FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER
                              SECTION 13 OR 15(d)
                  (As last amended by 34-31905, eff. 4/26/93)

                                  FORM 10-KSB

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934 [No Fee Required]

                  For the fiscal year ended December 31, 1996
                                      or
[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934 [No Fee Required]
                 For the transition period.........to.........

                         Commission file number 0-14530

                       DAVIDSON INCOME REAL ESTATE, L.P.
                 (Name of small business issuer in its charter)

      Delaware                                                62-1242144
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                             Identification No.)

One Insignia Financial Plaza, P.O. Box 1089
    Greenville, South Carolina                                   29602
(Address of principal executive offices)                       (Zip Code)

                    Issuer's telephone number (864) 239-1000

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

                                      None

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

                     Units of Limited Partnership Interest
                                (Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 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 there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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]

State issuer's revenues for its most recent fiscal year.  $ 4,709,000

State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests, as of December 31, 1996. Market Value information for the
Registrant's partnership interests is not available.  Should a trading market
develop for these interest, it is the Managing General Partner's belief that
such trading would not exceed $25,000,000.

                     DOCUMENTS INCORPORATED BY REFERENCE
1.  Portions of the Prospectus of Registrant dated July 26, 1985 (included in
Registration Statement, No. 2-97539,  of Registrant) are incorporated by
reference into Parts I and III.


                                     PART I

Item 1.  Description of Business

Davidson Income Real Estate, L.P. (the "Registrant" or "Partnership") is a
Delaware limited partnership organized in April 1985.  The general partners of
the Registrant are Davidson Diversified Properties, Inc., a Tennessee
corporation ("Managing General Partner"), David W. Talley and James T. Gunn
(collectively, "Individual General Partners") (collectively, the "General
Partners").

The offering of the Registrant's limited partnership units ("Units") commenced
on July 26, 1985, and terminated on May 30, 1986.  The Registrant received gross
proceeds from the offering of $26,776,000 and net proceeds of $25,700,160.

The Registrant's primary business is to acquire, operate and hold existing,
income-producing residential and commercial real estate properties.  Industry
segment information is not relevant.  The Registrant does not engage in any
foreign operations nor derive any income from foreign sources.

All of the net proceeds of the offering were invested in the Registrant's four
properties and in a 17.5% joint venture interest which owns one property.  See
"Item 2. Description of Properties," below for a description of the Registrant's
properties.

The Registrant receives income from its properties and is responsible for
operating expenses, capital improvements and debt service payments under
mortgage obligations secured by the properties.  The Registrant financed its
properties primarily through non-recourse debt.  Therefore, in the event of
default, the lender can generally only look to the subject property for recovery
of amounts due.

Both the income and expenses of operating the properties owned by the Registrant
are subject to factors outside of the Registrant's control, such as oversupply
of similar properties resulting from overbuilding, increases in unemployment or
population shifts, reduced availability of permanent mortgage funds, changes in
zoning laws, or changes in patterns or needs of users.  In addition, there are
risks inherent in owning and operating residential properties because such
properties are susceptible to the impact of economic and other conditions
outside of the control of the Registrant.

A further description of the Partnership's business is included in "Management's
Discussion and Analysis or Plan of Operation" included in "Item 6" of this form
10-KSB.

The Registrant has no employees.  Management and administrative services are
performed by the Managing General Partner and by Insignia Residential Group,
L.P., an affiliate of Insignia Financial Group, Inc. ("Insignia").  Effective
January 1, 1992, affiliates of Insignia began to provide partnership
administration, asset management, and investor services for the Partnership.
See "Item 12. Certain Relationships and Related Transactions" for an enumeration
of the affiliates and the compensation and reimbursement received from the
Registrant during 1996 and 1995.

The real estate business in which the Partnership is engaged is highly
competitive and the Partnership is not a significant factor in this industry.
The Registrant's real property investments are subject to competition from
similar types of properties in the vicinities in which they are located.  In
addition, various limited partnerships have been formed by related parties to
engage in business which may be competitive with the Registrant.

Item 2.  Description of Properties

The following tables set forth the Registrant's investments in properties:

                            Date of
Property                    Purchase        Type of Ownership        Use

Northsprings Apartments     11/13/85     Fee ownership subject     Apartment
Atlanta, Georgia                         to first and second       120 units
                                         mortgages.

Lakeside Apartments         05/20/86     Fee ownership subject     Apartment
Charlotte, North Carolina                to first mortgage.        216 units

Bexley House Apartments     09/30/86     Fee ownership subject     Apartment
Columbus, Ohio                           to first and second       64 units
                                         mortgages.

Covington Pointe            03/10/87     Fee ownership subject     Apartment
 Apartments                              to first and second       180 units
Dallas, Texas                            mortgages.

Brighton Crest Apartments   Phase I      Registrant has a 17.5%    Apartment
Marietta, Georgia           06/30/87     interest in the Joint     320 units
                                         Venture which has fee
                            Phase II     ownership subject to
                            12/15/87     first and second
                                         mortgages.

Schedule of Properties:
(dollar amounts in thousands)


                    Gross
                  Carrying   Accumulated                  Federal
Property            Value   Depreciation   Rate   Method Tax Basis

Northsprings      $ 4,624      $1,974    5-25 yrs   S/L   $ 3,777
Lakeside            6,367       2,632    5-25 yrs   S/L     4,960
Bexley House        3,601       1,383    5-25 yrs   S/L     2,876
Covington Pointe    9,321       3,266    5-25 yrs   S/L     6,902

                  $23,913      $9,255                     $18,515



See "Note A" to the financial statements included in "Item 7" for a description
of the Partnership's depreciation policy.


Schedule of Mortgages:
(dollar amounts in thousands)



                   Principal                                 Principal
                  Balance At   Stated                         Balance
                 December 31, Interest   Period    Maturity    Due At
Property             1996       Rate    Amortized    Date     Maturity

Northsprings
 1st mortgage     $ 1,912       7.83%  28.67 yrs   10/15/03    $1,701
 2nd mortgage          61       7.83%     (1)      10/15/03        61

Lakeside
 1st mortgage       4,100       7.33%     (1)      11/01/03     4,100

Bexley House
 1st mortgage       1,330       7.60%  21.40 yrs   11/15/02     1,052
 2nd mortgage          45       7.60%     (1)      11/15/02        45

Covington Pointe
 1st mortgage       4,685       7.83%  28.67 yrs   10/15/03     4,169
 2nd mortgage         150       7.83%     (1)      10/15/03       150

    Total          12,283

Less unamortized
  discounts          (171)

                  $12,112


(1) Interest only payments.

Average annual rental rate and occupancy for 1996 and 1995 for each property:

                        Average Annual             Average
                    Rental Rates Per Unit         Occupancy

Property              1996         1995        1996       1995

Northsprings       $ 9,008       $8,331         96%        96%
Lakeside             6,021        5,711         95%        97%
Bexley House        11,076       11,113         97%        91%
Covington Pointe     9,192        9,084         92%        91%


The Managing General Partner attributes the increase in occupancy at Bexley 
House Apartments to property improvements and an increase in services provided 
to the tenants.

As noted under "Item 1. Description of Business," the real estate industry is 
highly competitive.  All of the properties of the Partnership are subject to
competition from other residential apartment complexes in the area.  The
Managing General Partner believes that all of the properties are adequately
insured.  The multi-family residential properties' lease terms are for one year
or less.  No residential tenant leases 10% or more of the available rental
space.

Real estate taxes and rates in 1996 for each property were (in thousands):

                                    1996      1996
                                  Billing     Rate

Northsprings                       $ 70       4.03
Lakeside                             81       1.37
Bexley House                         85       8.12
Covington Pointe                    211       2.59


Item 3.  Legal Proceedings

The Registrant is unaware of any pending or outstanding litigation that is not 
of a routine nature.  The Managing General Partner of the Registrant believes
that all such matters will be resolved without a material adverse effect upon
the Partnership's financial condition, results of operations, or liquidity.


