UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C. 20549

                                  FORM 10-K

(Mark One)
  X  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
     EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
                                      OR
     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
     SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from            to

Commission File Number:  0-14340

                   Balcor/Colonial Storage Income Fund - 85
            (Exact name of registrant as specified in its charter)

                Illinois                                      36-3338930
    (State or other jurisdiction of                     (I.R.S. Employer
     incorporation or organization)                    Identification No.)


     2355 Waukegan Road Suite A200 Bannockburn, Illinois            60015
      (Address of principal executive offices)                   (Zip Code)

Registrant's telephone number, including area code:  (847) 267-1600

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

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

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

                              Yes   X       No

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


                               PART I



Item 1.      Business

Balcor/Colonial Storage Income Fund - 85 (the "Registrant") is a limited
partnership formed in September 1983 under the laws of the State of
Illinois, which raised $69,229,500 from sales of Limited Partnership
Interests.  The Registrant's operations consist exclusively of investment
in and operation of income-producing mini-warehouse facilities, and all
financial information included in this report relates to that industry
segment.

The principal purpose of the Registrant is to acquire, own, maintain,
operate, lease, and hold for capital appreciation and current income,
existing mini-warehouse facilities offering storage space for business and
personal use.  The Registrant utilized the net offering proceeds to
acquire from affiliates of a General Partner sixty-nine mini-warehouse
facilities in 1985.  Additionally, the Registrant acquired from non-
affiliated entities four mini-warehouse facilities in 1986.  The Registrant
sold one mini-warehouse facility each in 1989 and 1990 and two facilities
in 1993.

The Partnership Agreement provides that the proceeds of any sale,
financing, or refinancing will not be reinvested in new acquisitions,
except that net proceeds may be used to purchase or finance improvements or
additions to the Registrant's properties.

The Registrant received notice of an unsolicited offer for the purchase of
Limited Partnership Interests ("tender offer") in February 1997.  The tender
offer was made by First Trust Investors, LLC (First Trust).  First Trust
stated that their primary motive in making the offer was to make a profit
from the purchase of the Interests.  The Registrant incurred administrative
costs in responding to the tender offer and may incur additional costs if
additional tender offers are made in the future.  The General Partners
cannot predict with any certainty what the impact of any future tender
offers will have on the operations or management of the Registrant.

The General Partners' current strategy is to continue to operate the
Registrant's properties in a manner to maximize cash flow and to provide
the Limited Partners with regular quarterly distributions.  A further
objective is to maximize the price at which the properties may ultimately
be sold.  During the second half of 1996, the Registrant solicited and
eceived bids from major institutional owners of mini-warehouse facilities
for a sale of all of the Registrant's assets.  The General Partners have not
agreed to accept any of the submitted bids.  However, discussions are
continuing with certain of the bidders.  Limited Partner approval would
be required for any sale of two-thirds or more of the Registrant's
remaining assets.  The General Partners cannot presently predict whether
any sale of the Registrant's assets will be consummated in the foreseeable
future.

The Registrant, by virtue of its ownership of real estate, is subject to
federal and state laws and regulations covering various environmental
issues.  Management of the Registrant utilizes the services of
environmental consultants to assess a wide range of environmental issues
and to conduct tests for environmental contamination as appropriate.  The
General Partners are not aware of any potential liability due to
environmental issues or conditions that would be material to the
Registrant.


The officers, directors, and employees of Balcor Storage Partners-85 and
Colonial Storage 85, Inc., the General Partners of the Registrant, and
their affiliates perform certain services for the Registrant.  The
Registrant currently has 52 full-time and 56 part-time employees engaged in
its operations.


<PAGE>
Item 2.        Properties

As of December 31, 1996, the Registrant owned the properties described below.

                                                Net
                                             Rentable
                         Land                   Area            No. of
                         Area                 (Square          Rentable
Location                (Acres)                 Feet)           Spaces

3233 East Highway 80
Odessa, Texas             1.3                  22,450              156

2306 North Collins Boulevard
Arlington, Texas          1.7                  26,098              248

3107 South Lake Drive
Texarkana, Texas          1.1                  19,230              152

6715 Wolflin Road
Amarillo, Texas           1.6                  21,080              217

7800 North Broadway
Oklahoma City, Oklahoma   2.4                  35,880              260

1604 Camp Lane
Albany, Georgia           1.9                  32,942              299

1005 West Cotton
Longview, Texas           2.2                  24,002              208

6046 Financial Drive
Norcross, Georgia         2.2                  34,708              285

1320 Norwood Drive
Bedford, Texas            1.8                  29,220              251

5311 Apex Highway
Durham, North Carolina    3.0                  23,000              252

218 Eisenhower Drive
Savannah, Georgia         1.5                  21,716              206

132 Slaton Highway
Lubbock, Texas            1.9                  16,840              113

2960 South Cobb Drive
Smyrna, Georgia           1.8                  28,892              255

3513 Highway 45 North
Meridian, Mississippi     2.0                  24,980              186

3194 South Campbell Avenue
Springfield, Missouri     1.7                  25,360              233

1440 North Hairston Road
Stone Mountain, Georgia   2.3                  30,117              270

3472 Hillsboro Road
Durham, North Carolina    1.9                  31,600              315
<PAGE>
4615 West Beryl Road
Raleigh, North Carolina   1.7                  28,750              295

