% 99% 98% 97% 8,933 8,758 8,581 8,286 8,014
Naperville, IL

Garden Court 70% 75% 75% 85% 92% 4,133 4,284 4,476 5,101 4,819
Springfield, IL

Glenridge Gardens 91% 86% 93% 91% 97% 4,040 4,324 4,229 4,503 4,802
Augusta, ME

Hale Ohana 96% 93% 97% 67% 67% 8,970 8,837 8,290 6,123 6,475
Koloa, Kauai, HI

Harborview 98% 99% 100% 99% 100% 8,329 8,411 7,791 7,269 6,148
St. Croix, Virgin Islands

Highland Village 95% 99% 100% 98% 100% 5,442 5,313 5,245 5,127 5,199
Ware, MA
</TABLE>

I-6
<PAGE>
SCHEDULE OF PROJECTS OWNED BY LOCAL PARTNERSHIPS
IN WHICH CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
HAS AN INVESTMENT(1) - Continued

<TABLE>
<CAPTION>
Average Effective Annual
Units Occupied As Rental Per Unit
Percentage of Total Units for the Years Ended
As of December 31, December 31,
Name and Location ------------------------------------ -----------------------------------------------------
of Apartment Complex 1996 1995 1994 1993 1992 1996 1995 1994 1993 1992
- -------------------- ---- ---- ---- ---- ---- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Holiday Village 96% 99% 95% 100% 100% $ 3,340 $ 3,414 $ 3,282 $ 3,064 $ 2,929
Park City, UT

Hometown Villages 97% 91% 95% 92% 97% 5,677 5,601 5,608 6,891 5,376
Various cities, WI

Jewish Federation 100% 100% 97% 99% 100% 9,475 8,929 8,813 8,606 8,344
Cherry Hill, NJ

Lakes of Northdale 92% 89% 95% 94% 92% 6,949 7,486 7,151 6,758 6,676
Tampa, FL

Liberty Tower 99% 99% 96% 97% 100% 8,324 8,270 8,077 7,871 7,665
California, PA

Madison Square 98% 98% 97% 98% 98% 7,397 7,170 7,115 7,105 6,981
Grand Rapids, MI

Mary Allen West Tower 99% 100% 100% 100% 100% 6,165 6,170 6,142 6,092 6,011
Galesburg, IL

Matthew XXV 100% 100% 100% 100% 100% 8,775 8,724 8,874 8,512 8,196
Warwick, RI

Northridge Park 90% 91% 94% 89% 93% 8,038 7,576 7,244 7,602 7,598
Salinas, CA

Pilgrim Tower East 99% 100% 100% 100% 100% 8,734 8,717 8,661 8,413 8,159
Pasadena, CA

Pilgrim Tower North 98% 100% 100% 100% 100% 4,625 4,663 4,321 3,965 3,880
Pasadena, CA

Redden Gardens 100% 97% 100% 99% 98% 4,694 4,717 4,560 4,434 4,397
Dover, NH

Riverview Manor 100% 97% 100% 100% 100% 5,668 5,639 5,599 5,522 5,235
Fort Atkinson, WI

Scoville Center 98% 95% 99% 98% 100% 5,303 5,220 5,131 7,794 4,931
Beloit, WI

Second Lakewood 93% 96% 95% 92% 97% 9,298 8,988 8,688 8,483 8,583
Schaumburg, IL

Thornwood House 100% 100% 100% 100% 100% 4,832 4,665 4,496 4,324 4,170
University Park, IL
</TABLE>

I-7
<PAGE>
SCHEDULE OF PROJECTS OWNED BY LOCAL PARTNERSHIPS
IN WHICH CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
HAS AN INVESTMENT(1) - Continued

<TABLE>
<CAPTION>
Average Effective Annual
Units Occupied As Rental Per Unit
Percentage of Total Units for the Years Ended
As of December 31, December 31,
Name and Location ------------------------------------ -----------------------------------------------------
of Apartment Complex 1996 1995 1994 1993 1992 1996 1995 1994 1993 1992
- -------------------- ---- ---- ---- ---- ---- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tradewinds Terrace 96% 95% 99% 97% 95% $ 4,198 $ 4,096 $ 4,095 $ 4,076 $ 3,939
Traverse City, MI

Valley View 98% 100% 100% 98% 100% 4,265 4,071 3,877 3,667 3,526
Rockford, IL

Valley Vista 89% 94% 90% 100% 98% 4,803 4,824 4,742 4,511 4,600
Syracuse, NY

Wellington Woods 100% 97% 100% 100% 100% 2,895 2,854 2,645 2,600 2,563
Clarkson, NY

Westport Village 98% 98% 97% 97% 98% 4,783 4,595 4,406 4,110 3,597
Freeport, IL

Wollaston Manor 100% 99% 100% 100% 99% 5,819 5,791 5,634 5,191 4,641
Quincy, MA
---- ---- ---- ---- ---- -------- -------- -------- -------- --------
Totals(3) 38 96% 96% 97% 97% 97% $ 6,321 $ 6,260 $ 6,106 $ 6,060 $ 5,739
==== ==== ==== ==== ==== ======== ======== ======== ======== ========

</TABLE>

I-8
<PAGE>
PART I
----------

ITEM 1. BUSINESS - Continued
--------

(1) All properties are multifamily housing complexes. No single
tenant/resident rents 10% or more of the rentable square footage.
Residential leases are typically one year or less in length, with varying
expiration dates, and substantially all rentable space is for residential
purposes.

(2) The amounts provided are the balances of first mortgage loans payable by
the Local Partnerships as of December 31, 1996.

(3) The totals for the percentage of units occupied and the average effective
annual rental per unit are based on a simple average.

(4) The Section 8 contract expiration date reflects a one year extension from
the original expiration date, in accordance with congressional legislation.

For additional information regarding the real estate of Local Partnerships
in which the Partnership has invested, see Part IV, Schedule III - "Real Estate
and Accumulated Depreciation of Local Partnerships in which Capital Realty
Investors-IV Limited Partnership has Invested."

On January 31, 1995, Southgate Apartments Company sold Southgate Apartments
to a non-profit entity. See Part II, Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations and the notes to the
consolidated financial statements for additional information pertaining to the
sale.

On February 6, 1996, Clearfield Hills I Limited Partnership sold Clearfield
Hills I to a non-profit entity. See Part II, Item 7, Management's Discussion
and Analysis of Financial Condition and Results of Operations and the notes to
the consolidated financial statements for additional information pertaining to
the sale.

On February 6, 1996, New Village Apartments North Limited Partnership sold
Village Apartments North to a non-profit entity. See Part II, Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the notes to the consolidated financial statements for additional
information pertaining to the sale.

On August 27, 1996, River Run Company sold River Run to a non-profit
entity. See Part II, Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations and the notes to the consolidated financial
statements for additional information pertaining to the sale.

On September 19, 1996, New Forest Park Associates Limited Partnership sold
Forest Park to a non-profit entity. See Part II, Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
notes to the consolidated financial statements for additional information
pertaining to the sale.

On September 19, 1996, New Walnut Square Associates Limited Partnership
sold Walnut Square to a non-profit entity. See Part II, Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
notes to the consolidated financial statements for additional information
pertaining to the sale.

On February 17, 1997, the local managing general partner of the New Second
Lakewood Associates Limited Partnership (Second Lakewood) entered into an

I-9
<PAGE>
PART I
-------

ITEM 1. BUSINESS - Continued
--------

agreement to sell the property to an unaffiliated entity. The potential buyer
has made a deposit of $100,000 and has commenced its due diligence review.
There is no assurance that a sale of Second Lakewood will occur, as the
potential buyer has the option to cancel the agreement and receive its deposit
on or before April 18, 1997, based on the results of its due diligence review.
See Part II, Item 7, Management's Discussion and Analysis of Financial Condition
and Results of Operations and the notes to the consolidated financial statements
for additional information pertaining to the potential sale.

ITEM 2. PROPERTIES
----------

Through its ownership of limited partnership interests in Local Partner-
ships, Capital Realty Investors-IV Limited Partnership indirectly holds an
interest in the underlying real estate. See Part I, Item 1 and Schedule III of
Part IV, Item 14 for information pertaining to these properties.

ITEM 3. LEGAL PROCEEDINGS
-----------------

There are no material legal proceedings to which the Partnership is a
party.

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 1996.

I-10
<PAGE>
PART II
-------

ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS AND
-----------------------------------------------------
RELATED PARTNERSHIP MATTERS
---------------------------

(a) On August 29, 1996, Equity Resource Bay Fund (Bay Fund), a
Massachusetts Limited Partnership which is affiliated with Equity
Resources Group, the general partner of various partnerships that are
Additional Limited Partners in the Partnership, initiated a tender
offer to purchase 2,400 additional units in the Partnership at a price
of $10 per Additional Limited Partner unit. Bay Fund, which is
unaffiliated with CRI, Inc., stated that it made the offer for the
express purpose of holding the limited partnership units for
investment purposes and not with a view to resale. The purchase offer
was determined solely at the discretion of Bay Fund and does not
necessarily represent the fair market value of each Additional Limited
Partner unit. The Bay Fund offer expired on September 29, 1996, and
as of March 10, 1997, Bay Fund held approximately 2.8% of the
Additional Limited Partner units of the Partnership. Other than the
Bay Fund tender offer, or any other offer of the same type, it is not
anticipated that there will be any formal market for resale of
interests in the Partnership. As a result, investors may be unable to
sell or otherwise dispose of their interests in the Partnership.

(b) As of March 10, 1997, there were approximately 7,000 registered
holders of limited partnership interests in the Partnership.

(c) For the year ended December 31, 1996, the Partnership distributed
$1,999,119 (or $27.20 per Additional Limited Partner unit) to the
Additional Limited Partners on October 31, 1996. This distribution
was a result of the sale of the properties relating to the
Partnership's investment in Clearfield Hills I, Village North, River
Run, Forest Park and Walnut Square. For the year ended December 31,
1995, the Partnership distributed $745,290 (or $10.14 per unit of
Additional Limited Partner unit) to the Additional Limited Partners on
April 28, 1995 as a result of the sale of the property relating to the
Partnership's investment in Southgate Apartments. The Partnership
received distributions of $872,629 and $845,622 from Local
Partnerships during 1996 and 1995, respectively. Some of the Local
Partnerships operate under restrictions imposed by the government
agencies which limit the cash return available to the Partnership.

II-1
<PAGE>
PART II
-------

ITEM 6. SELECTED FINANCIAL DATA
-----------------------

<TABLE>
<CAPTION>
For the years ended December 31,
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Share of income (loss) from partnerships $ 122,378 $ 245,013 $ (1,399,207) $ (12,883) $ (432,472)
Interest and other income 546,446 433,511 359,536 227,959 201,515
Expenses (15,974,088) (15,169,222) (13,949,301) (12,836,439) (11,484,081)
Gain on disposition of investments in
partnerships 8,245,471 2,840,833 -- 2,693,169 --
Extraordinary gain from extinguishment
of debt 13,405,200 214,343 -- -- --
------------ ------------ ------------ ------------ ------------
Net income (loss) $ 6,345,407 $(11,435,522) $(14,988,972) $ (9,928,194) $(11,715,038)
============ ============ ============ ============ ============
Income (loss) allocated to Additional
Limited Partners (97%) $ 6,155,045 $(11,092,457) $(14,539,303) $ (9,630,348) $(11,363,587)
============ ============ ============ ============ ============
Income (loss) per unit of Additional
Limited Partnership Interest based on
73,500 units outstanding $ 83.74 $ (150.92) $ (197.81) $ (131.03) $ (154.61)
============ ============ ============ ============ ============
Cash distribution per unit of
Additional Limited Partnership
Interest based on 73,500 units
outstanding $ 27.20 $ 10.14 $ -- $ 21.37 $ --
============ ============ ============ ============ ============
Total assets $ 41,548,239 $ 43,620,768 $ 45,061,364 $ 47,178,378 $ 50,293,562
============ ============ ============ ============ ============
Total remaining amounts due on investments,
including accrued interest on purchase
money notes $122,219,645 $135,227,496 $129,630,374 $119,523,104 $115,010,188
============ ============ ============ ============ ============

</TABLE>

II-2
<PAGE>
PART II
-------

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------

General
-------

The Partnership has invested, through Local Partnerships, principally in
federal or state government-assisted apartment complexes intended to provide
housing to low and moderate income tenants. In conjunction with such government
assistance, which includes federal and/or state financing at below-market
interest rates and rental subsidies, the Local Partnerships agreed to regulatory
limitations on (i) cash distributions, (ii) use of the properties and (iii) sale
or refinancing. These limitations typically were designed to remain in place
for the life of the mortgage.

The original investment objectives of the Partnership primarily were to
deliver tax benefits, as well as cash proceeds upon disposition of the
properties through the Partnership's investment in local limited partnerships.
Only limited annual cash distributions from property operations were projected
because of the regulatory restrictions on cash distributions from the
properties.

The original investment objectives of the Partnership have been affected by
the Tax Reform Act of 1986 which virtually eliminated many of the incentives for
the new construction or the sale of existing low income housing properties by
limiting the use of passive loss deductions. Therefore, the Managing General
Partner continues to concentrate on transferring the source of investment yield
from tax benefits to cash flow wherever possible and potentially enhancing the
ability of the Partnership to share in the appreciated value of the properties.

The acquisition of interests in certain Local Partnerships resulted in
purchase money note obligations of the Partnership. The purchase money notes
are nonrecourse obligations of the Partnership which typically mature fifteen
years from the date of acquisition of the interests in particular Local
Partnerships.

The Managing General Partner has been working to develop a strategy to sell
certain properties by utilizing opportunities presented by federal affordable
housing legislation, favorable financing terms and preservation incentives
available to nonprofit purchasers. The Managing General Partner intends to
utilize part or all of the Partnership's net proceeds (after a 50% distribution
to limited partners) received from the sales of properties to fund reserves for
paying at maturity, prepaying or purchasing prior to maturity, at a discount
where possible, currently outstanding purchase money notes. The Managing
General Partner believes that this represents an opportunity to reduce the
Partnership's long-term obligations.

