UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, ~~2010~~2011

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

For the transition period from ____________ to ____________

Commission file number 1-11149

CAPITAL REALTY INVESTORS, LTD.

(Exact Name of Issuer as Specified in its Charter)

District of Columbia	52-1219926
(State of Incorporation)	(I.R.S. Employer Identification No.)

11200 Rockville Pike
Rockville, MD	20852
(Address of Principal Executive Offices)	(ZIP Code)

(301) 468-9200

(Issuer’s Telephone Number, Including Area Code)

_____________________

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨ No þ

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Yes o No þ

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No ¨

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

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of Aaccelerated filer and large accelerated filer@ in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No þ

The units of limited partner interest of the Registrant are not traded in any market. Therefore, the units of limited partner interest had neither a market selling price nor an average bid or asked price.

DOCUMENTS INCORPORATED BY REFERENCE

CAPITAL REALTY INVESTORS, LTD.

~~2010~~2011 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

		Page Number
	PART I
Item 1.	Business	I-1
Item 2.	Properties	I-3
Item 3.	Legal Proceedings	I-3
Item 4.	Submission of Matters to a Vote of Security Holders	I-3
	PART II
Item 5.	Market for the Registrant’s Partnership Interests
	and Related Partnership Matters	II-1
Item 7.	Management’s Discussion and Analysis of Financial Condition
	and Results or Operations	II-2
Item 8.	Financial Statements	II-5
Item 9.	Changes In and Disagreements With Accountants
	on Accounting and Financial Disclosure	II-56
Item 9A.	Controls and Procedures	II-6
Item 9B.	Other Information	II-78
	PART III
Item 10.	Directors and Executive Officers of the Registrant	III-1
Item 11.	Executive Compensation	III-1
Item 12.	Security Ownership of Certain Beneficial Owners and Management	III-2
Item 13.	Certain Relationships and Related Transactions	III-3
Item 14.	Principal Accountant Fees and Services	III-3
	PART IV
Item 15.	Exhibits and Financial Statements	IV-1

PART I

ITEM 1. BUSINESS

Capital Realty Investors, Ltd. (the “Partnership”) is a limited partnership which was formed under the District of Columbia Limited Partnership Act on June 1, 1981. On December 31, 1981, the Partnership commenced offering 30,000 units of limited partner interest through a public offering managed by Merrill Lynch, Pierce, Fenner & Smith, Incorporated. The Partnership closed the offering on December 31, 1982, at which time 24,837 units of limited partner interest had become subscribed. As of December 31, ~~2010~~2011, 90 units of limited partner interest had been abandoned.

The General Partners of the Partnership are C.R.I., Inc. (“CRI”), which is the Managing General Partner, current and former shareholders of CRI and Rockville Pike Associates, Ltd., a Maryland limited partnership which includes the shareholders of CRI and certain former officers and employees of CRI. 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 limited partner interests in limited partnerships (“Local Partnerships”). The Partnership originally made investments in eighteen Local Partnerships. As of December 31, ~~2010~~2011, the Partnership retained investments in six Local Partnerships. The original objectives of these investments, not necessarily in order of importance, were to:

(i)

preserve and protect the Partnership's capital;

(ii)

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 could use to offset income from other sources;

(iii)

provide capital appreciation through increases in the value of the Partnership's investments and increased equity through periodic payments on the indebtedness of the apartment complexes; and

(iv)

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 invested were organized by private developers who acquired the sites, or options thereon, applied for mortgage financing and applicable mortgage insurance and/or subsidies, and who generally remain as the local general partners in the Local Partnerships. In most cases, the local general partners of the Local Partnerships retain responsibility for maintaining, operating and managing the projects. However, under certain circumstances, the Local Partnerships’ partnership agreements permit removal of the local general partner and replacement with another local general partner or with an affiliate of the Partnership's Managing General Partner.

As a result of its investment in the Local Partnerships, the Partnership became the principal limited partner in eighteen (six remaining as of December 31, ~~2010~~2011) Local Partnerships. As a limited partner, the Partnership's legal liability for obligations of the Local Partnerships is limited to its investment. In most cases, an affiliate of the Managing General Partner of the Partnership is also a general partner of the Local Partnerships. 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.

I-1

PART I

ITEM 1. BUSINESS - Continued

A schedule of the apartment complexes owned by Local Partnerships in which the Partnership has an investment as of December 31, ~~2010~~2011, follows.

SCHEDULE OF APARTMENT COMPLEXES OWNED BY LOCAL PARTNERSHIPS

IN WHICH CAPITAL REALTY INVESTORS, LTD. HAS AN INVESTMENT (1)

Name and Location Of Apartment Complex	Mortgage Payable at 12/31/1011 (2)	Financed and/or Insured and/or Subsidized Under	Number of Rental Units	Units Authorized for Low Income Subsidies	Expiration of HAP Contract
Capitol Commons Lansing, MI	$ 1881,~~737,742~~480	Michigan State Housing Development Authority (MAHDA)	200	200	05/31/12 (4)
Chestnut Fresno, CA	~~685~~420,~~660~~123	California Housing Finance Agency	90	90	01/14/13
Hillview Terrace Traverse City, MI	1,~~671~~595,~~314~~173	Rural Economic Community Development	125	--	--
New Sharon Woods Apts. Deptford, NJ	31,~~569~~217,~~297~~446	Federal Housing Administration(FHA)	5051	5051	09/01/26
Shallowford Oaks Chamblee, GA	~~4,630,356~~--	FHA	204	--	--
Westwood Village New Haven, CT	~~310~~120,~~891~~854	Connecticut Housing Finance Authority	48	48	0211/2401/12
Totals (6 Properties)	$124,~~605~~235,~~261~~076		717	~~388~~389

Name and Location of Apartment Complex	Units Occupied As Percentage of Total Units As of December 31,					Average Effective Annual Rental Per Unit for the Years Ended December 31,
	2010	2009	2008	2007	2006	2010	2009	2008	2007	2006
	2011	2010	2009	2008	2007	2011	2010	2009	2008	2007
Capitol Commons Lansing, MI	~~100~~98%	99100%	99%	~~100~~99%	99100%	$10,~~325~~397	$10,~~376~~325	$10,~~122~~376	$10,~~114~~122	$ 910,~~831~~114
Chestnut Fresno, CA	98100%	9998%	99%	99%	99%	9,~~019~~294	89,~~806~~019	8,~~591~~806	8,~~347~~591	8,~~094~~347
Hillview Terrace Traverse City, MI	99100%	99%	99%	99%	~~100~~99%	5,~~172~~253	5,~~160~~172	5,~~062~~160	45,~~846~~062	4,~~608~~846
New Sharon Woods Apts. Deptford, NJ	9897%	9798%	9897%	9398%	9893%	12,~~513~~485	1112,~~960~~513	11,~~784~~960	1011,~~835~~784	1110,~~680~~835
Shallowford Oaks Chamblee, GA	8853%	8588%	8285%	8882%	9288%	64,~~849~~202	76,~~013~~849	7,~~877~~013	87,~~229~~877	8,~~166~~229
Westwood Village New Haven, CT	97%	97%	9697%	9596%	9895%	1516,~~464~~021	1415,~~891~~464	1314,~~793~~891	1213,~~853~~793	12,~~918~~853
Totals (6 Properties) (3)	91%	9591%	9695%	96%	9896%	$ 89,~~770~~609	$ 8,~~725~~770	$ 8,~~771~~725	$ 98,~~204~~771	$ 9,~~216~~204

————————————

(1)	All properties are multifamily housing complexes. No single tenant 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, ~~2010~~2011.

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

(4)	Management of the Local Partnership has applied for a new 20 year HAP contract. As of June 30, 2012, MHSDA is still in process of reviewing the application

I-2

PART I

ITEM 1. BUSINESS – Continued

AsOn aNovember, ~~subsequent~~1, ~~event in January~~ 2011, the mortgage holder for Shallowford Oaks, ~~property~~LSREF2 ~~was~~Chalk ~~unable~~2, toLLC, ~~meet~~foreclosed ~~its~~on ~~debt~~the ~~service~~property ~~requirements~~ and ~~was~~became ~~therefore~~the innew ~~default~~owner ~~with~~of ~~regards~~the property pursuant to ~~the~~a ~~mortgage~~non-judicial ~~encumbering~~foreclosure sale under the ~~property~~power of sale clause contained in its law documents. ~~See~~As a result of the ~~notes~~foreclosure toall of the ~~financial~~assets ~~statements~~and ~~for~~liabilities ~~additional~~of ~~information~~the ~~concerning~~Local Partnership were written off as of December 31, 2011. The resulting loss of the ~~default~~foreclosure was $31,263 and is recorded on the ~~mortgage~~Statements of ~~the~~Operations ~~Shallowford~~as ~~Oaks~~Loss ~~property~~from foreclosure on Local Partnership.

On March 31, 2008, the Partnership’s interest in Court Place was sold. See the notes to financial statements for additional information concerning the sale.

On March 31, 2008, the Partnership’s interest in Park Glen was sold. See the notes to financial statements for additional information concerning the sale.

On March 31, 2008, the Partnership’s interest in Warner House was sold. See the notes to financial statements for additional information concerning the sale.

On January 1, 2008, the Partnership’s interest in Linden Place was sold. See the notes to financial statements for additional information concerning the sale.

ITEM 2. PROPERTIES

Through its ownership of limited partner interests in Local Partnerships, Capital Realty Investors, Ltd., indirectly holds an interest in the real estate owned by the Local Partnerships. See Part I, Item 1, for information concerning these properties.

ITEM 3. LEGAL PROCEEDINGS

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

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

None.

I-3

PART II

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

AND RELATED PARTNERSHIP MATTERS

(a)

There is no established market for the purchase and sale of units of limited partner interest (Units) in the Partnership, although various informal secondary market services may exist. Due to the limited markets, however, investors may be unable to sell or otherwise dispose of their Units.

(b) As of April 131, ~~2011~~2012, there were approximately 1,~~276~~196 registered holders of Units in the Partnership.

(c) On ~~March~~July 2726, ~~2009~~2010, the Partnership paid a cash distribution of $2742,~~524,194~~410 ($~~102~~30 per Unit) to the Limited Partners who were holders of record as of ~~March~~July 271, ~~2009~~2010.

On July 26, 2010, the Partnership paid a cash distribution of $742,410 ($30 per Unit) to the Limited Partners who were holders of record as of July 1, 2010.

II-1

PART II

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

CONDITION AND RESULTS OF OPERATIONS

Capital Realty Investors, Ltd.’s Management’s Discussion and Analysis of Financial Condition and Results of Operations section is based on the financial statements, and contains information that may be considered forward looking, including statements regarding the effect of governmental regulations. Actual results may differ materially from those described in the forward looking statements and will be affected by a variety of factors including national and local economic conditions, the general level of interest rates, governmental regulations affecting the Partnership and interpretations of those regulations, the competitive environment in which the Partnership operates, and the availability of working capital.

Critical Accounting Policies

The Partnership has disclosed its selection and application of significant accounting policies in Note 1 of the notes to financial statements included in this annual report on Form 10-K at December 31, ~~2010~~2011. The Partnership accounts for its investments in partnerships (Local Partnerships) by the equity method because the Partnership is a limited partner in the Local Partnerships. As such the Partnership has no control over the selection and application of accounting policies, or the use of estimates, by the Local Partnerships. Environmental and operational trends, events and uncertainties that might affect the properties owned by the Local Partnerships would not necessarily have a significant impact on the Partnership’s application of the equity method of accounting, since the equity method has been suspended for four Local Partnerships which have cumulative losses in excess of the amount of the Partnership’s investments in those Local Partnerships. The Partnership reviews property assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. Recoverability is measured by a comparison of the carrying amount of an asset to the estimated future net cash flows expected to be generated by the asset. If an asset was determined to be impaired, its basis would be adjusted to fair value through the recognition of an impairment loss.