2826 South Clack Street
Abilene, Texas            2.4                  32,038              266

1301 South Stemmons
Lewisville, Texas         1.2                  21,900              162

2316 Highway 19 North
Meridian, Mississippi     2.3                  27,880              215

3016 South Cooper
Arlington, Texas          1.5                  24,912              193

2215 West Southwest Loop 223
Tyler, Texas              2.5                  28,301              248

2000 Country Club Drive
Carrollton, Texas         2.0                  35,379              253

2331 South Collins Boulevard
Arlington, Texas          2.0                  31,396              276

2990 Pio Nono Avenue
Macon, Georgia            1.7                  26,998              220

5513 East Lancaster
Fort Worth, Texas         1.3                  22,104              210

5121 North Street
Nacogdoches, Texas        2.0                  17,483              147

4917 California Parkway, S.E.
Fort Worth, Texas         1.7                  27,132              247

1881 Gordon Highway
Augusta, Georgia          1.6                  22,464              229

3208 East Park Row
Arlington, Texas          2.1                  35,505              319

5502 Chapel Hill Boulevard
Chapel Hill, North
Carolina                  1.7                  26,800              260

3654 West Pioneer Parkway
Arlington, Texas          2.3                  34,176              253

1311 Northwest Loop 281
Longview, Texas           2.0                  24,940              200

3125 Cherry Street North
Winston-Salem,
North Carolina            1.3                  21,500              258

1010 Holiday Hill Drive
North Midland, Texas      2.6                  42,578              354
<PAGE>
95 Green Street
Warner Robins, Georgia    1.2                  19,940              192

2115 Silas Creek Parkway
Winston-Salem,
North Carolina            1.7                  25,350              305

3120 Knickerbocker Road
San Angelo, Texas         1.8                  19,425              151

2302 Parkview Drive
San Angelo, Texas         1.1                  19,575              180

8457 Roswell Road
Dunwoody, Georgia         3.9                  60,240              466

5717 Will Ruth Avenue
El Paso, Texas            2.0                  33,056              260

1513 Denman Street
Lufkin, Texas             1.5                  14,362              119

9303 Abercorn Extension
Savannah, Georgia         3.0                  34,080              277

1850 North Clack Street
Abilene, Texas            1.2                  17,280               99

7012 Glenwood
Raleigh, North Carolina   1.5                  25,200              192

3730 West Wendover Avenue
Greensboro,
North Carolina   bbbb     1.7                  30,600              289

2305 East Lohman Avenue
Las Cruces, New Mexico    1.3                  17,380              175

4000 I-40 East
Amarillo, Texas           1.6                  21,860              218

4701 Osborne Drive
El Paso, Texas            1.3                  18,900              173

3229 Highway 80
Mesquite, Texas           2.1                  31,120              211

1510 West 7th Street
Clovis, New Mexico        1.0                  13,640              124

914 N.E. 8th Street
Grand Prairie, Texas      1.8                  27,940              206

7469 Tara Boulevard
Jonesboro, Georgia        1.8                  29,082              221
<PAGE>
871 North Forest
Amarillo, Texas           2.5                  23,379              200

5808 Highway 271 South
Fort Smith, Arkansas      1.1                  14,680              123

5604 Tinker Diagonal
Midwest City, Oklahoma    1.6                  27,901              278

3751 Longmire Way
Doraville, Georgia        2.1                  29,780              300

818 South Clack Street
Abilene, Texas            1.5                  16,340              165

8400 Canyon Drive
Amarillo, Texas           2.2                  17,570              157

3121 Washington Road
Augusta, Georgia          1.4                  28,138              255

4011 Midland Boulevard
Fort Smith, Arkansas      1.9                  26,580              174

4141 Snapfinger Woods Drive
Decatur, Georgia          2.7                  36,580              336

1808 Hampton Road
Texarkana, Texas          2.8                  28,621              247

4155 Milgen Road
Columbus, Georgia         1.5                  24,624              215

426 South College Drive
Wilmington,
North Carolina            2.3                  28,131              290

1412 Poinsett Highway
Greenville,
South Carolina            1.6                  19,300              200

2815 White Horse Road
Greenville,
South Carolina            2.6                  31,500              309

1515 Mt. Zion Road
Morrow, Georgia           5.0                  64,539              666

Mini-warehouse units in the above properties are rented with leases of one
year or less, with no tenant occupying greater than ten percent of the
property.  Real estate taxes incurred in 1996 for the above properties
totaled $653,221.

The Federal tax basis of the Registrant's properties totaled $40,512,784 as
of December 31, 1996.  For federal income tax purposes, the acquisition
costs of the properties are depreciated over useful lives ranging from 18
to 19 years using ACRS methods.  Other minor assets are depreciated over
their applicable recovery periods.

In the opinion of the General Partners, the Registrant has provided for
adequate insurance coverage for its real estate investment properties.

Item 3.    Legal Proceedings

The Registrant is not subject to any material pending legal proceedings,
nor were any such proceedings terminated during the fourth quarter of 1996.


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

No matters were submitted to a vote of the Limited Partners of the
Registrant during 1996.

<PAGE>
                                 PART II


Item 5.    Market for Registrant's Common Equity and Related Stockholder
           Matters

There has not been an established public market for Limited Partnership
Interests, and it is not anticipated that one will develop.  For
information regarding previous distributions, see the Statements of
Partners' Capital, page F-5, and Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources, below.

As of December 31, 1996, the number of record holders of Limited
Partnership Interests of the Registrant was 6,919.

Item 6.                       Selected Financial Data

                              Year Ended December 31
                       1996        1995        1994       1993        1992
Rental income   $  10,519,053  10,316,881  10,067,226  9,298,505  8,600,074
Interest income $     248,062     330,915     293,869    213,018    194,020
Net income      $   4,043,793   4,124,388   4,816,067  4,089,522  3,443,706

Net income per
Limited
Partnership
Interest        $       14.46       14.74       17.22      14.62      12.31

Taxable income  $   4,015,081   4,693,882   4,893,600  3,930,321  3,208,375

Taxable income
per Limited
Partnership
Interest        $       14.35       16.78       17.50      14.05      11.47

Cash and
cash
equivalents     $   4,187,645   3,643,915   4,014,486  2,834,883  2,427,287

Total mini-
warehouse
properties, net
of accumulated
depreciation    $  41,655,334  43,428,692  44,809,932 46,050,709 48,492,489

Total assets    $  46,089,970  48,991,405  50,764,405 51,105,762 52,366,414

Distributions to
Limited
Partners        $   6,882,762   6,601,725   5,170,064  5,305,745  4,715,919

Distributions per
Limited
Partnership
Interest        $       24.85       23.84       18.67      19.16      17.03

Properties
owned on
December 31                69          69          69         69         71


<PAGE>
Item 7.    Management's Discussion and Analysis of Financial Condition and
           Results of Operations


Summary of Operations

The net income of Balcor/Colonial Storage Income Fund-85 (the Partnership")
remained relatively unchanged from 1995 to 1996.  Increased property
management fees and Partnership incentive management fees earned by the
General Partners in 1995 were the primary reasons net income decreased
during 1995 as compared to 1994.  No material events occurred during these
periods which significantly impacted the net income of the Partnership.
Further discussion of the Partnership's operations is summarized below.

