UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549

                           FORM 10-KSB

    Annual Report Under Section 13 or 15(d) of The Securities
                      Exchange Act of 1934

          For the Fiscal Year Ended:  December 31, 2005

               Commission file number:  333-125266

                 AEI INCOME & GROWTH FUND 26 LLC
         (Name of small business issuer in its charter)

        State of Delaware                41-2173048
  (State or other jurisdiction of      (I.R.S. Employer
  incorporation or organization)     Identification No.)

      30 East 7th Street, Suite 1300, St. Paul, Minnesota 55101
              (Address of principal executive offices)

                          (651) 227-7333
                   (Issuer's telephone number)

Securities registered under Section 12(b) of the Exchange Act:
                                 Name of each exchange on
     Title of each class             which registered
             None                          None

Securities registered under Section 12(g) of the Exchange Act:

                   Limited Liability Company Units
                        (Title of class)

Check whether the issuer is not required to file reports pursuant
to Section 13 or 15(d) of the Exchange Act.

Check  whether  the issuer (1) filed all reports required  to  be
filed by Section 13 or 15(d) of the Exchange Act during the  past
12  months  (or  for such shorter period that the registrant  was
required to file such reports), and (2) has been subject to  such
filing requirements for the past 90 days.       Yes [X]  No

Check if disclosure of delinquent filers in response to Rule  405
of  Regulation  S-B  is  not  contained  in  this  Form,  and  no
disclosure  will  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-KSB or  any
amendment to this Form 10-KSB. [X]

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

The  Issuer's revenues for the year ended December 31, 2005  were
$4.

As  of  February  28,  2006,  there  were  no  Units  of  limited
membership interest outstanding and owned by nonaffiliates of the
registrant,  which  Units had an aggregate  market  value  (based
solely  on  the price at which they were sold since there  is  no
ready market for such Units) of $0.

               DOCUMENTS INCORPORATED BY REFERENCE
 The registrant has not incorporated any documents by reference
                        into this report.

Transitional Small Business Disclosure Format:  Yes   No [X]


                             PART I

ITEM 1.   DESCRIPTION OF BUSINESS.

        AEI  Income  & Growth Fund 26 LLC (the "Company"  or  the
"Registrant") is a limited liability company which was  organized
pursuant to the laws of the State of Delaware on March 14,  2005.
The  registrant  is  comprised of AEI Fund Management  XXI,  Inc.
(AFM),  as  the Managing Member, Robert P. Johnson, the President
and  sole  director of AFM, as the Special Managing  Member,  and
purchasers of LLC Units as Limited Members.  The Company  offered
for  sale up to $100,000,000 of limited membership interests (the
"Units")  (10,000,000  Units  at $10  per  Unit)  pursuant  to  a
registration   statement  effective  October   20,   2005.    The
registration  statement indicated that the Company would  not  be
capitalized, and all subscription funds would be held in  escrow,
until  the  Company had received subscriptions for 150,000  units
($1,500,000). At December 31, 2005, the Company had not  received
the  minimum amount of subscriptions.  The Managing Members  have
contributed capital of $1,000.

        The  Company was organized to acquire existing and  newly
constructed  commercial properties, to lease such  properties  to
tenants  under  net  leases,  to  hold  such  properties  and  to
eventually  sell such properties.  As of December 31,  2005,  the
Company   had  not  purchased  any  properties.   The   Company's
properties  will be purchased with subscription proceeds  without
any indebtedness.  The Company will not finance properties in the
future to obtain proceeds for new property acquisitions.   If  it
is   required  to  do  so,  the  Company  may  incur   short-term
indebtedness   to  finance  day-to-day  cash  flow   requirements
(including cash flow necessary to repurchase Units).  The Company
may borrow to finance the refurbishing of a property.

        The  Company will hold its properties until the  Managing
Members  determine  that  the sale or other  disposition  of  the
properties  is  advantageous in view of the Company's  investment
objectives.  In deciding whether to sell properties, the Managing
Members will consider factors such as potential appreciation, net
cash  flow  and income tax considerations.  In addition,  certain
tenants  may  be granted options to purchase properties  after  a
specified  portion  of the lease term has elapsed.   The  Company
expects to sell some or all of its properties prior to its  final
liquidation  and  to  reinvest the proceeds from  such  sales  in
additional  properties.  The Company reserves the right,  at  the
discretion of the Managing Members, to either distribute proceeds
from  the  sale of properties to the Members or to reinvest  such
proceeds  in  additional  properties,  provided  that  sufficient
proceeds  are distributed to the Limited Members to  pay  federal
and state income taxes related to any taxable gain recognized  as
a  result  of the sale.  It is anticipated that the Company  will
commence liquidation through the sale of its remaining properties
ten  to  twelve years after completion of the acquisition  phase,
depending  upon  the then current real estate and money  markets,
the  economic  climate  and the income tax  consequences  to  the
Members.

ITEM 1.   DESCRIPTION OF BUSINESS.  (Continued)

Leases

       Although there will be variations in the specific terms of
the  leases, the following is a summary of the general  terms  of
the  Company's leases.  The properties will be leased to  various
tenants  under  triple  net  leases,  which  are  classified   as
operating  leases.   Under  a triple net  lease,  the  tenant  is
responsible  for  all real estate taxes, insurance,  maintenance,
repairs  and  operating expenses for the property.   The  primary
lease  terms  will be generally for 15 to 20 years.   The  leases
will  provide for base annual rental payments, payable in monthly
installments, and contain rent clauses which entitle the  Company
to  receive additional rent in future years based on stated  rent
increases.