~~Recent~~GAAP ~~Accounting~~provides ~~Pronouncements~~guidance on when a company should include the assets, liabilities, and activities of a variable interest entity (VIE) in its financial statements and when it should disclose information about its relationship with a VIE. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that will receive a majority of the VIE’s expected losses, receive a majority of a VIE’s expected residual returns, or both.

OnThe ~~July~~Partnership 1,does ~~2009,~~not consolidate the Partnership's ~~adopted~~interests ~~Financial~~in ~~Accounting~~these ~~Standards~~VIE’s ~~Board~~under ~~Accounting~~this ~~Standards~~guidance, ~~Codification~~as ~~(“ASC”),~~it ~~which~~is ~~establishes~~not ~~the~~considered ~~ASC~~to asbe the ~~source~~primary ofbeneficiary. The ~~authoritative~~Partnership ~~accounting~~currently ~~principles~~records tothe beamount ~~applied~~of inits ~~preparation~~investment ofin ~~financial~~these ~~statements~~partnerships inas ~~conformity~~an ~~with~~asset USon ~~GAAP. The~~its ~~adoption~~balance ofsheet, ~~this~~recognizes ~~standard~~its ~~did~~share ~~not~~of ~~have~~partnership aincome ~~material~~or ~~impact~~losses onin the ~~financial~~statements ~~position~~of operations, ~~results~~and discloses how it accounts for material types of ~~operations~~these orinvestments ~~cash~~in ~~flows~~its financial statements.

OnThe ~~January~~Partnership’s 1,balance ~~2009,~~in ~~the~~investment ~~Partnership~~in ~~adopted~~Local ~~the~~Partnerships ~~new~~represents ~~accounting~~its ~~standard~~maximum ~~which~~exposure ~~requires~~to ~~adoption~~loss. The ofPartnership’s ~~the~~exposure ~~fair~~to ~~value~~loss ~~standards~~on inthese ~~the~~partnerships ~~ASC~~is ~~for~~mitigated ~~nonfinancial~~by ~~assets~~the condition and ~~nonfinancial~~financial ~~liabilities. The~~performance ~~adoption~~of ~~did~~the ~~not~~underlying ~~have~~properties aas ~~material~~well ~~impact~~as on the ~~financial~~strength ~~position, results~~ of ~~operations~~the orlocal ~~cash~~general ~~flows~~partners.

During the quarter ended June 30, 2009, the Partnership adopted the new accounting standard which requires disclosure regarding the fair value of financial instruments for interim reporting periods as well as in annual financial statements.

II-2

PART II

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

~~CONDITION~~Recent ~~AND~~Accounting ~~RESULTS OF OPERATIONS – Continued~~Pronouncements

~~The~~In ~~ASC~~May ~~establishes~~2009, ~~general~~the ~~standards~~FASB ofissued guidance addressing the accounting for and disclosure requirements of events or transactions that occur after the balance sheet date, but before the ~~Partnership issues~~ financial statements orare ~~has them available to issue~~issued. The ~~ASC~~Partnership ~~defines~~adopted ~~(i)~~ the ~~period~~guidance ~~after~~as ~~the~~of ~~balance~~June 30, ~~sheet~~2009 ~~date~~as ~~during~~it ~~which~~was aeffective ~~reporting~~for ~~entity’s~~interim ~~management~~and ~~should~~annual ~~evaluate~~periods ~~events~~ending orafter ~~transactions~~June 15, ~~that~~2009. ~~may~~The ~~occur~~adoption ~~for~~did ~~potential~~not ~~recognition~~have ora ~~disclosure~~significant inimpact on the ~~financial~~subsequent ~~statements,~~events ~~(ii)~~that the ~~circumstances~~Partnership ~~under~~reports, ~~which~~either anthrough ~~entity~~recognition ~~should recognize events~~ or ~~transactions~~disclosure, ~~occurring~~in ~~after~~ the ~~balance~~consolidated ~~sheet~~financial ~~date~~statements. inIn ~~its~~February ~~financial~~2010, ~~statements~~however, ~~and (iii)~~ the ~~disclosures~~FASB anamended ~~entity~~its ~~should~~guidance ~~make~~on ~~about~~subsequent events orto ~~transactions~~remove ~~that~~the ~~occurred~~requirement ~~after~~to disclose the ~~balance sheet~~ date. ~~The~~through ~~guidance~~which ~~became~~an ~~effective~~entity ~~for~~has ~~periods~~evaluated ~~ending~~subsequent ~~after June 15~~events, ~~2009.~~alleviating ~~The~~conflicts ~~adoption~~with ofcurrent ~~the~~SEC guidance. ~~did~~This ~~not~~amendment ~~have~~was aeffective ~~material~~immediately ~~impact~~and ontherefore the ~~financial~~Partnership ~~position,~~did ~~results~~not ofinclude ~~operations~~the ordisclosure ~~cash~~in ~~flows~~this Form 10-K.

In June 2009, the Financial Accounting Standards Board (FASB) issued an amendment to the accounting and disclosure requirements for the consolidation of ~~variable interest entities (“VIE”s)~~VIEs. The amended guidance modifies the consolidation model to one based on control and economics, and replaces the current quantitative primary beneficiary analysis with a qualitative analysis. The primary beneficiary of a VIE will be the entity that has (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the amended guidance requires continual reconsideration of the primary beneficiary of a VIE and adds an additional reconsideration event for determination of whether an entity is a VIE. Additionally, the amendment requires enhanced and expanded disclosures around VIEs. This amendment is effective for fiscal years beginning after November 15, 2009. The ~~Partnership has determined that~~ adoption of this guidance ~~has~~on noJanuary 1, 2010 did not have a material ~~impact~~effect on the Partnership’s financial statements.

General

The Partnership has invested, through Local Partnerships, primarily in federal or state government-assisted apartment complexes intended to provide housing to the elderly and/or to low and moderate income tenants. In conjunction with such governmental assistance, which may include 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.

C.R.I., Inc. (the Managing General Partner) continues to evaluate the Partnership’s underlying apartment complexes to develop strategies that maximize the benefits to investors. Numerous variables, including adverse general economic conditions, as well as, Local Partnership agreements and regulatory restrictions impact the ability and timing of effectuating the sale of certain properties owned by the Local Partnerships or the Partnership’s interests in the Local Partnerships. The Managing General Partner continues to explore strategies that will result in the sale of properties owned by the Local Partnerships or the Partnership’s interests in the Local Partnerships at terms advantageous to the Partnership. While the Managing General Partner cannot predict the outcome for any particular property at this time, the Managing General Partner will continue to work with the Local Partnerships to develop strategies that maximize the benefits to investors.

II-3

PART II

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

CONDITION AND RESULTS OF OPERATIONS – Continued

Financial Condition/Liquidity

As of December 31, ~~2010~~2011, the Partnership had approximately 1,276 investors who held a total of 24,747 units of limited partner interest which were originally sold for the aggregate amount of $24,747,000. The Partnership originally made investments in eighteen Local Partnerships, of which six remain at December 31, ~~2010~~2011. The Partnership’s liquidity, with unrestricted cash resources of $2,~~552~~194,~~538~~867 as of December 31, ~~2010~~2011, along with anticipated future cash distributions from the Local Partnerships, is expected to be adequate to meet its current and anticipated operating cash needs. As of ~~April~~June 13__, ~~2011~~2012, there were no material commitments for capital expenditures.

During ~~2010~~2011 and ~~2009~~2010, the Partnership received cash distributions of $5951,~~372~~316 and $4159,~~875~~372, respectively, from the Local Partnerships.

The Partnership closely monitors its cash flow and liquidity position in an effort to ensure that sufficient cash is available for operating requirements. For the year ended December 31, ~~2010~~2011, existing cash resources and the receipt of distributions from Local Partnerships were adequate to support net cash used in operating activities ~~and investing activities~~. Cash and cash equivalents decreased $1357,~~297,495~~671 during ~~2010~~2011, primarily due to ~~the~~operating ~~distribution paid and advances made to the Local Partnership~~activities.

On March 27, 2009, the Partnership paid a cash distribution of $2,524,194 ($102 per Unit) to the Limited Partners who were holders of record as of March 27, 2009.

On July 26, 2010, the Partnership paid a cash distribution of $742,410 ($30 per Unit) to the Limited Partners who were holders of record as of July 1, 2010.

Results of Operations

~~2010~~2011 versus ~~2009~~2010

The Partnership recognized a net income of $~~296~~852,~~978~~463 for the year ended December 31, ~~2010~~2011, compared to a net ~~loss~~income of $~~202~~296,~~018~~978 for the year ended ~~2009~~2010, primarily due to increases in share of income from partnerships and a decrease in general and administrative expenses. Share of income from partnerships increased primarily due to higher share of income from one Local Partnership as well as due to lower advances which were reduced to zero by the Partnership as a result of losses at the Local Partnership level (see note 2.b. in notes to financial statements for additional information).

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 share of income from partnerships for the years ended December 31, ~~2010~~2011 and ~~2009~~2010, did not include losses of $64115,~~462~~426 and $~~275~~64,~~248~~462, respectively. Distributions of $7,219 ~~and~~were ~~$14,439~~ received from one Local Partnership during ~~2010~~both 2011 and ~~2009~~2010, ~~respectively,~~ for which the Partnership’s carrying value is zero (equity method suspended), were recorded as increases in the Partnership’s share of income from partnerships in the year received.

II-4

PART II

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

Inflation

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 the Partnership’s 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 combined rental revenues of the Partnership’s remaining properties for the three years ended December 31, ~~2010,~~2011 ~~2009~~ and ~~2008~~2010 follow. Combined rental revenue amounts have been adjusted to reflect property sales and interests transferred in prior years.

	For the years ended December 31,
	2010		2009		2008
	2011		2010
Combined Rental Revenue	$65,~~288~~835,~~311~~632		$6,~~256~~288,~~068~~311		~~$6,288,472~~
Annual Percentage Increase (decrease)		0(7.52%)		(0.5%)		~~1.1%~~

ITEM 8. FINANCIAL STATEMENTS

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

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE

On December 22, 2010, the Partnership dismissed Grant Thornton LLP (“Grant Thornton”) as the Partnership’s independent registered public accounting firm. The decision to change accountants was approved by the Audit Committee of the Board of Directors of the Partnership.

Effective as of December 23, 2010, the Audit Committee of the Partnership engaged Reznick Group, P.C. (“Reznick”) as the Partnership’s independent registered public accounting firm. The decision to engage Reznick was approved by the Audit Committee of the Board of Directors of the Partnership as of such date.

During the years ended December 31, 2009 and 2008, and the subsequent interim period ended September 30, 2010, neither the Partnership nor anyone on its behalf has consulted with Reznick regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Partnership’s financial statements; or (ii) any matter that was the subject of a disagreement (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a reportable event (as that term is defined in Item 304(a)(1)(v) of Regulation S-K).

II-5

PART II

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

ONOn ~~ACCOUNTING~~December ~~AND~~22, ~~FINANCIAL~~2010, ~~DISCLOSURE–~~the ~~Continued~~Partnership dismissed Grant Thornton LLP (“Grant Thornton”) as the Partnership’s independent registered public accounting firm. The decision to change accountants was approved by the Audit Committee of the Board of Directors of the Partnership.