Operations

1996 Compared to 1995

Due to an overall increase in rental rates at the Partnership's mini-
warehouse facilities, rental income increased during 1996 as compared to 1995.
Rental income increased slightly in the Dallas/Fort Worth, Georgia and Carolina
regions and decreased slightly in the West Texas region.

Interest income from short term investments decreased during 1996 as
compared to 1995 as a result of a decrease in amounts available for
investment primarily due to the payment of the additional 3% property
management fee and incentive management fees during the first quarter of
1996.

Interest income from mortgage notes receivable decreased during 1996 as
compared to 1995 due to the receipt of the entire balance of the
outstanding mortgage notes during 1996.

The Limited Partners received distributions equal to 10% of Adjusted
Original Capital for the period April 1995 through March 1996 and for the
period April 1996 through March 1997.  In accordance with the Partnership
Agreement, the full 6% management fee was recognized for the twelve months
ended March 31, 1996 and the nine months ended December 31, 1995.  The
recognition of the additional management fee was the primary reason
anagement fees increased for 1996 as compared to 1995.

Higher payroll and supply expenses as well as professional fees and
printing and postage costs incurred in connection with the tender offers
during 1996 resulted in an increase in general and administrative expenses
for 1996 as compared to 1995.

1995 Compared to 1994

Due to increases in rental rates at certain of the Partnership's mini-
warehouse facilities, particularly in the Georgia region of the United
States, rental  income increased from 1994 to 1995.  This increase was
partially offset by a decrease in occupancies and, correspondingly,
revenues, in the West Texas region.

Interest income on short-term investments increased from 1994 to 1995 due
to an increase in average cash balances available for investment as well as
an increase in rates during the first half of 1996.

Property operating expenses increased from 1994 to 1995 due to an increase
in maintenance and repairs and real estate taxes.  Maintenance and repairs
increased due to  an increase in painting and paving expenditures.  Real
estate taxes increased due to an increase in values and rates at certain of
the Partnership's properties.

The Limited Partners received distributions equal to 10% of Adjusted
Original Capital for 1995 and in accordance with the Partnership Agreement,
the full 6% management fee was recognized for the nine months ended
December 31, 1995 (see Note 3 of Notes to Financial Statements for
additional information).  The recognition of the additional management fee
for the period stated was the primary reason property management fees
increased for 1995 as compared to 1994.

Incentive management fees of $477,021 were earned by the General Partners
in 1995 due to the receipt by Limited Partners of the above mentioned
distributions.  See Note 3 of Notes to Financial Statements for additional
information.

Increased accounting and asset management costs resulted in an increase in
general and administrative expenses during 1995 as compared to 1994.


Liquidity and Capital Resources

The cash position of the Partnership increased by approximately $544,000
from December 31, 1995, to December 31, 1996 as cash generated from
operations and payments received on mortgage notes receivable exceeded
distributions to Limited Partners and capital expenditures.  The
Partnership's cash flow provided by operating activities in 1996 of
approximately $6,100,000 was generated primarily by the operations of the
mini-warehouse properties and interest income earned on the Partnership's
short-term investments and mortgage notes receivable, which was partially
offset by administrative expenses. Payment of the balance on mortgage notes
receivable of approximately $1,650,000 resulted in cash flow provided from
investing activities.  Additionally, $256,000 was used in investing
activities to make capital improvements to the properties, which included
painting, roofing and paving expenditures, and in financing activities to
provide distributions to the Limited and General Partners totaling
approximately $6,951,000.

Accounts receivable net of the related allowance for doubtful accounts
decreased from December 31, 1995 to December 31, 1996 due to the level and
timing of collection efforts.  The timing of collection efforts are
determined by individual state law.  There have been no changes in the
credit terms extended to the Partnership's customers nor in the method used
to allow for doubtful accounts.

In September, 1996, the Partnership received $508,364, $797,114 and
$323,172 in full satisfaction of the remaining mortgage notes receivable
resulting from the sale of mini-warehouse facilities in 1993, 1990 and 1
989, respectively.

Pursuant to the Partnership Agreement, the General Partners are entitled to
8% of Net Cash Receipts available for distribution, which is subordinated
to the receipt by Limited Partners of specified distribution levels (see
Note 1(c) of Notes to Financial Statements for additional information).
The General Partners received $549,026 in January, 1997 ($480,398 as its
incentive management fee and $68,628 as their distributive share of Net
Cash Receipts).  From the inception of the offering through December 31,
1996, the General Partners' share of Net Cash Receipts totaled
approximately $4,838,000, $3,748,000 of which is subordinated.  The General
Partners are entitled to receive subordinated amounts only from distributed
Net Cash Proceeds.

In January 1997, the Partnership paid $1,122,461 ($4.05 per Interest) to
the Limited Partners representing the quarterly Net Cash Receipts
distribution for the fourth quarter of 1996 and $1,256,265 ($4.54 per
Interest) representing the distribution of Net Cash Proceeds earned from
the receipt of the balance of mortgage notes; $647,105 ($2.34 per Interest)
of which is considered a return of original capital.  The General Partners
believe the cash flow generated from property operations should enable the
Partnership to continue making quarterly distributions to Limited Partners.
However, the level of future cash distributions to Limited Partners will be
dependent upon the amount of cash flow generated by the Partnership's
properties, as to which there can be no assurance.  Quarterly distributions
per Interest remained constant at $6.25 for the first three quarters of
1996 and increased to $8.59 per Interest for the fourth quarter of 1996.
Quarterly distributions increased for the fourth quarter of 1996 due to
epayment of the mortgage notes receivable.  Limited Partners received
distributions equal to 10% of Adjusted Original Capital for 1996
(distributions paid in April, July and October 1996 and January 1997).
Including the January 1997 distribution, the Partnership has distributed to
Limited Partners $215.71 per Interest, of which $213.37 represents Net Cash
Receipts and Net Cash Proceeds and $2.34 represents return of original
capital. The General Partners intend to retain on behalf of the Partnership
cash reserves adequate to meet working capital requirements as they may
arise.