        The  leases may provide the tenants with renewal  options
subject  to  the same terms and conditions as the  primary  term.
Certain  tenants may be granted options to purchase the  property
at  a  formula price, which would exceed the original cost.   The
actual sale price of a property to a tenant may or may not exceed
original cost depending on market and other conditions.

Major Tenants

       In the event that certain tenants contribute more than ten
percent  of rental revenue in future years, any failure of  these
major  tenants could materially affect the Company's  net  income
and cash distributions.

Competition

        The  Company  is  a minor factor in the  commercial  real
estate  business.   There are numerous entities  engaged  in  the
commercial  real  estate  business which have  greater  financial
resources  than the Company.  At the time the Company  elects  to
dispose  of its properties, it will be in competition with  other
persons and entities to find buyers for its properties.

Employees

        The Company has no direct employees.  Management services
are  performed for the Company by AEI Fund Management,  Inc.,  an
affiliate of AFM.

ITEM 2.   DESCRIPTION OF PROPERTIES.

Investment Objectives

         The  Company's  investment  objectives  are  to  acquire
existing or newly-developed commercial properties that offer  the
potential  for  (i) regular cash distributions of  lease  income;
(ii)  growth  in lease income through rent escalation provisions;
(iii) preservation of capital through all-cash transactions; (iv)
capital  growth through appreciation in the value of  properties;
and  (v)  stable  property  performance through  long-term  lease
contracts.  The Company does not have a policy, and there  is  no
limitation, as to the amount or percentage of assets that may  be
invested  in any one property.  However, to the extent  possible,
the  Managing Members attempt to diversify the type and  location
of the properties.


ITEM 2.   DESCRIPTION OF PROPERTIES. (Continued)

Description of Properties

       As of December 31, 2005, the Company had not purchased any
properties.  The Company's properties will be commercial,  single
tenant buildings.  The properties will be acquired on a debt-free
basis  and  leased  to various tenants under triple  net  leases,
which  probably  will  be classified as  operating  leases.   The
Company  will  hold  undivided  fee  simple  interests   in   the
properties.

        The  Company's properties will be subject to the  general
competitive conditions incident to the ownership of single tenant
investment real estate.  Since each property will be leased under
a  long-term  lease, there will be little competition  until  the
Company  decides to sell the property.  At this time, the Company
will  be  competing  with other real estate  owners,  on  both  a
national  and local level, in attempting to find buyers  for  the
properties.  In the event of a tenant default, the Company  would
be  competing  with other real estate owners, who  have  property
vacancies,  to  attract a new tenant to lease the property.   The
Company's  tenants  will  operate in  industries  that  are  very
competitive  and can be affected by factors such  as  changes  in
regional  or local economies, seasonality and changes in consumer
preference.

        For  tax  purposes,  the  Company's  properties  will  be
depreciated  under the Modified Accelerated Cost Recovery  System
(MACRS).  The largest depreciable component of a property is  the
building  which  is depreciated, using the straight-line  method,
over  39  years.   The  remaining  depreciable  components  of  a
property  are personal property and land improvements  which  are
depreciated,  using an accelerated method, over 5 and  15  years,
respectively.   Since  the Company will have tax-exempt  Members,
the  Company is subject to the rules of Section 168(h)(6) of  the
Internal  Revenue  Code  which  requires  a  percentage  of   the
properties' depreciable components to be depreciated over  longer
lives  using  the straight-line method.  In general, the  federal
tax basis of the properties for tax depreciation purposes will be
the same as the basis for book depreciation purposes.

ITEM 3.   LEGAL PROCEEDINGS.

       None.

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

       None.


                             PART II

ITEM 5.   MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS
       AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.

        (a)  As  of  December 31, 2005, there were no holders  of
record of the registrant's LLC Units.  There is no other class of
security  outstanding or authorized.  The registrant's Units  are
not  a  traded security in any market.  During the period covered
by  this  report, the Company did not sell any equity  securities
that are not registered under the Securities Act of 1933.

        (b) The registration statement for the offering (No. 333-
125266) was declared effective on October 20, 2005.  The offering
commenced  on  October 20, 2005 and is ongoing.  AEI  Securities,
Inc.   (ASI)  is  the  dealer  manager  of  the  offering.    The
registration  statement  covers  10,000,000  Units   of   limited
liability  company interest at an aggregate price of up  to  $100
million.   The registration statement indicated that the  Company
would  not  be capitalized, and all subscription funds  would  be
held in escrow, until the Company had received subscriptions  for
150,000  units ($1,500,000).  At December 31, 2005,  the  Company
had not received the minimum amount of subscriptions.

        (c)  Beginning in March 2009, pursuant to Section 7.7  of
the  Operating Agreement, each Limited Member has  the  right  to
present Units to the Company for purchase by submitting notice to
the  Managing  Member during January or July of each  year.   The
purchase  price  of the Units is equal to 80% of  the  net  asset
value  of  the Units, as of the first business day of January  or
July  of  each  year,  as determined by the  Managing  Member  in
accordance with the provisions of the Operating Agreement.  Units
tendered  to the Company during January and July are redeemed  on
April 1st and October 1st, respectively, of each year subject  to
the following limitations.  The Company will not be obligated  to
purchase  in any year more than 2% of the total number  of  Units
outstanding  on  January 1 of such year.  In no event  shall  the
Company be obligated to purchase Units if, in the sole discretion
of the Managing Member, such purchase would impair the capital or
operation  of  the Company.  During the period  covered  by  this
report, the Company did not purchase any Units.