~~Grant~~Effective ~~Thornton’s~~as ~~reports on the financial statements for each~~ of ~~the two fiscal years ended~~ December ~~31,~~ ~~2009 and 2008~~23, ~~contained no adverse opinion or disclaimer of opinion~~2010, ~~and were not qualified or modified as to uncertainty, audit scope or accounting principle. During~~ the ~~fiscal~~Audit ~~years~~Committee ~~ended December 31, 2009 and 2008 there were no disagreements with Grant Thornton on any matter~~ of ~~accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to~~ the ~~satisfaction~~Partnership ofengaged ~~Grant~~Reznick ~~Thornton~~Group, ~~would have caused it to make reference to the subject matter of the disagreements in its reports on the financial statements for such years~~P.C. ~~During the fiscal years ended December 31, 2009 and 2008 there were no reportable events as defined in Item 304~~(a“Reznick”)~~(1)(v)~~ ~~of Regulation S-K. Grant Thornton has furnished a letter addressed to the Securities and Exchange Commission that was included~~ as ~~an exhibit to~~ the Partnership’s ~~Form~~independent ~~8-K,~~registered ~~initially~~public ~~filed~~accounting ~~with~~firm. The ~~the~~decision ~~Securities~~to ~~and~~engage ~~Exchange~~Reznick ~~Commission~~was onapproved ~~December~~by ~~28,~~the ~~2010,~~Audit ~~stating~~Committee ~~its~~of ~~agreement~~the ~~with~~Board ~~the~~of ~~statements~~Directors ~~concerning~~of ~~Grant~~the ~~Thornton~~Partnership ~~made~~as inof ~~that~~such ~~8-K~~date.

During the interim period ended September 30, 2010, and through December 22, 2010, neither the Partnership nor anyone on its behalf has consulted with Reznick regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Partnership’s financial statements; or (ii) any matter that was the subject of a disagreement (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a reportable event (as that term is defined in Item 304(a)(1)(v) of Regulation S-K).

During the interim period ended September 30, 2010 and through December 22, 2010, there were no disagreements with Grant Thornton on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Grant Thornton, would have caused it to make reference to the subject matter of the disagreements in its reports on the financial statements for such years. During the interim period ended September 30, 2010 and through December 22, 2010, there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K. Grant Thornton has furnished a letter addressed to the Securities and Exchange Commission that was included as an exhibit to the Partnership’s Form 8-K, initially filed with the Securities and Exchange Commission on December 28, 2010, stating its agreement with the statements concerning Grant Thornton made in this Item 9.

ITEM 9A.	CONTROLS AND PROCEDURES

InAs ~~February 2011, representatives~~ of the ~~Managing~~end ~~General Partner~~ of the ~~Partnership~~periods ~~carried~~covered ~~out~~by anthis ~~evaluation~~report, ofrepresentatives ~~the effectiveness~~ of the ~~design~~General ~~and~~Partner, ~~operation~~under of the ~~Partnership’s~~supervision ~~disclosure controls~~ and ~~procedures,~~with ~~pursuant~~the toparticipation ~~Exchange~~of ~~Act Rules 13a-15 and 15d-15. The Managing General Partner does not expect that~~ the ~~Partnership’s~~Chief ~~disclosure~~Executive ~~controls~~Officer and ~~procedures~~Chief ~~will~~Financial ~~prevent all error and all fraud. A control system~~Officer, nocarried ~~matter~~out ~~how~~an ~~well~~evaluation ~~conceived and operated, can provide only reasonable assurance that the objectives~~ of the ~~control~~effectiveness ~~system are met. Further, the design~~ of ~~a control system must reflect~~ the ~~fact~~Partnership’s ~~that~~“disclosure ~~there~~controls ~~are resource constraints,~~ and ~~the~~procedures” ~~benefits~~as ofdefined ~~controls must be considered relative to their costs. Because of the inherent limitations~~ in ~~all~~Securities ~~control~~Exchange ~~systems,~~Act ~~no evaluation~~ of ~~controls~~1934 ~~can~~Rules ~~provide~~13a-15 ~~absolute~~and ~~assurance that all control issues have been detected~~15d-15. ~~These~~ ~~inherent~~Based ~~limitations~~on ~~include the realities~~ that ~~judgments in decision-making can be faulty~~evaluation, ~~and that breakdowns can occur because of simple error or mistake. The design of any system of controls also is based in part upon certain assumptions about~~ the ~~likelihood~~Chief ofExecutive ~~future~~Officer ~~events,~~ and ~~there~~Chief ~~can~~Financial beOfficer nohave ~~assurance~~concluded that ~~any design will succeed in achieving its stated goals under all potential future conditions. Over time~~, ~~controls~~as ~~may become inadequate because~~ of ~~changes in conditions, or~~ the ~~degree~~end of ~~compliance with~~ the ~~policies~~period orcovered ~~procedures~~by ~~may~~this ~~deteriorate. Because~~report, of the ~~inherent~~Partnership’s limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of December 31, 2010, our disclosure controls and procedures were not effective to ensure that ~~(i)~~material ~~the~~ information required to be disclosed ~~by us~~ in the ~~reports~~Partnership’s ~~filed~~periodic orreport ~~submitted~~filings bywith usSEC ~~under~~is ~~the Securities Exchange Act of 1934, as amended, was~~ recorded, processed, summarized orand reported within the time ~~periods~~period specified inby the SEC’s rules and forms, ~~and~~consistent ~~(ii)~~with ~~such~~the ~~information~~definition ~~was~~of ~~accumulated~~“disclosure ~~and~~controls ~~communicated to management, including our principal executive officer~~ and ~~principal~~procedures” ~~financial~~under ~~officer,~~the toSecurities ~~allow~~Exchange ~~timely~~Act ~~decisions~~of ~~regarding required disclosure~~1934.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

II-6

~~ITEM~~PART ~~9A. CONTROLS AND PROCEDURES – Continued~~II

~~Based~~ITEM on9A. ~~our~~CONTROLS ~~evaluation,~~AND ~~management~~PROCEDURES ~~has~~- ~~concluded that its internal control over financial reporting was effective as of December 31, 2010.~~Continued

~~This~~The ~~Annual~~General ~~Report~~Partner ~~does~~must ~~not~~rely ~~include~~on anthe ~~attestation~~Local ~~report~~Limited ofPartnerships to provide the Partnership’s ~~registered~~with ~~public~~certain ~~accounting~~information ~~firm~~necessary ~~regarding~~to ~~internal~~the ~~control~~timely ~~over~~filing ~~financial~~of ~~reporting.~~the ~~Management~~Partnership’s ~~report~~periodic ~~was~~reports. ~~not~~Factors ~~subject~~in tothe ~~attestation~~accounting byat the ~~Partnership’s~~Local ~~registered~~Limited ~~public~~Partnerships ~~accounting~~have ~~firm~~caused ~~pursuant~~delays toin ~~rules~~ the provision of ~~the~~such ~~Securities~~information ~~and~~during ~~Exchange~~past ~~Commission~~reporting ~~that~~periods, ~~permit~~and resulted in the Partnership’s inability to ~~provide~~file ~~only~~its ~~management’s~~periodic ~~report~~reports in ~~this~~a ~~Annual~~timely ~~Report on Form 10-K~~manner.

InOnce ~~addition,~~the ~~there~~Partnership ~~have~~has ~~been~~received nothe ~~significant~~necessary ~~changes~~information infrom the ~~Partnership’s~~Local ~~internal~~Limited ~~control~~Partnerships, ~~over~~the ~~financial~~Chief ~~reporting~~Executive Officer and the Chief Financial Officer believe that ~~occurred~~the ~~during~~material information required to be disclosed in the Partnership’s ~~most~~periodic ~~recent~~report ~~fiscal~~filings ~~quarter~~with ~~that~~SEC ~~has~~is ~~materially~~effectively ~~affected~~recorded, orprocessed, issummarized ~~reasonably~~and ~~likely~~reported, toalbeit ~~materially~~not ~~affect~~in a timely manner. Going forward, the Partnership’s ~~internal~~will ~~control~~use ~~over~~the ~~financial~~means ~~reporting~~reasonably within its power to impose procedures designed to obtain from the Local Limited Partnerships the information necessary to the timely filing of the Partnership’s periodic reports.

Management’s Annual Report on Internal Control over Financial Reporting

The General Partner is responsible for establishing and maintaining for the Partnership adequate internal control over financial reporting as that term is defined in Securities Exchange Act of 1934 Rules 13a-15(f) and 15d-15(f), and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2011. The internal control process, as it is applicable to the Partnership, was designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements, and includes those policies and procedures that:

(1)	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Partnership;

(2)

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States, and that the Partnership’s receipts and expenditures are being made only in accordance with authorization of the management of the Partnership; and

(3)	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Partnership’s assets that could have a material effect on the financial statements

All internal control processes, no matter how well designed, have inherent limitations. Therefore, even those processes determined to be effective can provide only reasonable assurance with respect to the reliability of financial statement preparation and presentation. Further, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Representatives of the General Partner assessed the effectiveness of its internal control over financial reporting, as it is applicable to the Partnership, as of the end of the Partnership’s most recent fiscal year. In making this assessment, it used the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its assessment, the General Partner has concluded that, for the reasons set forth above under “Disclosure controls and procedures,” the internal control over financial reporting, as it is applicable to the Partnership, was not effective as of December 31, 2011.

II-7

PART II

ITEM 9A.	CONTROLS AND PROCEDURES - Continued

For purposes of the Securities Exchange Act of 1934, the term “material weakness” is a deficiency, or a combination of deficiencies, in a reporting company’s internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. For the reasons discussed above in this

Item 9A, sub-section (a) under the caption “Disclosure Controls and Procedures,” the Partnership’s internal control over financial reporting has not been effective in permitting timely reporting of the Partnership’s financial information. Accordingly, the management of the Partnership believes that this inability to generate timely reports constitutes a material weakness in its internal control over financial reporting.

Changes in internal controls

There were no changes in the Partnership’s internal control over financial reporting that occurred during the quarter ended March 31, 2012 that materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

ITEM 9B.	OTHER INFORMATION

On November, 1, 2011, the mortgage holder for Shallowford Oaks, LSREF2 Chalk 2, LLC, foreclosed on the property and became the new owner of the property pursuant to a non-judicial foreclosure sale under the power of sale clause contained in its law documents. As a result of the foreclosure all of the assets and liabilities of the Local Partnership were written off as of December 31, 2011. The resulting loss of the foreclosure was $31,263 and is recorded on the Statements of Operations as Loss from foreclosure on Local Partnership.

As a subsequent event in January 2011, the Shallowford Oaks property was unable to meet its debt service requirements and was therefore in default with regards to the mortgage encumbering the property. See the notes to the financial statements for additional information concerning the default on the mortgage of the Shallowford Oaks property.

Certain states may assert claims against the Partnership for failure to withhold and remit state income tax on operating profit or where the sale(s) of property in which the Partnership was invested failed to produce sufficient cash proceeds with which to pay the state tax and/or to pay statutory partnership filing fees. The Partnership is unable to quantify the amount of such potential claims at this time. The Partnership has consistently advised its Partners that they should consult with their tax advisors as to the necessity of filing non-resident returns in such states with respect to their proportional taxes due.

II-78

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a) and (b)

The Partnership has no directors, executive officers or employees of its own.