The General Partners' current strategy is to continue to operate the
Partnership's properties in a manner to maximize cash flow and to provide
the Limited Partners with regular quarterly distributions.  A further
objective is to maximize the price at which the properties may ultimately
be sold.  During the second half of 1996, the Registrant solicited and
received bids from major institutional owners of mini-warehouse facilities
for a sale of all of the Registrant's assets.  The General Partners have
not agreed to accept any of the submitted bids.

However, discussions are continuing with certain of the bidders.  Limited
Partner approval would be required for any sale of two-thirds or more of
the Registrant's remaining assets.  The General Partners cannot presently
predict whether any sale of the Registrant's assets will be consummated
in the foreseeable future.

Inflation has several types of potentially conflicting impacts on real
estate investments.  Short-term inflation can increase real estate
operating costs which may or may not be recovered through increased rents
and/or sales prices depending on general or local economic conditions.
In the long term, inflation can be expected to increase operating costs and
replacement costs and may lead to increased rental revenues and real estate
values.


<PAGE>
Item 8.     Financial Statements and Supplementary Data

See Index to Financial Statements on Page F-1 of this Form 10-K.

The supplemental financial information specified by Item 302 of Regulation
S-K is not applicable.

The net effect of the differences between the financial statements and the
tax information is summarized as follows:

                             December 31, 1996        December 31, 1995
                            Financial      Tax       Financial      Tax
                            Statements    Return     Statements    Return

Total assets              $ 46,089,970  52,569,595   48,991,405  55,365,771
Partners' capital
  accounts:
    General Partners      $    334,503     390,166      362,211     314,619
    Limited Partners      $ 44,118,058  51,022,418   46,997,465  53,896,444
Net income:
    General Partners      $     40,438      41,511       41,244      46,939
    Limited Partners      $  4,003,355   4,109,570    4,083,144   4,646,943
    Per Limited
      Partnership
      Interest            $      14.46       14.84        14.74       16.78



Item 9.    Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure

           There have been no changes in or disagreements with accountants on
           any matter of accounting principles, practices or financial statement
           disclosure.

<PAGE>
                            PART III

Item 10.    Directors and Executive Officers of the Registrant

(a)    Neither the Registrant nor Balcor Storage Partners-85, one of the
       General Partners, has a Board of Directors.

       The other General Partner, Colonial Storage 85, Inc., has a Board of
       Directors.  The sole member is James R. Pruett (see b, c, e, and f
       below) who has been a director since the formation of Colonial
       Storage 85, Inc.

(b,c,
&e)    The names, ages, and business experience of the executive officers
       and significant employees of the General Partners of the Registrant
       are as follows:


       Balcor Storage Partners-85

             TITLE                            OFFICERS

      Chairman, President and Chief          Thomas E. Meador
         Executive Officer
      Senior Vice President                  Alexander J. Darragh
      Senior Vice President                  James E. Mendelson
      Senior Vice President                  John K. Powell, Jr.
      Managing Director, Chief               Jayne A. Kosik
         Financial Officer, Treasurer
         and Assistant Secretary


      Thomas E. Meador (age 49) joined Balcor in July 1979.  He is
      Chairman, President and Chief Executive Officer and has
      responsibility for all ongoing day-to-day activities at Balcor.
      He is a Director of The Balcor Company.  He is also Senior Vice
      President of American Express Company and is responsible for its real
      estate operations worldwide.  Prior to joining Balcor, Mr. Meador was
      employed at the Harris Trust and Savings Bank in the commercial real
      estate division where he was involved in various lending activities.
      Mr. Meador received his M.B.A. degree from the Indiana University
      Graduate School of Business.

      Alexander J. Darragh (age 42) joined Balcor in September 1988 and is
      responsible for due diligence analysis and real estate advisory
      services for Balcor and American Express Company.  He also has
      supervisory responsibility for Balcor's environmental matters.  Mr.
      Darragh received masters' degrees in Urban Geography from Queen's
      University and in Urban Planning from Northwestern University.

      James E. Mendelson (age 34) joined Balcor in July 1984 and is
      responsible for Balcor's property sales activities.  He also has
      supervisory responsibility for Balcor's accounting, financial,
      treasury, investor services and investment administration functions.
      From 1989 to 1995, Mr. Mendelson was Vice President - Transaction
      Management and Vice President - Senior Transaction Manager and had
      responsibility for various asset management matters relating to real
      estate investments made by Balcor, including negotiations for the
      restructuring of mortgage loan investments.  Mr. Mendelson received
      his M.B.A. degree from the University of Chicago.

      John K. Powell Jr. (age 46) joined Balcor in September 1985 and is
      responsible for portfolio and asset management matters relating to
      Balcor's partnerships.  Mr. Powell also has supervisory
      responsibility for Balcor's risk management  function.  He received a
      Master of Planning degree from the University of Virginia.  Mr.
      Powell has been designated a Certified Real Estate Financier by the
      National Society for Real Estate Finance and is a full member of the
      Urban Land Institute.

      Jayne A. Kosik (age 39) joined Balcor in August 1982 and, as Chief
      Financial Officer, is responsible for Balcor's financial, human
      resources and treasury functions.  From June 1989 until October 1996,
      Ms. Kosik had supervisory responsibility for accounting functions
      relating to Balcor's public and private partnerships. She is also
      Treasurer and a Managing Director of The Balcor Company.  Ms. Kosik
      is a Certified Public Accountant.