Other Information

        In order for NASD members and their associated persons to
participate in the offering and sale of Units of the Company, the
Company  is required, pursuant to NASD Rule 2810, to disclose  in
each  annual  report distributed to Limited Members  a  per  Unit
estimated  value,  the method by which it was developed  and  the
date  of  the  data  used  to develop the  estimated  value.   At
December  31, 2005, the Company's Units were valued at $10.   The
basis for this valuation is the Company is currently engaged in a
public offering at a price of $10 per Unit.  However, please note
that  there is no public trading market for the Units nor is  one
ever  expected  to  develop and there can be  no  assurance  that
Limited  Members could receive $10 per unit if such a market  did
exist  and  they sold their Units or that they will  be  able  to
receive such amount for their Units in the future.


ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS.

        The Management's Discussion and Analysis contains various
"forward  looking  statements"  within  the  meaning  of  federal
securities  laws  which  represent management's  expectations  or
beliefs  concerning future events, including statements regarding
anticipated  application of cash, expected  returns  from  rental
income,  growth  in revenue, taxation levels, the sufficiency  of
cash to meet operating expenses, rates of distribution, and other
matters.  These, and other forward looking statements made by our
managers, must be evaluated in the context of a number of factors
that   may   affect  our  financial  condition  and  results   of
operations, including the following:

    Market and economic conditions which affect the value of
    the properties we purchase and the cash from rental
    income such properties generate;

    the federal income tax consequences of rental income,
    deductions, gain on sales and other items and the
    affects of these consequences for members;

    resolution by our managers of conflicts with which they
    may be confronted;

    the success of our managers of locating properties with
    favorable risk return characteristics;

    the effect of tenant defaults; and

    the condition of the industries in which the tenants of
    properties purchased by the Company operate.


The Application of Critical Accounting Policies

        The  preparation  of  the Company's financial  statements
requires  management to make estimates and assumptions  that  may
affect the reported amounts of assets, liabilities, revenues  and
expenses,  and  related  disclosure  of  contingent  assets   and
liabilities. Management evaluates these estimates on  an  ongoing
basis,  including  those related to the carrying  value  of  real
estate  and  the  allocation  by AEI  Fund  Management,  Inc.  of
expenses to the Company as opposed to other funds they manage.

        The  Company will purchase properties and record them  in
the  financial  statements  at the lower  of  cost  or  estimated
realizable  value.  The Company initially records the  properties
at   cost  (including  capitalized  acquisition  expenses).   The
Company  is required to periodically evaluate the carrying  value
of  properties  to determine whether their realizable  value  has
declined.   For  properties the Company will  hold  and  operate,
management   determines  whether  impairment  has   occurred   by
comparing the property's probability-weighted cash flows  to  its
current carrying value.  For properties held for sale, management
determines  whether  impairment has  occurred  by  comparing  the
property's estimated fair value less cost to sell to its  current
carrying  value.   If  the carrying value  is  greater  than  the
realizable  value, an impairment loss is recorded to  reduce  the
carrying value of the property to its realizable value.  A change
in  these assumptions or analysis could cause material changes in
the carrying value of the properties.

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS.  (Continued)

        AEI  Fund Management, Inc. allocates expenses to each  of
the  funds  they manage primarily on the basis of the  number  of
hours  devoted  by their employees to each fund's affairs.   They
also  allocate  expenses at the end of each month  that  are  not
directly related to a fund's operations based upon the number  of
investors  in the fund and the fund's capitalization relative  to
other  funds they manage.  The Company reimburses these  expenses
subject  to  detailed  limitations  contained  in  the  Operating
Agreement.

        Management  of the Company has discussed the  development
and   selection  of  the  above  accounting  estimates  and   the
management  discussion  and analysis disclosures  regarding  them
with the managing member of the Company.

Results of Operations

        The Company did not engage in any operations or incur any
expenses  during the period from inception through  December  31,
2005  and  its  only income was interest earned on  the  Managing
Members' capital contribution.

Liquidity and Capital Resources

        The  Company's primary sources of cash will  be  proceeds
from  the  sale  of  Units, interest income,  rental  income  and
proceeds  from the sale of property.  Its primary  uses  of  cash
will  be  investment  in  real properties,  payment  of  expenses
involved  in the sale of Units, the organization of the  Company,
the  management of properties, the administration of the Company,
and the payment of distributions.

        Before  the  acquisition of properties,  cash  flow  from
operating  activities  is  not significant.   Net  income,  after
adjustment for depreciation, is lower during the first few  years
of  operations as administrative expenses remain high and a large
amount  of  the Company's assets remain invested on a  short-term
basis in lower-yielding cash equivalents.  Net income will become
the  largest component of cash flow from operating activities and
the  largest component of cash flow after the completion  of  the
acquisition phase.

        The  Operating Agreement requires that all proceeds  from
the  sale  of Units, subject to a reasonable reserve for  ongoing
operations, be invested or committed to investment in  properties
by  the  later  of two years after the date of the Prospectus  or
twelve  months after the offering terminates.  While the  Company
is  purchasing  properties, cash flow from  investing  activities
(investment  in  real  property) will remain  negative  and  will
constitute  the  principal  use of the Company's  available  cash
flow.