(a) and (b)

The names, ages and business experience of the directors and executive officers of C.R.I., Inc., the Managing General Partner of the Partnership, follow.

William B. Dockser, 7475, has been the Chairman of the Board and a Director of CRI 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 publicly held limited partnerships created to invest in low and moderate income multifamily apartment properties. 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 the Washington, D. C. area, Mr. Dockser was a practicing attorney in Boston and served as 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.

H. William Willoughby, 6465, has been President, Secretary and a Director of CRI since January 1990, and was Senior Executive Vice President, Secretary and a Director of CRI from 1974 to 1989. Effective May 7, 2005, he assumed the duties of Principal Financial Officer and Principal Accounting Officer of CRI. 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 & Co. He holds a Juris Doctor degree, a Master of Business Administration degree and a Bachelor of Science degree in Business Administration from the University of South Dakota.

(c)

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

(d)

Involvement in certain legal proceedings.

None.

ITEM 11. EXECUTIVE COMPENSATION

(a), (b), (c), (d), (e), (f), (g), and (h)

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 by this Item 11 is incorporated herein by reference to Notes 3 and 4 of the notes to financial statements contained in Part IV.

III-1

PART III

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

AND MANAGEMENT

(a)

Security ownership of certain beneficial owners.

The following table sets forth certain information concerning any person (including any “group”) who is known by the Partnership to be the beneficial owner of more than five percent of the issued and outstanding units of additional limited partner interest (Units) at ~~April~~June 1327, ~~2011~~2012.

		% of Total
Name and Address	Amount and Nature	Units Issued
Of Beneficial Owner	of Beneficial Ownership	and Outstanding
Equity Resource	56,~~744~~682.25 Units	2326.219%
Investments, LLC
& Affiliates
44 Brattle Street
Cambridge, MA 02138

(b)

Security ownership of management.

The following table sets forth certain information concerning all Units beneficially owned, as of ~~April~~June 1327, ~~2011~~2012, by each director and by all directors and officers as a group of the Managing General Partner of the Partnership.

	% of Total
Name of	Amount and Nature	Units Issued
Beneficial Owner	of Beneficial Ownership	and Outstanding

William B. Dockser	None	0.0%
H. William Willoughby	None	0.0%
All Directors and Officers
as a Group (2 persons)	None	0.0%

(c)

Changes in control.

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.

III-2

PART III

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

(a) and (b)

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 financial statements contained in Part IV, which contains disclosure of related party transactions, is also incorporated herein by reference.

(c)

Certain business relationships.

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).

(d)

Transactions with promoters.

Not applicable.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

For the years ended December 31, ~~2010~~2011 and December 31, ~~2009~~2010, the Partnership incurred professional fees for the services of the Partnership’s independent registered public accounting firm Grant Thornton as follows:

	2010		2009
	2011		2010
Audit fees (1)	$	3164,~~945~~250	$	~~112~~31,~~500~~945
Audit-related fees (2)		--		--
Tax fees (2)		13,000		16,800
Tax fees (3)		16,800		16,000
Total billed	$	77,250	$	48,745
All other fees		--		--
Total billed	$	48,745	$	128,500

————————————

(1)

Principally fees for the audit of the Partnership’s annual financial statements, the independent registered public accounting firm’s review of the Partnership’s quarterly financial statements, and services provided in connection with the Partnership’s regulatory filings.

(2) ~~Principally~~Fees ~~fees~~ for ~~assurance~~preparation ~~and~~of ~~related services performed by the~~ Partnership’s ~~independent~~federal ~~registered~~and ~~public~~state ~~accounting~~tax ~~firm that are reasonably related to the performance of the audit or review of the Partnership’s financial statements~~returns.

(3) Fees for preparation of Partnership federal and state tax returns.

III-3

PART III

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES –- Continued

The Partnership has no directors or officers. The Board of Directors of the Managing General Partner of the Partnership, serving as the Audit Committee, has approved in advance 100% of the fees paid to, and services provided by the Partnership’s independent registered public accounting firm. Prior to approving the Partnership’s independent registered public accounting firm providing any non-audit services, the Board of Directors of the Managing General Partner of the Partnership would assess whether the provision of those services would compromise the Partnership’s independent registered public accounting firm independence.

Grant Thornton was dismissed as the Partnership’s independent registered public accounting firm after the filing of the Partnership’s 10-Q for the third quarter of fiscal year 2010. Reznick was engaged as the Partnership’s new independent registered public accounting firm and performed the fiscal 2010 yearend audit. Reznick provided partnership tax return preparation services for the ~~year~~years ended December 31, ~~2010~~2011 and ~~Grant Thornton provided partnership tax return preparation services during the years ended December 31,~~ 2010 ~~and December 31, 2009, which services it was determined did not compromise Reznick’s or Grant Thornton’s independence~~.

III-4

PART IV

ITEM 15. EXHIBITS

1. Financial Statements

a. The following documents are included as part of this report:

(1) Financial Statements

Report of Independent Registered Public Accounting Firm

Balance Sheets

Statements of Operations

Statements of Changes in Partners’ (Deficit) Capital

Statements of Cash Flows

Notes to Financial Statements

(2) Financial Statement Schedules

None.

(3) Exhibits

Index of Exhibits (Listed according to the number assigned in the table in Item 601 of Regulation S-K.)

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

Amended Certificate and Limited Partnership Agreement of Capital Realty Investors, Ltd. (Incorporated by reference to Exhibit No. 4 to Registrant's Registration Statement on Form S-11, as amended, dated December 4, 1981.)

Exhibit No. 10 - Material Contracts.

Management Services Agreement between CRI and Capital Realty Investors, Ltd. (Incorporated by reference to Exhibit No. 10(b) to Registrant's Registration Statement on Form S-11, as amended, dated December 4, 1981.)

Exhibit No. 31.1 - Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	Exhibit No. 31.1 -	Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	Exhibit No. 31.2 -	Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	Exhibit No. 32 -	Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	Exhibit No. 99	Additional Exhibits

Exhibit No. 31.2 - Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit No. 32 - Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit No. 99 - Additional Exhibits

IV-1

PART IV

ITEM 15. EXHIBITS - Continued

Prospectus of the Partnership, dated December 31, 1981. (Incorporated by reference to Registrant's Registration Statement on Form S-11, as amended, dated December 4, 1981.)

b. Reports of other auditors relating to the audits of the financial statements of Local Partnerships in which Capital Realty Investors, Ltd. has invested.

IV-2

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CAPITAL REALTY INVESTORS, LTD.
		CAPITAL REALTY INVESTORS-III
	(Registrant)
			LIMITED PARTNERSHIP
April 13, 2011	By: /s/ William B. Dockser
		(Registrant)
DATE	William B. Dockser
June 27, 2012		by:		/s/ William B. Dockser
	Director, Chairman of the Board,
DATE				William B. Dockser,
	and Treasurer
				Director, Chairman of the Board
	Principal Executive Officer
					and Treasurer
				Principal Executive Officer)

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

April 13, 2011	By: /s/ H. William Willoughby
June 27, 2012		by:	/s/ H. William Willoughby
DATE	~~H. William Willoughby~~		H. William Willoughby
	~~Director, President, Secretary,~~		Director, President, Secretary,
	~~Principal Financial Officer and~~		Principal Financial Officer and
	~~Principal Accounting Officer~~			Principal Accounting Officer

IV-3

CAPITAL REALTY INVESTORS, LTD.

INDEX TO FINANCIAL STATEMENTS

	Page
Financial Statements of Capital Realty Investors, Ltd.
Report of Independent Registered Public Accounting Firm	IV-5-6
Balance Sheets as of December 31, 2010 and 2009	IV-7
Balance Sheets as of December 31, 2011 and 2010	IV-6
Statements of Operations for the Years Ended
December 31, 2010, 2009 and 2008	IV-8
December 31, 2011 and 2010	IV-7
Statements of Changes in Partners’ (Deficit) Capital for the Years Ended
December 31, 2010, 2009 and 2008	IV-9
December 31, 2011 and 2010	IV-8
Statements of Cash Flows for the Years Ended
December 31, 2010, 2009 and 2008	IV-10
December 31, 2011 and 2010	IV-9
Notes to Financial Statements	IV-1110

IV-4

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Partners

Capital Realty Investors, Ltd.

We have audited the accompanying balance ~~sheet~~sheets of Capital Realty Investors, Ltd. (the Partnership) as of December 31, 2011 and 2010 and the related statements of operations, changes in partners’ (deficit) capital, and cash flows for the ~~year~~years then ended. 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~~audits.

We conducted our ~~audit~~audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our ~~audit~~audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our ~~audit~~audits ~~provides~~provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Capital Realty Investors, Ltd. as of December 31, 2011 and 2010, and the results of its operations and its cash flows for the ~~year~~years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ REZNICK GROUP, P.C.

Bethesda, Maryland

~~April~~June 1327, ~~2011~~2012

IV-5

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Partners

Capital Realty Investors, Ltd.

We have audited the accompanying balance sheet of Capital Realty Investors, Ltd. (a Maryland limited partnership) (the Partnership) as of December 31, 2009, and the related statements of operations, changes in partners’ (deficit) capital, and cash flows for each of the two years in the period ended December 31, 2009. 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 audits. We did not audit the financial statements of the Local Partnerships. The Partnership’s share of income from these Local Partnerships constitutes no portion of income in 2009 and 2008 included in the Partnership’s 2009 and 2008 net income. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Capital Realty Investors, Ltd. as of December 31, 2009, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

/s/ GRANT THORNTON LLP

McLean, Virginia

May 18, 2010

IV-6

CAPITAL REALTY INVESTORS, LTD.

BALANCE SHEETS

ASSETS

	December 31,
	2010		2009
	2011		2010
Investments in and advances to partnerships	$	45,~~021~~297,~~281~~827	$	34,~~144~~021,~~406~~281
Cash and cash equivalents		2,~~552~~194,~~538~~867		32,~~850~~552,~~033~~538
Acquisition fees, principally paid to related parties,
Acquisitions fees, principally paid to related parties,
net of accumulated amortization of $184,526 and $178,047,
net of accumulated amortization of $108,671 and $184,526, respectively
respectively		74,629		81,108
Property purchase costs,
net of accumulated amortization of $47,819 and $46,154,
net of accumulated amortization of $39,489 and $47,819, respectively		14,028		19,026
respectively		19,026		20,691
Other assets		-		2,911
Other assets		2,911		--
Total assets	$	7,547,455	$	6,670,385
Total assets	$	6,670,385	$	7,096,238

LIABILITIES AND PARTNERS’ (DEFICIT) CAPITAL

Accounts payable and accrued expenses	$	4166,~~465~~072		$	2141,~~886~~465
Total liabilities		4166,~~465~~072			2141,~~886~~465
Commitments and contingencies
Partners’ capital
Partners' capital:
Capital paid in:
Capital paid in :
General Partners		14,000			14,000
Limited Partners		24,837,000			24,837,000
		24,851,000			24,851,000
Less:
Accumulated distributions to partners		(16,251,682	)		(1516,~~509~~251,~~272~~682	)
Offering costs		(2,689,521	)		(2,689,521	)
Accumulated gain		~~719~~1,~~123~~571,586			~~422~~719,~~145~~123
Total partners’ capital		6,628,920			7,074,352
Total partners' (deficit) capital		7,481,383			6,628,920
Total liabilities and partners’ capital	$	6,670,385		$	7,096,238
Total liabilities and partners' (deficit) capital	$	7,547,455		$	6,670,385

The accompanying notes are an integral part

of these financial statements.