       Colonial Storage 85, Inc.

            Name                                       Title

       James R. Pruett                 President, Vice President, Director
       James N. Danford                Secretary, Treasurer



       James R. Pruett (54) received his Bachelor of Science degree from McMurry
       College in Abilene, Texas, in 1965.  Mr. Pruett developed the first
       Atlanta, Georgia, Colonial Self Storage mini-warehouse facility in 1972.
       Since that time, he has handled substantially all business aspects of
       mini-warehouse development, construction, operation, and management.
       Mr. Pruett has directed the site selection and development or
       acquisition of numerous locations for mini-warehouses and office
       warehouses.  Mr. Pruett is President and a Director of Colonial Storage
       Management 85, Inc.("CSM-85) which manage the properties of the
       Registrant.

       James N. Danford (38) received his Bachelor of Business Administration
       degree from The University of Texas at Arlington.  Mr. Danford was a
       senior accountant with a public accounting firm prior to joining
       Colonial Storage Centers in June of 1986.  Mr. Danford is a Certified
       Public Accountant, member of the Texas Society of Certified Public
       Accountants, and is Chief Financial and Accounting Officer.

       The sole director of Colonial Storage 85, Inc. is not a director in
       any company with a class of securities registered pursuant to ection
       12 of the Securities Exchange Act of 1934 or subject to the
       requirements  of Section 15 (b) of the Act or any company registered
       as an investment company under the Investment Company Act of 1940,
       but is a director of four other corporations which act as general
       partners of limited partnerships which have a class of securities
       registered pursuant to Section 12 of the Act.

(d)    There is no family relationship between any of the foregoing
       officers or  director.

(f)    To the best of the Registrant's knowledge, there have been no events
       under any bankruptcy act, no criminal proceedings, and no judgments
       or injunctions material to the evaluation of the ability and
       integrity of any current director or executive officer of Colonial
       Storage 85, Inc., Colonial Storage Management 85, Inc., or any
       current executive officer of Balcor Storage Partners-85 during the
       past five years.




<PAGE>
Item 11.    Executive Compensation

(a,b,c,
d&e)   The Registrant paid $2,505 in 1996 with respect to one of the
       executive officers and directors of The Balcor Company.  The
       Registrant has not paid and does not propose to pay any renumeration
       to the remaining executive officers and directors of the General
       Partners.  Certain of the remaining officers receive compensation
       from The Balcor Company and Colonial Storage-85Inc., (but not from
       the Registrant) for services performed for various affiliated
       entities, which may include services performed for the Registrant.
       However, the General Partners believe that any such compensation
       attributable to services performed for the Registrant is immaterial
       to the Registrant.  See Note 3 of Notes to Financial Statements for
       the information relating to transactions with affiliates.

Item 12.    Security Ownership of Certain Beneficial Owners and Management


(a)     The following entity is the sole Limited Partner which owns
        beneficially more than 5% of the outstanding Limited Partnership
        Interests of the Registrant.

                               Name and         Amount and
                              Address of        Nature of       Percent
                              Beneficial        Beneficial        of
       Title of Class           Owner           Ownership        Class
       Limited                 Public           30,317.28        10.95%
       Partnership             Storage, Inc.    Limited
       Interests               Glendale,        Partnership
                               California       Interests


(b)    Balcor Storage Partners-85 and Colonial Storage 85, Inc. and its
       officers and director own as a group the following Limited
       Partnership Interests in the Registrant:

            Title of Class         Beneficially Owned      Percent of Class

      Limited Partnership Interests        400                 less than 1%


       Relatives and affiliates of the officers or director of the General
       Partners own an additional twenty Limited Partnership Interests in
       the Registrant.

(c)    The Registrant is not aware of any arrangements, the operation of
       which may result in a change of control of the Registrant.


Item 13.    Certain Relationships and Related Transactions

(a &
b)     See Note 1 of Notes to Financial Statements for information relating
       to the Partnership Agreement and the allocation of distributions and
       profits and losses.

       See Note 3 of Notes to Financial Statements for additional
       information relating to transactions with affiliates.

(c)    No management person is indebted to the Registrant.

(d)    The Registrant has no outstanding agreements with any promoters.

<PAGE>
                                    PART IV




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



(a) (1&2)   See Index to Financial Statements on page F-1 of this Form 10-K.

     (3)    Exhibits:

          (3)    The Amended and Restated Agreement and Certificate of
                 Limited Partnership set forth as Exhibit 3 to Amendment No.
                 1 to the Registrant's Registration Statement Form S-11 dated
                 May 14, 1985 and to Registrant's Registration Statements
                 dated September 23, 1985, and January 29, 1986 (Registration
                 No. 2-95752, No. 33-357, and No. 33-2977, respectively) are
                 incorporated herein by reference.

          (4)    Form of Subscription Agreement previously filed as
                 Exhibit 4.1 to Amendment No. 1 to the Registrant's
                 Registration Statement on Form S-11 dated May 14, 1985 and
                 to Registrant's Registration Statement on Form S-11 dated
                 January 29, 1986 (Registration No. 2-95752, and No. 33-2977,
                 respectively) and Form of Confirmation regarding Interests
                 in the Registrant set forth as Exhibit 4.2 to the
                 Registrant's Report on Form 10-Q for the quarter ended June
                 30, 1992 (Commission File No. 0-14340) are incorporated
                 herein by reference.

          (27)   Financial Data Schedule of the Registrant for the year ended
                 December 31, 1996 is attached hereto.


(b)  Reports on Form 8-K.

     No reports on Form 8-K were filed by the Registrant during the quarter
     ended December 31, 1996.


(c)  Exhibits:  See Item 14 (a)(3) above.


(d)  Financial Statement Schedules:  See Index to Financial Statements on Page
     F-1 of this Form 10-K.