Some of the rental properties owned by the Local Partnerships have
mortgages which are federally insured under Section 236 or Section 221(d)(3)of
the National Housing Act, as amended. The Low Income Housing Preservation and
Resident Homeownership Act of 1990 (LIHPRHA), which provided property owners
with restricted opportunities to sell low income housing, ended effective
September 30, 1996. However, the U.S. Department of Housing and Urban
Development (HUD) received approximately $175 million to fund sales of
qualifying properties under the LIHPRHA program during the federal government's
fiscal year 1997, which began October 1, 1996. Continued funding of the LIHPRHA

II-3
<PAGE>
PART II
-------

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

program after fiscal year 1997 is uncertain. There is no assurance that a sale
of any properties that previously qualified under the LIHPRHA program will
occur.

Some of the rental properties owned by the Local Partnerships are financed
by state housing agencies. The Managing General Partner has been working to
develop strategies to sell or refinance certain properties pursuant to programs
developed by these agencies or other potential buyers. These programs may
include opportunities to sell the property to a qualifying purchaser who would
agree to maintain the property as low to moderate income housing in perpetuity,
or to refinance the property, or to obtain supplemental financing. The Managing
General Partner continues to monitor certain state housing agency programs
and/or programs provided by certain lenders, to ascertain whether the properties
would qualify within the parameters of a given program and whether these
programs would provide an appropriate economic benefit to the limited partners
of the Partnership.

Some of the rental properties owned by the Local Partnerships are dependent
on the receipt of project-based Section 8 Rental Housing Assistance Payments
(HAP) provided by HUD pursuant to HAP contracts. In 1995 and 1996, HUD released
its Reinvention Blueprint and a revision to its Reinvention Blueprint which
contained proposals that have come to be known as "Mark-to-Market". Congress,
HUD and the Clinton Administration continue to struggle with the Mark-to-Market
initiative. This initiative was intended to deal with HUD's increasing burden
of funding HAP contracts. Under the initiative, HUD would eliminate the
project-based subsidy and provide the residents with "sticky vouchers" which
would allow residents to move to other developments should they so choose.
However, with the elimination of the HAP contract, there is no assurance that
rental properties would be able to maintain the rental income and occupancy
levels necessary to pay operating costs and debt service. The initiative will
impact those properties that have HAP contracts with shorter terms than that of
the underlying property mortgage. For instance, some properties may have a 20-
year HAP contract while the underlying mortgage has a 40-year term. In the
interim, Congress has authorized one-year extensions for properties with HAP
contracts expiring during the government's fiscal year 1997, which began October
1, 1996. In light of recent political scrutiny of appropriations for HUD
programs, continued funding of annual renewals for Section 8 HAP contracts
expiring after fiscal year 1997 is uncertain.

With the ending of the LIHPRHA program and with the uncertainty surrounding
renewals of expiring Section 8 HAP contracts, the Managing General Partner is
developing new strategies to deal with the ever changing environment of
affordable housing policy. Section 236 and Section 221(d)(3) properties that
are in the 18th year of their mortgage may be eligible for pre-payment of the
mortgage. Properties with expiring Section 8 HAP contracts may become
convertible to market-rate apartment properties. Currently, there are a few
lenders that will provide financing either to prepay the existing mortgage or
provide additional funds to allow the property to convert to market rate units.
Where opportunities exist, the Managing General Partner will continue to work
with the Local Partnerships to develop a strategy that makes economic sense for
all parties involved.

II-4
<PAGE>
PART II
-------

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

these properties were properties owned by some of the Local Partnerships in
which the Partnership invested. CMS was formed by Martin C. Schwartzberg, a
nominal general partner of the Partnership and a former stockholder of CRI, when
he retired from CRI and its related businesses as of January 1, 1990. Mr.
Schwartzberg agreed not to act as a general partner with respect to any of the
CRI-sponsored partnerships, including this Partnership, and has not done so
since that time. In late 1995, a dispute arose between CRI and CMS over the
funding level of the 1996 contract for CMS. On November 9, 1995, CRI filed a
complaint against CMS to determine the proper amount of fees to be paid in 1996
under the asset management agreement. CMS answered on January 10, 1996, but
asserted no counterclaims.

Thereafter, Mr. Schwartzberg launched a hostile consent solicitation to be
designated as managing general partner of approximately 125 private partnerships
sponsored by CRI. On January 18, 1996, Mr. Schwartzberg and CMS filed a
complaint in the Circuit Court of Montgomery County, Maryland (the Circuit
Court), against CRI and Messrs. Dockser and Willoughby (who are general partners
of the Partnership) alleging, among other things, that CRI and Messrs. Dockser
and Willoughby breached the asset management agreement pursuant to which Mr.
Schwartzberg's company, CMS, agreed to perform limited functions related to
property-level issues for a portion of CRI's subsidized housing portfolio
(including some of the properties in which the Partnership invested), by
reducing the proposed budget for 1996. The Partnership was not named as a
defendant in this action. Messrs. Dockser and Willoughby entered an answer
denying all of Mr. Schwartzberg's claims. On February 6, 1996, CRI terminated
the CMS contract for cause. (CRI subsequently retained an independent asset
management company to perform functions previously performed by CMS.) Mr.
Schwartzberg and CMS responded to the contract termination by filing a motion
for injunctive relief in the Circuit Court, asking the court to enjoin CRI from
terminating the contract. In a ruling issued on February 12, 1996, the Circuit
Court, among other things, refused to grant the injunction requested by CMS. On
February 12, 1996, the Circuit Court also issued a memorandum opinion and order
enjoining CMS and Mr. Schwartzberg from disclosing information made confidential
under the asset management agreement.

Following subsequent litigation, none of which involved the Partnership, on
June 12, 1996, Mr. Schwartzberg, CRI and others entered an agreement (which
contemplates the execution of a subsequent definitive agreement) to resolve the
disputes between CRI and CMS. The Partnership was not a signatory to the
agreement. As part of the resolution, Mr. Schwartzberg withdrew any derogatory
statements he made about CRI and its principals. Upon execution of the
definitive agreement, Mr. Schwartzberg shall withdraw as a General Partner of
this Partnership and his interest will become that of a Special Limited Partner.
As of March 10, 1997, CRI and Mr. Schwartzberg were unable to agree on the
language of various provisions of the definitive agreement and have agreed to
submit the open issues to arbitration. The Partnership is not a party to the
arbitration proceeding.

Financial Condition/Liquidity
-----------------------------

As of December 31, 1996, the Partnership had approximately 7,000 investors,
who subscribed to a total of 73,500 units of limited partnership interests in
the original amount of $73,500,000. As of December 31, 1996, the Partnership
had investments in thirty-eight Local Partnerships. The Partnership's

II-5
<PAGE>
PART II
-------

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

liquidity, with unrestricted cash resources of $8,871,297 as of December 31,
1996, along with anticipated future cash distributions from the Local
Partnerships, is expected to meet its current and anticipated operating cash
needs. As of December 31, 1996, $535,410 of cash was restricted for the
Partnership's remaining purchase money note obligation with respect to Forest
Park. This obligation was paid on January 2, 1997, as discussed below.
Additionally $50,400 of cash was restricted for future interest payments on one
of the purchase money notes. The Partnership determined that the carrying
amounts of its cash and cash equivalents and restricted cash approximate fair
value. As of March 10, 1997, there were no material commitments for capital
expenditures.

During 1996, 1995 and 1994 the Partnership received cash distributions of
$872,629, $845,622 and $712,622, respectively, from the Local Partnerships.

The Partnership's obligations with respect to its investments in Local
Partnerships, in the form of purchase money notes having a principal balance of
$43,806,343 (exclusive of unamortized discount on purchase money notes of
$16,874,671) plus accrued interest of $78,413,302 as of December 31, 1996, are
payable in full upon the earliest of: (1) sale or refinancing of the respective
Local Partnership's rental property; (2) payment in full of the respective Local
Partnership's permanent loan; or (3) maturity. Purchase money notes in an
aggregate principal amount of $1,370,000 matured in 1994 but have not been paid,
as discussed below. Purchase money notes in an aggregate principal amount of
$1,330,000 mature on August 31, 1997, as discussed below. Purchase money notes
originally due to mature on September 1, 1999, were retired at a discount on
January 2, 1997, in connection with the terms of an escrow agreement, as
discussed below. The remaining purchase money notes mature from 1999 to 2025.
The purchase money notes are generally secured by the Partnership's interest in
the respective Local Partnerships. There is no assurance that the underlying
properties will have sufficient appreciation and equity to enable the
Partnership to pay the purchase money notes' principal and accrued interest when
due. If a purchase money note is not paid in accordance with its terms, the
Partnership will either have to renegotiate the terms of repayment or risk
losing its partnership interest in the Local Partnership. The Managing General
Partner is continuing to investigate possible alternatives to reduce the
Partnership's long-term debt obligations. These alternatives include, among
others, retaining the cash available for distribution to meet the purchase money
note requirements, buying out certain purchase money notes at a discounted
price, extending the due dates of certain purchase money notes, or refinancing
the respective properties' underlying debt and using the Partnership's share of
the proceeds to pay off or buy down certain purchase money note obligations.

Purchase money notes plus accrued interest relating to Redden Development
Company (Redden Gardens) in the principal amount of $1,330,000 mature on August
31, 1997. The Managing General Partner anticipates proposing a five year
extension. There is no assurance that the Managing General Partner will reach
an agreement of any kind with the noteholders. Accordingly, there can be no
assurance that the Partnership will be able to retain its interest in the Local
Partnership. The uncertainty about the continued ownership of the Partnership's
interest in the related Local Partnership does not impact the Partnership's
financial condition because the related purchase money note is nonrecourse and
secured solely by the Partnership's interest in the Local Partnership.
Therefore, should the investment in Redden Gardens not produce sufficient value
to satisfy the purchase money note related to Redden Gardens, the Partnership's

II-6
<PAGE>
PART II
-------

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

exposure to loss is limited since the amount of the nonrecourse indebtedness
exceeds the carrying amount of the investment in and advances to the Local
Partnership. Thus, even a complete loss of this investment would not have a
material impact on the operations of the Partnership.

On May 23, 1994, the local general partner of New Forest Park Associates
Limited Partnership (Forest Park) filed a notice of intent to participate under
LIHPRHA. On July 11, 1996, the local managing general partner's plan of action
regarding the sale of Forest Park under the LIHPRHA program was approved by HUD.
On September 19, 1996, Forest Park sold the property, a 284-unit apartment
complex located in New Orleans, Louisiana, under the LIHPRHA program to Forest
Park Affordable Housing Inc., a District of Columbia non-profit organization.
The sale of the property generated net cash proceeds to the Partnership of
approximately $1.2 million. The proceeds were net of approximately $1.7 million
used to retire, at a discount, a portion of the Partnership's purchase money
note obligation with respect to the property. The proceeds were also net of
$531,100 which was used to purchase a certificate of deposit which was held in
escrow until January 2, 1997, at which time all principal and interest accrued
up to three percent per annum on the certificate of deposit was used to retire
the Partnership's remaining purchase money note obligation with respect to the
property. All interest that accrued on the certificate of deposit in excess of
three percent per annum was received by the Partnership. Accordingly, the
accompanying financial statements include $531,100 of restricted cash
equivalents as of December 31, 1996, which represents the remaining principal
balance which became due on January 2, 1997, in accordance with the escrow
agreement. The sale provided proceeds to the Partnership in excess of its
investment in the Local Partnership, and resulted in a net financial statement
gain in 1996 of $7,287,743, of which $4,825,355 resulted from the retirement of
the purchase money note obligation with respect to the property. The federal
tax gain was $10,085,650. The Managing General Partner of the Partnership
and/or its affiliates did not receive any fees relating to the sale.

On May 23, 1994, the local general partner of New Walnut Square Associates
Limited Partnership (Walnut Square) filed a notice of intent to participate
under LIHPRHA. On July 11, 1996, the local managing general partner's plan of
action regarding the sale of Walnut Square under the LIHPRHA program was
approved by HUD. On September 19, 1996, Walnut Square sold the property, a 284-
unit apartment complex located in New Orleans, Louisiana, under the LIHPRHA
program to Walnut Square Affordable Housing, Inc., a District of Columbia non-
profit entity. The sale of the property generated net cash proceeds to the
Partnership of approximately $966,000. The proceeds were net of $2.4 million
used to retire, at a discount, the Partnership's purchase money note obligation
with respect to the property. The sale provided proceeds to the Partnership in
excess of its investment in the Local Partnership, and resulted in a net
financial statement gain in 1996 of $8,566,073, of which $6,672,477 resulted
from the retirement of the purchase money note obligation with respect to the
property. The federal tax gain was $11,357,595. The Managing General Partner
of the Partnership and/or its affiliates did not receive any fees relating to
the sale.

II-7
<PAGE>
PART II
-------

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

Illinois, under the LIHPRHA program to National Handicap Housing Institute,
Inc., a non-profit entity. The sale of the property generated net cash proceeds
to the Partnership of approximately $552,000. The proceeds were net of
approximately $530,000 used to retire, at a discount, the Partnership's purchase
money note obligation with respect to the property. The sale provided proceeds
to the Partnership in excess of its investment in the Local Partnership, and
resulted in a net financial statement gain in 1996 of $1,445,203, of which
$404,670 resulted from the retirement of the purchase money note obligation with
respect to the property. The federal tax gain was $3,169,629. The Managing
General Partner of the Partnership and/or its affiliates earned net fees of
$26,606 for its services relating to the sale of River Run. As of March 10,
1997, $8,869 of these fees have not been paid.