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS.  (Continued)

        The  Company has not entered into any formal  contractual
commitments  to expend capital.  However, in order to  facilitate
the purchase of the Company's first property, AEI Fund Management
XVII, Inc. (AFM), an affiliate of the Managing Members, purchased
a  40%  interest  in  a Gart Sports (Sports Authority)  store  in
Wichita,  Kansas  for $2,200,000 from an unrelated  third  party.
When  sufficient  subscription proceeds are raised,  the  Company
anticipates it will purchase the property interest from AFM.  The
price  paid  will  be equal to the price paid  by  AFM  plus  any
expenses  incurred to transfer ownership of the property  to  the
Company, which are expected to be minimal.  Any profit or loss on
the  property during the period the property is owned by AFM will
be  paid  or  charged to the Company.  There  will  be  no  other
benefit arising out of the transaction to the Managing Members or
their  affiliates apart from compensation otherwise permitted  by
the Operating Agreement.

       During the offering of Units, the Company's primary source
of  cash  flow will be from the sale of LLC Units.   The  Company
commenced  its  offering of LLC Units to  the  public  through  a
registration statement that became effective October 20, 2005 and
will  continue  until October 19, 2006, subject to  extension  to
October 19, 2007 if all 10,000,000 LLC Units are not sold  before
then.   The  registration statement indicated  that  the  Company
would  not  be capitalized, and all subscription funds  would  be
held in escrow, until the Company had received subscriptions  for
150,000 units ($1,500,000). At December 31, 2005, the Company had
not received the minimum amount of subscriptions.

        The Operating Agreement requires that no more than 15% of
the  proceeds  from  the  sale of Units be  applied  to  expenses
involved  in the sale of Units (including Commissions)  and  that
such expenses, together with acquisition expenses, not exceed 20%
of  the proceeds from the sale of Units.  As set forth under  the
caption  "Estimated  Use  of Proceeds"  of  the  Prospectus,  the
Managing  Members  anticipate that 15% of such proceeds  will  be
applied  to cover organization and offering expenses if only  the
minimum  proceeds  are obtained and that 12.8% of  such  proceeds
will  be  applied  to such expenses if the maximum  proceeds  are
obtained.   To  the  extent organization  and  offering  expenses
actually incurred exceed 15% of proceeds, they are borne  by  the
Managing Members.

        After  completion of the acquisition phase, the Company's
primary  use  of  cash  flow  will be  distribution  payments  to
Members.    The  Company  will  declare  its  regular   quarterly
distributions  before  the  end  of  each  quarter  and  pay  the
distribution in the first ten days after the end of each quarter.

        Beginning  in  March 2009, the Company may acquire  Units
from  Limited  Members  who  have tendered  their  Units  to  the
Company.  Such Units may be acquired at a discount.  The  Company
will not be obligated to purchase in any year more than 2% of the
total number of Units outstanding on January 1 of such year.   In
no  event shall the Company be obligated to purchase Units if, in
the  sole discretion of the Managing Member, such purchase  would
impair the capital or operation of the Company.

        Until capital is invested in properties, the Company will
remain   extremely   liquid.   After   completion   of   property
acquisitions, the Company will attempt to maintain a cash reserve
of  only  approximately  .5% of subscription  proceeds.   Because
properties  are  purchased for cash and leased  under  triple-net
leases,   this   is   considered   adequate   to   satisfy   most
contingencies.


ITEM 7.   FINANCIAL STATEMENTS.

       See accompanying index to financial statements.





                 AEI INCOME & GROWTH FUND 26 LLC

                  INDEX TO FINANCIAL STATEMENTS






Report of Independent Registered Public Accounting Firm

Balance Sheet as of December 31, 2005

Statements for the Period from Inception (March 14, 2005) to
  December 31, 2005:

     Income

     Cash Flows

     Changes in Members' Equity

Notes to Financial Statements





     REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the Members:
AEI Income & Growth Fund 26 LLC
St. Paul, Minnesota




     We have audited the accompanying balance sheet of AEI Income
& Growth Fund 26 LLC (a Delaware limited liability company) as of
December  31,  2005 and the related statements  of  income,  cash
flows  and  changes  in  members'  equity  for  the  period  from
inception (March 14, 2005) to December 31, 2005.  These financial
statements  are  the responsibility of the Company's  management.
Our  responsibility is to express an opinion on  these  financial
statements based on our audit.

      We conducted our audit in accordance with the standards  of
the  Public  Company Accounting Oversight Board (United  States).
Those  standards require that we plan and perform  the  audit  to
obtain   reasonable   assurance  about  whether   the   financial
statements are free of material misstatement.  An audit  includes
examining,  on a test basis, evidence supporting the amounts  and
disclosures in the financial statements.  An audit also  includes
assessing   the   accounting  principles  used  and   significant
estimates  made by management, as well as evaluating the  overall
financial  statement  presentation.  We believe  that  our  audit
provides 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  AEI Income & Growth Fund 26 LLC as of December 31, 2005,  and
the  results of its operations and its cash flows for the  period
from  inception  (March  14,  2005)  to  December  31,  2005,  in
conformity with U.S. generally accepted accounting principles.