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

During the fourth quarter of 1996, no matter was submitted to a vote of security
holders through the solicitation of proxies or otherwise.


                                    PART II


Item 5. Market for Partnership Equity and Related Partner Matters

There is no established market for the Units and it is not anticipated that any
will occur in the foreseeable future.  As of December 31, 1996, there are 3,123
holders of record owning an aggregate of 26,776 units.  No public trading has
developed for the Units, and it is not anticipated that such a market will
develop in the future. Distributions of approximately $480,000 were made in 1996
while distributions of approximately $601,000 were made during 1995.  Future
distributions will depend on the levels of cash generated from operations,
refinancings, property sales and the availability of cash reserves.

Pursuant to the terms of the Partnership Agreement, there are restrictions on
the ability of the Limited Partners to transfer their Units.  In all cases, the
General Partners must consent to any transfer.

The Revenue Act of 1987 contained provisions which have an adverse impact on
investors in "publicly traded partnerships."  Accordingly, the General Partners
have established a policy of imposing limited restrictions on the
transferability of the Units in secondary market transactions.  Implementation
of this policy should prevent a public trading market from developing and may
impact the ability of an investor to liquidate his investment quickly.  It is
expected that such policy will remain in effect until such time, if ever, as
further clarification of the Revenue Act of 1987 may permit the Registrant to
lessen the scope of the restrictions.


Item 6.  Management's Discussion and Analysis or Plan of Operation

Results of Operations

The Partnership's net income for the year ended December 31, 1996, was
approximately $42,000 compared to a net loss of approximately $216,000 for the
corresponding period of 1995.  The increase in net income is primarily
attributable to increased rental income as a result of monthly rental rate
increases at Northsprings, Lakeside and Covington and increases in occupancy at
Bexley House, and Covington Pointe.  Also contributing to the increase in net
income was a decrease in maintenance expense and loss on disposal of property.
Maintenance expense decreased as a result of major landscaping projects
completed at Lakeside and Northsprings Apartments in 1995.  Additionally,
maintenance expense decreased as a result of an asbestos abatement project
completed at Northsprings in 1995.  Also, an exterior painting project was
completed at Bexley House in 1995. Included in maintenance expense in 1996 is
approximately $78,000 of major repairs and maintenance comprised primarily of
major landscaping, parking lot repairs and exterior building repairs.  Loss on
the disposal of property decreased as a result of the completion of roof
replacements at Northsprings and Lakeside Apartments in 1995.

The Partnership owns 17.5% of Sterling Crest Joint Venture.  Equity in the
income of the joint venture increased as a result of an increase in the net
income of Sterling Crest Joint Venture's investment property, Brighton Crest.
The increase in net income was due to an increase in rental rates and an
increase in corporate unit income which stemmed from additional rents to patrons
of the Olympic games.  Operating expense increased due to higher utilities and
corporate unit expense related to the additional rents.

As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of each of its investment
properties to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting the Partnership from increases in
expense.  As part of this plan, the Managing General Partner attempts to protect
the Partnership from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level.  However, due
to changing market conditions, which can result in the use of rental concessions
and rental reductions to offset softening market conditions, there is no
guarantee that the Managing General Partner will be able to sustain such a plan.

Liquidity and Capital Resources

At December 31, 1996, the Partnership had unrestricted cash of approximately
$655,000 compared to approximately $876,000 at December 31, 1995.  Net cash
provided by operating activities increased as a result of the increase in net
income as discussed above. Offsetting the increase in cash provided by operating
activities was an increase in cash used for accounts payable due to timing of
payments to vendors.  Net cash used in investing activities increased primarily
as a result of an increase in property improvements and replacements, an
increase in deposits to restricted escrows and a decrease in distributions from
the joint venture.  Net cash used in financing activities decreased due to the
refinancing of Lakeside Apartments in 1996, which resulted in net proceeds to
the Partnership, and a decrease in distributions to partners in 1996.

The Partnership has no material capital programs scheduled to be performed in
1997, although certain routine capital expenditures and maintenance expenses
have been budgeted. These capital expenditures and maintenance expenses will be
incurred only if cash is available from operations or is received from the
capital reserve accounts.

On November 13, 1996, the Partnership successfully refinanced Lakeside
Apartments.  The Partnership received $4.1 million in gross proceeds from the
financing.  The mortgage note requires monthly interest only payments at a
stated interest rate of 7.33% and has a balloon payment due November 1, 2003.
The Partnership retired debt of approximately $3,812,000 which had a stated
interest rate of 10.75% and matured on July 1, 1996.  Bridge loans were obtained
until the permanent refinancing was finalized.

The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership.  Such assets are currently
thought to be sufficient for any near-term needs of the Partnership.  The
mortgage indebtedness of approximately $12,112,000, net of discount, is
amortized over varying periods with required balloon payments ranging from
November 2002, to November 2003, at which time the properties will either be
refinanced or sold.  Distributions paid to partners during the years ended
December 31, 1996 and 1995, were approximately $480,000 and $601,000.  Future
cash distributions will depend on the levels of net cash generated from
operations, capital expenditure requirements, property sales and the
availability of cash reserves.


Item 7.  Financial Statements


DAVIDSON INCOME REAL ESTATE LIMITED PARTNERSHIP      

LIST OF CONSOLIDATED FINANCIAL STATEMENTS



    Report of Independent Auditors

    Consolidated Balance Sheet - December 31, 1996

    Consolidated Statements of Operations - Years ended December 31, 1996
        and 1995

     Consolidated Statements of Changes in Partners' Capital (Deficit) - Years
        ended December 31, 1996 and 1995

    Consolidated Statements of Cash Flows - Years ended December 31, 1996
        and 1995

    Notes to Consolidated Financial Statements



                Report of Ernst & Young LLP, Independent Auditors




The Partners
Davidson Income Real Estate, L.P.


We have audited the accompanying consolidated balance sheet of Davidson Income
Real Estate, L.P. (A Limited Partnership) as of December 31, 1996, and the
related consolidated statements of operations, changes in partners' capital
(deficit) and cash flows for each of the two years in the period ended
December 31, 1996.  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 the
Partnership's 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Davidson Income Real Estate, L.P. (A Limited Partnership) as of December 31,
1996, and the consolidated results of its operations and its cash flows for each
of the two years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.



                                                       /s/ERNST & YOUNG LLP

Greenville, South Carolina
February 5, 1997

                DAVIDSON INCOME REAL ESTATE LIMITED PARTNERSHIP

                           CONSOLIDATED BALANCE SHEET

                               December 31, 1996
                        (in thousands, except unit data)


Assets
  Cash and cash equivalents:
     Unrestricted                                                  $   655
     Restricted--tenant security deposits                              101
  Accounts receivable                                                   20
  Escrow for taxes                                                     272
  Restricted escrows                                                   410
  Other assets                                                         375
  Investment properties:
     Land                                         $ 4,120
     Buildings and related personal property       19,793
                                                   23,913
     Less accumulated depreciation                 (9,255)          14,658
  Investment in Joint Venture                                          291

                                                                   $16,782


Liabilities and Partners' Capital (Deficit)
Liabilities
  Accounts payable                                                 $    63
  Tenant security deposits                                             101
  Accrued taxes                                                        297
  Other liabilities                                                     98
  Mortgage notes payable                                            12,112

Partners' Capital (Deficit)
  General partners                                $  (645)
  Limited partners (26,776 units
     issued and outstanding)                        4,756            4,111

                                                                   $16,782

          See Accompanying Notes to Consolidated Financial Statements


                DAVIDSON INCOME REAL ESTATE LIMITED PARTNERSHIP

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                        (in thousands, except unit data)


                                                      Years Ended December 31,
                                                          1996         1995
Revenues:
 Rental income                                         $ 4,459       $ 4,268
 Other income                                              250           239
    Total revenues                                       4,709         4,507

