SecProbe.io

CORRESP
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  Paul T. Jenson

  Direct: (312) 836-4046

  E-Facsimile:
  (312) 275-7581

  E-mail:
  pjenson@shefskylaw.com

  005879-00205

June 22, 2005

Mr.
Steven Jacobs

Accounting
Branch Chief

United
States Securities and Exchange Commission

450
Fifth Street, N.W.

Washington,
D.C.  20549

Re:                               NTS
Mortgage Income Fund

Dear Mr. Jacobs:

We are writing
on behalf of our client, NTS Mortgage Income Fund (the “Company”), in response
to the comments contained in the Staff’s letter dated June 14, 2005.  The headings and paragraph numbers below
correspond to the headings and paragraph numbers in your letter.  In addition, for your convenience we have
reproduced your comments in this letter and included our responses directly
below each comment.

Form 10-K for the year ended December 31, 2004

Financial Statements and Notes

Note 6 – Inventory, pages 35-36

1.                                       Please
address the inconsistency between this footnote, which states you do not expect
to incur selling expenses related to issuance of the remaining initial
memberships for Lake Forest and your statements on pages 6, 11 and 20 stating
that you continue to capitalize these costs to inventory.  Additionally, explain your basis for
continuing to capitalize these selling costs subsequent to completion and
transfer of the amenity and clarify whether the initiation fees due at 50%
reduced inventory.

RESPONSE:

The Company
turned over the ownership and operations for The Lake Forest Country Club (“Lake
Forest”) to Lake Forest’s members on December 28, 2003.  In addition, the Company entered into the
Membership Marketing Agreement with Lake Forest on June 7, 2004, which,
among other things, transferred the responsibility of

selling Lake
Forest’s initial memberships to Lake Forest.
Prior to June 7, 2004, however, the Company retained the responsibility
for selling these initial memberships.  Therefore,
the twelve month period ending December 31, 2004 was a transition period in
which the Company incurred costs related to the sale of Lake Forest’s initial
memberships for a portion of the year.  These
costs, as well as the initiation fees, were capitalized to the Company’s
inventory.  This is consistent with item
8a of FAS 67, which states that “The common costs include expected future
operating costs to be borne by the developer until they are assumed by buyers
of units in a project.”  Capitalizing the
costs and the initiation fees to inventory is also consistent with the Company’s
past history of recording to inventory the incremental costs and revenues from
the sales of Lake Forest’s initial memberships.

While the
Membership Marketing Agreement is in place, the Company does not expect to
incur costs related to the sale of Lake Forest’s initial memberships.  The Membership Marketing Agreement will
terminate on the earlier of: (i) May 31, 2009; (ii) written notice of a breach
of such Agreement that is not remedied within fifteen days after receipt of
written notice of the breach; and (iii) the sale of all initial memberships in
Lake Forest.  However, if the Membership
Marketing Agreement terminates prior to the sale of all initial memberships in
Lake Forest, the Company may regain the responsibility for selling the initial
memberships.  If this occurs and the
Company incurs costs associated with the sale of these memberships in the future,
the Company will capitalize these costs to inventory as is consistent with item
8a of FAS 67 and the Company’s past practice.

Set forth
below is a summary of the Company’s selling costs and fees related to Lake
Forest and included in inventory during the year ended December 31, 2004.

  DR/(CR)

  Selling costs for the period January 1,
  2004 through June 7, 2004

  $

  53,579

  Initial membership fees for the year ended
  December 31, 2004

  $

  (86,500

  )

  Net membership fees credited to inventory

  $

  (32,921

  )

2.                                       Please
tell us whether the capitalized costs of Fawn Lake Country Club were greater or
less than the fair value you recorded and how you accounted for this difference
(e.g. allocation of cost in excess of fair value to common costs), if any.

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RESPONSE:

The Company
obtained from an independent third party an appraisal of Fawn Lake Country Club’s
(“Fawn Lake”) value when Fawn Lake’s development was substantially
completed.  At that time, the capitalized
costs of Fawn Lake were in excess of its fair value as determined by the
appraisal.  The difference between Fawn
Lake’s capitalized costs and its fair value was capitalized to inventory as
common amenity costs in accordance with item 8b of FAS 67.

3.                                       Please
tell us what comprises amenities of $9,457,000 and $12,356,000 for the years
2004 and 2003, respectively, and disclose this information in future filings.

RESPONSE:

The amenities for
NTS/LFII and NTS/VA include all common areas, entrance walls, lakes and dams, a
maintenance facility, clubhouses, golf courses, swimming pools, tennis courts,
sport fields and parks.  The Company will
include this information in its future periodic reports under the Securities
Exchange Act of 1934.

          *          *
*

The Company
acknowledges that:

•                                          The
Company is responsible for the adequacy and accuracy of the disclosure in the
filing;

•                                          Staff
comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the filing; and

•                                          The
Company may not assert staff comments as a defense in any proceeding initiated
by the Commission or any person under federal securities laws of the United
States.

We appreciate
the opportunity to respond to the staff’s comments with respect to the Company’s
Form 10-K for the year ended December 31, 2004.
The Company hopes that the information included in this response
satisfies the staff’s comments.

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Please contact
me if you have any questions or require additional information.

  Sincerely,

  SHEFSKY & FROELICH LTD.

  /s/ Paul T. Jenson

  Paul T. Jenson

PTJ:dja/962007_3

Enclosures

cc:                                 Brian F. Lavin

Gregory
A. Wells

Timothy
Baker

Cezar
M. Froelich

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