IV-76

CAPITAL REALTY INVESTORS, LTD.

STATEMENTS OF OPERATIONS

	For the years ended
	December 31,
	2010			2009			2008
	2011			2010
Share of income from partnerships	$	~~784~~1,~~932~~299,472		$	~~267~~784,~~006~~932		$	~~348,731~~
Other revenue and expenses:
Revenue:
Interest and other		5352,~~511~~882			1853,~~540~~511			~~210,784~~
Expenses:
General and administrative		~~276~~235,~~481~~531			~~270~~276,~~648~~481			~~349,262~~
Professional fees		~~161~~130,~~632~~258			~~113~~161,~~564~~632			~~73,157~~
Management fee		95,208			95,208			95,208
Management fees		95,208			95,208
Amortization of deferred costs		87,~~144~~631			8,144			~~8,668~~
		541,465			487,564			526,295
Loss on foreclosure of Local Partnership		31,263			-
Total other revenue and expenses		(487,954	)		(469,024	)		(315,511	)
		499,891			541,465
Income (loss) before gain on disposition of investment in
Total other revenue and expenses		(447,009	)		(487,954	)
Partnerships		296,978			(202,018	)		33,220
Net income	$	852,463		$	296,978
Gain on disposition of investment in partnerships, net of
Net income allocated to
disposition fee		--			--			2,975,217
General Partners (3%)	$	25,574		$	8,909
Net income (loss)	$	296,978		$	(202,018	)	$	3,008,437
Net income allocated to
Net income (loss) allocated to General Partners (3%)	$	8,909		$	(6,061	)	$	90,253
Limited Partners (97%)	$	826,889		$	288,069
Net income (loss) allocated to Limited Partners (97%)	$	288,069		$	(195,957	)	$	2,918,184
Net income per unit of Limited Partner
Net income (loss) per unit of Limited Partner Interest,
Interest, based on 24,747 units outstanding	$	33.41		$	11.64
based on 24,747 units outstanding	$	11.64		$	(7.92	)	$	117.92

The accompanying notes are an integral part

of these financial statements.

IV-87

CAPITAL REALTY INVESTORS, LTD.

STATEMENTS OF CHANGES IN PARTNERS' (~~DEFICIT~~DEFICT) CAPITAL

	General			Limited
	Partners			Partners			Total
Partners’ (deficit) capital, January 1, 2008	$	(130,433	)	$	6,925,241		$	6,794,808
Partners' (deficit) capital, January 1, 2010	$	(46,241	)	$	7,120,593		$	7,074,352
Net income		90,253			2,918,184			3,008,437
Distribution paid		--			(2,681	)		(2,681	)
Partners’ (deficit) capital, December 31, 2008		(40,180	)		9,840,744			9,800,564
Net loss		(6,061	)		(195,957	)		(202,018	)
Distribution of $102 per Unit
of Limited Partner Interest		--			(2,524,194	)		(2,524,194	)
Partners’ (deficit) capital, December 31, 2009		(46,241	)		7,120,593			7,074,352
Net income		8,909			288,069			296,978
Distribution of $30 per Unit
Distribution of $30 per Unit of
of Limited Partner Interest		--			(742,410	)		(742,410	)
Limited Partner Interest		-			(742,410	)		(742,410	)
Partners’ (deficit) capital, December 31, 2010	$	(37,332	)	$	6,666,252		$	6,628,920
Partners' (deficit) capital, December 31, 2010		(37,332	)		6,666,252			6,628,920
Net income		25,574			826,889			852,463
Partners' (deficit) capital, December 31, 2011	$	( 11,758	)	$	7,493,141		$	7,481,383

The accompanying notes are an integral part

of these financial statements.

IV-98

CAPITAL REALTY INVESTORS, LTD.

STATEMENTS OF CASH FLOWS

	For the years ended
	December 31,
	2010			2009			2008
	2011			2010
Cash flows from operating activities:
Net income (loss)	$	296,978		$	(202,018	)	$	3,008,437
Net income	$	852,463		$	296,978
Adjustments to reconcile net (loss) income to net cash
Adjustments to reconcile net loss income to net cash
used in operating activities:
Share of income from partnerships		(~~784~~1,~~932~~299,472	)		(~~267~~784,~~006~~932	)		~~(348,731~~	)
Amortization of deferred costs		87,~~144~~631			8,144			~~8,668~~
Gain on disposition of investment in partnership, net of
Loss on foreclosure of Local Partnership		31,263			-
disposition fee		--			--			(2,975,217	)
Changes in assets and liabilities:
Changes in assets and liabilities:
Increase in accrued interest receivable on advances
Increase in accrued interest receivable on advances
to local partnership		(28,390	)		(51,315	)
to local partnership		(51,315	)		--			--
Decrease (increase) in other assets		2,911			(2,911	)
Decrease (increase) in other assets		(2,911	)		7,791			(876	)
Increase (decrease) in accounts payable and accrued
Increase (decrease) in accounts payable and accrued
expenses		24,607			19,579
expenses		19,579			(29,597	)		(73,688	)
Net cash used in operating activities		(408,987	)		(514,457	)
Net cash used in operating activities		(514,457	)		(482,686	)		(381,407	)
Cash flows from investing activities:
Cash flows from investing activities:
Receipt of distributions from partnerships		51,316			59,372
Proceeds from disposition of investment in partnerships		--			--			7,451,019
Advances made to local partnership		-			(100,000	)
Collection of sale proceeds due to the Partnership		--			--			536,727
Net cash provided by (used in ) investing activities		51,316			(40,628	)
Receipt of distributions from partnerships		59,372			41,875			70,568
Cash flows from financing activities:
Disposition fee paid to a related party		--			--			(1,464,800	)
Distributions to Limited Partners		-			(742,410	)
Advances made to local partnership		(100,000	)		(450,000	)		(135,000	)
Net cash used in financing activities		-			(742,410	)
Collection of advance made to local partnership		--			--			3,260
Net decrease in cash and cash equivalents		(357,671	)		(1,297,495	)
Net cash (used in) provided by investing activities		(40,628	)		(408,125	)		6,461,774
Cash and cash equivalents, beginning of year		2,552,538			3,850,033
Cash flows from financing activities:
Cash and cash equivalents, end of year	$	2,194,867		$	2,552,538
Distributions to Limited Partners		(742,410	)		(2,524,194	)		(403,464	)
Tax distribution on behalf of Limited Partners		--			--			(155,574	)
Net cash used in financing activities		(742,410	)		(2,524,194	)		(559,038	)
Net (decrease) increase in cash and cash equivalents		(1,297,495	)		(3,415,005	)		5,521,329
Cash and cash equivalents, beginning of year		3,850,033			7,265,038			1,743,709
Cash and cash equivalents, end of year	$	2,552,538		$	3,850,033		$	7,265,038

The accompanying notes are an integral part

of these financial statements.

IV-109

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Organization

Capital Realty Investors, Ltd. (the Partnership) was formed under the District of Columbia Limited Partnership Act on June 1, 1981, and shall continue until December 31, 2030, unless sooner dissolved in accordance with the terms of the Partnership Agreement. The Partnership was formed to invest in real estate by acquiring and holding limited partner interests in limited partnerships (Local Partnerships) that own and operate federal or state government-assisted properties or properties which provide housing principally to the elderly or to individuals and families of low or moderate income, or conventionally financed apartment properties, located throughout the United States.

The General Partners of the Partnership are C.R.I., Inc. (CRI), which is the Managing General Partner, current and former shareholders of CRI, and Rockville Pike Associates, Ltd., a Maryland limited partnership which includes the shareholders of CRI and certain former officers and employees of CRI.

The Partnership sold 24,837 units at $1,000 per unit of limited partner interest through a public offering. The offering period was terminated on December 31, 1982. As of December 31, ~~2010~~2011, 90 units of limited partner interest had been abandoned.

b. Method of accounting

The financial statements of the Partnership are prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America.

c. Variable interest entities

GAAP provides guidance on when a company should include the assets, liabilities, and activities of a variable interest entity (VIE) in its financial statements and when it should disclose information about its relationship with a VIE. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that will receive a majority of the VIE’s expected losses, receive a majority of a VIE’s expected residual returns, or both.

The Partnership does not consolidate the Partnership's interests in these VIE’s under this guidance, as it is not considered to be the primary beneficiary. The Partnership currently records the amount of its investment in these partnerships as an asset on its balance sheet, recognizes its share of partnership income or losses in the statements of operations, and discloses how it accounts for material types of these investments in its financial statements.

IV-1110

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

1.	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

The Partnership’s balance in investment in Local Partnerships represents its maximum exposure to loss. The Partnership’s exposure to loss on these partnerships is mitigated by the condition and financial performance of the underlying properties as well as the strength of the local general partners.

d. Investments in and advances to partnerships

The Partnership’s investment in Local Partnerships is considered to be variable interest entities (VIEs) because the owners of the equity at risk in these entities do not have the power to direct their operations. However, the Partnership is not considered the primary beneficiary of the Local Partnerships since it does not have the power to direct the activities that are considered most significant to the economic performance of these entities. Therefore, and because the Partnership is a limited partner in the Local Partnerships, the Partnership accounts for the investment in its Local Partnerships using the equity method of accounting. Under the equity method, the initial investment is recorded at cost, increased or decreased by the Partnership’s share of income or losses, and decreased by distributions received and syndication costs. The investment balance cannot be reduced below zero. After the investment account is reduced to zero, receivables due from the Local Partnership are decreased by the Partnership’s share of losses. Distributions received after the investment account is reduced to zero are recorded as income.

As of December 31, ~~2010~~2011 and ~~2009~~2010, the Partnership's share of cumulative losses for four of the Local Partnerships exceeded the amount of the Partnership's investments in and advances to those Local Partnerships by $43,~~760~~356,~~850~~064 and $4,~~951~~760,~~574~~850, respectively. Since the 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 financial statements. The Partnership’s carrying value is zero and the equity method has been suspended for the following ~~four~~three Local Partnerships as of December 31, ~~2010~~2011: Hillview Terrace, New Sharon Woods and Shallowford Oaks. The Partnership’s carrying value is zero and the equity method has been suspended for the following four Local Partnerships as of December 31, ~~2009~~2010: Hillview Terrace, New Sharon Woods, Shallowford Oaks, and Westwood Village. Distributions of $7,219 ~~and $14,439~~ received from one Local Partnership during ~~2010~~both 2011 and ~~2009~~2010, for which the Partnership’s carrying value is zero (equity method suspended) were recorded as increases in the Partnership’s share of income from partnerships in the year received.

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. Investment in partnerships held for sale

When investments are reclassified to investment in partnerships held for sale, amortization of acquisition fees and property purchase costs are discontinued. Assets held for sale are recorded at the lower of the carrying amount or expected sales price less costs to sell.