Expenses:
 Operating                                               1,518         1,434
 General and administrative                                234           240
 Maintenance                                               587           657
 Depreciation                                              850           782
 Interest                                                1,084         1,145
 Property taxes                                            472           433
 Loss on disposal of property                               --            89
    Total expenses                                       4,745         4,780

Equity in income of joint venture                           78            57

    Net income (loss)                                  $    42       $  (216)

Net income (loss) allocated to general partners (3%)   $     1       $    (6)
Net income (loss) allocated to limited partners (97%)       41          (210)

                                                       $    42       $  (216)

Net income (loss) per limited partnership unit         $  1.54       $ (7.84)


          See Accompanying Notes to Consolidated Financial Statements


                DAVIDSON INCOME REAL ESTATE LIMITED PARTNERSHIP

       CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
                        (in thousands, except unit data)

                              Limited
                            Partnership  General    Limited
                               Units     Partners  Partners     Total

Original capital
  contributions                26,776     $   1     $26,776    $26,777
Partners' capital (deficit)
  at December 31, 1994         26,776     $(608)    $ 5,974    $ 5,366
Distribution paid
  to partners                               (18)       (583)      (601)
Net loss for the year
  ended December 31, 1995                    (6)       (210)      (216)
Partners' capital (deficit)
  at December 31, 1995         26,776      (632)      5,181      4,549
Distributions paid
  to partners                               (14)       (466)      (480)
Net income for the year
  ended December 31, 1996                     1          41         42
Partners' capital (deficit)
  at December 31, 1996         26,776     $(645)    $ 4,756    $ 4,111


          See Accompanying Notes to Consolidated Financial Statements

                DAVIDSON INCOME REAL ESTATE LIMITED PARTNERSHIP

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (in thousands)


                                                       Years Ended December 31,
                                                          1996         1995
Cash flows from operating activities:
  Net income (loss)                                    $    42      $ (216)
  Adjustments to reconcile net income (loss) to net
   cash provided by operating activities:
    Depreciation                                           850         782
    Amortization of discounts and loan costs                74          80
    Equity in income of joint venture                      (78)        (57)
    Loss on disposition of property                         --          89
    Change in accounts:
      Restricted cash                                        2         (19)
      Accounts receivable                                  (10)         (4)
      Escrow for taxes                                       9          77
      Other assets                                          (3)         --
      Accounts payable                                     (32)        (20)
      Accrued property taxes                                 3         (51)
      Tenant security deposit liabilities                   (1)         16
      Other liabilities                                    (42)        (23)
       Net cash provided by operating activities           814         654

Cash flows from investing activities:
  Property improvements and replacements                  (565)       (374)
  Deposits to restricted escrows                          (213)        (10)
  Receipts from restricted escrows                          62          25
  Distributions from joint venture                         112         175
       Net cash used in investing activities              (604)       (184)

Cash flows from financing activities:
  Payments on mortgage notes payable                      (130)       (140)
  Distributions paid                                      (480)       (601)
  Proceeds from long-term borrowings                     4,100          --
  Repayment of mortgage notes payable                   (3,812)         --
  Loan costs                                              (109)         --
       Net cash used in financing activities              (431)       (741)

Net decrease in cash                                      (221)       (271)

Unrestricted cash and cash equivalents
    at beginning of period                                 876       1,147
Unrestricted cash and cash equivalents
    at end of period                                   $   655      $  876

Supplemental disclosure of cash flow information:
  Cash paid for interest                               $   986      $1,065

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY
Property improvements and replacements

Accounts payable was adjusted approximately $108,000 at December 31, 1995, for
non-cash amounts in connection with property improvements and replacements.

          See Accompanying Notes to Consolidated Financial Statements

                DAVIDSON INCOME REAL ESTATE LIMITED PARTNERSHIP

                   Notes to Consolidated Financial Statements

                               December 31, 1996


Note A - Organization and Significant Accounting Policies

Organization:  Davidson Income Real Estate, L.P. (the "Partnership" or
"Registrant") is a Delaware limited partnership organized in April 1985, to
acquire and operate residential and commercial real estate properties.  The
General Partners of the Registrant are Davidson Diversified Properties, Inc., a
Tennessee corporation ("Managing General Partner"), David W. Talley and James T.
Gunn (collectively, "Individual General Partners") (collectively, the "General
Partners").  The Partnership owns and operates four apartment properties located
in the Mid-West, South and Southeast.

Principles of Consolidation:  The financial statements of the Partnership
include all of the accounts of the Partnership, Bexley House, L.P., and Davidson
IRE Associates, L.P.  The Partnership owns 99.99% of Bexley House, L.P., and
99.99% of Davidson IRE Associates, L.P.  All significant interpartnership
balances have been eliminated.

Use of Estimates:  The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Allocations to Partners:  Net income (loss) of the Partnership and taxable
income (loss) are allocated 97% to the limited partners and 3% to the general
partners. Distributions from distributable cash from operations are allocated
among the limited partners and the general partners in accordance with the
agreement of limited partnership.  Distributions of cash from operations per
limited partnership unit were $17.40 and $21.76 for 1996 and 1995, respectively.
The weighted average number of limited partnership units outstanding for 1996
and 1995 was 26,776 units.

Net income (loss) of the Partnership and taxable income (loss) are allocated 97%
to the limited partners and 3% to the general partners, except for such amounts
which are allocated prior to the Partnership meeting the minimum close
requirements as defined in the partnership agreement.  Distributions of
available cash from operations are allocated 97% to the limited partners and 3%
to the general partners.  Cash from sales or refinancing are allocated 97% to
limited partners and 3% to general partners until the limited partners have
received an amount of cumulative distributions from sales or refinancings that
equal original invested capital plus an amount which, when added to the prior
distributions to limited partners will equal 12% per annum cumulative
noncompounded on Adjusted Invested Capital, as defined in the agreement of
limited partnership.  Thereafter, upon payment to an affiliate of the general
partners certain real estate commissions and incentive fees as described in the
limited partnership agreement, remaining cash from sales or refinancings are
allocated 97% to limited partners and 3% to general partners.  In connection
with the liquidation of the Partnership, cash from sales or refinancings and any
remaining working capital reserves shall be allocated among, and distributed to,
the partners in proportion to, and to the extent of, their positive capital
account balances.

Restricted Escrows

        Capital Improvement Reserves - At the time of the refinancing of
Northsprings in 1993, approximately $163,000 of the proceeds were designated for
"capital improvement escrows" for certain capital improvements.  At December 31,
1996, Northsprings had an unexpended balance of approximately $11,000 for
capital improvements.  Upon completion of scheduled property improvements, any
excess funds will be returned for property operations.

At the time of the refinancing of Bexley House Apartments' mortgage note payable
in 1992, $122,000 of the proceeds were designated for a "capital improvement
escrow" for certain capital improvements.  At December 31, 1996, approximately
$3,000 remained in escrow for 1997 capital improvements of which any excess
funds will be returned for property operations.

At the time of the refinancing of Lakeside Apartments' mortgage note payable in
November 1996, approximately $198,000 of the proceeds were designated for a
"capital improvement escrow" for certain capital improvements.  At December 31,
1996 approximately $203,000 remained in escrow for 1997 capital improvements of
which any excess funds will be returned for property operations.

      Reserve Account - In addition to the Capital Improvement Reserves
established in the various refinancings, general reserve accounts of $48,000,
$72,000 and $64,000 on Northsprings, Covington Pointe and Bexley House,
respectively, were established with the refinancing and financing proceeds for
the properties involved.  These funds were established to cover necessary
repairs and replacements of existing improvements, debt services, out-of-pocket
expenses incurred for ordinary and necessary administrative tasks, and payments
of real property taxes and insurance premiums.  The Partnership was required to
deposit net operating income (as defined in the mortgage notes) from the
properties to the respective reserve accounts until the reserve accounts equaled
$400 per apartment unit or $48,000 for Northsprings and $72,000 for Covington
Pointe and $1,000 per apartment unit or $65,000 for Bexley House.  At December
31, 1996, the account balances were approximately $53,000, $75,000 and $65,000,
respectively, which includes interest earned on these funds.