                       /s/Boulay, Heutmaker, Zibell & Co. P.L.L.P.
                               Certified Public Accountants

Minneapolis, Minnesota
January 27, 2006

<PAGE>
                 AEI INCOME & GROWTH FUND 26 LLC
                          BALANCE SHEET
                           DECEMBER 31



                             ASSETS

                                                        2005

CURRENT ASSETS:
  Cash and Cash Equivalents                          $   1,004
                                                      =========




                 LIABILITIES AND MEMBERS' EQUITY


MEMBERS' EQUITY:
  Managing Members' Equity                           $   1,004
                                                      ---------
           Total  Liabilities and Members' Equity    $   1,004
                                                      =========

 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
                 AEI INCOME & GROWTH FUND 26 LLC
                       STATEMENT OF INCOME
 FOR THE PERIOD FROM INCEPTION (MARCH 14, 2005) TO DECEMBER 31, 2005



                                                        2005

INCOME                                               $       4

EXPENSES:
  LLC Administration - Affiliates                            0
  LLC Administration - Unrelated Parties                     0
                                                      ---------
      Total Expenses                                         0
                                                      ---------

NET INCOME                                           $       4
                                                      =========

NET INCOME ALLOCATED:
  Managing Members                                   $       4
                                                      =========



 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
                 AEI INCOME & GROWTH FUND 26 LLC
                     STATEMENT OF CASH FLOWS
 FOR THE PERIOD FROM INCEPTION (MARCH 14, 2005) TO DECEMBER 31, 2005



                                                        2005

CASH FLOWS FROM OPERATING ACTIVITIES:
    Net  Income                                      $       4
                                                      ---------
        Net Cash Provided By
          Operating Activities                               4
                                                      ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Capital Contributions from Managing Members           1,000
                                                      ---------

NET INCREASE IN CASH                                     1,004

CASH, beginning of period                                    0
                                                      ---------
CASH, end of period                                  $   1,004
                                                      =========


 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
                 AEI INCOME & GROWTH FUND 26 LLC
             STATEMENT OF CHANGES IN MEMBERS' EQUITY
 FOR THE PERIOD FROM INCEPTION (MARCH 14, 2005) TO DECEMBER 31,
                              2005


                                                           Limited
                                                            Member
                           Managing  Limited                Units
                           Members   Members   Total     Outstanding


BALANCE, March 14, 2005    $     0  $      0  $      0          0

  Capital Contributions      1,000         0     1,000          0

  Net Income                     4         0         4
                            -------  --------  --------   --------
BALANCE, December 31, 2005 $ 1,004  $      0  $  1,004          0
                            =======  ========  ========   ========




 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>

                 AEI INCOME & GROWTH FUND 26 LLC
                  NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 2005

(1)  Organization -

     AEI  Income  & Growth Fund 26 LLC (the Company),  a  Limited
     Liability  Company, was formed on March 14, 2005 to  acquire
     and  lease commercial properties to operating tenants.   The
     Company's operations are managed by AEI Fund Management XXI,
     Inc.  (AFM),  the Managing Member.  Robert P.  Johnson,  the
     President  and sole director of AFM, serves as  the  Special
     Managing  Member.  AFM is a wholly owned subsidiary  of  AEI
     Capital  Corporation of which Mr. Johnson  is  the  majority
     shareholder.  AEI Fund Management, Inc. (AEI), an  affiliate
     of  AFM, performs the administrative and operating functions
     for the Company.

     The  terms of the offering call for a subscription price  of
     $10  per LLC Unit, payable on acceptance of the offer.   All
     subscriptions  will  be held in escrow until  a  minimum  of
     150,000 Units are sold.  As of December 31, 2005, no Limited
     Members  were admitted to the Company.  Under the  terms  of
     the  Operating Agreement, 10,000,000 LLC Units are available
     for subscription which, if fully subscribed, will result  in
     contributed  Limited Members' capital of $100,000,000.   The
     Managing  Members have contributed capital of  $1,000.   The
     Company  shall  continue  until December  31,  2055,  unless
     dissolved, terminated and liquidated prior to that date.

     During operations, any Net Cash Flow, as defined, which  the
     Managing Members determine to distribute will be distributed
     97%  to  the Limited Members and 3% to the Managing Members.
     Distributions to Limited Members will be made  pro  rata  by
     Units.

     Any  Net  Proceeds  of Sale, as defined, from  the  sale  or
     financing of properties which the Managing Members determine
     to distribute will, after provisions for debts and reserves,
     be  paid  in  the following manner: (i) first,  99%  to  the
     Limited  Members  and 1% to the Managing Members  until  the
     Limited  Members  receive  an amount  equal  to:  (a)  their
     Adjusted  Capital Contribution plus (b) an amount  equal  to
     6.5%  of  their  Adjusted  Capital Contribution  per  annum,
     cumulative  but not compounded, to the extent not previously
     distributed  from Net Cash Flow; (ii) any remaining  balance
     will  be distributed 90% to the Limited Members and  10%  to
     the  Managing Members.  Distributions to the Limited Members
     will be made pro rata by Units.

     For  tax  purposes,  profits  from  operations,  other  than
     profits  attributable  to  the  sale,  exchange,  financing,
     refinancing  or  other  disposition  of  property,  will  be
     allocated 97% to the Limited Members and 3% to the  Managing
     Members.   Net losses from operations will be allocated  99%
     to the Limited Members and 1% to the Managing Members.