On May 22, 1992, Clearfield Hills I Limited Partnership (Clearfield Hills
I) filed a notice of intent to participate under LIHPRHA. The sale of the
property was completed on February 6, 1996. The sale price of approximately
$3.2 million generated sufficient proceeds to the Partnership to retire, at a
discount, the purchase money note obligation of the Partnership with respect to
such property, which matured on October 30, 1994. The sale provided proceeds to
the Partnership in excess of its investment in the Local Partnership, and
resulted in a net financial statement gain in 1996 of $1,765,277, of which
$50,107 resulted from the retirement of the purchase money note obligation with
respect to the property. The federal tax gain was $2,368,084. The Managing
General Partner and/or its affiliates did not receive any fees for services
relating to the sale.

On March 1, 1994, New Village Apartments North (Village North) filed a
notice of intent to participate under the LIHPRHA program. The sale of the
property was completed on February 6, 1996. The sale price of approximately
$2.86 million generated sufficient proceeds to the Partnership to retire, at a
discount, the purchase money note obligation of the Partnership with respect to
such property, which matured on September 27, 1994. The sale provided proceeds
to the Partnership in excess of its investment in the Local Partnership, and
resulted in a net financial statement gain in 1996 of $2,586,375, of which
$1,452,591 resulted from the retirement of the purchase money note obligation
with respect to the property. The federal tax gain was $3,307,018. The
Managing General Partner and/or its affiliates did not receive any fees for
services relating to the sale.

On October 31, 1996, the Partnership distributed $1,999,119 (or $27.20 per
Additional Limited Partner unit) to the Additional Limited Partners from the
proceeds of the sales of Clearfield Hills I, Village North, River Run, Forest
Park and Walnut Square. The Managing General Partner intends to retain all of
the Partnership's remaining undistributed net sale proceeds for the possible
repayment, prepayment or purchase of the Partnership's outstanding purchase
money notes related to other Local Partnerships.

II-8
<PAGE>
PART II
-------

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

$3,055,176, of which $214,343 resulted from the retirement of the purchase money
note obligation with respect to the property. The federal tax gain was
$6,982,026. The Partnership distributed $745,290 (or $10.14 per Additional
Limited Partner unit) on April 28, 1995 to the Additional Limited Partners. The
Managing General Partner intends to retain all of the Partnership's remaining
undistributed net sale proceeds for the repayment, prepayment or purchase of
purchase money notes of other Local Partnerships, as discussed above. The
General Partner and/or its affiliates received net fees for services relating to
the sale of $186,512 on February 2, 1995.

The Partnership defaulted on its purchase money note relating to Holiday
Village Apartments on July 27, 1994 when the note matured and was not paid. The
defaulted amount included principal and accrued interest of $1,370,000 and
$2,862,342, respectively. As of March 10, 1997, principal and accrued interest
totalling $1,370,000 and $4,292,052, respectively, were due. In June 1994, an
offer was made to extend the maturity date of this note to coincide with the
potential refinancing of the first mortgage. There is no assurance that a
refinancing of the first mortgage will be obtained. The Managing General
Partner and the noteholder continue to negotiate settlement options, and as of
March 10, 1997, negotiations between the Managing General Partner and the
noteholder were ongoing. There is no assurance that an agreement will be
reached. Should the noteholder begin foreclosure proceedings on the
Partnership's interest in the related Local Partnership, the Partnership intends
to vigorously defend any action by the noteholder. However, there is no
assurance that the Partnership will be able to retain its interest in the Local
Partnership. The uncertainty about the continued ownership of the Partnership's
interest in the related Local Partnership does not impact the Partnership's
financial condition because the related purchase money note is nonrecourse and
secured solely by the Partnership's interest in the Local Partnership.
Therefore, should the investment in Holiday Village Apartments not produce
sufficient value to satisfy the related purchase money note, the Partnership's
exposure to loss is limited since the amount of the nonrecourse indebtedness
exceeds the carrying amount of the investment in and advances to the Local
Partnership. Thus, even a complete loss of this investment would not have a
material impact on the operations of the Partnership.

The Partnership has determined that it is not practicable to estimate the
fair value of the purchase money notes, either individually or in the aggregate,
due to: (1) the lack of an active market for this type of financial instrument,
(2) the variable nature of purchase money note interest payments as a result of
fluctuating cash flow distributions received from the related Local Partnership,
and (3) the excessive costs associated with an independent appraisal of the
purchase money notes.

The Partnership closely monitors its cash flow and liquidity position in an
effort to ensure that sufficient cash is available for operating requirements.
In 1996 and 1995, the receipt of distributions from Local Partnerships and the
release of restricted cash equivalents were adequate to support operating cash
requirements.

Results of Operations
---------------------

The Partnership's net income increased in 1996 from 1995 primarily due to
the extraordinary gain from extinguishment of debt and the gain on disposition

II-9
<PAGE>
PART II
-------

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

of investments related to the sale of Forest Part, Walnut Square, River Run,
Clearfield Hills I and Village North during 1996, as discussed above.
Contributing to the increase in the Partnership's net income was an increase in
interest income due to larger cash and cash equivalent balances during 1996 and
a decrease in general and administrative expenses due to decreased payroll
costs. Partially offsetting the increase in the Partnership's net income was an
increase in interest expense due to the amortization of imputed interest, and a
decrease in share of income from partnerships due to a decrease in repayment of
an advance received by the Partnership from the New Second Lakewood Associates
Limited Partnership (Second Lakewood). Repayment of advances received by the
Partnership from Second Lakewood were recorded as income during 1996 and 1995 as
the Partnership's investment in the Local Partnership has been reduced to zero
due to recurring operating losses.

The Partnership's net loss decreased in 1995 from 1994 primarily due to the
recognition of gain on the disposition of Southgate in 1995, as previously
discussed. Contributing to the decrease in net loss was an increase in share of
income from Local Partnerships primarily as a result of one property's
accumulated losses exceeding the Partnership's basis in the related investment
in Local Partnership during 1995. The Partnership does not record losses from
the Local Partnerships in excess of the Partnership's investment in the
respective Local Partnerships, as discussed below. Contributing to the increase
in share of income from Local Partnerships was the repayment in 1995 of the
Partnership's advance to the same Local Partnership discussed above, which was
recorded by the Partnership as income from Local Partnerships since the
Partnership's investment in the particular Local Partnership had been reduced to
zero. Also contributing to the increase in share of income from Local
Partnerships was a decrease in interest expense at one property, an increase in
rental revenues at two properties, and a decrease in operating expenses at two
properties. Also contributing to the decrease in the Partnership's net loss was
an increase in interest and other income as a result of higher cash balances and
increased yields on investments. Partially offsetting the decrease in net loss
was an increase in interest expense as a result of the amortization of the
discount on the purchase money notes, as discussed below.

The purchase money notes originated from 1984 through 1985. When they were
issued, the market interest rate was approximately 15%, while the stated
interest rates ranged from 9 to 12%. The notes were discounted as required by
Generally Accepted Accounting Principles, and a simple/compound method was used
at the stated interest rate for tax purposes and the compound method at the
market interest rate was used for book purposes. As the book interest is being
compounded, the interest expense for book purposes will eventually surpass the
interest expense for tax purposes, thereby reducing the discount and increasing
the interest expense. In fiscal year 1996, all properties with purchase money
notes had book interest which exceeded the tax interest. This increase in
interest expense and the resulting reduction in the discount is expected to
increase in future years.

For financial reporting purposes, the Partnership, as a limited partner in
the Local Partnerships, does not record losses from the Local Partnerships in
excess of its investment to the extent that the Partnership has no further
obligation to advance funds or provide financing to the Local Partnerships. As
a result, the Partnership's recognized losses for the years ended December 31,
1996, 1995 and 1994 did not include losses of $1,101,875, $1,262,820 and
$1,071,631, respectively. The Partnership's net loss recognized from the Local

II-10
<PAGE>
PART II
-------

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

Partnerships is generally expected to decrease in subsequent years as the
Partnership's investments in the Local Partnership are reduced to zero.
Accordingly, excludable losses are generally expected to increase.
Distributions of $35,513, $28,777 and $68,981 received from three Local
Partnerships during 1996, 1995 and 1994, were offset against the respective
years' recorded losses because these amounts were in excess of the Partnership's
investment.

The letter of credit related to the tax-exempt bonds on Lakes of Northdale,
which originally matured in June 1995, had been extended to February 15, 1996.
The letter of credit fee increased from its previous level of 1% per annum to a
maximum of 4% per annum in October 1995. During June 1996, the Local
Partnership received a new letter of credit with a three-year term and a three-
year renewal option. In conjunction with the new letter of credit, the
Partnership successfully negotiated with the holder of the related purchase
money note to extend the term thereof to that of the letter of credit.

On September 30, 1995, the local general partner of Northridge Park Limited
Partnership (Northridge Park) restructured its existing first mortgage. In
conjunction with the restructuring, the Managing General Partner restructured
the related purchase money note, extending the maturity from July 31, 1999 to
October 1, 2025. In addition, the interest rate on the purchase money note was
lowered from 9% to 8.17%. The new maturity date and interest rate of the
purchase money note are the same as the terms of Northridge Park's restructured
mortgage.

The Managing General partner received $1,000 on January 5, 1996 for an
option to purchase the Partnership's limited partner interest in Second Lakewood
and an additional $1,000 on May 3, 1996, to extend the term of the option.
Negotiations between the Managing General Partner and the option holder
continued following the expiration of the option until November 1996, when they
were terminated. In January 1997, the local managing general partner received
an offer to purchase the property from a third party, and a purchase agreement
was signed effective February 17, 1997. The potential buyer has made a deposit
of $100,000 and has commenced its due diligence review. There is no assurance
that a sale of Second Lakewood will occur as the potential buyer has the option
to cancel the agreement and receive its deposit on or before April 18, 1997,
based on the results of its due diligence review.

In 1989, Second Lakewood was experiencing rent losses due to units being
taken off the market because of roof leakage. The Partnership advanced a total
of $750,000 during 1990 to fund roof replacement in order to maintain the
marketability and income of the property. The outstanding loan and interest
accrued thereon totalled $80,740 and $2,738, respectively, as of December 31,
1996 and $224,543 and $617, respectively, as of December 31, 1995. On March 7,
1997, the loan and interest accrued thereon of $80,740 and $4,366, respectively,
was paid to the Partnership by the Local Partnership in full satisfaction of the
outstanding advance.

In September 1995, HUD sold the mortgage of Second Lakewood to a new
mortgagee. The new mortgagee is now servicing the loan and Second Lakewood is
no longer subject to HUD regulatory requirements.

II-11
<PAGE>
PART II
-------

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

Garden Court Apartments, located in Springfield, Illinois, received a
$330,000 grant from HUD to make certain improvements to the property. The local
general partner of Garden Court Apartments addressed security issues as part of
these improvements in an effort to improve occupancy. Improvements made under
this grant were completed in the fourth quarter of 1995.

The report of the auditors on the financial statements of Garden Court for
the year ended December 31, 1996 indicated that substantial doubt exists about
the ability of the Local Partnership to continue as a going concern due to
negative cash flow resulting from decreasing occupancy levels. The
Partnership's investment in Garden Court was previously reduced to zero as a
result of losses from the Local Partnership during prior years. In addition,
the Partnership did not issue any purchase money notes or debt instruments in
connection with its investment in Garden Court. Therefore, the uncertainty
about the Local Partnership's continued ownership of the property does not
impact the Partnership's financial condition. Furthermore, the complete loss of
this investment would not have a material impact on the operations of the
Partnership.

The first mortgage loan on Clearfield Hills II originally matured on
October 2, 1995. The existing lender granted an extension of this loan to
October 31, 1995. The Local Partnership refinanced the mortgage with a new
lender on October 13, 1995. The new first mortgage principal balance of
$1,513,000 carries an interest rate of 8.32% per annum. From June 26, 1995 to
October 9, 1995, the Partnership advanced a total of $49,260 to Clearfield Hills
II for closing costs. On October 13, 1995, the Partnership received $45,310
from the refinancing proceeds as partial reimbursement of these advances. The
remaining $3,950 was repaid to the Partnership on December 20, 1995 upon the
release of certain escrows related to the original mortgage.

The local general partners of the following properties have each filed a
notice of intent to participate under the LIHPRHA program:

Property Date of Filing
------------------- ------------------
<S> <C>
Valley Vista November 4, 1992
Cedar Point November 23, 1993
Thornwood House November 23, 1993
Redden Gardens December 23, 1994
Holiday Village January 9, 1995
Cottonwood Park January 23, 1995
</TABLE>

The plan of actions for these properties were not approved by HUD,
therefore, these properties are no longer eligible to participate in what
remains of the LIHPRHA program.

Incentives available under LIHPRHA are discussed above in the General
section. As discussed above, there is no assurance that a sale or supplemental
financing of these properties will occur due to the federal government's limited
funding or appropriations to the LIHPRHA program.

II-12
<PAGE>
PART II
-------

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

Inflation
---------

Inflation allows for increases in rental rates, usually offsetting any
higher operating and replacement costs. Furthermore, inflation generally does
not impact the fixed rate long-term financing under which real property
investments were purchased. Future inflation could allow for appreciated values
of the Local Partnerships' properties over an extended period of time as rental
revenues and replacement values gradually increase.

The following table reflects the combined rental revenues of the
Partnership's remaining thirty-eight properties for the five years ended
December 31, 1996. Combined rental revenue amounts for years prior to 1996 have
been adjusted to reflect property sales in 1996 and 1995, as discussed above.

II-13
<PAGE>
PART II
-------

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

<TABLE>
<CAPTION>
For the years ended December 31,
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Combined Rental
Revenue $36,656,513 $36,350,774 $35,378,422 $35,365,870 $33,489,630

Annual Percentage
(Decrease)/increase .84% 2.7% .04% 5.6%

</TABLE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------

The information required by this item is contained in Part IV.

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

None.