Escrows for Taxes:  These escrows are held by the Partnership for Bexley House,
Covington Pointe, Northsprings and Lakeside.  All escrow funds are designated
for the payment of real estate taxes.

Present Value Discounts:  Periodically, the Partnership incurs debt at below
market rates for similar debt.  Present value discounts are recorded on the
basis of prevailing market rates and are amortized on an interest method over
the life of the related debt.  The amortization expense is included in interest 
expense.

Investment Properties:  During the fourth quarter of 1995, the Partnership
adopted "FASB Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," which requires impairment
losses to be recorded on long-lived assets used in operations when indicators 
of impairment are present and the undiscounted cash flows estimated to be 
generated by those assets are less than the assets' carrying amount.  The 
impairment loss is measured by comparing the fair value of the asset to its 
carrying amount.  The effect of adoption was not material.

Depreciation:  Depreciation is calculated by the straight-line method over the
estimated lives of the investment properties and related personal property.  For
Federal income tax purposes, the accelerated cost recovery method is used (1)
for real property over 18 years for additions after March 15, 1984, and before
May 9, 1985, and 19 years for additions after May 8, 1985, and before January 1,
1987, and (2) for personal property over 5 years for additions prior to January
1, 1987.  As a result of the Tax Reform Act of 1986, for additions after
December 31, 1986, the modified accelerated cost recovery method is used for
depreciation of (1) real property additions over 27 1/2 years, and (2) personal
property additions over 7 years.

Cash and Cash Equivalents:

        Unrestricted Cash - The Partnership considers unrestricted cash and
certificates of deposit to be cash.  At certain times, the amount of cash
deposited at a bank may exceed the limit on insured deposits.

        Restricted Cash--Tenant Security Deposits - The Partnership requires
security deposits from all apartment lessees for the duration of the lease which
are considered to be restricted cash.  Deposits are refunded when the tenant
vacates the apartment if there has been no damage to the unit.

Loan Costs:  Loan costs of approximately $498,000, less accumulated amortization
of approximately $96,000 are included in other assets and are being amortized on
a straight-line basis over the life of the loans.  The amortization expense is
included in interest expense.  In connection with the refinancing of Lakeside
Apartments in November 1996, an additional $109,000 was capitalized.

Leases:  The Partnership generally leases apartment units for twelve-month terms
or less.  The Partnership recognizes income as earned on leases.  The Managing
General Partner finds it necessary to offer rental concessions during
particularly slow months or in response to heavy competition from other similar
complexes in the area.  During 1995, the properties offered various concessions
including one month free rent and variable move-in allowances.  Concessions are
charged to expense as incurred.

Joint Venture:  The Partnership accounts for its investment in Sterling Crest
Joint Venture using the equity method of accounting.

Advertising:  The Partnership expenses the costs of advertising as incurred.
Advertising expense, included in operating expenses, was approximately $103,000
and $93,000 for the years ended December 31, 1996 and 1995, respectively.

Fair Value:  In 1995, the Partnership implemented "Statement of Financial
Accounting Standards No. 107, Disclosure about Fair Value of Financial
Instruments," which requires disclosure of fair value information about
financial instruments for which it is practicable to estimate that value.  The
carrying amount of the Partnership's cash and cash equivalents approximates fair
value due to short-term maturities.  The Partnership estimates the fair value of
its fixed rate mortgages by discounted cash flow analysis, based on estimated
borrowing rates currently available to the Partnership.

Reclassifications:  Certain reclassifications have been made to the 1995
balances to conform to the 1996 presentation.

Note B - Investment in Joint Venture

The Partnership owns a 17.5% interest in Sterling Crest Joint Venture with
Davidson Growth Plus, L.P., an affiliate of the Managing General Partner which
owns the remaining 82.5% of the joint venture.  In connection with the joint
venture's purchase of Phase I of Brighton Crest Apartments on June 30, 1987, the
Partnership invested approximately $2,727,000 in the joint venture.  The joint
venture purchased Phase II of Brighton Crest Apartments on December 15, 1987.

Summary financial information for Sterling Crest Joint Venture is as follows (in
thousands):

                               December 31,
                                   1996

Total assets                     $ 8,956
Total liabilities                 (6,709)

Total ventures' equity           $ 2,247

                                   1996

Total revenues                   $ 2,611
Total expenses                    (2,166)

                                 $   445

In 1996 and 1995, the Partnership received distributions of approximately
$112,000 and $175,000 respectively, from the Joint Venture.  In 1996 and 1995,
the Partnership recognized equity in the income of the Joint Venture of
approximately $78,000 and $57,000, respectively.

Note C - Mortgage Notes Payable

The principal terms of the mortgage notes payable are as follows (in thousands):


                   Principal    Monthly                     Principal
                   Balance At   Payment   Stated             Balance
                  December 31, Including Interest  Maturity   Due At
Property              1996      Interest   Rate      Date    Maturity

Northsprings
 1st mortgage      $ 1,912       $ 14      7.83%  10/15/03    $1,701
 2nd mortgage           61         --      7.83%  10/15/03        61

Lakeside             4,100         25      7.33%  11/01/03     4,100

Bexley House
 1st mortgage        1,330         12      7.60%  11/15/02     1,052
 2nd mortgage           45         --      7.60%  11/15/02        45

Covington Pointe
 1st mortgage        4,685         35      7.83%  10/15/03     4,169
 2nd mortgage          150          1      7.83%  10/15/03       150

Total               12,283

Less unamortized
discounts             (171)

                   $12,112



The estimated fair values of the Partnership's aggregate debt approximates its
carrying value.  This value represents a general approximation of possible value
and is not necessarily indicative of the amounts the Partnership may pay in
actual market transactions.

The mortgage notes payable are non-recourse and are secured by pledge of the
respective apartment properties and by pledge of revenues from the respective
apartment properties. Certain of the notes require prepayment penalties if
repaid prior to maturity and prohibit resale of the properties subject to
existing indebtedness.

The Partnership exercised interest rate buy-down options reducing the stated
rate from 8.76% to 7.60% for Bexley House and 8.13% to 7.83% for Northsprings
and Covington Pointe.  The fees for the interest rate reductions were
approximately $243,000 and are being amortized as loan discounts using the
interest method over the life of the loans. The discount fees are reflected as a
reduction of the mortgage notes payable and increases the effective rate of the
debt to 8.76% for Bexley House and 8.13% for Northsprings and Covington Pointe.

On November 13, 1996, the Partnership successfully refinanced Lakeside
Apartments.  The Partnership received $4.1 million in gross proceeds from the
financing.  The mortgage note requires monthly interest only payments at a
stated interest rate of 7.33% and has a balloon payment due November 1, 2003.
The Partnership retired debt of approximately $3,812,000 which had a stated
interest rate of 10.75% and matured on July 1, 1996. Bridge loans were obtained
until the permanent refinancing was finalized.

Scheduled principal payments of mortgage notes payable subsequent to December
31, 1996, are as follows (in thousands):


                         1997               $   124
                         1998                   134
                         1999                   144
                         2000                   156
                         2001                   168
                    Thereafter               11,557
                                            $12,283


Note D - Income Taxes

The Partnership has received a ruling from the Internal Revenue Service that it
will be classified as a partnership for Federal income tax purposes.
Accordingly, no provision for income taxes is made in the financial statements
of the Partnership.  Taxable income or loss of the Partnership is reported in
the income tax returns of its partners.