~~f. Cash and cash equivalents~~IV-11

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

1.	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

f. Deferred Costs

Acquisition Fees and Property Purchase Costs incurred for services rendered to acquire the Local Partnerships are amortized over 40 years using the straight-line method, beginning upon commencement of operations of the Local Partnerships. The Partnership regularly assesses deferred costs for the existence of impairment in conjunction with the assessment of its investment in Local Partnerships. Amortization expense for the years ended December 31, 2011 and 2010 was $7,631 and $8,144, respectively. Estimated amortization expense for each of the ensuing years through December 31, 2016 is $5,401. One Local Partnership was foreclosed on during 2011. Therefore, deferred costs of $123,079 and associated accumulated amortization of $91,816 were written off. This amount is included in Loss of foreclosure of Local Partnership on the Statements of operations.

g. Cash and cash equivalents

Cash and cash equivalents consist of money market funds, time and demand deposits, and repurchase agreements with original maturities of three months or less. Interest income is recognized as earned.

h. Income taxes

The Partnership has elected to be treated as a pass-through entity for income tax purposes and, as such, is not subject to income taxes. Rather, all items of taxable income, deductions and tax credits are passed through to and are reported by its owners on their respective income tax returns. The Partnership’s federal tax status as a pass-through entity is based on its legal status as a partnership. Accordingly, the Partnership is not required to take any tax positions in order to qualify as a pass-through entity. The Partnership is required to file and does file tax returns with the Internal Revenue Service and other taxing authorities. Accordingly, these financial statements do not reflect a provision for income taxes and the Partnership has no other tax positions which must be considered for disclosure.

i. Use of estimates

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, 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 of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

IV-12

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

1.	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

gj. ~~Income~~Fair ~~taxes~~Value of Financial Instruments

~~For~~The ~~federal~~Financing ~~and~~Accounting ~~state~~Standards ~~income~~Board ~~tax~~Accounting ~~purposes,~~Standards ~~each~~Codification ~~partner~~establishes ~~reports~~a onhierarchy ~~his~~for orinputs ~~her~~used ~~personal~~in ~~income~~measuring ~~tax~~fair ~~return~~value ~~his or her share of the Partnership’s income or loss~~ as ~~determined for tax purposes. Accordingly, no provision has been made for income taxes in these financial statements.~~follows:

h. Use of estimates

i. Fair Value of Financial Instruments

On January 1, 2009, the Partnership adopted the new accounting standard which requires adoption of the fair value standards in the Financing Accounting Standards Board Accounting Standards Codification (ASC) for nonfinancial assets and nonfinancial liabilities. The adoption did not have a material impact on the financial position, results of operations or cash flows.

The ASC establishes a hierarchy for inputs used in measuring fair value as follows:

Level 1 Inputs -- quoted prices in active markets for identical assets and liabilities.

Level 2 Inputs -- observable inputs other than quoted prices in active markets for identical assets and liabilities.

Level 3 Inputs -- unobservable inputs.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

The balance sheet carrying amount for cash and cash equivalents approximates their fair value.

k. Impairment analysis

The Partnership reviews property assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. Recoverability is measured by a comparison of the carrying amount of an asset to the estimated future net cash flows expected to be generated by the asset. Impairment for investments in partnerships is determined by review of the performance of the underlying asset and expected proceeds from the sale of the investment. If an asset were determined to be impaired, its basis would be adjusted to fair value through the recognition of an impairment loss.

l. Allocation of net income (loss)

Net income (loss) is allocated based on respective partnership interest or units outstanding. The Partnership has no dilutive interests.

m. Subsequent events

Events that occur after the balance sheet date but before the financial statements were available to be issued must be evaluated for recognition or disclosure. The effects of subsequent events that provide evidence about conditions that existed at the balance sheet date are recognized in the accompanying financial statements. Subsequent events which provide evidence about conditions that existed after the balance sheet date require disclosure in the accompanying notes. Management evaluated the activity of the Partnership and concluded that no subsequent events have occurred that would require recognition in the financial statements or disclosure in the notes to the financial statements.

IV-13

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

1.	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

jn. ~~Impairment~~Recent ~~analysis~~accounting pronouncements

~~The~~In ~~Partnership~~May ~~reviews~~2009, ~~property~~the ~~assets~~FASB issued guidance addressing the accounting for ~~impairment~~and ~~whenever~~disclosure requirements of events or ~~changes~~transactions inthat ~~circumstances~~occur ~~indicate~~after ~~that~~ the ~~carrying~~balance ~~amount~~sheet ofdate, anbut ~~asset~~before ~~may~~the ~~not~~financial bestatements ~~fully~~are ~~recoverable~~issued. ~~Recoverability~~ isThe ~~measured~~Partnership byadopted ~~a comparison of~~ the ~~carrying~~guidance ~~amount~~as of anJune 30, ~~asset~~2009 toas ~~the~~it ~~estimated~~was ~~future~~effective ~~net~~for ~~cash~~interim ~~flows~~and ~~expected~~annual toperiods beending ~~generated~~after byJune 15, ~~the asset~~2009. ~~Impairment~~ ~~for~~The ~~investments~~adoption indid ~~partnerships~~not ishave ~~determined~~a bysignificant ~~review~~impact ofon the ~~performance~~subsequent ofevents that the ~~underlying~~Partnership ~~asset~~reports, ~~and~~either ~~expected~~through ~~proceeds~~recognition ~~from~~or ~~the~~disclosure, ~~sale~~in of the ~~investment~~consolidated financial statements. If anIn ~~asset~~February ~~were~~2010, ~~determined~~however, tothe beFASB ~~impaired,~~amended its ~~basis~~guidance ~~would~~on besubsequent ~~adjusted~~events to ~~fair~~remove ~~value~~the ~~through~~requirement to disclose the ~~recognition~~date ofthrough which an ~~impairment~~entity ~~loss.~~has evaluated subsequent events, alleviating conflicts with current

kSEC guidance. ~~Allocation~~ ofThis ~~net~~amendment ~~income~~was ~~(loss)~~effective immediately and therefore the Partnership did not include the disclosure in this Form 10-K.

~~Net~~In ~~income~~June 2009, the Financial Accounting Standards Board (~~loss~~FASB) isissued ~~allocated~~an amendment to the accounting and disclosure requirements for the consolidation of VIEs. The amended guidance modifies the consolidation model to one based on ~~respective~~control ~~partnership~~and ~~interest~~economics, orand ~~units~~replaces ~~outstanding~~the current quantitative primary beneficiary analysis with a qualitative analysis. The ~~Partnership~~primary beneficiary of a VIE will be the entity that has (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. If multiple unrelated parties share such power, as defined, no ~~dilutive~~party ~~interests~~will be required to consolidate the VIE. Further, the amended guidance requires continual reconsideration of the primary beneficiary of a VIE and adds an additional reconsideration event for determination of whether an entity is a VIE. Additionally, the amendment requires enhanced and expanded disclosures around VIEs. This amendment is effective for fiscal years beginning after November 15, 2009. The adoption of this guidance on January 1, 2010 did not have a material effect on the Partnership’s financial statements.

l. Subsequent events

m. Recent accounting pronouncements

On July 1, 2009, the Partnership adopted Financial Accounting Standards Board Accounting Standards Codification, which establishes the ASC as the source of authoritative accounting principles to be applied in preparation of financial statements in conformity with US GAAP. The adoption of this standard did not have a material impact on the financial position, results of operations or cash flows.

On January 1, 2009, the Partnership adopted the new accounting standard which requires adoption of the fair value standards in the ASC for nonfinancial assets and nonfinancial liabilities. The adoption did not have a material impact on the financial position, results of operations or cash flows.

IV-14

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

The ASC establishes general standards of accounting and disclosure of events that occur after the balance sheet date but before the Partnership issues financial statements or has them available to issue. The ASC defines (i) the period after the balance sheet date during which a reporting entity’s management should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and (iii) the disclosures an entity should make about events or transactions that occurred after the balance sheet date. The guidance became effective for periods ending after June 15, 2009. The adoption of the guidance did not have a material impact on the financial position, results of operations or cash flows.

In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for the consolidation of variable interest entities (VIEs). The amended guidance modifies the consolidation model to one based on control and economics, and replaces the current quantitative primary beneficiary analysis with a qualitative analysis. The primary beneficiary of a VIE will be the entity that has (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the amended guidance requires continual reconsideration of the primary beneficiary of a VIE and adds an additional reconsideration event for determination of whether an entity is a VIE. Additionally, the amendment requires enhanced and expanded disclosures around VIEs. This amendment is effective for fiscal years beginning after November 15, 2009. The Partnership has determined that adoption of this guidance has no material impact on the Partnership’s financial statements.

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS

a. Interests in profits, losses and cash distributions made by Local Partnerships

The Partnership has a 94.99% to 98.98% interest in profits, losses and cash distributions (as restricted by various federal and state housing agencies) (collectively, the “Agencies”) of each Local Partnership. An affiliate of the Managing General Partner of the Partnership is also a general partner of each Local Partnership. As stipulated by the Local Partnerships’ partnership agreements, the Local Partnerships are required to make annual cash distributions from surplus cash flow, if any. During ~~2010,~~2011 ~~2009~~ and ~~2008~~2010, the Partnership received cash distributions from rental operations of the Local Partnerships of $5951,~~372,~~316 ~~$41,875~~ and $7059,~~568~~372, respectively. As of December 31, ~~2010~~2011 and ~~2009~~2010, two and three of the Local Partnerships had aggregate surplus cash, as defined by their respective regulatory Agencies, in the amounts of $1,~~043~~238,~~598~~617 and $~~855~~1,~~928~~043,598, respectively, which may be available for distribution in accordance with their respective regulatory Agencies' regulations.

IV-15

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

The cash distributions to the Partnership from the operations of the Local Partnerships may be limited by the Agencies' 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 generally required to be placed in a residual receipts account held by the governing state or federal agency for the benefit of the property. In addition, local general partners have the authority to withhold funds if needed for property repairs, improvements, or other property needs.

Upon sale or refinancing of a property owned by a Local Partnership, or upon the liquidation of a

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

b. Advance to Local Partnership

As of both December 31, ~~2010~~2011 and ~~2009~~2010, the Partnership had advanced funds, including accrued interest, totaling $~~980~~1,~~348~~008,738 and $~~872~~980,~~636~~348, respectively, to ARA Associates - Shangri-La Ltd. (Shallowford Oaks). On April ~~28, 2009, the Partnership advanced $150,000 to Shallowford Oaks for operating expenses. On July 29, 2009, the Partnership advanced $300,000 to Shallowford Oaks for maintenance expenses. On April~~ 15, 2010, the Partnership advanced $100,000 to Shallowford Oaks for operating expenses. The Partnership accrued $28,390 and $51,315 to interest receivables on the advances to Shallowford Oaks as of December 31, 2011 and 2010, respectively. For financial reporting purposes, these loans ~~and related accrued interest receivables~~ have been reduced to zero by the Partnership as a result of losses at the Local Partnership level during prior years. As a result, the amount advanced and accrued interest has been reflected as a reduction of share of income from partnerships.