II-14
<PAGE>
PART III
--------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------

(a), (b) and
(c) The Partnership has no directors, executive officers or
significant employees of its own.
(a), (b), (c)
and (e) The names, ages and business experience of the directors and
executive officers of C.R.I., Inc. (CRI), the Managing General
Partner of the Partnership, are as follows:

William B. Dockser, 60, has been the Chairman of the Board of CRI and a Director
since 1974. Prior to forming CRI, he served as President of Kaufman and Broad
Asset Management, Inc., an affiliate of Kaufman and Broad, Inc., which managed a
number of publicly held limited partnerships created to invest in low and
moderate income multifamily apartment complexes. For a period of 2-1/2 years
prior to joining Kaufman and Broad, he served in various positions at HUD,
culminating in the post of Deputy FHA Commissioner and Deputy Assistant
Secretary for Housing Production and Mortgage Credit, where he was responsible
for all federally insured housing production programs. Before coming to
Washington, Mr. Dockser was a practicing attorney in Boston and also was a
special Assistant Attorney General for the Commonwealth of Massachusetts. He
holds a Bachelor of Laws degree from Yale University Law School and a Bachelor
of Arts degree, cum laude, from Harvard University. He is also Chairman of the
Board of CRIIMI MAE Inc., CRIIMI, Inc. and CRI Liquidating REIT, Inc.

H. William Willoughby, 50, President, Secretary and a Director of CRI since
January 1990 and Senior Executive Vice President, Secretary and a Director of
CRI from 1974 to 1989. He is principally responsible for the financial
management of CRI and its associated partnerships. Prior to joining CRI in
1974, he was Vice President of Shelter Corporation of America and a number of
its subsidiaries dealing principally with real estate development and equity
financing. Before joining Shelter Corporation, he was a senior tax accountant
with Arthur Andersen & Company. He holds a Juris Doctorate degree, a Master of
Business Administration degree and a Bachelor of Science degree in Business
Administration from the University of South Dakota. He is also a Director and
executive officer of CRIIMI MAE Inc., CRIIMI, Inc. and CRI Liquidating REIT,
Inc.

Ronald W. Thompson, 50, Group Executive Vice President-Hotel Asset Management.
Prior to joining CRI in 1985, he was employed at the Hyatt Organization where he
most recently served as the General Manager of the Hyatt Regency in Flint,
Michigan. During his nine year tenure with Hyatt, he held senior management
positions with the Hyatt Regency in Dearborn, Michigan, the Hyatt in Richmond,
Virginia, the Hyatt in Winston-Salem, North Carolina and the Hyatt Regency in
Atlanta, Georgia. Before joining Hyatt, Mr. Thompson worked in London, England
for the English Tourist Board as well as holding management positions in Europe,
Australia, and New Zealand in the hotel industry. Mr. Thompson received his
education in England where he received a business degree in Hotel Administration
from Winston College.

III-1
<PAGE>
PART III
--------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - Continued
--------------------------------------------------

Susan R. Campbell, 38, Senior Vice President-CRI Realty Services. Prior to
joining CRI in March 1985, she was a budget analyst for the B. F. Saul Advisory
Company. She holds a Bachelor of Science degree in General Business from the
University of Maryland.

Melissa Cecil Lackey, 41, Senior Vice President and General Counsel. Prior to
joining CRI in 1990, she was associated with the firms of Zuckerman, Spaeder,
Goldstein, Taylor & Kolker in Washington, D.C. and Hirsch & Westheimer in
Houston, Texas. She holds a Juris Doctorate from the University of Virginia
School of Law and a Bachelor of Arts degree from the College of William & Mary.

(d) There is no family relationship between any of the foregoing directors
and executive officers.

(f) Involvement in certain legal proceedings.

None.

(g) Promoters and control persons.

Not applicable.

ITEM 11. EXECUTIVE COMPENSATION
----------------------

(a), (b), (c), (d), (e), (f), (g), (i), (j), (k) and (l)

The Partnership has no officers or directors. However, in accordance with
the Partnership Agreement, and as disclosed in the public offering, various
kinds of compensation and fees were paid or are payable to the General
Partners and their affiliates. Additional information required in these
sections is included in Notes 3 and 4 to the consolidated financial
statements contained in Part IV, Item 14.

Additionally, the General Partners may receive an annual distribution from
the Partnership if there is cash available for distribution, as defined in
the Partnership Agreement.

The Managing General Partner is also entitled to the following payments:

(1) Annual incentive management fee for managing the affairs and business
of the Partnership in an amount not to exceed .25% of invested assets,
including the Partnership's allocable share of the mortgages, payable
first, in an annual amount equal to $375,000; and second, after
distributions to investors in the amount of 1% of the gross proceeds
of the offering, the balance of such .25% of invested assets. Any flex
subsidy mortgage loans obtained by the local managing general partner
of the Local Partnerships will not be included as part of the assets
upon which the Managing General Partner's incentive management fee is
calculated. The annual incentive management fee amounted to $375,000
for each of the years ended December 31, 1996, 1995 and 1994.

(2) 12% of sale and refinancing proceeds remaining after the limited
partners have received a return of all their capital contributions,
adjusted as provided in the Partnership Agreement, and the General
Partners have received the property disposition fees described below.
The General Partners may also receive a return of their capital

III-2
<PAGE>
PART III
--------

ITEM 11. EXECUTIVE COMPENSATION - Continued
----------------------

contributions and repayment of any loans made to the Partnership. No
sale or refinancing proceeds were paid to the General Partners during
the years ended December 31, 1996, 1995 and 1994.

(3) 1% of the aggregate selling prices, including any amounts previously
unpaid upon prior sales of apartment complexes, payable after the
limited partners have received a return of all their capital
contributions, adjusted as provided in the Partnership Agreement.
This amount and any other commissions or fees payable upon the sale of
apartment complexes shall not in the aggregate exceed the lesser of
the competitive rate or 6% of the sales price of the apartment
complexes. No such amounts were paid to the General Partners during
the years ended December 31, 1996, 1995 and 1994.

(4) In addition, the Managing General Partner and/or its affiliates may
receive a fee in an amount of not more than 2% of the sales price of
the investment in a Local Partnership or the property it owns. The
fee would only be payable upon the sale of the investment in a Local
Partnership or the property it owns and would be subject to certain
restrictions, including achievement of a certain level of sales
proceeds and making certain minimum distributions to limited partners.
During the year ended December 31, 1996, the Managing General Partner
and/or its affiliates earned net fees totalling $26,606 in connection
with the sale of the property relating to the Partnership's investment
in River Run. As of March 10, 1997, $8,869 of these fees have not
been paid. No fees were paid to the Managing General Partner and/or
its affiliates for services performed in connection with the 1996
sales of the properties relating to the Partnership's investments
Clearfield Hills I, New Village Apartments North, Forest Park and
Walnut Square. In February 1995, the Managing General Partner and/or
its affiliates received net fees totalling $186,512 for services
relating to the sale of the Southgate property. No such fees were
paid to the Managing General Partner and/or its affiliates during the
year ending December 31, 1994.

(h) Termination of employment and change in control arrangements.

None.

III-3
<PAGE>
PART III
--------

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
---------------------------------------------------
MANAGEMENT
----------

(a) Security ownership of certain beneficial owners.

No person or "group", as that term is used in Section 13(d)(3) of the
Securities Exchange Act 1934, is known by the Partnership to be the
beneficial owner of more than 5% of the issued and outstanding
partnership units at December 31, 1996.

(b) Security ownership of management.

The following table sets forth certain information concerning all
units beneficially owned, as of December 31, 1996, by each director
and by all directors and officers as a group of the Managing General
Partner of the Partnership.

Name of Amount and Nature % of total
Beneficial Owner of Beneficial Ownership Units issued
---------------- ----------------------- ------------
<S> <C> <C>
William B. Dockser None 0%
H. William Willoughby None 0%
All Directors and Officers
as a Group (5 persons) None 0%

There exists no arrangement known to the Partnership, the operation of
which may, at a subsequent date, result in a change in control of the
Partnership. There is a provision in the Limited Partnership
Agreement which allows, under certain circumstances, the ability to
change control.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------

(a) Transactions with management and others.

The Partnership has no directors or officers. In addition, the
Partnership has had no transactions with individual officers or
directors of the Managing General Partner of the Partnership other
than any indirect interest such officers and directors may have in the
amounts paid to the Managing General Partner or its affiliates by
virtue of their stock ownership in CRI. Item 11 of this report, which
contains a discussion of the fees and other compensation paid or
accrued by the Partnership to the General Partners or their
affiliates, is incorporated herein by reference. Note 3 of the notes
to the consolidated financial statements, which contains disclosure of
related party transactions, is also incorporated herein by reference.

(b) Certain business relationships.

III-4
<PAGE>
PART III
--------

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - Continued
----------------------------------------------

The Partnership's response to Item 13(a) is incorporated herein by
reference. In addition, the Partnership has no business relationship
with entities of which the officers and directors of the Managing
General Partner of the Partnership are officers, directors or equity
owners other than as set forth in the Partnership's response to Item
13(a).

None.

(d) Transactions with promoters.

Not applicable.

III-5
<PAGE>
PART IV
-------

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
------------------------------------------------------
FORM 8-K
--------

(a) 1. Financial Statements Page
-------------------- ----

Report of Independent Certified Public
Accountants - Capital Realty Investors-IV
Limited Partnership IV-5

Reports of Independent Certified Public
Accountants - Local Partnerships in which
Capital Realty Investors-IV Limited
Partnership has invested IV-6

Consolidated Balance Sheets as of December 31,
1996 and 1995 IV-7

Consolidated Statements of Operations for the
years ended December 31, 1996, 1995 and IV-8
1994

Consolidated Statement of Changes in Partners'
Deficit for the years ended
December 31, 1996, 1995 and 1994 IV-9

Consolidated Statements of Cash Flows for
the years ended December 31, 1996, 1995
and 1994 IV-10

Notes to Consolidated Financial Statements IV-11

(a) 2. Financial Statement Schedules
-----------------------------

Included in Part IV of this report are the
following schedules for the year ended
December 31, 1996, which are applicable to
the Local Partnerships in which Capital Realty
Investors-IV Limited Partnership has invested:

Report of Independent Certified Public
Accountants on Financial Statement Schedule IV-32

Schedule III - Real Estate and Accumulated
Depreciation IV-33

The remaining schedules are omitted because the required
information is included in the financial statements and notes
thereto or they are not applicable or not required.

IV-1
<PAGE>
PART IV
-------

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
------------------------------------------------------
FORM 8-K - Continued
--------

(a) 3. Exhibits (listed according to the number assigned in the table in
Item 601 of Regulation S-K).

Exhibit No. 3 - Articles of Incorporation and bylaws.

a. Certificate of Limited Partnership of Capital Realty
Investors-IV Limited Partnership. (Incorporated by
reference from Exhibit 3 to Registrant's Registration
Statement on Form S-11, as amended, dated June 7, 1984.)

Exhibit No. 4 - Instruments defining the rights of security
holders, including indentures.

a. Limited Partnership Agreement of Capital Realty Investors-IV
Limited Partnership. (Incorporated by reference from
Exhibit 4 to Registrant's Registration Statement on Form
S-11, as amended, dated June 7, 1984.)

Exhibit No. 10 - Material Contracts

a. Management Services Agreement between CRI and Capital Realty
Investors-IV Limited Partnership. (Incorporated by
reference from Exhibit No. 10(b) to the Registrant's
Registration Statement on Form S-11, as amended, June 7,
1984.)

Exhibit No. 27 - Financial Data Schedule

Exhibit No. 28 - Other Exhibits

a. Prospectus of the Partnership, dated June 12, 1985
(Incorporated by reference to the Registrant's Registration
Statement on Form S-11, as amended, dated June 7, 1984).

(b) Reports on Form 8-K
-------------------

A report on Form 8-K was filed with the Commission on October 4,
1996 regarding the sale of the properties relating to the
Partnership's investment in River Run, Forest Park and Walnut
Square.

The list of Exhibits required by Item 601 of Regulation S-K is
included in Item (a)3., above.

IV-2
<PAGE>
PART IV
-------

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
------------------------------------------------------
FORM 8-K - Continued
--------

(d) Financial Statement Schedules
-----------------------------

See Item (a)2, above.

IV-3
<PAGE>

SIGNATURES
----------

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

Capital Realty Investors-IV
Limited Partnership

By: C.R.I., Inc.
Managing General Partner

March 27, 1997 /s/ William B. Dockser
- --------------------------- --------------------------------
DATE William B. Dockser, Director,
Chairman of the Board,
Treasurer and Principal
Executive Officer

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

March 27, 1997 /s/ H. William Willoughby
- --------------------------- --------------------------------
DATE H. William Willoughby
Director, President and
Secretary

March 27, 1997 /s/ Deborah K. Browning
- --------------------------- --------------------------------
DATE Deborah K. Browning
Vice President,
Chief Accounting Officer,
Principal Financial and
Principal Accounting Officer

IV-4
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------

To the Partners
Capital Realty Investors-IV Limited Partnership

We have audited the consolidated balance sheets of Capital Realty
Investors-IV Limited Partnership as of December 31, 1996 and 1995, and the
related consolidated statements of operations, changes in partners' deficit and
cash flows for the years ended December 31, 1996, 1995 and 1994. These
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements based
on our audit. We did not audit the financial statements of certain Local
Partnerships. The Partnership's share of income or loss from these Local
Partnerships constitutes $262,827 of losses in 1996, $666,622 of losses in 1995
and $1,158,768 of losses in 1994 included in the Partnership's net income/loss.
The financial statements of these Local Partnerships were audited by other
auditors whose reports thereon have been furnished to us, and our opinion
expressed herein, insofar as it relates to the amount included for these Local
Partnerships, is based solely upon the reports of the other auditors.

We conducted our audits in accordance with generally accepted auditing
standards. 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 examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based upon our audits and the reports of other auditors,
the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Capital Realty Investors-IV
Limited Partnership as of December 31, 1996 and 1995, and the consolidated
results of its operations, changes in partners' deficit and cash flows for the
years ended December 31, 1996, 1995 and 1994, in conformity with generally
accepted accounting principles.