                 AEI INCOME & GROWTH FUND 26 LLC
                  NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 2005

(1)  Organization - (Continued)

     For  tax purposes, profits arising from the sale, financing,
     or  other  disposition  of property  will  be  allocated  in
     accordance  with  the Operating Agreement  as  follows:  (i)
     first,  to  those  Members with deficit  balances  in  their
     capital  accounts  in an amount equal to  the  sum  of  such
     deficit  balances; (ii) second, 99% to the  Limited  Members
     and  1%  to the Managing Members until the aggregate balance
     in  the Limited Members' capital accounts equals the sum  of
     the Limited Members' Adjusted Capital Contributions plus  an
     amount equal to 6.5% of their Adjusted Capital Contributions
     per  annum, cumulative but not compounded, to the extent not
     previously  allocated;  (iii)  third,  the  balance  of  any
     remaining  gain  will then be allocated 90% to  the  Limited
     Members  and  10% to the Managing Members.  Losses  will  be
     allocated 99% to the Limited Members and 1% to the  Managing
     Members.

     The  Managing Members are not required to currently  fund  a
     deficit capital balance.  Upon liquidation of the Company or
     withdrawal  by a Managing Member, the Managing Members  will
     contribute to the Company an amount equal to the  lesser  of
     the  deficit balances in their capital accounts or 1.01%  of
     the  total capital contributions of the Limited Members over
     the amount previously contributed by the Managing Members.

(2)  Summary of Significant Accounting Policies -

     Financial Statement Presentation

       The  accounts of the Company are maintained on the accrual
       basis  of  accounting for both federal income tax purposes
       and financial reporting purposes.

     Accounting Estimates

       Management  uses  estimates and assumptions  in  preparing
       these  financial statements in accordance  with  generally
       accepted  accounting  principles.   Those  estimates   and
       assumptions may affect the reported amounts of assets  and
       liabilities,  the  disclosure  of  contingent  assets  and
       liabilities,  and  the  reported  revenues  and  expenses.
       Actual results could differ from those estimates.

     Statement of Cash Flows

       For  purposes  of  reporting cash  flows,  cash  and  cash
       equivalents  may include cash in checking,  cash  invested
       in   money   market  accounts,  certificates  of  deposit,
       federal  agency notes and commercial paper with a term  of
       three months or less.

                 AEI INCOME & GROWTH FUND 26 LLC
                  NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 2005

(2)  Summary of Significant Accounting Policies - (Continued)

     Income Taxes

       The  income or loss of the Company for federal income  tax
       reporting  purposes  is  includable  in  the  income   tax
       returns  of  the Members.  In general, no recognition  has
       been  given to income taxes in the accompanying  financial
       statements.

       The  tax  return  and the amount of distributable  Company
       income  or loss are subject to examination by federal  and
       state  taxing authorities.  If such an examination results
       in  changes to distributable Company income or  loss,  the
       taxable   income   of  the  members  would   be   adjusted
       accordingly.

     Real Estate

       The  Company's real estate will be leased under triple net
       leases  classified as operating leases.  The  leases  will
       provide  for  base  annual  rental  payments  payable   in
       monthly  installments.  The Company will recognize  rental
       revenue  according to the terms of the individual  leases.
       For  leases  which  contain stated rental  increases,  the
       increases  will be recognized in the year  in  which  they
       are   effective.   Contingent  rental  payments  will   be
       recognized  when the contingencies on which  the  payments
       are  based  are  satisfied and the rental payments  become
       due under the terms of the leases.

       Real  estate  will  be recorded at the lower  of  cost  or
       estimated net realizable value.  The Company will  compare
       the  carrying  amount of its properties to  the  estimated
       probability-weighted future cash flows expected to  result
       from  the property and its eventual disposition.   If  the
       sum  of  the expected future cash flows is less  than  the
       carrying   amount  of  the  property,  the  Company   will
       recognize  an impairment loss by the amount by  which  the
       carrying amount of the property exceeds the fair value  of
       the property.

       The  Company will capitalize as Investments in Real Estate
       certain  costs  incurred in the review and acquisition  of
       the  properties.  The costs will be allocated to the land,
       buildings and equipment.

       The  buildings  and  equipment  of  the  Company  will  be
       depreciated  using the straight-line method for  financial
       reporting purposes based on estimated useful lives  of  25
       years and 5 years, respectively.

                 AEI INCOME & GROWTH FUND 26 LLC
                  NOTES TO FINANCIAL STATEMENTS
                        DECEMBER 31, 2005

(3)  Fair Value of Financial Instruments -

     The estimated fair values of the financial instruments, none
     of  which  are held for trading purposes, are as follows  at
     December 31:


                                           2005
                                  Carrying      Fair
                                   Amount       Value

     Money Market Funds           $  1,004    $  1,004
                                   --------    --------
          Total Cash and
            Cash Equivalents      $  1,004    $  1,004
                                   ========    ========

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
       ACCOUNTING AND FINANCIAL DISCLOSURE.

       None.

ITEM 8A.  CONTROLS AND PROCEDURES.

       (a) Evaluation of disclosure controls and procedures

        Under  the  supervision  and with  the  participation  of
management, including its President and Chief Financial  Officer,
the Managing Member of the Company evaluated the effectiveness of
the   design  and  operation  of  its  disclosure  controls   and
procedures (as defined in Rule 13a-14(c) under the Exchange Act).
Based  upon  that  evaluation, the President and Chief  Financial
Officer of the Managing Member concluded that, as of the  end  of
the  period  covered by this report, the disclosure controls  and
procedures of the Company are adequately designed to ensure  that
information required to be disclosed by us in the reports we file
or   submit  under  the  Exchange  Act  is  recorded,  processed,
summarized  and  reported, within the time periods  specified  in
applicable rules and forms.