<PAGE>
SIGNATURES

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

                                       BALCOR/COLONIAL STORAGE INCOME FUND -85

                                       By:  /s/ James N. Danford
                                       James N. Danford
                                       Secretary/Treasurer (Principal
                                       Financial and Accounting
                                       Officer) of Colonial Storage 85,
                                       Inc., a General Partner
Date:     March 31, 1997


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




        Signature                      Title                         Date


/s/ Thomas E. Meador    President and Chief Executive Officer
Thomas E. Meador        (Principal Executive Officer) of Balcor
                        Storage Partners-85, a General Partner   March 31, 1997


/s/ Jayne A. Kosik      Managing Director and Chief Accounting
Jayne A. Kosik          and Financial Officer (Principal
                        Accounting Officer) of Balcor Storage
                        Partners-85, a General Partner           March 31, 1997


/s/ James R. Pruett     President and Director of Colonial
James R. Pruett         Storage 85 Inc., a General Partner       March 31, 1997


/s/ James N. Danford    Secretary/Treasurer (Principal Financial
James N. Danford        and Accounting Officer) of Colonial
                        Storage 85, Inc., a General Partner      March 31, 1996

<PAGE>
                        Index to Financial Statements


                                                                        Pages

Independent Auditors' Report                                             F-2

Financial Statements:

Balance Sheets as of December 31, 1996 and 1995                          F-3

Statements of Income, years ended December 31, 1996, 1995 and 1994       F-4

Statements of Partners' Capital, years ended December 31, 1996, 1995
and 1994                                                                 F-5

Statements of Cash Flows, years ended December 31, 1996, 1995 and
1994                                                                     F-6

Notes to Financial Statements                                       F-7 to F-10


Schedules are omitted for the reason that they are inapplicable or
equivalent information has been included elsewhere herein.

<PAGE>
Financial Statements and Supplementary Data


                         INDEPENDENT AUDITORS' REPORT


The Partners
Balcor/Colonial Storage Income Fund - 85:

We have audited the financial statements of Balcor/Colonial Storage Income
Fund - 85 (an Illinois Limited Partnership) as listed in the accompanying
index.  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 conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Balcor/Colonial Storage
Income Fund - 85 as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted
accounting principles.



                                           KPMG Peat Marwick LLP


Fort Worth, Texas
March 11, 1997


<PAGE>
               Balcor/Colonial Storage Income Fund - 85
                  (An Illinois Limited Partnership)

                          Balance Sheets

                    December 31, 1996 and 1995

                                                         1996           1995
Assets
Cash and cash equivalents                          $  4,187,645      3,643,915
Accounts receivable, net of allowance for doubtful
  accounts of $19,068 and $18,321 in 1996 and 1995,
  respectively                                          122,698        148,300
Mortgage notes receivable (note 2)                        -          1,649,953
Other                                                   124,293        120,545
                                                      4,434,636      5,562,713
Mini-warehouse facilities:
  Land                                               14,193,743     14,193,743
  Buildings                                          47,634,567     47,445,774
  Furniture, fixtures and equipment                   1,127,156      1,060,425
                                                     62,955,466     62,699,942
  Less accumulated depreciation                      21,300,132     19,271,250
    Mini-warehouse facilities, net of accumulated
     depreciation                                    41,655,334     43,428,692
                                                   $ 46,089,970     48,991,405
Liabilities and Partners' Capital
Accounts payable                                   $      -              1,503
Due to affiliates (note 3)                              902,658        825,200
Accrued real estate taxes                               302,408        372,527
Other accrued liabilities                                48,932         81,290
Security deposits                                        43,333         54,741
Deferred income                                         340,078        296,468
  Total liabilities                                   1,637,409      1,631,729
Partners' capital (note 4)(276,918 Limited
  Partnership Interests issued and outstanding)      44,452,561     47,359,676
                                                   $ 46,089,970     48,991,405




















See accompanying notes to financial statements.
<PAGE>


                 Balcor/Colonial Storage Income Fund - 85
                    (An Illinois Limited Partnership)

                          Statements of Income

               Years ended December 31, 1996, 1995 and 1994

                                            1996          1995          1994
Income:
   Rental                              $ 10,519,053    10,316,881    10,067,226
   Interest on short-term investments       132,236       172,464       126,665
   Interest from mortgage notes
      receivable                            115,826       158,451       167,204
                                         10,767,115    10,647,796    10,361,095
Expenses:
   Property operating                     2,832,574     2,929,624     2,759,069
   Depreciation                           2,028,882     2,003,642     1,967,052
   Property management fees (note 3)        623,983       532,242       297,186
   Incentive management fees (note 3)       480,398       477,021         -
   General and administrative (note 3)      757,485       580,879       521,721
                                          6,723,322     6,523,408     5,545,028
         Net income                    $  4,043,793     4,124,388     4,816,067

Limited Partners' share of net income
($14.46, $14.74 and $17.22 per
 Interest for 1996, 1995 and 1994,
 respectively)                         $  4,003,355     4,083,144     4,767,906
General Partners' share of net income        40,438        41,244        48,161
                                       $  4,043,793     4,124,388     4,816,067
























See accompanying notes to financial statements.
<PAGE>


                      Balcor/Colonial Storage Income Fund - 85
                          (An Illinois Limited Partnership)

                           Statements of Partners' Capital

                    Years ended December 31, 1996, 1995 and 1994

                                    Limited          General
                                    Partners         Partners        Total

Balance at December 31, 1993      $ 49,918,204         272,806      50,191,010

Net income                           4,767,906          48,161       4,816,067

Cash distributions ($18.67 per
   Limited Partner Interest)        (5,170,064)           -         (5,170,064)

Balance at December 31, 1994        49,516,046         320,967      49,837,013

Net income                           4,083,144          41,244       4,124,388

Cash distributions ($23.84 per
   Limited Partner Interest)        (6,601,725)          -          (6,601,725)

Balance at December 31, 1995        46,997,465         362,211      47,359,676

Net income                           4,003,355          40,438       4,043,793

Cash distributions ($24.85 per
   Limited Partner Interest)        (6,882,762)          -          (6,882,762)