Grant Thornton LLP

Vienna, VA
March 10, 1997

IV-5
<PAGE>

REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS -

LOCAL PARTNERSHIPS IN WHICH

CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

HAS INVESTED*

* The reports of independent certified public accountants - Local
Partnerships in which Capital Realty Investors-IV Limited Partnership has
invested were filed in paper format under Form SE on March 26, 1997, in
accordance with the Securities and Exchange Commission's continuing
hardship exemption granted December 19, 1996.

IV-6
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

ASSETS

</TABLE>
<TABLE>
<CAPTION>
December 31,
1996 1995
------------- -------------
<S> <C> <C>
Investments in and advances to partnerships $ 30,456,822 $ 33,458,291
Investment in partnerships held for sale -- 1,479,864
Cash and cash equivalents 8,871,297 6,801,118
Restricted cash 585,810 44,800
Acquisition fees, principally paid to related parties, net
of accumulated amortization of $358,374 and $365,275,
respectively 819,825 941,910
Property purchase costs, net of accumulated amortization
of $346,512 and $348,023, respectively 777,328 880,553
Other assets 37,157 14,232
------------- -------------
Total assets $ 41,548,239 $ 43,620,768
============= =============

LIABILITIES AND PARTNERS' DEFICIT

Due on investments in partnerships $ 26,931,672 $ 27,313,495
Accrued interest payable 78,413,302 84,441,538
Accounts payable and accrued expenses 99,062 116,689
Consulting fees payable to related parties 8,869 --
------------- -------------
Total liabilities 105,452,905 111,871,722
------------- -------------
Commitments and contingencies

Partners' capital (deficit):

Capital paid-in:
General Partners 2,000 2,000
Limited Partners 73,501,500 73,501,500
------------- -------------
73,503,500 73,503,500
Less:
Accumulated distributions to partners (5,451,702) (3,452,583)
Offering costs (7,562,894) (7,562,894)
Accumulated losses (124,393,570) (130,738,977)
------------- -------------
Total partners' deficit (63,904,666) (68,250,954)
------------- -------------
Total liabilities and partners' deficit $ 41,548,239 $ 43,620,768
============= =============

</TABLE>

The accompanying notes are an integral part
of these consolidated financial statements.

IV-7
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
For the years ended December 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Share of income (loss) from partnerships $ 122,378 $ 245,013 $ (1,399,207)
------------ ------------ ------------
Other revenue and expenses:
Revenue
Interest and other income 546,446 433,511 359,536
------------ ------------ ------------
Expenses
Interest 15,278,276 14,418,899 13,238,386
Management fee 375,000 375,000 375,000
Professional fees 95,386 101,361 117,503
General and administrative 163,763 207,778 148,861
Amortization 61,663 66,184 69,551
------------ ------------ ------------
15,974,088 15,169,222 13,949,301
------------ ------------ ------------
Total other revenue and expenses (15,427,642) (14,735,711) (13,589,765)
------------ ------------ ------------
Loss before gain on disposition
of investments in partnerships (15,305,264) (14,490,698) (14,988,972)

Gain on disposition of investments in
partnerships 8,245,471 2,840,833 --
------------ ------------ ------------

Loss before extraordinary gain from
extinguishment of debt (7,059,793) (11,649,865) (14,988,972)

Extraordinary gain from extinguishment of
debt 13,405,200 214,343 --
------------ ------------ ------------
Net income (loss) $ 6,345,407 $(11,435,522) $(14,988,972)
============ ============ ============
Income (loss) allocated to General Partners (1.51%) $ 95,816 $ (172,676) $ (226,333)
============ ============ ============
Income (loss) allocated to Initial and Special Limited
Partners (1.49%) $ 94,546 $ (170,389) $ (223,336)
============ ============ ============
Income (loss) allocated to Additional Limited
Partners (97%) $ 6,155,045 $(11,092,457) $(14,539,303)
============ ============ ============
Income (loss) per unit of Additional Limited Partnership
Interest based on 73,500 units outstanding $ 83.74 $ (150.92) $ (197.81)
============ ============ ============

</TABLE>

The accompanying notes are an integral part
of these consolidated financial statements.

IV-8
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT

For the years ended December 31, 1996, 1995 and 1994

Initial and
Special Additional
General Limited Limited
Partners Partners Partners Total
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Partners' deficit,
January 1, 1994 $(1,590,312) $(1,569,720) $(37,921,138) $(41,081,170)

Net loss (226,333) (223,336) (14,539,303) (14,988,972)
----------- ----------- ------------ ------------
Partners' deficit,
December 31, 1994 (1,816,645) (1,793,056) (52,460,441) (56,070,142)

Distribution of $10.14
per Additional Limited
Partnership Interest -- -- (745,290) (745,290)

Net loss (172,676) (170,389) (11,092,457) (11,435,522)
----------- ----------- ------------ ------------
Partners' deficit,
December 31, 1995 (1,989,321) (1,963,445) (64,298,188) (68,250,954)

Distribution of $27.20
per Additional Limited
Partnership Interest -- -- (1,999,119) (1,999,119)

Net income 95,816 94,546 6,155,045 6,345,407
----------- ----------- ------------ ------------
Partners' deficit,
December 31, 1996 $(1,893,505) $(1,868,899) $(60,142,262) $(63,904,666)
=========== =========== ============ ============

</TABLE>

The accompanying notes are an integral part
of these consolidated financial statements.

IV-9
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
For the years ended December 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 6,345,407 $(11,435,522) $(14,988,972)
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Share of (income) loss from partnerships (122,378) (245,013) 1,399,207
Payment of purchase money note interest (304,873) (342,518) (346,806)
(Increase) decrease in accrued interest receivable
on advances to partnerships (2,121) 67,192 (48,565)
Amortization of discount on purchase money notes 4,298,552 3,255,277 2,784,342
Amortization of deferred costs 61,663 66,184 69,551
Gain on disposition of investment in
partnerships (8,245,471) (2,840,833) --
Extraordinary gain from extinguishment of debt (13,405,200) (214,343) --

Changes in assets and liabilities:
Increase in other assets (22,925) (4,227) (2,068)
Increase in accrued interest payable 10,979,724 11,163,622 10,454,046
(Decrease) increase in accounts payable (8,758) 24,306 (45,065)
------------ ------------ ------------

Net cash used in operating activities (426,380) (505,875) (724,330)
------------ ------------ ------------

Cash flows from investing activities:
Receipt of distributions from partnerships 872,629 845,622 712,622
Payment to purchase money note sinking fund (5,600) (5,600) --
Release of restricted cash equivalents -- 75,000 67,225
Repayment of advances to partnerships 143,803 216,958 61,756
Investment held in escrow (535,410) -- --
Net proceeds from disposition of investment
in partnership 11,998,519 4,712,726 --
------------ ------------ ------------

Net cash provided by investing activities 12,473,941 5,844,706 841,603
------------ ------------ ------------

Cash flows from financing:
Payment of purchase money note principal (8,865) (10,973) --
Distribution to Additional Limited Partners (1,999,119) (745,290) --
Pay-off of purchase money notes and related interest (7,969,398) (3,217,005) --
------------ ------------ ------------
Net cash used in financing activities (9,977,382) (3,973,268) --
------------ ------------ ------------
Net increase in cash and cash equivalents 2,070,179 1,365,563 117,273

Cash and cash equivalents, beginning of year 6,801,118 5,435,555 5,318,282
------------ ------------ ------------
Cash and cash equivalents, end of year $ 8,871,297 $ 6,801,118 $ 5,435,555
============ ============ ============
</TABLE>

The accompanying notes are an integral part
of these consolidated financial statements.

IV-10
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Organization
------------

Capital Realty Investors-IV Limited Partnership (the Partnership) was
formed under the Maryland Revised Uniform Limited Partnership Act on
December 7, 1983 and shall continue until December 31, 2038 unless sooner
dissolved in accordance with the Partnership Agreement. The Partnership
was formed to invest in real estate by acquiring and holding a limited
partnership interest in limited partnerships (Local Partnerships) which own
and operate federal or state government-assisted or conventionally financed
apartment complexes located throughout the United States, which provide
housing principally to the elderly and to individuals and families of low
or moderate income.

The General Partners of the Partnership are C.R.I., Inc. (CRI), which
is the Managing General Partner, and current and former shareholders of
CRI. The Initial Limited Partner of the Partnership is Rockville Pike
Associates Limited Partnership-IV, a limited partnership which includes
certain officers and former employees of CRI or its affiliates. The
Special Limited Partner of the Partnership is Two Broadway Associates-III,
a limited partnership comprised of an affiliate and employees of Merrill
Lynch, Pierce, Fenner and Smith, Incorporated.

The Partnership sold 73,500 units at $1,000 per unit of Additional
Limited Partnership Interest through a public offering. The offering
period was terminated on August 31, 1984.

b. Method of accounting
--------------------

The financial statements of the Partnership are prepared on the
accrual basis of accounting in accordance with generally accepted
accounting principles.

c. Principles of consolidation
---------------------------

These financial statements include the accounts of three intermediary
limited partnerships which have invested in three Local Partnerships which
own and operate government-assisted or conventionally financed apartment
complexes. All activity between the three intermediary limited
partnerships and the Partnership has been eliminated in consolidation.

d. Investments in and advances to partnerships
-------------------------------------------

The investments in and advances to Local Partnerships (see Note 2) are
accounted for by the equity method because the Partnership is a limited
partner in the Local Partnerships. Under this method, the carrying amount
of the investments in and advances to Local Partnerships is (i) reduced by
distributions received and (ii) increased or reduced by the Partnership's
share of earnings or losses, respectively, of the Local Partnerships. As
of December 31, 1996 and 1995, the Partnership's share of cumulative losses
of eleven and ten, respectively, of the Local Partnerships exceeds the
amount of the Partnership's investments in and advances to those Local
Partnerships by $15,165,646 and $14,737,878, respectively. Since the

IV-11
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Partnership has no further obligation to advance funds or provide financing
to these Local Partnerships, the excess losses have not been reflected in
the accompanying consolidated financial statements. As of December 31,
1996 and 1995, cumulative cash distributions of approximately $250,561 and
$215,048, respectively, have been received from Local Partnerships for
which the Partnership's carrying value is zero. These distributions are
recorded as increases in the Partnership's share of income from
partnerships.

Costs incurred in connection with acquiring these investments have
been capitalized and are being amortized using the straight-line method
over the estimated useful lives of the properties owned by the Local
Partnerships.

e. Cash and cash equivalents
-------------------------

Cash and cash equivalents consist of all money market funds, time and
demand deposits, repurchase agreements and commercial paper with original
maturities of three months or less. The Partnership has determined that
the carrying amount of its cash and cash equivalents approximates fair
value.

f. Restricted cash
---------------

Restricted cash consists of cash restricted for the Partnership's
remaining purchase money note obligation with respect to Forest Park. This
obligation was paid on January 2, 1997, as discussed below. Restricted
cash also consists of future interest payments on one of the purchase money
notes. The Partnership has determined that the carrying amount of its
restricted cash approximates fair value.

g. Offering costs
--------------

The Partnership incurred certain costs in connection with the offering
and selling of limited partnership interests. Such costs were recorded as
a reduction of partners' capital when incurred.

h. Income taxes
------------

For federal and state income tax purposes, each partner reports on his
personal income tax return his share of the Partnership's income or loss as
determined for tax purposes. Accordingly, no provision (credit) has been
made for income taxes in these consolidated financial statements.

i. Use of estimates
----------------

In preparing financial statements in conformity with generally
accepted accounting principles, the Partnership is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements and revenues and expenses during the
reporting period. Actual results could differ from those estimates.

IV-12
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

j. Asset held for sale
-------------------

On February 6, 1996, the local general partners of Clearfield Hills I
Limited Partnership and New Village Apartments North sold their respective
properties to non-profit entities. Accordingly, the Partnership's
investments in these Local Partnerships were classified as investments held
for sale on the consolidated balance sheet as of December 31, 1995. Assets
held for sale are not recorded in excess of their estimated net realizable
value.

k. Reclassification
----------------

Certain amounts in the 1995 financial statements have been
reclassified to conform to the 1996 presentation.

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS

a. Due on investments in partnerships
----------------------------------

As of December 31, 1996 and 1995, the Partnership had limited
partnership interests in thirty-eight and forty-three limited partnerships,
respectively, which were organized to develop, construct, own, maintain and
operate rental apartment complexes which provide housing principally to the
elderly and to individuals and families of low or moderate income. The
remaining principal amounts due on investments in the Local Partnerships at
December 31, 1996 and 1995 are as follows:

<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Purchase money notes due:
1994 $ 1,370,000 $ 3,491,850
1997 (1) 1,861,100 1,330,000
1999 37,910,243 43,299,108
2000 2,165,000 2,165,000
Thereafter 500,000 500,000

Less unamortized discount (16,874,671) (23,472,463)
------------ ------------
$ 26,931,672 $ 27,313,495
============ ============
</TABLE>

(1) The $1.861 million due in 1997 includes $531,100 which represents the
Partnership's remaining purchase money note obligation relating to
Forest Park. As discussed below, in connection with the sale of
Forest Park on September 19, 1996, this amount was placed in a
certificate of deposit held in escrow until January 2, 1997, at which
time it was paid to satisfy the Partnership's remaining purchase money
note obligation relating to Forest Park.