       (b)  Changes in internal controls

        There  were no significant changes made in the  Company's
internal controls during the most recent period covered  by  this
report that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over  financial
reporting.

ITEM 8B.  OTHER INFORMATION.

       None.


                            PART III

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
       PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

        The registrant is a limited liability company and has  no
officers,  directors, or direct employees.  The Managing  Members
manage  and  control  the  Company's  affairs  and  have  general
responsibility  and  the  ultimate  authority  in   all   matters
affecting the Company's business.  The Managing Members  are  AEI
Fund  Management XXI, Inc. (AFM), the Managing Member, and Robert
P.  Johnson, Chief Executive Officer, President and sole director
of  AFM,  the  Special Managing Member.  AFM is  a  wholly  owned
subsidiary of AEI Capital Corporation of which Mr. Johnson is the
majority   shareholder.   AFM  has  only  one  senior   financial
executive,  its  Chief Financial Officer.   The  Chief  Financial
Officer  reports  directly to Mr. Johnson and is accountable  for
his actions to Mr. Johnson.  Although Mr. Johnson and AFM require
that  all  of  their  personnel, including  the  Chief  Financial
Officer, engage in honest and ethical conduct, ensure full, fair,
accurate, timely, and understandable disclosure, comply with  all
applicable  governmental laws, rules and regulations, and  report
to  Mr. Johnson any deviation from these principles, because  the
organization  is  composed of only approximately 35  individuals,
because  the  management  of a company  by  an  entity  that  has
different  interests in distributions and income  than  investors
involves numerous conflicts of interest that must be resolved  on
a  daily  basis, and because the ultimate decision maker  in  all
instances  is Mr. Johnson, AFM has not adopted a formal  code  of
conduct.   Instead,  the materials pursuant  to  which  investors
purchase Units disclose these conflicts of interest in detail and
Mr.  Johnson,  as  the  CEO and sole director  of  AFM,  resolves
conflicts  to  the  best  of  his ability,  consistent  with  his
fiduciary obligations to AFM and the fiduciary obligations of AFM
to the Company.  The director and officers of AFM are as follows:

        Robert  P.  Johnson, age 61, is Chief Executive  Officer,
President  and  sole director and has held these positions  since
the  formation  of AFM in August 1994, and has  been  elected  to
continue  in these positions until December 2006.  From  1970  to
the  present, he has been employed exclusively in the  investment
industry,  specializing in limited partnership  investments.   In
that capacity, he has been involved in the development, analysis,
marketing   and  management  of  public  and  private  investment
programs investing in net lease properties as well as public  and
private  investment  programs investing  in  energy  development.
Since 1971, Mr. Johnson has been the president, a director and  a
registered principal of AEI Securities, Inc., which is registered
with  the SEC as a securities broker-dealer, is a member  of  the
National Association of Securities Dealers, Inc. (NASD) and is  a
member  of the Security Investors Protection Corporation  (SIPC).
Mr.  Johnson  has  been president, a director and  the  principal
shareholder   of  AEI  Fund  Management,  Inc.,  a  real   estate
management  company founded by him, since 1978.  Mr.  Johnson  is
currently  a general partner or principal of the general  partner
in  eleven  limited partnerships and a managing  member  in  four
LLCs.

        Patrick  W.  Keene,  age 46, is Chief Financial  Officer,
Treasurer  and  Secretary  and has  held  these  positions  since
January  22,  2003  and  has been elected to  continue  in  these
positions  until December 2006.  Mr. Keene has been  employed  by
AEI  Fund  Management, Inc. and affiliated entities  since  1986.
Prior  to being elected to the positions above, he was Controller
of  the various entities.  From 1982 to 1986, Mr. Keene was  with
KPMG  Peat  Marwick  Certified Public Accountants,  first  as  an
auditor and later as a tax manager.  Mr. Keene is responsible for
all accounting functions of AFM and the registrant.


ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
       PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

       Since Mr. Johnson serves as the Special Managing Member of
the  Company,  as well as the sole director of AFM,  all  of  the
duties  that might be assigned to an audit committee are assigned
to  Mr. Johnson.  Mr. Johnson is not an audit committee financial
expert, as defined.  As an officer and majority owner, through  a
parent  company, of AFM, and as the Special Managing Member,  Mr.
Johnson is not a "disinterested director" and may be subject to a
number of conflicts of interests in his capacity as sole director
of AFM.

        Before the independent auditors are engaged, Mr. Johnson,
as the sole director of AFM, approves all audit-related fees, and
all permissible nonaudit fees, for services of our auditors.

Section 16(a) Beneficial Ownership Reporting Compliance

        Under federal securities laws, the directors and officers
of  the Managing Member of the Company, and any beneficial  owner
of  more than 10% of a class of equity securities of the Company,
are  required  to report their ownership of the Company's  equity
securities  and  any changes in such ownership to the  Securities
and  Exchange Commission (the "Commission").  Specific due  dates
for  these  reports have been established by the Commission,  and
the  Company is required to disclose in this Annual Report on 10-
KSB any delinquent filing of such reports and any failure to file
such  reports  during the fiscal year ended  December  31,  2005.
Based upon information provided by officers and directors of  the
Managing Member, all officers, directors and 10% owners filed all
reports on a timely basis in the 2005 fiscal year.

ITEM 10.  EXECUTIVE COMPENSATION.