Cash distribution to
   General Partners                      -             (68,146)        (68,146)
Balance at December 31, 1996      $ 44,118,058         334,503      44,452,561

























See accompanying notes to financial statements.
<PAGE>

                       Balcor/Colonial Storage Income Fund - 85
                            (An Illinois Limited Partnership)

                                 Statements of Cash Flows

                     Years ended December 31, 1996, 1995 and 1994

                                            1996         1995          1994
Operating activities:
   Net income                          $ 4,043,793     4,124,388     4,816,067
   Adjustments to reconcile net income
     to net cash provided by
     operating activities:
     Depreciation                        2,028,882     2,003,642     1,967,052
     Net change in:
        Net accounts receivable             25,602       (37,310)       17,867
        Other assets                        (3,748)       32,367        24,414
        Accounts payable                    (1,503)       (2,534)        4,037
        Due to affiliates                   77,458       634,342        75,567
        Accrued real estate taxes          (70,119)       70,519        (7,312)
        Other accrued liabilities          (32,358)       27,096        (3,170)
        Security deposits                  (11,408)      (21,746)      (54,669)
        Deferred income                     43,610        (3,340)       (1,813)
      Net cash provided by
        operating activities             6,100,209     6,827,424     6,838,040

Investing activities:
   Additions to mini-warehouse
      facilities, net                     (255,524)     (622,402)     (726,275)
   Collection of principal payments on
      mortgage notes receivable
      (note 2)                           1,649,953        26,132       237,902
      Net cash provided by (used in)
       investing activities              1,394,429      (596,270)     (488,373)

Financing activities:
   Distributions to Limited Partners    (6,882,762)   (6,601,725)   (5,170,064)
   Distribution to General Partners        (68,146)        -             -
      Net cash used in financing
       activities                       (6,950,908)   (6,601,725)   (5,170,064)
       Net change in cash and cash
         equivalents                       543,730      (370,571)    1,179,603
Cash and cash equivalents at
   beginning of year                     3,643,915     4,014,486     2,834,883
Cash and cash equivalents at
   end of year                         $ 4,187,645     3,643,915     4,014,486







See accompanying notes to financial statements
<PAGE>

                 Balcor/Colonial Storage Income Fund - 85
                    (An Illinois Limited Partnership)

                      Notes to Financial Statements

                    December 31, 1996, 1995 and 1994

(1)     Summary of Significant Accounting Policies

       (a)   Description of Partnership

             Balcor/Colonial Storage Income Fund - 85 (the "Partnership") is a
             limited partnership formed in September 1983.  The Partnership
             Agreement provides that Balcor Storage Partners-85 (an Illinois
             general partnership) and Colonial Storage 85, Inc. (a Texas
             corporation) are the General Partners of the Partnership and
             provides for the admission of Limited Partners through the sale of
             up to 320,000 Limited Partnership Interests at $250 per Interest,
             of which 276,918 ($69,229,500) Limited Partnership Interests were
             sold prior to the termination of the offering.

             The principal purpose of the Partnership is to acquire, own,
             maintain, operate, lease, and hold for capital appreciation and
             current income, existing mini-warehouse facilities offering
             storage space for business and personal use.  The Partnership
             acquired sixty-nine mini-warehouse facilities from affiliates in
             1985 and four mini-warehouse facilities from non-affiliated
             entities in 1986.  The Partnership sold four mini-warehouse
             facilities prior to 1996.  The remaining properties are located in
             various markets within the United States.

      (b)    Allocation of Net Income and Profits

             The Partnership Agreement provides that net income (after a
             deduction for any incentive management fees) from operations shall
             be allocated 99% and 1% to the Limited Partners and General
             Partners, respectively.

             Additionally, when a property is sold or otherwise disposed of,
             the General Partners will be allocated profits equal to the
             greater of 1% of total profits or the amount of Net Cash Proceeds
             distributable to the General Partners from the sale (in excess of
             subordinated Net Cash Receipts, note 1(c)).  The balance of the
             profits will be allocated to the Limited Partners.

      (c)    Cash Distributions

             Net Cash Receipts available for distribution from operations shall
             be distributed 92% to the Limited Partners and 8% to the General
             Partners, 7% as their partnership incentive  management fee and 1%
             as their distributable share from operations.  Distributions from
             operations to the General Partners are currently subordinated to
             receipt by the Limited Partners of a return equal to 10% on
             Adjusted Original Capital.

             Net Cash Proceeds from sales or refinancings will be distributed
             first to the Limited Partners until they have received any
             deficiencies in the aforementioned minimum cash distributions from
             operations.  Distributions to the Limited Partners will then be
<PAGE>
                     Balcor/Colonial Storage Income Fund - 85
                         (An Illinois Limited Partnership)

                           Notes to Financial Statements


             made in an amount equal to total Original Capital plus any
             deficiency in a cumulative distribution of 12% of Adjusted
             Original Capital for the period commencing approximately one year
             following the termination of the offering.  If the receipt of any
             portion of the General Partners' 8% share of Net Cash Receipts
             from operations (approximately $3,748,000 has been deferred as of
             December 31, 1996) or the property management fee (note 3) has
             been deferred as a result of subordination, thereafter, available
             Net Cash Proceeds will be distributed to the General Partners to
             the extent of such deferred amounts.  Thereafter, remaining Net
             Cash Proceeds will be distributed 85% to the Limited Partners and
             15% to the General Partners.

      (d)    Cash and Cash Equivalents

             The Partnership considers all highly liquid investments with
             maturities at the date of purchase of three months or less to be
             cash equivalents.


      (e)    Mini-Warehouse Facilities

             Costs associated with the appraisal and acquisition of mini-
             warehouse facilities are capitalized.

             The buildings, furniture, fixtures, and equipment are depreciated
             using the straight-line method over their estimated useful lives
             ranging from 7 to 25 years.

             Maintenance and repairs are charged to expense when incurred.
             Expenditures for improvements are charged to the related asset
             account.