The following is a reconciliation of reported net income (loss) and Federal
taxable loss (in thousands, except unit data):


                                                    1996         1995

Net income (loss) as reported                    $    42      $ (216)
Add (deduct):
 Depreciation differences                             (2)        (57)
 Equity in Joint Venture                             (26)        (38)
 Miscellaneous                                         4          84
 Prepaid rents                                       (53)        (19)

Federal taxable loss                             $   (35)     $ (246)

Federal taxable loss
per limited partnership unit                     $ (1.27)     $(8.90)


The following is a reconciliation between the Partnership's reported amounts 
and Federal tax basis of net assets and liabilities (in thousands):

    Net assets as reported                                    $ 4,111

    Land and buildings                                          3,185

    Accumulated depreciation                                      672

    Syndication                                                 3,809

    Other                                                         873

    Net assets - Federal tax basis                            $12,650



Note E - Transactions with Affiliated Parties

The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities. The Partnership Agreement provides for payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. Property management fees paid to
affiliates of Insignia Financial Group, Inc. during the year ended December 31,
1996 and 1995, are included in operating expenses on the Consolidated Statement
of Operations and are reflected in the following table.  The Managing General
Partner and its affiliates received reimbursements and fees as reflected in the
following table:


                                                         1996      1995

    Property management fees                             $233      $222
    Reimbursement for services of affiliates (1)          153       185



(1) Included in "reimbursements for services of affiliates" for 1996 and 1995,
are approximately $10,000 and $14,000 respectively in reimbursements for
construction oversight costs.

The Partnership insures its properties under a master policy through an agency
and insurer unaffiliated with the Managing General Partner.  An affiliate of the
Managing General Partner acquired, in the acquisition of a business, certain
financial obligations from an insurance agency which was later acquired by the
agent who placed the current year's master policy.  The current agent assumed
the financial obligations to the affiliate of the Managing General Partner who
receives payments on these obligations from the agent.  The amount of the
Partnership's insurance premiums accruing to the benefit of the affiliate of the
Managing General Partner by virtue of the agent's obligations is not
significant.



Note F - Real Estate and Accumulated Depreciation
(in thousands)


                                     Initial Cost
                                    To Partnership
                                                          Cost
                                          Buildings    Capitalized
                                         and Related (Written Down)
                                          Personal    Subsequent to
Description       Encumbrances    Land    Property     Acquisition

Northsprings        $ 1,973      $  736    $ 4,196    $  (308)

Lakeside              4,100       1,259      5,791       (683)

Bexley House          1,375         647      3,067       (113)

Covington Pointe      4,835       1,935      7,041        345

  Totals            $12,283      $4,577    $20,095    $  (759)


(in thousands)

<TABLE>
<CAPTION>
                                       Gross Amount At Which Carried
                                            At December 31, 1996
                       Buildings
                      And Related
                        Personal             Accumulated      Date of       Date     Depreciable
Description    Land     Property     Total   Depreciation   Construction  Acquired   Life-Years
<S>          <C>        <C>       <C>         <C>              <C>        <C>         <C>
Northsprings  $  597     $ 4,027   $  4,624    $  1,974         1969       11/85       5-25

Lakeside       1,046       5,321      6,367       2,632         1980       05/86       5-25
                          
Bexley House     542       3,059      3,601       1,383         1972       09/86       5-25

Covington      1,935       7,386      9,321       3,266         1982       03/87       5-25

Totals        $4,120     $19,793    $23,913    $  9,255
</TABLE>

Reconciliation of "Real Estate and Accumulated Depreciation" (in thousands):

                                                Years Ended December 31,
                                                   1996           1995
Real Estate
Balance at beginning of year                     $23,465        $23,230
     Property improvements                           457            482
     Disposal of property                             (9)          (247)
Balance at End of Year                           $23,913        $23,465

Accumulated Depreciation
Balance at beginning of year                     $ 8,412        $ 7,788
    Additions charged to expense                     850            782
    Disposal of property                              (7)          (158)
Balance at End of Year                           $ 9,255        $ 8,412


The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1996 and 1995, is approximately $27,098,000 and approximately
$26,641,000.  The accumulated depreciation taken for Federal income tax purposes
at December 31, 1996 and 1995, is approximately $8,583,000 and approximately
$7,731,000.

Note G - Commitments

The Partnership Agreement provides for payment of a fee to the Managing General
Partner for managing the affairs of the Partnership.  The fee is 2% of adjusted
cash from operations, as defined in the partnership agreement.  The fee is
payable only after the Partnership has distributed to all limited partners,
adjusted cash from operations in any year equal to 10% of their adjusted
invested capital as defined in the partnership agreement.  No fees were payable
for the years ended December 31, 1996, or December 31, 1995.

Item 8. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosures

    None.

                                      PART III


Item 9. Directors, Executive Officers, Promoters and Control Persons, Compliance
        with Section 16(a) of the Exchange Act

The Registrant does not have any directors or officers.  The Managing General
Partner, Davidson Diversified Properties, Inc., is responsible for the
management and control of substantially all of the Registrant's operations and
has general responsibility and ultimate authority in all matters affecting the
Registrant's business.  The Individual General Partners, in their capacity as
such, did not devote any material amount of business time or attention to the
Registrant's affairs.

The present officers of the Managing General Partner are listed below:


Name                             Age         Position

Carroll D. Vinson                56          President

Robert D. Long, Jr.              29          Controller and Principal
                                             Accounting Officer

William H. Jarrard, Jr.          50          Vice President

John K. Lines                    37          Vice President and Secretary

Kelley M. Buechler               39          Assistant Secretary


Carroll D. Vinson has been President of Davidson Diversified Properties, Inc.
since August of 1994.  Prior to that, from April 1993 to August 1994, Mr. Vinson
was affiliated with Crisp, Hughes & Co. (regional CPA firm) and engaged in
various other investment and consulting activities.  Briefly, in early 1993, Mr.
Vinson served as President and Chief Executive Officer of Angeles Corporation, a
real estate investment firm.  From 1991 to 1993, Mr. Vinson was employed by
Insignia in various capacities including Managing Director-President during
1991.

Robert D. Long, Jr. is Controller and Principal Accounting Officer of Davidson
Diversified Properties, Inc.  Prior to joining Metropolitan Asset Enhancement,
L.P., and subsidiaries, he was an auditor for the State of Tennessee and was
associated with the accounting firm of Harshman Lewis and Associates.

William H. Jarrard, Jr. has been Managing Director - Partnership Administration
of Insignia since January 1991.  Mr. Jarrard served as Managing Director -
Partnership Administration and Asset Management from July 1994 until January
1996.

John K. Lines has been General Counsel and Secretary of Insignia since June
1994.  From May 1993 until June 1994, Mr. Lines was the Assistant General
Counsel and Vice President of Ocwen Financial Corporation in West Palm Beach,
Florida.  From October 1991 until April 1993, Mr. Lines was a Senior Attorney
with Banc One Corporation in Columbus, Ohio.  From May 1984 until October 1991,
Mr. Lines was employed as an Associate Attorney with Squire Sanders & Dempsey in
Columbus, Ohio.

Kelley M. Buechler is Assistant Secretary of Insignia.  During the five years
prior to joining Insignia in 1991, she served in a similar capacity for U.S.
Shelter.

Item 10. Executive Compensation

The Registrant was not required to and did not pay remuneration to officers
and/or directors of the Managing General Partner during 1996 or 1995.  See "Item
12." below and "Note E" of the Notes to the financial statements in Item 7 for a
discussion of compensation and reimbursements paid to the General Partners and
certain affiliates.

Item 11. Security Ownership of Certain Beneficial Owners and Management

As of December 31, 1996, the only person or entity known by the Registrant to be
the beneficial owner of more than 5% of the Units of the Registrant is set forth
below:


                                               Amount and Nature of     Percent
Entity                     Title of Class      Beneficial Ownership    of Class

Hospital Corporation of    Units of Limited        3,000 Units @         11.2%
 America                   Partnership Interest   $1,000/Unit
201 West Main Street
Louisville, KY 40202

As of December 31, 1996, no director or officer of the Managing General Partner
owns, nor do the directors or officers as a whole own more than 1% of the
Registrant's Units. No such director or officer had any right to acquire
beneficial ownership of additional Units of the Registrant.