        The Managing Member and affiliates will be reimbursed  at
cost  for all services performed on behalf of the registrant  and
for  all  third party expenses paid on behalf of the  registrant.
The  cost for services performed on behalf of the registrant will
be  actual  time spent performing such services plus an  overhead
burden.   These  services include organizing the  registrant  and
arranging  for the offer and sale of Units, reviewing  properties
for acquisition and rendering administrative, property management
and  property  sales  services.  The amount and  nature  of  such
payments are detailed in Item 12 of this annual report on Form 10-
KSB.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
       MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

        As of December 31, 2005, no Limited Members were admitted
to  the  Company.  The registration statement indicated that  the
Company  would  not  be capitalized, and all  subscription  funds
would   be  held  in  escrow,  until  the  Company  had  received
subscriptions  for 150,000 units ($1,500,000).  At  December  31,
2005,  the  Company  had  not  received  the  minimum  amount  of
subscriptions.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

        The  registrant,  AFM  and  its  affiliates  have  common
management and utilize the same facilities.  As a result, certain
administrative  expenses will be allocated  among  these  related
entities.   All  of  such activities and any  other  transactions
involving the affiliates of the Managing Member of the registrant
are  governed by, and will be conducted in conformity  with,  the
limitations  set  forth  in  the  Operating  Agreement   of   the
registrant.

        The  limitations  included  in  the  Operating  Agreement
require  that  the  cumulative  reimbursements  to  the  Managing
Members and their affiliates for certain expenses will not exceed
an  amount  equal to the sum of (i) 20% of capital contributions,
(ii)  1% of gross revenues, plus an initial leasing fee of 3%  of
gross  revenues for the first five years of the original term  of
each lease, (iii) 3% of Net Proceeds of Sale, and (iv) 10% of Net
Cash  Flow  less  the Net Cash Flow actually distributed  to  the
Managing Members. The cumulative reimbursements subject  to  this
limitation  are reimbursements for (i) organization and  offering
expenses,  including  commissions and an Organization  Fee,  (ii)
acquisition expenses paid with proceeds from the initial offering
of  Units,  (iii)  services  provided  in  the  sales  effort  of
properties, and (iv) expenses of controlling persons and overhead
expenses  directly  attributable  to  the  forgoing  services  or
attributable to administrative services.


                             PART IV

ITEM 13.  EXHIBITS

     3.1   Certificate of Limited Liability Company (incorporated
     by   reference   to   Exhibit  3.1   of   the   registrant's
     Registration  Statement on Form SB-2 filed on May  26,  2005
     [File No. 333-125266]).

     3.2  Operating Agreement to the Prospectus (incorporated  by
     reference  to  Exhibit  A  of the registrant's  Registration
     Statement  on Form SB-2 filed on October 14, 2005 [File  No.
     333-125266]).

     10.1  Form  of  Impoundment  Agreement  with  Fidelity  Bank
     (incorporated   by   reference  to   Exhibit   10   of   the
     registrant's  Registration Statement on Form SB-2  filed  on
     September 29, 2005 [File No. 333-125266]).

     31.1  Certification of Chief Executive Officer  of  Managing
     Member pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a))  and
     Section 302 of the Sarbanes-Oxley Act of 2002.

     31.2  Certification of Chief Financial Officer  of  Managing
     Member pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a))  and
     Section 302 of the Sarbanes-Oxley Act of 2002.

     32    Certification  of Chief Executive  Officer  and  Chief
     Financial  Officer  of Managing Member pursuant  to  Section
     906 of the Sarbanes-Oxley Act of 2002.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

        The  following  is a summary of the fees  billed  to  the
Company   by  Boulay,  Heutmaker,  Zibell  &  Co.  P.L.L.P.   for
professional  services rendered for the years ended December  31,
2005:

     Fee Category                   2005

     Audit Fees                  $  7,939
     Audit-Related Fees                 0
     Tax Fees                           0
     All Other Fees                     0
                                  --------
          Total Fees             $  7,939
                                  ========

Audit  Fees  - Consists of fees billed for professional  services
rendered   for  the  audit  of  the  Company's  annual  financial
statements   and  review  of  the  interim  financial  statements
included  in  quarterly reports, and services that  are  normally
provided   by  Boulay,  Heutmaker,  Zibell  &  Co.  P.L.L.P.   in
connection with statutory and regulatory filings or engagements.

Audit-Related  Fees - Consists of fees billed for  assurance  and
related  services that are reasonably related to the  performance
of  the  audit  or  review of financial statements  and  are  not
reported under "Audit Fees." These services include consultations
concerning financial accounting and reporting standards.

Tax  Fees - Consists of fees billed for professional services for
federal and state tax compliance, tax advice and tax planning.

All Other Fees - Consists of fees for products and services other
than the services reported above.

Policy   for  Preapproval  of  Audit  and  Permissible  Non-Audit
Services of Independent Auditors

       Before the Independent Auditors are engaged by the Company
to render audit or non-audit services, the engagement is approved
by Mr. Johnson acting as the Company's audit committee.



                           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.


                            AEI INCOME & GROWTH FUND 26
                            Limited Liability Company
                            By: AEI Fund Management XXI, Inc.
                                Its Managing Member


March 24, 2006              By:/s/ Robert P Johnson
                                   Robert P.Johnson, President and Director
                                   (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.

         Name                         Title                        Date


/s/Robert P Johnson  President (Principal Executive Officer)  March 24, 2006
   Robert P.Johnson  and Sole Director of Managing Member


/s/Patrick W Keene   Chief Financial Officer and Treasurer    March 24, 2006
   Patrick W.Keene   (Principal Accounting Officer)