IV-13
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

The purchase money notes have stated interest rates ranging from 9% to
12.3%, certain of which are compounded annually. Unamortized discounts are
based upon imputed interest at 15% to reflect market interest rates which
prevailed when the notes were issued. The resulting discount has been
recorded by the Partnership and is being amortized to interest expense over
the life of the respective purchase money notes using the effective
interest method. The purchase money notes are payable upon the earliest
of: (1) sale or refinancing of the respective Local Partnership's rental
property; (2) payment in full of the respective Local Partnership's
permanent loan; or (3) maturity. Purchase money notes in an aggregate
principal amount of $1,370,000 matured in 1994 but have not been paid, as
discussed below. Purchase money notes in an aggregate principal amount of
$1,330,000 mature on August 31, 1997, as discussed below. Purchase money
notes originally due to mature on September 1, 1999, were retired at a
discount on January 2, 1997, in connection with the terms of an escrow
agreement, as discussed below. The remaining purchase money notes mature
from 1999 to 2025. The purchase money notes are generally secured by the
Partnership's interest in the respective Local Partnerships. There is no
assurance that the underlying properties will have sufficient appreciation
and equity to enable the Partnership to pay the purchase money notes'
principal and accrued interest when due. If a purchase money note is not
paid in accordance with its terms, the Partnership will either have to
renegotiate the terms of repayment or risk losing its partnership interest
in the Local Partnership. The Managing General Partner is continuing to
investigate possible alternatives to reduce the Partnership's long-term
debt obligations. These alternatives include, among others, retaining the
cash available for distribution to meet the purchase money note
requirements, buying out certain purchase money notes at a discounted
price, extending the due dates of certain purchase money notes, or
refinancing the respective properties' underlying debt and using the
Partnership's share of the proceeds to pay off or buy down certain purchase
money note obligations.

Interest expense on the Partnership's purchase money notes for the
years ended December 31, 1996, 1995 and 1994 was $15,278,276, $14,418,899
and $13,238,386, respectively. The accrued interest on the purchase money
notes of $78,413,302 and $84,441,538 as of December 31, 1996 and 1995,
respectively, is due on the respective maturity dates of the purchase money
notes or earlier, if the Local Partnerships have distributable net cash
flow, as defined in the relevant Local Partnership agreements.

Purchase money notes plus accrued interest relating to Redden
Development Company (Redden Gardens) in the principal amount of $1,330,000
mature on August 31, 1997. The Managing General Partner has proposed a
five year extension. There is no assurance that the Managing General
Partner will reach an agreement of any kind with the noteholders.
Accordingly, there can be no assurance that the Partnership will be able to
retain its interest in the Local Partnership. The uncertainty about the
continued ownership of the Partnership's interest in the related Local
Partnership does not impact the Partnership's financial condition because
the related purchase money note is nonrecourse and secured solely by the
Partnership's interest in the Local Partnership. Therefore, should the
investment in Redden Gardens not produce sufficient value to satisfy the

IV-14
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

purchase money note related to Redden Gardens, the Partnership's exposure
to loss is limited since the amount of the nonrecourse indebtedness exceeds
the carrying amount of the investment in and advances to the Local
Partnership. Thus, even a complete loss of this investment would not have
a material impact on the operations of the Partnership.

On September 19, 1996, the Partnership paid off the purchase money
note obligation relating to New Forest Park Associates Limited Partnership
(Forest Park) and New Walnut Square Associates Limited Partnership (Walnut
Square) at a discount, as discussed below. On August 27, 1996, the
Partnership paid off the purchase money note obligation relating to River
Run Company (River Run) at a discount, as discussed below. On February 6,
1996, the Partnership paid off the purchase money note obligation relating
to New Village Apartments North (Village North) and Clearfield Hills I
Limited Partnership (Clearfield Hills I) at a discount, as discussed below.

The Partnership defaulted on its purchase money note relating to
Holiday Village Apartments on July 27, 1994 when the note matured and was
not paid. The defaulted amount included principal and accrued interest of
$1,370,000 and $2,862,342, respectively. As of March 10, 1997, principal
and accrued interest totalling $1,370,000 and $4,292,052, respectively,
were due. In June 1994, an offer was made to extend the maturity date of
this note to coincide with the potential refinancing of the first mortgage.
There is no assurance that a refinancing of the first mortgage will be
obtained. The Managing General Partner and the noteholder continue to
negotiate settlement options, and as of March 10, 1997, negotiations
between the Managing General Partner and the noteholder were ongoing.
There is no assurance that an agreement will be reached. Should the
noteholder begin foreclosure proceedings on the Partnership's interest in
the related Local Partnership, the Partnership intends to vigorously defend
any action by the noteholder. However, there is no assurance that the
Partnership will be able to retain its interest in the Local Partnership.
The uncertainty about the continued ownership of the Partnership's interest
in the related Local Partnership does not impact the Partnership's
financial condition because the related purchase money note is nonrecourse
and secured solely by the Partnership's interest in the Local Partnership.
Therefore, should the investment in Holiday Village Apartments not produce
sufficient value to satisfy the related purchase money note, the
Partnership's exposure to loss is limited since the amount of the
nonrecourse indebtedness exceeds the carrying amount of the investment in
and advances to the Local Partnership. Thus, even a complete loss of this
investment would not have a material impact on the operations of the
Partnership.

b. Interests in profits, losses and cash distributions
---------------------------------------------------

The Partnership has a 94.99% to 99% interest in profits, losses and
cash distributions (as restricted by various federal and state housing
agencies) of each Local Partnership. An affiliate of the General Partners
of the Partnership is also a general partner of each Local Partnership or
the intermediary limited partnership which invests in the Local
Partnership. The Partnership received cash distributions from the rental
operations of the Local Partnerships totalling $872,629 $845,622 and
$712,622 during the years ended December 31, 1996, 1995 and 1994, respect-
ively. As of December 31, 1996 and 1995, twenty-eight and thirty-one,
respectively, of the Local Partnerships had surplus cash, as defined by

IV-15
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

their respective agencies, in the amount of $2,693,709 and $3,144,436,
respectively, which is available for distribution in accordance with their
respective agency's regulations.

The cash distributions to the Partnership from the operations of the
rental properties may be limited by U.S. Department of Housing and Urban
Development (HUD) regulations. Such regulations limit annual cash
distributions to a percentage of the owner's equity investment in a rental
property. Funds in excess of those which may be distributed to owners are
required to be placed in a residual receipts account held by the governing
state or federal agency for the benefit of the property.

Upon sale, refinancing or liquidation of each Local Partnership, the
proceeds from the sale, refinancing or liquidation shall be distributed in
accordance with the provisions of the respective Local Partnership's
partnership agreement. In accordance with such provisions, the Partnership
would receive from such proceeds its percentage interest of any remaining
proceeds, after payment of (1) all debts and liabilities of the Local
Partnership and certain other items, (2) the Partnership's capital
contributions plus certain specified amounts as outlined in the respective
Local Partnership's partnership agreement, and (3) certain special
distributions to the general partners and related entities of the Local
Partnership.

c. Property matters
----------------

The following table reflects the amounts of advances made to the Local
Partnerships as of December 31, 1996 and 1995.

Local Partnership 1996 1995
----------------- ------------ ------------
<S> <C> <C>
Lakes of Northdale:
Principal amount of
funds advanced $ 54,500 $ 54,500
Accrued interest on
advances -- --

Second Lakewood:
Principal amount of
funds advanced 80,740 224,543
Accrued interest on
advances 2,738 617
------------ ------------
Totals $ 137,978 $ 279,660
============ ============
</TABLE>

IV-16
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

three-year term and a three-year renewal option. In conjunction with the
new letter of credit, the Partnership successfully negotiated with the
holder of the related purchase money note to extend the term thereof to
that of the letter of credit.

In 1989, New Second Lakewood Associates Limited Partnership (Second
Lakewood) was experiencing rent losses due to units being taken off the
market because of roof leakage. The Partnership advanced a total of
$750,000 during 1990 to fund roof replacement in order to maintain the
marketability and income of the property. The outstanding loan and
interest accrued thereon totalled $80,740 and $2,738, respectively, as of
December 31, 1996 and $224,543 and $617, respectively, as of December 31,
1995. On March 7, 1997, the loan and interest accrued thereon of $80,740
and $4,366, respectively, was paid to the Partnership by the Local
Partnership in full satisfaction of the outstanding advance.

In September 1995, HUD sold the mortgage of Second Lakewood to a new
mortgagee. The new mortgagee is now servicing the loan and Second Lakewood
is no longer subject to HUD regulatory requirements.

The Managing General partner received $1,000 on January 5, 1996 for an
option to purchase the Partnership's limited partner interest in Second
Lakewood and an additional $1,000 on May 3, 1996, to extend the term of the
option. Negotiations between the Managing General Partner and the option
holder continued following the expiration of the option until November
1996, when they were terminated. In January 1997, the local managing
general partner received an offer to purchase the property from a third
party, and a purchase agreement was signed effective February 17, 1997.
The potential buyer has made a deposit of $100,000 and has commenced its
due diligence review. There is no assurance that a sale of Second Lakewood
will occur as the potential buyer has the option to cancel the agreement
and receive its deposit on or before April 18, 1997, based on the results
of its due diligence review.

On May 23, 1994, the local general partner of New Forest Park
Associates Limited Partnership (Forest Park) filed a notice of intent to
participate under LIHPRHA. On July 11, 1996, the local managing general
partner's plan of action regarding the sale of Forest Park under the
LIHPRHA program was approved by HUD. On September 19, 1996, Forest Park
sold the property, a 284-unit apartment complex located in New Orleans,
Louisiana, under the LIHPRHA program to Forest Park Affordable Housing
Inc., a District of Columbia non-profit organization. The sale of the
property generated net cash proceeds to the Partnership of approximately
$1.2 million. The proceeds were net of approximately $1.7 million used to
retire, at a discount, a portion of the Partnership's purchase money note
obligation with respect to the property. The proceeds were also net of
$531,100 which was used to purchase a certificate of deposit which was held
in escrow until January 2, 1997, at which time all principal and interest
accrued up to three percent per annum on the certificate of deposit was
used to retire the Partnership's remaining purchase money note obligation
with respect to the property. All interest that accrued on the certificate
of deposit in excess of three percent per annum was received by the
Partnership. Accordingly, the accompanying financial statements include
$531,100 of restricted cash equivalents as of December 31, 1996, which
represents the remaining principal balance which became due on January 2,
1997, in accordance with the escrow agreement. The sale provided proceeds
to the Partnership in excess of its investment in the Local Partnership,

IV-17
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

and resulted in a net financial statement gain in 1996 of $7,287,743, of
which $4,825,355 resulted from the retirement of the purchase money note
obligation with respect to the property. The federal tax gain was
$10,085,650. The Managing General Partner of the Partnership and/or its
affiliates did not receive any fees relating to the sale.

On May 23, 1994, the local general partner of New Walnut Square
Associates Limited Partnership (Walnut Square) filed a notice of intent to
participate under LIHPRHA. On July 11, 1996, the local managing general
partner's plan of action regarding the sale of Walnut Square under the
LIHPRHA program was approved by HUD. On September 19, 1996, Walnut Square
sold the property, a 284-unit apartment complex located in New Orleans,
Louisiana, under the LIHPRHA program to Walnut Square Affordable Housing,
Inc., a District of Columbia non-profit entity. The sale of the property
generated net cash proceeds to the Partnership of approximately $966,000.
The proceeds were net of $2.4 million used to retire, at a discount, the
Partnership's purchase money note obligation with respect to the property.
The sale provided proceeds to the Partnership in excess of its investment
in the Local Partnership, and resulted in a net financial statement gain in
1996 of $8,566,073, of which $6,672,477 resulted from the retirement of the
purchase money note obligation with respect to the property. The federal
tax gain was $11,357,595. The Managing General Partner of the Partnership
and/or its affiliates did not receive any fees relating to the sale.

On March 15, 1993, the local general partner of River Run Company
(River Run) filed a notice of intent to participate under LIHPRHA. On
February 27, 1996, the local managing general partner's plan of action
regarding the sale of River Run under the LIHPRHA program was approved by
HUD. On August 27, 1996, River Run sold the property, a 100-unit apartment
complex located in Macomb, Illinois, under the LIHPRHA program to National
Handicap Housing Institute, Inc., a non-profit entity. The sale of the
property generated net cash proceeds to the Partnership of approximately
$552,000. The proceeds were net of approximately $530,000 used to retire,
at a discount, the Partnership's purchase money note obligation with
respect to the property. The sale provided proceeds to the Partnership in
excess of its investment in the Local Partnership, and resulted in a net
financial statement gain in 1996 of $1,445,203, of which $404,670 resulted
from the retirement of the purchase money note obligation with respect to
the property. The federal tax gain was $3,169,629. The Managing General
Partner of the Partnership and/or its affiliates earned net fees of
$26,606 for its services relating to the sale of River Run. As of March
10, 1997, $8,869 of these fees have not been paid.

On May 22, 1992, Clearfield Hills I Limited Partnership (Clearfield
Hills I) filed a notice of intent to participate under LIHPRHA. The sale
of the property was completed on February 6, 1996. The sale price of
approximately $3.2 million generated sufficient proceeds to the Partnership
to retire, at a discount, the purchase money note obligation of the
Partnership with respect to such property, which matured on October 30,
1994. The sale provided proceeds to the Partnership in excess of its
investment in the Local Partnership, and resulted in a net financial
statement gain in 1996 of $1,765,277, of which $50,107 resulted from the
retirement of the purchase money note obligation with respect to the
property. The federal tax gain was $2,368,084. The Managing General
Partner and/or its affiliates did not receive any fees for services
relating to the sale.

IV-18
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

On March 1, 1994, New Village Apartments North (Village North) filed a
notice of intent to participate under the LIHPRHA program. The sale of the
property was completed on February 6, 1996. The sale price of
approximately $2.86 million generated sufficient proceeds to the
Partnership to retire, at a discount, the purchase money note obligation of
the Partnership with respect to such property, which matured on September
27, 1994. The sale provided proceeds to the Partnership in excess of its
investment in the Local Partnership, and resulted in a net financial
statement gain in 1996 of $2,586,375, of which $1,452,591 resulted from the
retirement of the purchase money note obligation with respect to the
property. The federal tax gain was $3,307,018. The Managing General
Partner and/or its affiliates did not receive any fees for services
relating to the sale.