             The Partnership adopted the provisions of SFAS No. 121,
             "Accounting for the Impairment of Long-Lived Assets and for Long-
             Lived Assets to Be Disposed Of", on January 1, 1996.  This
             Statement requires that long-lived assets and certain identifiable
             intangibles be reviewed for impairment whenever events or changes
             in circumstances indicate that the carrying amount of an asset may
             not be recoverable.  Recoverability of assets to be held and used
             is measured by a comparison of the carrying amount of an asset to
             future net cash flows expected to be generated by the asset.  If
             such assets are considered to be impaired, the impairment to be
             recognized is measured by the amount by which the carrying amount
             of the assets exceed the fair value of the assets.  Assets to be
             disposed of are reported at the lower of the carrying amount or
             fair value less costs to sell.  Adoption of this Statement had no
             impact on the Partnership's financial position, results of
             operations, or liquidity.
<PAGE>
                     Balcor/Colonial Storage Income Fund - 85
                         (An Illinois Limited Partnership)

                           Notes to Financial Statements


             When properties are disposed of, the related costs and accumulated
             depreciation will be removed from the respective accounts, and any
             gain or loss on disposition will be recognized in accordance with
             generally accepted accounting principles.


      (f)    Income Taxes

             Taxable income or loss of the Partnership is includable in the
             income tax returns of the individual partners; therefore, no
             provision for income taxes has been made in the accompanying
             financial statements.

             The tax bases of the Partnership's assets exceeded the amounts
             recorded in the Financial Statements at December 31, 1996 and
             1995, by $6,479,625 and $6,374,366, respectively.

      (g)    Use of Estimates

             Management of the Partnership has made a number of estimates and
             assumptions relating to the reporting of assets and liabilities to
             prepare these financial statements in conformity with generally
             accepted accounting principles.  Actual results could differ from
             those estimates.

       (h)     Fair Value of Financial Instruments

               In accordance with the reporting requirements of Statement on
               Financial Accounting Standards No. 107, "Disclosures about Fair
               Value of Financial Instruments," the Partnership calculates the
               fair value of its financial instruments and includes this
               additional information in the notes to the financial statements
               when the fair value is different than the carrying value of
               those financial instruments.  When the fair value reasonably
               approximates the carrying value, no additional disclosure is
               made.


(2)     Mortgage Notes Receivable

        The Partnership had three notes resulting from the sale of mini-
        warehouse facilities in 1993, 1990 and 1989.  Two notes bore interest
        rates of 10% per annum with monthly principal and interest payments
        based on a 25-year amortization schedule and final balloon payments in
        1996 and 1998, respectively.  The other note bore an interest rate of
        8.5% per annum with monthly principal and interest payments based on a
        25-year amortization schedule and a final balloon payment in 1998.  In
        September, 1996 the notes were repaid in full in the amount of
        $1,628,650.
<PAGE>
                     Balcor/Colonial Storage Income Fund - 85
                         (An Illinois Limited Partnership)

                           Notes to Financial Statements


(3)     Transactions With Affiliates

        The Partnership has an agreement with Colonial Storage Management 85,
        Inc., an affiliate of Colonial Storage 85, Inc., a General Partner, to
        supervise and direct the business and affairs associated with the mini-
        warehouse facilities for a fee of 6% of the gross revenues of the
        facilities.  One-half of this property management fee is subordinated
        to receipt by the Limited Partners of a Special Distribution of 8%
        during the first twelve month period after termination of the offering,
        9% during the second twelve month period and 10% during each twelve
        month period thereafter.  Any deferred portion of the property
        management fee will be paid only from distributed Net Cash Proceeds.
        As of December 31, 1996 property management fees of $1,991,890 were
        deferred.

        The Limited Partners received distributions equal to 10% of Adjusted
        Original Capital for the period April 1995 through March 1996 and for
        the period April 1996 through March 1997.  Consequently, in January
        1997 and February 1996, the Partnership paid Colonial Storage
        Management 85, Inc. $234,057 and $228,837, respectively,  representing
        the amount necessary to meet the 6% property management fee.  For the
        same periods mentioned above the General Partners received $549,026
        ($480,398 as incentive management fees and $68,628 as their
        distributive share of Net Cash Receipts) in January 1997, and $545,167
        ($477,021 as incentive management fees and $68,146 as their
        distributive share of Net Cash Receipts) in February 1996.  Incentive
        management fees have been accrued at December 31, 1996 and 1995, while
        the General Partners distributive share of Net Cash Receipts are
        deducted from Partners' Capital when paid.

        In connection with the sales of the mini-warehouse facilities made to
        date, the General Partners may each receive a real estate commission of
        up to $36,975 which have been subordinated in accordance with the
        Partnership Agreement.  Certain general and administrative expenses are
        reimbursed to affiliates of the General Partners to cover
        administrative requirements of the Partnership.


<PAGE>
                   Balcor/Colonial Storage Income Fund - 85
                      (An Illinois Limited Partnership)

                        Notes to Financial Statements

        Commissions, fees, and expenses paid and payable by the Partnership to
        affiliates for the years ended December 31, 1996, 1995 and 1994, are:


                       1996                  1995                  1994

                  Paid     Payable      Paid     Payable      Paid      Payable

Property
 management
 fees          $ 615,969   259,955     354,727    251,941    246,188    74,426
General and
 administrative
 expenses      $ 419,375    88,395     392,417     22,328    343,434    42,522
Real estate
 commissions   $   -        73,910       -         73,910       -       73,910
Incentive
 management
 fees          $ 477,021   480,398       -        477,021      -         -

(4)     Subsequent Event

        In January 1997, the Partnership paid $1,122,461 ($4.05 per Interest)
        to the Limited Partners representing the quarterly Net Cash Receipts
        distribution for the fourth quarter of 1996 and $1,256,265 ($4.54 per
        Interest) representing the distribution of Available Net Cash Proceeds
        from the receipt of the balance of mortgage notes, $647,105 ($2.34 per
        Interest) of which is considered a return of capital.