Item 12. Certain Relationships and Related Transactions

Davidson Diversified Properties, Inc., the Managing General Partner of the
Registrant, is owned by MAE GP Corporation, which is wholly owned by
Metropolitan Asset Enhancement. L.P., an affiliate of Insignia.

Effective January 1, 1992, management and administrative services were assumed
by affiliates of Insignia.  Management fees paid to affiliates of Insignia in
1996 and 1995 were approximately $233,000 and $222,000, respectively.
Reimbursements for services of affiliates was approximately $153,000 and
$185,000 for the years ended December 31, 1996 and 1995, respectively.  These
reimbursements include approximately $10,000 and $14,000 for construction
oversight costs for the years ended December 31, 1996 and 1995, respectively.

The Partnership Agreement provides for the Managing General Partner to receive a
fee for managing the affairs of the Partnership.  The fee is 2% of adjusted cash
from operations, as defined in the partnership agreement.  The fee is payable
only after the Partnership has distributed to all limited partners, adjusted
cash from operations in any year equal to 10% of their adjusted invested capital
as defined in the partnership agreement.  No fees were payable for the years
ended December 31, 1996, or December 31, 1995.


Item 13.       Exhibits and Reports on Form 8-K

(a)       Exhibits:  See Exhibit Index contained herein.

          Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
          report.

(b)       Reports on Form 8-K filed in the fourth quarter of fiscal year 1996:

          None.


                                     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.



                                DAVIDSON INCOME REAL ESTATE, L.P.

                                By:    Davidson Diversified Properties, Inc.,
                                       as Managing General Partner

                                By:    /s/ Carroll D. Vinson
                                       Carroll D. Vinson
                                       President

                                Date:  March 24, 1997



      In accordance with the Exchange Act, this report has been signed below by
the following person on behalf of the Registrant and in the capacities and on
the date indicated.

/s/ Carroll D. Vinson                       President
Carroll D. Vinson



/s/ Robert D. Long, Jr.                     Controller
Robert D. Long, Jr.                         and Principal
                                            Accounting Officer

                                 EXHIBIT INDEX


Exhibit


3      Agreement of Limited Partnership is incorporated by reference to Exhibit
       A to the Prospectus of the Registrant dated July 26, 1985 as filed with
       the Commission pursuant to Rule 424(b) under the Act.

3A     Amendment to Partnership Agreement dated October 1, 1985 is incorporated
       by reference to Exhibit 3A to the Registrant's Annual Report on Form 10-
       K for the fiscal year ended December 31, 1987.

4      Certificate of Limited Partnership dated April 29, 1985 is incorporated
       by reference to Exhibit 4 to the Registrant's Registration Statement on
       Form S-11 dated May 7, 1985.

4A     Certificate of Amendment to Certificate of Limited Partnership dated
       July 16, 1985 is incorporated by reference to Exhibit 4B in Amendment
       No. 1 to Registration Statement No. 2-97539, dated July 24, 1985.

10A    Agent's Agreement dated July 1, 1985 between the Registrant and Harvey
       Freeman & Sons, Inc., is incorporated by reference to Exhibit 10B in
       Amendment No. 1 to Registration Statement No. 2-97539, dated July 24,
       1985.

10B    Agreement Among Agents dated July 1, 1985 by and among Harvey Freeman &
       Sons, Inc., Harvey Freeman & Sons, Inc. of Arkansas, Harvey Freeman &
       Sons, Inc. of Florida, Harvey Freeman & Sons, Inc. of Georgia, Harvey
       Freeman & Sons, Inc. of Indiana, Harvey Freeman & Sons, Inc. of
       Kentucky, Harvey Freeman & Sons, Inc. of Mississippi, Harvey Freeman &
       Sons of Missouri, Inc., Harvey Freeman & Sons, Inc. of North Carolina,
       Harvey Freeman & Sons, Inc. of Ohio and Harvey Freeman & Sons, Inc. of
       South Carolina is incorporated by reference to Exhibit 10C in Amendment
       No. 1 to Registration Statement No. 2-97539, dated July 24, 1985.

10C    Acquisition and Disposition Services Agreement dated July 1, 1985
       between the Registrant and Criswell Freeman Company is incorporated by
       reference to Exhibit 10D in Amendment No. 1 to Registration Statement
       No. 2-97539, dated July 24, 1985.

10D    Contract for Sale of Real Estate for North Springs apartments dated
       October 16, 1985 between James B. Miller, Karina Miller, Dahlis Winn,
       Christine Abrams and William Lichirie, as Tenants in Common and
       Tennessee Trust Company is incorporated by reference to Exhibit 10(a) to
       the Registrant's Current Report on Form 8-K dated November 13, 1985.

10E    Assignment of Contract for Sale of Real Estate for North Springs
       Apartments dated November 12, 1985 between Tennessee Trust Company and
       the Registrant is incorporated by reference to Exhibit 10(b) to the
       Registrant's Current Report on Form 8-K dated November 13, 1985.

10F    Promissory Note dated February 14, 1969 executed by Mt. Pleasant Plaza,
       Inc., a Georgia corporation payable to The Fulton National Bank of
       Atlanta, a corporation having its principal place of business in Fulton
       County, Georgia, is incorporated by reference to Exhibit 10G to the
       Registrant's Annual Report on Form 10-K for the fiscal year ended
       December 31, 1985.

10G    Agreement dated December 24, 1969 between Massachusetts Mutual Life
       Insurance Company, a Massachusetts corporation and Mt. Pleasant Plaza,
       Inc., a corporation of the State of Georgia, is incorporated by
       reference to Exhibit 10H to the Registrant's Annual Report on Form 10-K
       for the fiscal year ended December 31, 1985.

10H    Purchase Agreement for Lakeside Apartments dated April 4, 1986 between
       Lakeside Apartments Venture, a North Carolina general partnership and
       Tennessee Trust Company, a Tennessee corporation, is incorporated by
       reference to Exhibit 10(a) to the Registrant's Current report on Form 8-
       K dated May 20, 1986.

10I    Assignment of Agreement dated May 16, 1986 between Tennessee Trust
       Company, a Tennessee corporation, and the Registrant is incorporated by
       reference to Exhibit 10(b) to the Registrant's Current Report on Form 8-
       K dated May 20, 1986.

10J    Deed of Trust Note dated June 13, 1989 executed by the Registrant
       payable to John Hancock Variable Life Insurance Company relating to
       Lakeside Apartments.

10K    Deed of Trust and Security Agreement dated April 28, 1980 between
       Lakeside Properties, Ltd., a North Carolina limited partnership, Gibson
       L. Smith, Jr., Trustee and Continental Illinois National Bank and Trust
       Company of Chicago is incorporated by reference to Exhibit 10(d) to the
       Registrant's Current Report on Form 80-K dated May 20, 1986.

10L    Contract for Sale of Real Estate for The Bexley House dated July 16,
       1986 between Bexley House, Limited, an Ohio limited partnership and
       Tennessee Trust company is incorporated by reference to Exhibit 10(a) to
       the Registrant's Current Report on Form 8-K dated September 30, 1986.

10M    Reinstatement and Amendment of Contract for Sale of Real Estate for The
       Bexley House dated September 4, 1986 between Bexley House, Limited, an
       Ohio limited partnership and Tennessee Trust Company, a Tennessee
       corporation, is incorporated by reference to Exhibit 10(b) to the
       Registrant's Current Report on Form 8-K dated September 30, 1986.

10N    Amendment to Reinstated and Amended Contract for Sale of Real Estate for
       The Bexley House dated September 19, 1986 between Bexley House, Limited,
       an Ohio limited partnership and Tennessee Trust Company, a Tennessee
       corporation, is incorporated by reference to Exhibit 10(c) to the
       Registrant's Current Report on Form 80K dated September 30, 1986.