On October 31, 1996, the Partnership distributed $1,999,119 (or $27.20
per Additional Limited Partner unit) to the Additional Limited Partners
from the proceeds of the sales of Clearfield Hills I, Village North, River
Run, Forest Park and Walnut Square. The Managing General Partner intends
to retain all of the Partnership's remaining undistributed net sale
proceeds for the possible repayment, prepayment or purchase of the
Partnership's outstanding purchase money notes related to other Local
Partnerships.

On May 11, 1992, Southgate Apartments Company (Southgate) filed a plan
of action under Title II of the Emergency Low Income Housing Preservation
Act of 1987 to sell the real estate to a non-profit entity. The sale was
completed on January 31, 1995. The sale price of approximately $9.3
million generated sufficient proceeds to the Partnership to retire, at a
discount, the purchase money note obligation of the Partnership with
respect to such property. The sale provided proceeds to the Partnership in
excess of its investment in the Local Partnership, and resulted in a net
financial statement gain in 1995 of $3,055,176, of which $214,343 resulted
from the retirement of the purchase money note obligation with respect to
the property. The federal tax gain was $6,982,026. The Partnership
distributed $745,290 (or $10.14 per Additional Limited Partner unit) on
April 28, 1995 to the Additional Limited Partners. The Managing General
Partner intends to retain all of the Partnership's remaining undistributed
net sale proceeds for the repayment, prepayment or purchase of purchase
money notes of other Local Partnerships, as discussed above. The General
Partner and/or its affiliates received net fees for services relating to
the sale of $186,512 on February 2, 1995.

On September 30, 1995, the local general partner of Northridge Park
Limited Partnership (Northridge Park) restructured its existing first
mortgage. In conjunction with the restructuring, the Managing General
Partner restructured the related purchase money note, extending the
maturity from July 31, 1999 to October 1, 2025. In addition, the interest
rate on the purchase money note was lowered from 9% to 8.17%. The new
maturity date and interest rate of the purchase money note are the same as
the terms of Northridge Park's restructured mortgage.

IV-19
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

Clearfield Hills II for closing costs. On October 13, 1995, the
Partnership received $45,310 from the refinancing proceeds as partial
reimbursement of these advances. The remaining $3,950 was repaid to the
Partnership on December 20, 1995 upon the release of certain escrows
related to the original mortgage.

Garden Court Apartments, located in Springfield, Illinois, received a
$330,000 grant from HUD to make certain improvements to the property. The
local general partner of Garden Court Apartments addressed security issues
as part of these improvements in an effort to improve occupancy.
Improvements made under this grant were completed in the fourth quarter of
1995.

The report of the auditors on the financial statements of Garden Court
for the year ended December 31, 1996 indicated that substantial doubt
exists about the ability of the Local Partnership to continue as a going
concern due to negative cash flow resulting from decreasing occupancy
levels. The Partnership's investment in Garden Court was previously
reduced to zero as a result of losses from the Local Partnership during
prior years. In addition, the Partnership did not issue any purchase money
notes or debt instruments in connection with its investment in Garden
Court. Therefore, the uncertainty about the Local Partnership's continued
ownership of the property does not impact the Partnership's financial
condition. Furthermore, the complete loss of this investment would not
have a material impact on the operations of the Partnership.

Some of the rental properties owned by the Local Partnerships have
mortgages which are federally insured under Section 236 or Section
221(d)(3)of the National Housing Act, as amended. The LIHPRHA program,
which provided property owners with restricted opportunities to sell low
income housing, ended effective September 30, 1996. However, HUD received
approximately $175 million to fund sales of qualifying properties under the
LIHPRHA program during the federal government's fiscal year 1997, which
began October 1, 1996. Continued funding of the LIHPRHA program after
fiscal year 1997 is uncertain. There is no assurance that a sale of any
properties that previously qualified under the LIHPRHA program will occur.

The local general partners of the following properties have each filed
a notice of intent to participate under the LIHPRHA program:

</TABLE>

IV-20
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

The plan of actions for these properties were not approved by HUD,
therefore, these properties are no longer eligible to participate in what
remains of the LIHPRHA program.

Incentives available under LIHPRHA are discussed above. As discussed
above, there is no assurance that a sale or supplemental financing of these
properties will occur due to the federal government's limited funding or
appropriations to the LIHPRHA program.

Some of the rental properties owned by the Local Partnerships are
financed by state housing agencies. The Managing General Partner has been
working to develop strategies to sell or refinance certain properties
pursuant to programs developed by these agencies or other potential buyers.
These programs may include opportunities to sell the property to a
qualifying purchaser who would agree to maintain the property as low to
moderate income housing in perpetuity, or to refinance the property, or to
obtain supplemental financing. The Managing General Partner continues to
monitor certain state housing agency programs and/or programs provided by
certain lenders, to ascertain whether the properties would qualify within
the parameters of a given program and whether these programs would provide
an appropriate economic benefit to the limited partners of the Partnership.

Some of the rental properties owned by the Local Partnerships are
dependent on the receipt of project-based Section 8 Rental Housing
Assistance Payments (HAP) provided by HUD pursuant to HAP contracts. In
1995 and 1996, HUD released its Reinvention Blueprint and a revision to its
Reinvention Blueprint which contained proposals that have come to be known
as "Mark-to-Market". Congress, HUD and the Clinton Administration continue
to struggle with the Mark-to-Market initiative. This initiative was
intended to deal with HUD's increasing burden of funding HAP contracts.
Under the initiative, HUD would eliminate the project-based subsidy and
provide the residents with "sticky vouchers" which would allow residents to
move to other developments should they so choose. However, with the
elimination of the HAP contract, there is no assurance that rental
properties would be able to maintain the rental income and occupancy levels
necessary to pay operating costs and debt service. The initiative will
impact those properties that have HAP contracts with shorter terms than
that of the underlying property mortgage. For instance, some properties
may have a 20-year HAP contract while the underlying mortgage has a 40-year
term. In the interim, Congress has authorized one-year extensions for
properties with HAP contracts expiring during the government's fiscal year
1997, which began October 1, 1996. In light of recent political scrutiny
of appropriations for HUD programs, continued funding of annual renewals
for Section 8 HAP contracts expiring after fiscal year 1997 is uncertain.

With the ending of the LIHPRHA program and with the uncertainty
surrounding renewals of expiring Section 8 HAP contracts, the Managing
General Partner is developing new strategies to deal with the ever changing
environment of affordable housing policy. Section 236 and Section
221(d)(3) properties that are in the 18th year of their mortgage may be
eligible for pre-payment of the mortgage. Properties with expiring Section
8 HAP contracts may become convertible to market-rate apartment properties.
Currently, there are a few lenders that will provide financing either to
prepay the existing mortgage or provide additional funds to allow the
property to convert to market rate units. Where opportunities exist, the
Managing General Partner will continue to work with the Local Partnerships
to develop a strategy that makes economic sense for all parties involved.

IV-21
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

d. Summarized financial information
--------------------------------

Summarized financial information for the Local Partnerships as of
December 31, 1996 and 1995 and for the years ended December 31, 1996, 1995
and 1994 is as follows:

IV-22
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

COMBINED BALANCE SHEETS

December 31,
1996 1995
------------ ------------
<S> <C> <C>
Rental property, at cost, net of accumulated depreciation
of $88,421,256 and $89,244,173, respectively $120,045,089 $136,070,343
Land 14,087,370 16,511,777
Other assets 32,640,343 32,843,388
------------ ------------
Total assets $166,772,802 $185,425,508
============ ============

Mortgage notes payable $127,498,668 $139,505,158
Other liabilities 23,958,565 24,425,791
------------ ------------
Total liabilities 151,457,233 163,930,949

Partners' capital 15,315,569 21,494,559
------------ ------------
Total liabilities and partners' capital $166,772,802 $185,425,508
============ ============

</TABLE>

<TABLE>
<CAPTION>
COMBINED STATEMENTS OF OPERATIONS

For the years ended December 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Revenue:
Rental $ 38,687,957 $ 40,960,669 $ 39,885,653
Other income, principally interest 2,404,385 2,450,769 1,872,739
------------ ------------ ------------
Total revenue 41,092,342 43,411,438 41,758,392
------------ ------------ ------------
Expenses:
Operating and other 26,497,472 28,457,155 27,084,843
Interest 7,598,988 7,987,695 8,741,795
Depreciation 7,927,617 8,130,495 8,275,946
Amortization 157,541 38,266 34,684
------------ ------------ ------------
Total expenses 42,181,618 44,613,611 44,137,268
------------ ------------ ------------
Net loss $ (1,089,276) $ (1,202,173) $ (2,378,876)
============ ============ ============

</TABLE>

IV-23
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

e. Reconciliation of the Local Partnerships' financial statement
-------------------------------------------------------------
net loss to taxable loss
------------------------

For federal income tax purposes, the Local Partnerships report on a
basis whereby: (1) certain revenue and the related assets are recorded when
received rather than when earned; (2) certain costs are expensed when paid
or incurred rather than capitalized and amortized over the period of
benefit; and (3) a shorter life is used to compute depreciation of the
property for tax purposes as permitted by Internal Revenue Service (IRS)
regulations. These returns are subject to audit and, therefore, possible
adjustment by the IRS.

A reconciliation of the Local Partnerships' financial statement net
loss reflected above to the taxable loss for the years ended December 31,
1996, 1995 and 1994 is as follows:

IV-24
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

<TABLE>
<CAPTION> For the years ended December 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Financial statement net loss $ (1,089,276) $ (1,202,173) $ (2,378,876)

Adjustments:

Additional tax depreciation using accelerated methods,
net of depreciation on construction period expenses
capitalized for financial statement purposes (3,597,191) (4,065,659) (4,405,027)

Miscellaneous, net (73,954) 354,880 (15,786)
------------ ------------ ------------
Taxable loss $ (4,760,421) $ (4,912,952) $ (6,799,689)
============ ============ ============
</TABLE>

3. RELATED-PARTY TRANSACTIONS

In accordance with the Partnership Agreement, the Partnership paid the
Managing General Partner a fee for services in connection with the review,
selection, evaluation, negotiation and acquisition of the interests in the Local
Partnerships. The fee amounted to $1,470,000 which is equal to 2% of the
Additional Limited Partners' capital contributions to the Partnership. The
acquisition fee was capitalized and is being amortized over a forty-year period
using the straight-line method.

In accordance with the terms of the Partnership Agreement, the Partnership
is obligated to reimburse the Managing General Partner for its direct expenses
in managing the Partnership. For the years ended December 31, 1996, 1995 and
1994, the Partnership paid $109,837, $132,284 and $109,488, respectively, as
direct reimbursement of expenses incurred on behalf of the Partnership. Such
expenses are included in the consolidated statements of operations as general
and administrative expenses.

Additionally, in accordance with the terms of the Partnership Agreement,
the Partnership is obligated to pay an annual incentive management fee (the
Management Fee), after all other expenses of the Partnership are paid. The
amount of the Management Fee shall not exceed .25% of invested assets, as
defined in the Partnership Agreement, and shall be payable from the
Partnership's cash available for distribution, as defined in the Partnership
Agreement, as of the end of each calendar year, as follows:

IV-25
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. RELATED-PARTY TRANSACTIONS - Continued

a. First, on a monthly basis as an operating expense before any
distributions to limited partners in an annual amount equal to
$375,000, and

b. Second, after distributions to the limited partners in the amount of
1% of the gross proceeds of the offering, the balance of such .25% of
invested assets.

For each of the years ended December 31, 1996, 1995 and 1994, the Part-
nership paid the Managing General Partner a Management Fee of $375,000. See
Note 4 for additional fees paid to the Managing General Partner and/or its
affiliates.

The Managing General Partner and/or its affiliates may receive a fee in an
amount of not more than 2% of the sales price of the investment in a Local
Partnership or the property it owns, payable under certain conditions upon the
sale of the investment in a Local Partnership or the property it owns. The
payment of the fee is subject to certain restrictions, including achievement of
a certain level of sales proceeds and making certain minimum distributions to
limited partners. During the year ended December 31, 1996, the Managing General
Partner and/or its affiliates earned net fees of $26,606 for services performed
in connection with the sale of the property relating to the Partnership's
investment in River Run. As of December 31, 1996, $8,869 of these fees have not
been paid. No fees were paid to the Managing General Partner and/or its
affiliates in connection with the 1996 sales of Clearfield Hills I, New Village
Apartments North, Forest Park and Walnut Square. The Managing General Partner
and/or its affiliates received net fees of $186,512 for services performed in
connection with the sale of the property relating to the Partnership's
investment in Southgate on February 2, 1995. No such fees were paid to the
Managing General Partner and/or its affiliates during the year ending December
31, 1994.

4. PARTNERSHIP PROFITS AND LOSSES AND DISTRIBUTIONS

All profits and losses prior to the first date on which Additional Limited
Partners were admitted were allocated 98.49% to the Initial Limited Partner and
1.51% to the General Partners. Upon admission of the Special Limited Partner
and the Additional Limited Partners, the interest of the Initial Limited Partner
was reduced to .49%. The interest of the Additional Limited Partners is 97% and
the interest of the Special Limited Partner is 1%.