IV-16

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

As of January 2011, the Shallowford Oaks property was unable to meet its debt service requirements and was therefore in default with regards to the mortgage encumbering the property. In February 2011, the mortgage lender for the mortgage encumbering the Shallowford Oaks property sent notice accelerating the debt. On November, 1, 2011, the mortgage holder for Shallowford Oaks, LSREF2 Chalk 2, LLC, foreclosed on the property and became the new owner of the property pursuant to a non-judicial foreclosure sale under the power of sale clause contained in its law documents. As a result of the foreclosure all of the assets and liabilities of the Local Partnership were written off as of December 31, 2011. The resulting loss of the foreclosure was $31,263 and is recorded on the Statements of Operations as Loss from foreclosure on Local Partnership. The loss is a result of writing off the deferred costs associated with the investment in the Local Partnership.

c. Property matters

Baltic Plaza

On ~~June~~December 2419, ~~2001~~2002, the Local ~~Managing~~Partnership ~~General~~which ~~Partner~~owned ~~entered into a contract to sell~~ the ~~property owned by Sencit~~ Baltic ~~Associates (Baltic~~ Plaza~~). On~~ ~~December~~apartments ~~19,~~sold ~~2002,~~the ~~Baltic Plaza was sold~~property. Cash proceeds received by the Partnership totaled $2,053,358. As part of the consideration, the Local Partnership took back a 30-year purchase money note in the principal amount of $2,300,000, collateralized by the partnership interests of the general partner of the maker/purchaser. The Local Partnership assigned the purchase money note to an escrow for the benefit of its partners (with CRI serving as escrow agent), so that the Local Partnership entity could be dissolved. The purchase money note bears interest at 4.6% compounded annually, and requires a minimum annual payment equal to 50% of the maker/purchaser’s annual audited cash flow, as defined, with the balance of unpaid principal, if any, plus accrued interest, due and payable on December 31, 2032. As of ~~April~~December 1331, ~~2010~~2011, no payments of principal or interest have been received on this purchase money note. The Partnership’s 98% beneficial interest in this purchase money note is reflected in the accompanying balance sheets at December 31, ~~2010~~2011 and ~~2009~~December 31, 2010, at its original principal balance of $2,300,000 plus estimated accrued but unpaid interest, all discounted to $619,000 to provide for an effective interest rate commensurate with the investment risk. The resulting discounted amount has been fully reserved due to uncertainty of collection of the purchase money note and related interest.

d. ~~Completed~~Summarized ~~sales~~financial information

~~Court~~Combined ~~Place~~balance sheets and combined statements of operations for the six Local Partnerships in which the Partnership is invested as of December 31, 2011, follow. The information is presented separately for two Local Partnerships which have investment basis (equity method), and for four Local Partnerships for which the Partnership’s carrying value is zero (equity method suspended).

On March 31, 2008, the Partnership’s interest in Court Place was sold. The sale resulted in net gain on disposition of investment in partnerships of $0 for financial statement purposes in 2008 and in gain of $70,099 for federal tax purposes. In accordance with the terms of the Partnership Agreement, in April 2008, the Managing General Partner was paid a disposition fee of $246,690 related to the sale. The fee was netted against the related gain on disposition of investment in partnerships at March 31, 2008.IV-16

Linden Place

On January 1, 2008, the Partnership’s interest in Linden Place Associates (Linden Place) was sold. The sale resulted in net gain on disposition of investment in partnerships of $2,796,506 for financial statement purposes in 2008 and in gain of $5,153,743 for federal tax purposes. In accordance with the terms of the Partnership Agreement, in January 2008, the Managing General Partner was paid a disposition fee of $917,500 related to the sale. The fee was netted against the related gain on disposition of investment in partnerships in January 2008. In May 2008, the Partnership received a cash flow distribution of $39,265 which was accrued and included in net gain on disposition of investment in partnerships at March 31, 2008.

IV-17

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

Park Glen

On March 31, 2008, the Partnership’s interest in Park Glen Associates (Park Glen) was sold. The sale resulted in net gain on disposition of investment in partnerships of $38,518 for financial statement purposes in 2008 and in gain of $2,220,956 for federal tax purposes. In accordance with the terms of the Partnership Agreement, in April 2008, the Managing General Partner was paid a disposition fee of $300,610 related to the sale. The fee was netted against the related gain on disposition of investment in partnerships at March 31, 2008.

Warner House

On October 22, 2007, a contract for the sale of the Partnership’s interest in Warner House Partnership (Warner House) was signed. On March 31, 2008, the Partnership’s interest in Warner House was sold. The sale resulted in net gain on disposition of investment in partnerships of $140,193 for financial statement purposes in 2008 and in gain of $1,529,981 for federal tax purposes.

e. Summarized financial information

Combined balance sheets and combined statements of operations for the six Local Partnerships in which the Partnership is invested as of December 31, 2010, follow. The information is presented separately for two Local Partnerships which have investment basis (equity method), and for four Local Partnerships for which the Partnership’s carrying value is zero (equity method suspended).

COMBINED BALANCE SHEETS

December 31, ~~2010~~2011

Equity

Method

Suspended

Total

Number of Local Partnerships

(a)

(b)

Rental property, at cost, net of accumulated

depreciation of $11,918,134, $16,147,113,

depreciation of $11,437,387 and $9,695,715,

and $28,065,247, respectively

1,788,227

2,428,822

4,217,049

Respectively

1,454,914

960,379

2,415,293

Land

~~709~~715,103

~~960~~303,~~528~~428

1,~~669~~018,~~631~~531

Other assets

34,~~621~~531,~~938~~684

21,~~189~~941,~~208~~575

56,~~811~~473,~~146~~259

Total assets

6,~~119~~701,~~268~~701

53,~~578~~205,~~558~~382

119,~~697~~907,~~826~~083

Mortgage notes payable

21,~~423~~422,~~402~~457

102,~~181~~812,~~858~~619

124,~~605~~235,~~261~~076

Other liabilities

~~163~~480,~~590~~041

25,~~728~~327,~~440~~515

25,~~892~~807,~~030~~556

Due to general partners

294,158

~~218~~36,~~239~~999

~~512~~331,~~397~~157

Total liabilities

2,~~881~~196,~~150~~656

138,~~128~~177,~~537~~133

1610,~~009~~373,~~688~~789

Partners' capital (deficit)

34,~~238~~505,~~118~~045

(74,~~549~~971,~~979~~751

)

(4466,~~311,861~~706

)

Total liabilities and partners'

capital (deficit)

6,~~119~~701,~~268~~701

53,~~578~~205,~~558~~382

119,~~697~~907,~~826~~083

~~—————————————~~(a) Capital Commons; Chestnut; Westwood Village

(ab) ~~Capital~~Hillview ~~Commons~~Terrace; ~~Chestnut~~New Sharon Woods; Shallowford Oaks

~~(b) Hillview Terrace; New Sharon Woods; Shallowford Oaks; Westwood Village~~IV-17

IV-18

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

COMBINED STATEMENTS OF OPERATIONS

For the year ended December 31, ~~2010~~2011

Equity

Method

Suspended

Total

Number of Local Partnerships

(a)

(b)

Revenue:

Rental

23,~~876~~684,~~645~~975

32,~~411~~150,~~666~~657

65,~~288~~835,~~311~~632

Other

~~305~~361,~~913~~263

692,~~969~~918,184

~~375~~3,~~882~~279,447

Total revenue

34,~~182~~046,~~558~~238

35,~~481~~068,~~635~~841

69,~~664~~115,~~193~~079

Expenses:

Operating

12,~~455~~022,~~052~~557

21,~~334~~838,~~239~~509

3,~~789~~861,~~291~~066

Interest

~~330~~230,~~198~~273

~~601~~482,~~728~~462

~~931~~712,~~926~~735

Depreciation and amortization

~~449~~378,~~241~~171

~~327~~265,~~959~~349

~~777~~643,~~200~~520

Total expenses

2,~~234~~631,~~491~~001

32,~~263~~586,~~926~~320

5,~~498~~217,~~417~~321

Net income

~~948~~1,~~067~~415,237

~~217~~2,~~709~~482,521

13,~~165~~897,~~776~~758

Cash distributions

5244,~~153~~097

7,219

5951,~~372~~316

Cash distributions recorded as reduction

of investments in partnerships

5244,~~153~~097

Cash distributions recorded as income

7,219

Partnership’s share of Local Partnership

net income

~~929~~1,~~028~~320,643

Advance to Local Partnership,

including accrued interest

(~~151~~28,~~315~~390

)

(~~151~~28,~~315~~390

)

Share of income (loss) from partnerships

~~929~~1,~~028~~320,643

(~~144~~21,~~096~~171

)

~~784~~1,~~932~~299,472

~~————————————~~(a) Capital Commons; Chestnut; Westwood Village

(ab) ~~Capital~~Hillview ~~Commons~~Terrace; ~~Chestnut~~New Sharon Woods; Shallowford Oaks

~~(b) Hillview Terrace; New Sharon Woods; Shallowford Oaks; Westwood Village~~IV-18

IV-19

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

Combined balance sheets and combined statements of operations for the six Local Partnerships in which the Partnership is invested as of December 31, 2009, follow. The information is presented separately for two Local Partnerships which have investment basis (equity method), and for four Local Partnerships for which the Partnership’s carrying value is zero (equity method suspended).

COMBINED BALANCE SHEETS

December 31, ~~2009~~2010

	Equity
	Method			Suspended			Total
Number of Local Partnerships		2	(a)		4	(b)		6
Rental property, at cost, net of accumulated
depreciation of $11,442,354, $15,898,429,
depreciation of $11,918,134, $16,147,113,
and $27,340,783, respectively	$	2,209,021		$	2,473,741		$	4,682,762
and $28,065,247, respectively	$	1,788,227		$	2,428,822		$	4,217,049
Land		709,103			960,528			1,669,631
Other assets		3,~~369~~621,~~422~~938			2,~~311~~189,~~054~~208			5,~~680~~811,~~476~~146
Total assets	$	6,~~287~~119,~~546~~268		$	5,~~745~~578,~~323~~558		$	1211,~~032~~697,~~869~~826
Mortgage notes payable	$	32,~~424~~423,~~340~~402		$	10,~~707~~181,~~368~~858		$	1412,~~131~~605,~~708~~261
Other liabilities		~~225~~163,~~777~~590			2,~~555~~728,~~465~~440			2,~~781~~892,~~242~~030
Due to general partners		294,158			~~242~~218,~~578~~239			~~536~~512,~~736~~397
Total liabilities		32,~~944~~881,~~275~~150			13,~~505~~128,~~411~~537			1716,~~449~~009,~~686~~688
Partners' capital (deficit)		23,~~343~~238,~~271~~118			(7,~~760~~549,~~088~~979	)		(54,~~416~~311,~~817~~861	)
Total liabilities and partners'
capital (deficit)	$	6,~~287~~119,~~546~~268		$	5,~~745~~578,~~323~~558		$	1211,~~032~~697,~~869~~826

———————————

(a) Capital Commons; Chestnut

(b) Hillview Terrace; New Sharon Woods; Shallowford Oaks; Westwood Village

IV-2019

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

COMBINED STATEMENTS OF OPERATIONS

For the year ended December 31, ~~2009~~2010

	Equity
	Method			Suspended			Total
Number of Local Partnerships		2	(a)		4	(b)		6
Revenue:
Rental	$	2,~~867~~876,~~670~~645		$	3,~~388~~411,~~398~~666		$	6,~~256~~288,~~068~~311
Other		~~232~~305,~~966~~913			5469,~~274~~969			~~287~~375,~~240~~882
Total revenue		3,~~100~~182,~~636~~558			3,~~442~~481,~~672~~635			6,~~543~~664,~~308~~193
Expenses:
Operating		1,~~477~~455,~~230~~052			2,~~478~~334,~~422~~239			3,~~955~~789,~~652~~291
Interest		~~438~~330,~~782~~198			~~630~~601,~~682~~728			1931,~~069,464~~926
Depreciation and amortization		~~467~~449,~~663~~241			~~366~~327,~~339~~959			~~834.002~~777,200
Total expenses		2,~~383~~234,~~675~~491			3,~~475~~263,~~443~~926			5,~~859~~498,~~118~~417
Net income (loss)	$	716,961		$	(32,771	)	$	684,190
Net income	$	948,067		$	217,709		$	1,165,776
Cash distributions	$	2752,~~436~~153		$	147,~~439~~219		$	4159,~~875~~372
Cash distributions recorded as reduction
of investments in partnerships	$	2752,~~436~~153		$	--		$	2752,~~436~~153
Cash distributions recorded as income	$	--		$	147,~~439~~219		$	147,~~439~~219
Partnership’s share of Local Partnership
net income	$	~~702~~929,~~567~~028		$	--		$	~~702~~929,~~567~~028
Advance to Local Partnership		--			( 450,000	)		(450,000	)
Advance to Local Partnership,
Share of income (loss) from partnerships	$	702,567		$	(435,561	)	$	267,006
including accrued interest		--			(151,315	)		(151,315	)
Share of income (loss) from partnerships	$	929,028		$	(144,096	)	$	784,932