10O    Assignment of Contract for Sale of Real Estate dated September 30, 1986
       between Tennessee Trust company and the Registrant is incorporated by
       reference to Exhibit 10(d) to the Registrant's Current Report on Form 8-
       K dated September 30, 1986.

10P    Limited Warranty Deed dated September 28, 1986 between Bexley House,
       Ltd., an Ohio limited partnership and the Registrant is incorporated by
       reference to Exhibit 10(e) to the Registrant's Current Report on Form 8-
       K dated September 30, 1986.

10Q    Contract for Sale of Real Estate for Covington Pointe Apartments dated
       January 20, 1987 between F.G.M.C. Investment Corp., a Texas corporation
       Tennessee Trust Company, a Tennessee corporation, is incorporated by
       reference to Exhibit 10(a) to the Registrant's Current Report on Form 8-
       K dated March 10, 1987.

10R    Amendment to Contract for Purchase of Real Estate for Covington Pointe
       Apartments dated January 23, 1987 between F.G.M.C. Investment Corp., a
       Texas corporation Tennessee Trust Company, a Tennessee corporation, is
       incorporated by reference to Exhibit 10(b) to the Registrant's Current
       Report on Form 8-K dated March 10, 1987.

10S    Assignment of Contract for Purchase of Real Estate for Covington Pointe
       Apartments dated March 2, 1987 between Tennessee Trust Company and the
       Registrant is incorporated by reference to Exhibit 10(c) to the
       Registrant's Current Report on Form 8-K dated March 10,1987.

10T    Contract for Purchase of Real Estate for Phase I of Sterling Crest
       Apartments dated March 10, 1987 between Sterling Crest Development
       Partners, Ltd., a Georgia limited partnership, and Tennessee Trust
       Company, a Tennessee corporation, is incorporated by reference to
       Exhibit 10(d) to the Registrant's Current Report on Form 8-K dated
       March 10, 1987.

10U    Mortgage Note dated March 23, 1987 executed by the Registrant payable to
       BancOhio National Bank, relating to The Bexley House, is incorporated by
       reference to Exhibit a(1) to the Registrant's Quarterly Report on Form
       10-Q for the quarter ended March 31, 1987.

10V    Open-End Mortgage, Assignment of Rents and Security Agreement dated
       March 23, 1987 executed by the Registrant in favor of BancOhio National
       Bank relating to The Bexley House, is incorporated by reference to
       Exhibit a(2) to the Registrant's Quarterly Report on Form 10-Q for the
       quarter ended March 31, 1987.

10W    Mortgage Note dated March 23, 1987 executed by the Registrant payable to
       BancOhio National Bank, relating to The Bexley House, is incorporated by
       reference to Exhibit a(3) to the Registrant's Quarterly Report on Form
       10-Q for the quarter ended March 31, 1987.

10X    Open-End Mortgage, Assignment of Rents and Security Agreement dated
       March 23, 1987 executed by the Registrant in favor of BancOhio National
       Bank relating to The Bexley House, is incorporated by reference to
       Exhibit a(4) to the Registrant's Quarterly Report on Form 10-Q for the
       quarter ended March 31, 1987.

10Y    Sterling Crest Joint Venture Agreement dated June 29, 1987 between the
       Registrant and Freeman Georgia Ventures, Inc. is incorporated by
       reference to Exhibit 10(b) to the Registrant's Current Report on Form 8-
       K dated June 30, 1987.

10Z    Assignment of Contract for Purchase of Real Estate for Phase I of
       Sterling Crest Apartments dated June 29, 1987 is incorporated by
       reference to Exhibit 10(c) to the Registrant's Current Report on Form 8-
       K dated June 30, 1987.

10AA   Warranty Deed dated June 30, 1987 between Sterling Crest Development
       Partners, Ltd. and Sterling Crest Joint Venture, is incorporated by
       reference to Exhibit 10(d) to the Registrant's Current Report on Form 8-
       K dated June 30, 1987.

10BB   Sub-Management Agreement dated June 30, 1987 between Harvey Freeman &
       Sons, Inc. and Sterling Property Management Company, is incorporated by
       reference to Exhibit 10(k) to the Registrant's Current Report on Form 8-
       K dated June 30, 1987.

10CC   Property Management Agreement dated June 30, 1987 between Sterling Crest
       Joint Venture and Harvey Freemen & Sons, Inc., is incorporated by
       reference to Exhibit 10(l) to the Registrant's Current Report on Form 8-
       K dated June 30, 1987.

10DD   Contract for Purchase of Real Estate for Phase II of Sterling Crest
       Apartments dated March 10, 1987 between Sterling Crest Development
       Partners, Ltd. and Tennessee Trust Company is incorporated by reference
       to Exhibit 10(a) to the Registrant's Report on Form 8 dated December 29,
       1987.

10EE   Tri-Party Agreement dated May 22, 1987 among North Carolina Federal
       Savings & Loan Association, Sterling Crest Development Partners, Ltd.
       and Tennessee Trust Company relating to Sterling Crest Apartments, is
       incorporated by reference to Exhibit 10(b) to the Registrant's Report on
       Form 8 dated December 29, 1987.

10FF   Assignment of Contract for Purchase of Real Estate and Tri-Party
       Agreement dated November 4, 1987 between Tennessee Trust Company and
       Sterling Crest Joint Venture relating to Sterling Crest Apartments, is
       incorporated by reference to Exhibit 10(c) to the Registrant's Report on
       Form 8 dated December 29, 1987.

10GG   Amended and Restated Sterling Crest Joint Venture Joint Venture
       Agreement dated June 29, 1987 among the Registrant, Freeman Georgia
       Ventures, Inc., and Freeman Growth Plus, L.P., is incorporated by
       reference to Exhibit 10(d) to the Registrant's Report on Form 8 dated
       December 29, 1987.

10HH   Memorandum of Understanding among SEC Realty Corp., Tennessee
       Properties, L.P., Freeman Mortgage Corporation, J. Richard Freeman, W.
       Criswell Freeman and Jacques-Miller Properties, Inc. is incorporated by
       reference to Exhibit 10MM to the Registrant's Annual Report on Form 10-K
       for the fiscal year ended December 31, 1988.

10II   Partnership Administration and Consultation Agreement among Freeman
       Properties, Inc., Freeman Diversified Properties, Inc., residual
       Equities Limited and Jacques-Miller Properties, Inc. is incorporated by
       reference to Exhibit 10NN to the Registrant's Annual Report on Form 10-K
       for the fiscal year ended December 31, 1988.

10JJ   Termination Agreement, dated December 31, 1991 among Jacques-Miller,
       Inc., Jacques-Miller Property Management, Davidson Diversified
       Properties, Inc., and Supar, Inc.

10KK   Assignment of Limited Partnership Interest of Freeman Equities, Limited,
       dated December 31, 1991 between Davidson Diversified Properties, Inc.
       and Insignia Jacques-Miller, L.P.

10LL   Assignment of General Partner Interests of Freeman Equities, Limited,
       dated December 31, 1991 between Davidson Diversified Properties, Inc.
       and MAE GP Corporation.

10MM   Stock certificate, dated December 31, 1991 showing ownership of 1,000
       shares of Davidson Diversified Properties, Inc. by MAE GP Corporation.

10NN   Contracts related to refinancing of debt:

     (a) First Deeds of Trust and Security Agreements dated October 28, 1992
         between Bexley House, L.P. and First Commonwealth Realty Credit
         Corporation, a Virginia Corporation, securing Bexley House Apartments
         is incorporated by reference to Exhibit 10NN (a) to the Registrant's
         Annual Report on Form 10-KSB for the fiscal year ended December 31,
         1992.

     (b) Seconds Deeds of Trust and Security Agreements dated October 28, 1992
         between Bexley House, L.P. and First Commonwealth Realty Credit

         Corporation, a Virginia Corporation, securing Bexley House Apartments
         is incorporated by reference to Exhibit 10NN (b) to the Registrant's
         Annual Report on Form 10-KSB for the fiscal year ended December 31,
         1992.