The net proceeds resulting from the liquidation of the Partnership or the
Partnership's share of the net proceeds from any sale or refinancing of the
projects or their rental properties which are not reinvested shall be
distributed and applied as follows:

(i) to the payment of debts and liabilities of the Partnership
(including all expenses of the Partnership incident to the sale
or refinancing) other than loans or other debts and liabilities
of the Partnership to any partner or any affiliates, such debts
and liabilities, in the case of a non-liquidating distribution,
to be only those which are then required to be paid or, in the
judgment of the Managing General Partner, required to be provided
for;
(ii) to the establishment of any reserves which the Managing General
Partner deems reasonably necessary for contingent, unmatured or
unforeseen liabilities or obligations of the Partnership;

IV-26
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. PARTNERSHIP PROFITS AND LOSSES AND DISTRIBUTIONS - Continued

(iii) except in the case of a refinancing, to each partner in an amount
equal to the positive balance in his capital account as of the
date of the sale, adjusted for operations and distributions to
that date, but before allocation of any profits for tax purposes
realized from such sale and allocated pursuant to the Partnership
Agreement;
(iv) to the limited partners (A) an aggregate amount of proceeds from
sale or refinancing and all prior sales or refinancing equal to
their capital contributions, without reduction for prior cash
distributions other than prior distributions of sale and
refinancing proceeds, plus (B) an additional amount equal to a
cumulative non-compounded 6% return on each limited partner's
capital contribution, reduced, but not below zero, by (1) an
annual amount equal to 50% of the losses for tax purposes plus
tax credits allocated to such limited partner and (2)
distributions of net cash flow to each limited partner, such
return, losses for tax purposes and net cash flow distributions
commencing on the first day of the month in which the capital
contribution was made;
(v) to the repayment of any unrepaid loans theretofore made by any
partner or any affiliate of the Partnership for Partnership
obligations and to the payment of any unpaid amounts owing to the
General Partners pursuant to the Partnership Agreement;
(vi) to the General Partners in the amount of their capital
contributions;
(vii) thereafter, for their services to the Partnership, in equal
shares to certain general partners, (or their designees) an
aggregate fee of 1% of the gross proceeds resulting from (A) such
sale (if the proceeds are from a sale rather than a refinancing)
and (B) any prior sales from which such 1% fee was not paid to
the General Partners or their designees; and,
(viii) the remainder, 12% in the aggregate to the General Partners (or
their assignees), 3% to the Special Limited Partner and 85% in
the aggregate to the Initial Limited Partner and the Additional
Limited Partners (or their assignees) in accordance with their
respective partnership interests.

Fees payable to certain general partners (or their designees) under (vii)
above, together with all other property disposition fees and any other
commissions or fees payable upon the sale of apartment complexes, shall not in
the aggregate exceed the lesser of the competitive rate or 6% of the sales price
of the apartment complexes.

In addition, the Managing General Partner and/or its affiliates may receive
a fee in an amount of not more than 2% of the sales price of the investment in a
Local Partnership or the property it owns. The fee would only be payable upon
the sale of the investment in a Local Partnership or the property it owns and
would be subject to certain restrictions, including achievement of a certain
level of sales proceeds and making certain minimum distributions to limited
partners. The Managing General Partner and/or its affiliates earned net fees of
$26,606 for services in connection with the sale of the property relating to the
Partnership's investment in River Run. As of December 31, 1996, $8,869 of
these fees have not been paid. No fees were paid to the Managing General
Partner and/or its affiliates in connection with the 1996 sales of the
properties relating to the Partnership's investment in Clearfield Hills I, New
Village Apartments North, Forest Park and Walnut Square. In February 1995, the
Managing General Partner and/or its affiliates received net fees totalling

IV-27
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. PARTNERSHIP PROFITS AND LOSSES AND DISTRIBUTIONS - Continued

$186,512 for services in connection with the sale of the property relating to
the Partnership's investment in Southgate. No such fees were paid to the
Managing General Partner and/or its affiliates during the year ending December
31, 1994.

Pursuant to the Partnership Agreement, all cash available for distribution,
as defined, shall be distributed, not less frequently than annually, 97% to the
Additional Limited Partners, 1% to the Special Limited Partner, .49% to the
Initial Limited Partner and 1.51% in the aggregate to the General Partners after
payment of the Management Fee, as discussed above, as specified in the
Partnership Agreement. As defined in the Partnership Agreement, prior to the
establishment of any reserves as deemed necessary by the Managing General
Partner and after payment of the Management Fee, the Partnership had cash
available for distribution of approximately $396,000, $315,000 and $33,000, for
the years ended December 31, 1996, 1995 and 1994, respectively. The Partnership
made a distribution of $1,999,119 (or $27.20 per Additional Limited Partnership
unit) to the Additional Limited Partners on October 31, 1996, in connection with
the sale of the properties relating to the Partnership's investments in
Clearfield Hills I, New Village North, River Run, Forest Park and Walnut Square.
The Partnership made a distribution of $745,290 (or $10.14 per unit) to the
Additional Limited Partners on April 28, 1995 for the sale of the Partnership's
interest in the Southgate Local Partnership. No distributions were declared or
paid during 1994.

5. RECONCILIATION OF THE PARTNERSHIP'S FINANCIAL STATEMENT NET INCOME
(LOSS) TO TAXABLE INCOME (LOSS)

For federal income tax purposes, the Partnership reports on a basis
whereby: (1) certain expenses are amortized rather than expensed when incurred;
(2) certain costs are amortized over a shorter period for tax purposes, as
permitted by IRS Regulations and (3) certain costs are amortized over a longer
period for tax purposes. The Partnership records its share of losses from its
investments in limited partnerships for federal income tax purposes as reported
on the Local Partnerships' federal income tax returns (see Note 2e), including
losses in excess of related investment amounts. In addition, adjustments
arising from the imputation of interest on the Partnership's purchase money
notes for financial reporting purposes are eliminated for income tax purposes
(see Note 2a). These returns are subject to audit and, therefore, possible
adjustment by the IRS.

A reconciliation of the Partnership's financial statement net income (loss)
to the taxable income (loss) for the years ended December 31, 1996, 1995 and
1994 is as follows:

IV-28
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. RECONCILIATION OF THE PARTNERSHIP'S FINANCIAL STATEMENT NET INCOME
(LOSS) TO TAXABLE INCOME (LOSS) - Continued

<TABLE>
<CAPTION>
For the years ended December 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Financial statement net income (loss) $ 6,345,407 $(11,435,522) $(14,988,972)

Adjustments:
Difference between the income tax losses and
financial statement losses related to the
Partnership's equity in the Local Partnerships'
losses (see Note 2e) 3,153,917 (1,384,000) (5,357,018)

Costs amortized over a shorter period for income
tax purposes (134,920) (141,189) (143,862)

Difference in interest expense due to interest
for consolidated partnerships and imputed
interest 5,347,345 3,927,594 2,649,591

Miscellaneous (82,694) -- --
------------ ------------ ------------
Taxable income (loss) $ 14,629,055 $ (9,033,117) $(17,840,261)
============ ============ ============

</TABLE>

6. CONTINGENCIES

In 1990, CRI, as managing general partner of the Partnership and various
other entities, subcontracted certain property-level asset management functions
for certain properties to Capital Management Strategies, Inc. (CMS). Among
these properties were properties owned by some of the Local Partnerships in
which the Partnership invested. CMS was formed by Martin C. Schwartzberg, a
nominal general partner of the Partnership and a former stockholder of CRI, when
he retired from CRI and its related businesses as of January 1, 1990. Mr.
Schwartzberg agreed not to act as a general partner with respect to any of the
CRI-sponsored partnerships, including this Partnership, and has not done so
since that time. In late 1995, a dispute arose between CRI and CMS over the
funding level of the 1996 contract for CMS. On November 9, 1995, CRI filed a
complaint against CMS to determine the proper amount of fees to be paid in 1996
under the asset management agreement. CMS answered on January 10, 1996, but
asserted no counterclaims.

IV-29
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. CONTINGENCIES - Continued

defendant in this action. Messrs. Dockser and Willoughby entered an answer
denying all of Mr. Schwartzberg's claims. On February 6, 1996, CRI terminated
the CMS contract for cause. (CRI subsequently retained an independent asset
management company to perform functions previously performed by CMS.) Mr.
Schwartzberg and CMS responded to the contract termination by filing a motion
for injunctive relief in the Circuit Court, asking the court to enjoin CRI from
terminating the contract. In a ruling issued on February 12, 1996, the Circuit
Court, among other things, refused to grant the injunction requested by CMS. On
February 12, 1996, the Circuit Court also issued a memorandum opinion and order
enjoining CMS and Mr. Schwartzberg from disclosing information made confidential
under the asset management agreement.

7. COMMITMENTS

Deposit Held by Escrow Agent
----------------------------

In connection with the sale of the property relating to the Partnership's
investment in Forest Park, the Partnership established an escrow on September
19, 1996, to satisfy the Partnership's remaining purchase money note obligation
with respect to Forest Park. The Partnership held a certificate of deposit in
the principal amount of $531,100 in escrow until January 2, 1997, at which time
all principal and interest accrued thereon up to three percent per annum was
used to satisfy the Partnership's remaining purchase money note obligation
relating to Forest Park.

IV-30
<PAGE>

FINANCIAL STATEMENT SCHEDULE

IV-31
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON
-----------------------------------------------------
FINANCIAL STATEMENT SCHEDULE
-----------------------------

To the Partners
Capital Realty Investors-IV Limited Partnership

In connection with our audit of the consolidated financial statements of
Capital Realty Investors-IV Limited Partnership referred to in our report dated
March 10, 1997 which is included in this Form 10-K, we have also audited
Schedule III as of December 31, 1996, 1995 and 1994. We did not audit the
financial statements for certain of the Local Partnerships in 1996, 1995 and
1994, respectively, which are accounted for as described in Note 1d. In our
opinion, this schedule presents fairly, in all material respects, the
information required to be set forth therein.

Grant Thornton LLP

Vienna, VA
March 10, 1997

IV-32
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION OF
LOCAL PARTNERSHIPS IN WHICH CAPITAL REALTY INVESTORS-IV LIMITED
PARTNERSHIP HAS INVESTED

December 31, 1996

COL. A COL. B COL. C COL. D
- -------------------- ------- ------------------------------- -------------------------------
Initial Costs Capitalized
Cost to Local Subsequent
Partnership to Acquisition
------------------------------- -------------------------------
Building
Description Encum- and Improvements/ Carrying
Operating Properties brances Land Improvements (Deletions) Costs (B)
- -------------------- ------- ----------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
Asbury Tower (A) $ 793,708 $ 11,866,083 $ 4,843,761 $ --
Asbury Park, NJ
(350-unit elderly
apartment complex)

Campbell Terrace 392,030 -- 11,807,433 545,347
Chicago, IL
(249-unit elderly
apartment complex)

Harborview 367,992 10,888,460 (167,211) --
St. Croix, Virgin Islands
(300-unit multi-family
apartment complex)

Aggregate of remaining (A) 14,596,057 133,827,246 32,383,541 409,268
properties which are ----------- ------------ ----------- --------
individually less than 5%
of the total of Column E

Total $16,149,787 $156,581,789 $48,867,524 $954,615
=========== ============ =========== ========
</TABLE>

IV-33
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION OF
LOCAL PARTNERSHIPS IN WHICH CAPITAL REALTY INVESTORS-IV LIMITED
PARTNERSHIP HAS INVESTED - Continued

December 31, 1996

COL. A COL. E COL. F COL. G COL. H COL. I
- -------------------- ------------------------------------------- ------------ ------- ------- ----------------
Gross amount at which Life upon
carried at close of period which dep-
------------------------------------------- Date reciation in
Building Accumulated of latest income
Description and Depreciation Const- Date statement is
Operating Properties Land Improvements Total (C) (D) (D) ruction Acquired computed (years)
- -------------------- ----------- ------------ ------------- ------------ ------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Asbury Tower $ 793,708 $ 16,709,844 $ 17,503,552 $ (7,084,749) 1973 8/2/84 5-25
Asbury Park, NJ
(350-unit elderly
apartment complex)

Campbell Terrace 392,512 12,352,298 12,744,810 (4,964,554) 1985 7/1/84 5-30
Chicago, IL
(249-unit elderly
apartment complex)

Harborview 367,992 10,721,249 11,089,241 (3,092,669) 1975 6/25/84 5-30
St. Croix, Virgin Islands
(300-unit multi-family
apartment complex)

Aggregate of remaining 12,533,158 168,682,954 181,216,112 (73,279,284) 1970-1986 7/1/84 to 5-40
properties which are ----------- ------------ ------------- ------------ 4/1/85
individually less
than 5% of the total
of Column E

Total $14,087,370 $208,466,345 $ 222,553,715 $(88,421,256)
=========== ============ ============= ============
</TABLE>

IV-34
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP

NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
OF LOCAL PARTNERSHIPS IN WHICH
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP HAS INVESTED

December 31, 1996

(A) Secured by mortgage loans.

(B) Consists of capitalized interest and real estate taxes during the
construction period.

(C) The aggregate cost of land for federal income tax purposes is
$13,765,285 and the aggregate cost of buildings and improvements for
federal income tax purposes is $229,882,236. The total of the
above-mentioned items is $243,647,521.

(D) Reconciliation of real estate
-----------------------------

For the years ended December 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period $241,826,293 $244,961,714 $242,246,771

Improvements during the period 2,303,014 2,540,404 3,253,782

Deletions during the period (21,575,592) (5,675,825) (538,839)
------------ ------------ ------------
Balance at end of period $222,553,715 $241,826,293 $244,961,714
============ ============ ============

</TABLE>

Reconciliation of accumulated depreciation
------------------------------------------

For the years ended December 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period $ 89,244,173 $ 83,255,939 $ 75,039,668

Depreciation expense for the period 7,927,617 8,130,495 8,275,946

Adjustments (8,750,534) (2,142,261) (59,675)
------------ ------------ ------------
Balance at end of period $ 88,421,256 $ 89,244,173 $ 83,255,939
============ ============ ============

</TABLE>

IV-35
<PAGE>

EXHIBIT INDEX
-------------

Exhibit Method of Filing
- ------- -----------------------------

27 Financial Data Schedule Filed herewith electronically

IV-36

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH 10-K.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 9,457,107
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 41,548,239
<CURRENT-LIABILITIES> 0
<BONDS> 105,344,974
0
0
<COMMON> 0
<OTHER-SE> (63,904,666)
<TOTAL-LIABILITY-AND-EQUITY> 41,548,239
<SALES> 0
<TOTAL-REVENUES> 668,824
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 695,812
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,278,276
<INCOME-PRETAX> (15,305,264)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15,305,264)
<DISCONTINUED> 8,245,471
<EXTRAORDINARY> 13,405,200
<CHANGES> 0
<NET-INCOME> 6,345,407
<EPS-PRIMARY> 83.74
<EPS-DILUTED> 83.74

</TABLE>