————————————

(a) Capital Commons; Chestnut

(b) Hillview Terrace; New Sharon Woods; Shallowford Oaks; Westwood Village

IV-2120

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

~~Combined~~f. ~~statements~~Reconciliation of ~~operations for~~ the ~~six~~ Local Partnerships' infinancial which the Partnership was invested as of December 31, 2008, follow. The information is presented separately for two Local Partnerships which have investment basis (equity method), and for four Local Partnerships for which the Partnership’s carrying value is zero (equity method suspended).statement

~~COMBINED~~net ~~STATEMENTS~~income OFto ~~OPERATIONS~~taxable income

For the year ended December 31, 2008

	Equity
	Method		Suspended			Total
Number of Local Partnerships		2		4			6
Revenue:
Rental	$	2,797,627	$	3,490,845		$	6,288,472
Other		183,581		92,164			275,745
Total revenue		2,981,208		3,583,009			6,564,217
Expenses:
Operating		1,478,613		2,392,811			3,871,424
Interest		535,279		649,323			1,184,602
Depreciation and amortization		485,709		378,254			863,963
Total expenses		2,499,601		3,420,388			5,919,989
Net income	$	481,607	$	162,621		$	644,228
Cash distributions	$	62,035	$	--		$	62,035
Partnership’s share of Local Partnership
net income	$	471,938	$	8,533	(1)	$	480,471
Advance to Local Partnership		--		(131,740	)		(131,740	)
Share of income from partnerships	$	471,938	$	(123,207	)	$	348,731

————————————

(1) Includes Warner House sold in March 2008.

All of the cash distributions recorded as income are included in share of income from partnerships on the statements of operations for the respective years, and are recorded as cash receipts on the respective balance sheets. Cash distributions recorded as a reduction of the related investment are recorded as cash receipts on the respective balance sheets, and are recorded as a reduction of investments in and advances to partnerships, also on the respective balance sheets.

IV-22

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

f. Reconciliation of the Local Partnerships' financial statement net income to taxable income

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

A reconciliation of the Local Partnerships' financial statement net income reflected above to taxable income follows.

	For the years ended
	December 31,
	2010			2009		2008
	2011			2010
Financial statement net income	$	13,~~165~~897,~~776~~758		$	~~684~~1,~~190~~165,776	$	~~644,228~~
Differences between financial statement
and tax depreciation, amortization,
and miscellaneous differences		~~279~~(2,~~300~~790,616	)		~~418~~279,~~614~~300		~~523,814~~
Taxable income	$	1,~~445~~107,~~076~~142		$	1,~~102~~445,~~804~~076	$	~~1,168,042~~

g. Investment reconciliation

The following is a reconciliation of investments in partnerships at December 31, 2011 and 2010:

Investments in partnerships at January 1, 2010:	$	3,144,406

Share of income from partnerships		784,932
Distribution from partnerships		(59,372	)
Advance to Local Partnership ( including accrued		-
interest of $51,315)		151,315

Investments in partnerships at December 31, 2010:		4,021,281

Share of income from partnerships		1,299,472
Distribution from partnerships		(51,316	)
Accrued interest on advance to Local Partnership		28,390

Investments in partnerships at December 31, 2011:	$	5,297,827

3. RELATED PARTY TRANSACTIONS

In accordance with the terms of the Partnership Agreement, the Partnership paid the Managing General Partner a fee for services in connection with the review, selection, evaluation, negotiation and initial acquisition of the original interests in the Local Partnerships. The fee amounted to $993,480, which is equal to four percent of the Limited Partners' capital contributions to the Partnership. The acquisition fee was capitalized and is being amortized over a 40-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 or its affiliates for certain direct expenses and payroll expenses in connection with managing the Partnership. Payroll expenses are reimbursed at a factor of 1.75 times base salary. For the years ended December 31, 2010, 2009 and 2008, the Partnership paid $167,844, $191,818 and $236,436, respectively, to the Managing General Partner or its affiliates as direct reimbursement of expenses incurred on behalf of the Partnership. In addition, certain employees of the Managing General Partner provided legal and tax accounting services to the Partnership. These are reimbursed comparable to third party service charges. For the years ended December 31, 2010, 2009 and 2008, the Partnership paid $83,391, $43,605 and $80,818, respectively, to the Managing General Partner or its affiliates for these services. Such reimbursed expenses are included in the accompanying statements of operations as general and administrative expenses.IV-21

IV-23

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

3. RELATED PARTY TRANSACTIONS - Continued

In accordance with the terms of the Partnership Agreement, the Partnership is obligated to reimburse the Managing General Partner or its affiliates for certain direct expenses and payroll expenses in connection with managing the Partnership. Payroll expenses are reimbursed at a factor of 1.75 times base salary. For the years ended December 31, 2011 and 2010, the Partnership paid $166,466 and $167,844 respectively, to the Managing General Partner or its affiliates as direct reimbursement of expenses incurred on behalf of the Partnership. In addition, certain employees of the Managing General Partner provided legal and tax accounting services to the Partnership. These are reimbursed comparable to third party service charges. For the years ended December 31, 2011 and 2010, the Partnership paid $69,420 and $83,391, respectively, to the Managing General Partner or its affiliates for these services. Such reimbursed expenses are included in the accompanying statements of operations as general and administrative expenses.

In accordance with the terms of the Partnership Agreement, the Partnership is obligated to pay the Managing General Partner an annual incentive management fee (Management Fee) after all other expenses of the Partnership are paid. The amount of the Management Fee shall be equal to 0.25% 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:

(i)

First, on a monthly basis as an operating expense before any distributions to limited partners in an annual amount equal to $95,208; and

(ii)

Second, after distributions to the limited partners in the amount of one percent of the gross proceeds of the offering, the balance of such 0.25% of invested assets.

For each of the years ended December 31, ~~2010,~~2011 ~~2009~~ and ~~2008~~2010, the Partnership paid the Managing General Partner a Management Fee of $95,208.

In accordance with the terms of the Partnership Agreement, in January 2008 the Managing General Partner was paid a disposition fee of $917,500 related to the sale of the Partnership’s interest in Linden Place, which was netted against the related gain on disposition of investment in partnerships at March 31, 2008. In accordance with the terms of the Partnership Agreement, in April 2008 the Managing General Partner was paid disposition fees of $246,690 and $300,610 related to the sales of the Partnership’s interests in Court Place and Park Glen, respectively, which were netted against the related gain on disposition of investment in partnerships.

4. PARTNERSHIP PROFITS AND LOSSES, AND DISTRIBUTIONS

All profits and losses are allocated 97% to the limited partners and 3% to the General Partners. 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 Local Partnerships 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 affiliate; 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;

(iii) to the limited partners in the amount of their capital contributions without deduction for prior cash distributions other than prior distributions of proceeds from any sale or refinancing;.

(iv) to the repayment of any unrepaid loans theretofore made by any partner or any affiliate to the Partnership for Partnership obligations and to the payment of any unpaid amounts owing to the General Partners pursuant to the Partnership Agreement;IV-22

(v) to the General Partners in the amount of their capital contributions;

IV-24

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

4. PARTNERSHIP PROFITS AND LOSSES, AND DISTRIBUTIONS - Continued

(iv)

to the repayment of any unrepaid loans theretofore made by any partner or any affiliate to the Partnership for Partnership obligations and to the payment of any unpaid amounts owing to the General Partners pursuant to the Partnership Agreement;

(v)

to the General Partners in the amount of their capital contributions;

(vi)

thereafter, for their services to the Partnership, in equal shares to certain general partners (or their designees), whether or not any is then a general partner, an aggregate fee of one percent 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 one percent fee was not paid to the General Partners or their designees; and,

(vii)

the remainder, 15% to the General Partner (or their assignees) and 85% to the limited partners (or their assignees). Fees payable to certain general partners (or their designees) under (vi) above, together with all other property disposition fees and any other commissions or fees payable upon the sale of apartment properties, shall not in the aggregate exceed the lesser of the competitive rate or six percent of the sales price of the apartment properties.

Pursuant to the Partnership Agreement, all cash available for distribution, as defined, shall be distributed, not less frequently than annually, 97% to the limited partners and 3% to the General Partners, after payment of the Management Fee (see Note 3), as specified in the Partnership Agreement. On March 27, 2009, the Partnership paid a cash distribution of $2,524,194 ($102 per Unit) to the Limited Partners who were holders of record as of March 27, 2009. The distribution consisted of a portion of the proceeds received from the sales of Linden Place, Court Place, Park Glen and Warner House. On July 26, 2010, the Partnership paid a cash distribution of $742,410 ($30 per Unit) to the Limited Partners who were holders of record as of July 1, 2010.

As defined in the Partnership Agreement, after the payment of the distributions described in the previous paragraph, after the establishment of any reserves deemed necessary by the Managing General Partner and after payment of the Management Fee, the Partnership had no remaining cash available for distribution for the years ended December 31, ~~2010,~~2011 ~~2009~~ and ~~2008~~2010. The Managing General Partner currently intends to retain all of the Partnership's remaining undistributed cash for operating cash reserves.

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

NET (LOSS) INCOME TO TAXABLE INCOME

For federal income tax purposes, the Partnership reports on a basis whereby: (i) certain expenses are amortized rather than expensed when incurred; (ii) certain costs are amortized over a shorter period for tax purposes, as permitted by the Internal Revenue Code and underlying regulations, and (iii) certain costs are amortized over a longer period for tax purposes. The Partnership records its share of income or losses from its investments in limited partnerships for federal income tax purposes as reported on the Local Partnerships' federal income tax returns (see Note 2.f.), including losses in excess of related investment amounts. These returns are subject to examination and, therefore, possible adjustment by the IRS.

IV-2523

CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

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

NET INCOME (LOSS) TO TAXABLE INCOME - Continued

A reconciliation of the Partnership's financial statement net income (loss) to taxable income follows.

	For the years ended
	December 31,
	2010			2009			2008
	2011			2010
Financial statement net income (loss)	$	~~296~~852,~~978~~463		$	~~(202~~296,~~018~~978	)	$	~~3,008,437~~
Adjustments:
Differences between financial statement
net income and taxable income related
to the Partnership's equity in the Local
Partnerships' income or losses and accrued
Expenses		608,830			829,717			819,310
expenses		(149,380	)		608,830
Difference between financial statement
gain (loss) and tax gain (loss) from
the sale or transfer properties		--			--			5,999,562
foreclosure of a Local Partnership		2,956,645			--
Costs amortized over a shorter period for
income tax purposes		1(10,~~280~~106	)		81,~~144~~280			~~8,669~~
Taxable income	$	~~907~~3,~~088~~649,622		$	~~635~~907,~~843~~088		$	~~9,835,978~~

6. CASH CONCENTRATION RISK

Financial instruments that potentially subject the Partnership to concentrations of risk consist primarily of cash. The Partnership maintains four cash accounts with two banks. As of December 31, ~~2010~~2011, the uninsured portion of the cash balances was $0.

IV-24

# # #

IV-26

Filing Compare · CAPITAL REALTY INVESTORS LTD