     (c) First Assignments of Leases and Rents dated October 28, 1992 between
         Bexley House, L.P. and First Commonwealth Realty Credit Corporation, a
         Virginia Corporation, securing Bexley House Apartments is incorporated
         by reference to Exhibit 10NN (c) to the Registrant's Annual Report on
         Form 10-KSB for the fiscal year ended December 31, 1992.

     (d) Second Assignments of Leases and Rents dated October 28, 1992 between
         Bexley House, L.P. and First Commonwealth Realty Credit Corporation, a
         Virginia Corporation, securing Bexley House Apartments  is
         incorporated by reference to Exhibit 10NN (d) to the Registrant's
         Annual Report on Form 10-KSB for the fiscal year ended December 31,
         1992.

     (e) First Deeds of Trust Notes dated October 28, 1992 between Bexley
         House, L.P. and First Commonwealth Realty Credit Corporation, relating
         to Bexley House Apartments is incorporated by reference to Exhibit
         10NN (e) to the Registrant's Annual Report on Form 10-KSB for the
         fiscal year ended December 31, 1992.

     (f) Second Deeds of Trust Notes dated October 28, 1992 between Bexley
         House, L.P. and First Commonwealth Realty Credit Corporation, relating
         to Bexley House Apartments is incorporated by reference to Exhibit
         10NN (f) to the Registrant's Annual Report on Form 10-KSB for the
         fiscal year ended December 31, 1992.

10OO Contracts related to refinancing of debt:

     (a) First Deeds of Trust and Security Agreements dated September 30, 1993
         between Davidson IRE Associates, L.P. and Lexington Mortgage Company,
         a Virginia Corporation, securing Northsprings Apartments is
         incorporated by reference to Exhibit 10oo (a) to the Registrant's
         Quarterly Report on Form 10-QSB for the quarter ended September 30,
         1993.

     (b) Second Deeds of Trust and Security Agreements dated September 30, 1993
         between Davidson IRE Associates, L.P. and Lexington Mortgage Company,
         a Virginia Corporation, securing Northsprings Apartments is
         incorporated by reference to Exhibit 10oo (b) to the Registrant's
         Quarterly Report on Form 10-QSB for the quarter ended September 30,
         1993.

     (c) First Assignments of Leases and Rents dated September 30, 1993 between
         Davidson IRE Associates, L.P. and Lexington Mortgage Company, a
         Virginia Corporation, securing Northsprings Apartments is incorporated
         by reference to Exhibit 10OO (c) to the Registrant's Quarterly Report
         on Form 10-QSB for the quarter ended September 30, 1993.

     (d) Second Assignments of Leases and Rents dated September 30, 1993
         between Davidson IRE Associates, L.P. and Lexington Mortgage Company,
         a Virginia Corporation, securing Northsprings Apartments is
         incorporated by reference to Exhibit 10OO (d) to the Registrant's
         Quarterly Report on Form 10-QSB for the quarter ended September 30,
         1993.

     (e) First Deeds of Trust Notes dated September 30, 1993 between Davidson
         IRE Associates, L.P. and Lexington Mortgage Company, relating to
         Northsprings Apartments is incorporated by reference to Exhibit 10OO
         (e) to the Registrant's Quarterly Report on Form 10-QSB for the
         quarter ended September 30, 1993.

     (f) Second Deeds of Trust Notes dated September 30, 1993 between Davidson
         IRE Associates, L.P. and Lexington Mortgage Company, relating to
         Northsprings Apartments is incorporated by reference to Exhibit 10OO
         (f) to the Registrant's Quarterly Report on Form 10-QSB for the
         quarter ended September 30, 1993.

10PP Contracts related to refinancing of debt:

     (a) First Deeds of Trust and Security Agreements dated September 30, 1993
         between Davidson IRE Associates, L.P. and Lexington Mortgage Company,
         a Virginia Corporation, securing Covington Pointe Apartments is
         incorporated by reference to Exhibit 10PP (a) to the Registrant's
         Quarterly Report on Form 10-QSB for the quarter ended September 30,
         1993.

     (b) Second Deeds of Trust and Security Agreements dated September 30, 1993
         between Davidson IRE Associates, L.P. and Lexington Mortgage Company,
         a Virginia Corporation, securing Covington Pointe Apartments is
         incorporated by reference to Exhibit 10PP (b) to the Registrant's
         Quarterly Report on Form 10-QSB for the quarter ended September 30,
         1993.

     (c) First Assignments of Leases and Rents dated September 30, 1993 between
         Davidson IRE Associates, L.P. and Lexington Mortgage Company, a
         Virginia Corporation, securing Covington Pointe Apartments is
         incorporated by reference to Exhibit 10PP (c) to the Registrant's
         Quarterly Report on Form 10-QSB for the quarter ended September 30,
         1993.

     (d) Second Assignments of Leases and Rents dated September 30, 1993
         between Davidson IRE Associates, L.P. and Lexington Mortgage Company,
         a Virginia Corporation, securing Covington Pointe Apartments is
         incorporated by reference to Exhibit 10PP (d) to the Registrant's
         Quarterly Report on Form 10-QSB for the quarter ended September 30,
         1993.

     (e) First Deeds of Trust Notes dated September 30, 1993 between Davidson
         IRE Associates, L.P. and Lexington Mortgage Company, relating to
         Covington Pointe Apartments is incorporated by reference to Exhibit
         10PP (e) to the Registrant's Quarterly Report on Form 10-QSB for the
         quarter ended September 30, 1993.

     (f) Second Deeds of Trust Notes dated September 30, 1993 between Davidson
         IRE Associates, L.P. and Lexington Mortgage Company, relating to
         Covington Pointe Apartments is incorporated by reference to Exhibit
         10PP (f) to the Registrant's Quarterly Report on Form 10-QSB for the
         quarter ended September 30, 1993.

     (g) Multifamily Note dated November 1, 1996, between "Davidson Income Real
         Estate L.P." and Lehman Brothers Holdings, Inc. d/b/a Lehman Capital, 
         A Division of Lehman Brothers Holdings, Inc.

10QQ Contracts related to refinancing of debt:

     (a) Multifamily Note dated July 1, 1996, between Davidson Income Real
         Estate, L.P., a Delaware limited partnership and Lehman Brothers
         Holdings, Inc. d/b/a Lehman Capital, a Division of Lehman Brothers
         Holdings, Inc.

     (b) Rider To Multifamily Note dated July 1, 1996, between Davidson Income
         Real Estate, L.P., a Delaware limited partnership and Lehman Brothers
         Holdings, Inc. d/b/a Lehman Capital, a Division of Lehman Brothers
         Holdings, Inc.

16   Letter from the Registrant's former independent accountant regarding its
     concurrence with the statements made by the Registrant is incorporated by
     reference to the exhibit filed with Form 8-K dated September 30, 1992.

27   Financial Data Schedule.

99A  Agreement of Limited Partnership for Davidson IRE GP Limited Partnership
     between Davidson Diversified Properties, Inc. and Davidson Income Real
     Estate, L.P. entered into on September 15, 1993 is incorporated by
     reference to Exhibit 99A to the Registrant's Quarterly Report on Form 10-
     QSB for the quarter ended September 30, 1993.

99B  Agreement of Limited Partnership for Davidson IRE Associates, L.P. between
     Davidson IRE GP Limited Partnership and Davidson Income Real Estate, L.P
     is incorporated by reference to Exhibit 99B to the Registrant's Quarterly
     Report on Form 10-QSB for the quarter ended September 30, 1993.

99C  Agreement of Limited Partnership for Bexley House L.P. between Davidson
     Income GP Limited Partnership and Davidson Income Real Estate, L.P.
     entered into on October 13, 1992 is incorporated by reference to Exhibit
     99C to the Registrant's Annual Report on Form 10-KSB for the fiscal year
     ended December 31, 1992.