SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-Q
(Mark One)

  X  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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     EXCHANGE ACT OF 1934.

For the quarterly period ended March 31, 1999
                               --------------

                                      OR

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

For the transition period from              to             
                               ------------    ------------

Commission file number 0-14352
                       -------

                         BALCOR CURRENT INCOME FUND-85
                        A REAL ESTATE LIMITED PARTNERSHIP         
                 -------------------------------------------------------
            (Exact name of registrant as specified in its charter)

          Illinois                                      36-3344227   
-------------------------------                     -------------------
(State or other jurisdiction of                      (I.R.S. Employer  
incorporation or organization)                      Identification No.)

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

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

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     
    -----     -----
<PAGE>
                         BALCOR CURRENT INCOME FUND-85
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                                BALANCE SHEETS
                     March 31, 1999 and December 31, 1998
                                  (Unaudited)

                                    ASSETS

                                                 1999            1998
                                            --------------  --------------
Cash and cash equivalents                   $   1,216,360   $   1,240,940
Accrued interest receivable                         4,895           5,252
Prepaid expense                                     1,896
                                            --------------  --------------
                                            $   1,223,151   $   1,246,192
                                            ==============  ==============



                         LIABILITIES AND PARTNERS' CAPITAL 


Accounts payable                            $      41,962   $      52,055
Due to affiliates                                  21,599          18,794
                                            --------------  --------------
    Total liabilities                              63,561          70,849
                                            --------------  --------------
Commitments and contingencies

Limited Partners' capital (57,074
  Interests issued and outstanding)             1,229,521       1,245,274
General Partner's (deficit)                       (69,931)        (69,931)
                                            --------------  --------------
    Total partners' capital                     1,159,590       1,175,343
                                            --------------  --------------
                                            $   1,223,151   $   1,246,192
                                            ==============  ==============

The accompanying notes are an integral part of the financial statements.
<PAGE>
                         BALCOR CURRENT INCOME FUND-85
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                       STATEMENTS OF INCOME AND EXPENSES
                for the quarters ended March 31, 1999 and 1998
                                  (Unaudited)


                                                 1999            1998
                                            --------------  --------------
Income:
  Interest on short-term investments        $      14,591   $      18,174
                                            --------------  --------------
    Total income                                   14,591          18,174
                                            --------------  --------------
Expenses:
  Property operating                                               20,945
  Administrative                                   30,344          62,872
                                            --------------  --------------
    Total expenses                                 30,344          83,817
                                            --------------  --------------
Net loss                                    $     (15,753)  $     (65,643)
                                            ==============  ==============
Net loss allocated to 
    General Partner                                  None            None
                                            ==============  ==============
Net loss allocated to 
  Limited Partners                          $     (15,753)  $     (65,643)
                                            ==============  ==============
Net loss per Limited Partnership
  Interest (57,074 issued and
  outstanding) - Basic and Diluted          $       (0.28)  $       (1.15)
                                            ==============  ==============
Distribution to Limited Partners                     None   $     501,941
                                            ==============  ==============
Distribution per Limited Partnership 
  Interest (57,074 issued and outstanding)           None   $        8.79
                                            ==============  ==============

The accompanying notes are an integral part of the financial statements.
<PAGE>
                         BALCOR CURRENT INCOME FUND-85
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                           STATEMENTS OF CASH FLOWS
                for the quarters ended March 31, 1999 and 1998
                                  (Unaudited)

                                                 1999            1998
                                            --------------  --------------
Operating activities:
  Net loss                                  $     (15,753)  $     (65,643)
  Adjustments to reconcile net
    loss to net cash used in
    operating activities:
      Net change in:
        Accounts and accrued interest
          receivable                                  357           4,098
        Prepaid expenses                           (1,896)         (1,760)
        Accounts payable                          (10,093)         11,321
        Due to affiliates                           2,805           3,922
                                            --------------  --------------
  Net cash used in operating activities           (24,580)        (48,062)
                                            --------------  --------------
Financing activity:
  Distribution to Limited Partners                               (501,941)
                                                            --------------
  Cash used in financing activity                                (501,941)
                                                            --------------
Net change in cash and cash equivalents           (24,580)       (550,003)
Cash and cash equivalents at beginning
  of period                                     1,240,940       1,805,138
                                            --------------  --------------
Cash and cash equivalents at end of period  $   1,216,360   $   1,255,135
                                            ==============  ==============

The accompanying notes are an integral part of the financial statements.
<PAGE>
                         BALCOR CURRENT INCOME FUND-85
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                         NOTES TO FINANCIAL STATEMENTS

1. Accounting Policy:

In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the quarter ended March 31,
1999, and all such adjustments are of a normal and recurring nature.

2. Partnership Termination:

The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. The Partnership sold its final real estate investment in February
1997. The Partnership has retained a portion of the cash from the property
sales to satisfy obligations of the Partnership as well as to establish a 
reserve for contingencies. The timing of the termination of the Partnership and 
final distribution of cash will depend upon the nature and extent of 
liabilities and contingencies which exist or may arise. Such contingencies may 
include legal and other fees and costs stemming from litigation involving the 
Partnership. There can be no assurances as to the time frame for the 
conclusion of contingencies which exist or may arise.

3. Transactions with Affiliates:

Fees and expenses paid and payable by the Partnership to affiliates during the
quarter ended March 31, 1999 are:

                                        Paid        Payable
                                    ------------   ---------
   Reimbursement of expenses to
     the General Partner, at cost     $ 9,379      $ 21,599 
<PAGE>
                         BALCOR CURRENT INCOME FUND-85
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

Balcor Current Income Fund-85 A Real Estate Limited Partnership (the
"Partnership") is a limited partnership formed in 1985 to invest in and operate
income-producing real property. The Partnership raised $57,074,000 through the
sale of Limited Partnership Interests and utilized these proceeds to acquire
five real property investments. As of March 31, 1999, the Partnership had no
properties remaining in its portfolio.

Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1998 for a more complete understanding of
the Partnership's financial position.

Operations
----------

Summary of Operations
---------------------
The operations of the Partnership in 1999 and 1998 consisted primarily of
administrative expenses which were partially offset by interest income earned
on short-term investments. In addition, the Partnership paid property operating
expenses in 1998 related to one of the properties sold during 1997. Primarily
as a result of lower administrative expenses in 1999 and the property operating
expenses paid in 1998, the Partnership's net loss decreased during 1999 as
compared to 1998. Further discussion of the Partnership's operations is
summarized below.

1999 Compared to 1998
---------------------
Discussions of fluctuations between 1999 and 1998 refer to the quarters ended
March 31, 1999 and 1998.

As a result of lower average cash balances due in part to a distribution to
Limited Partners in January 1998 and lower interest rates, interest income on
short-term investments decreased during 1999 when compared to 1998.

During 1998, the Partnership paid property operating expenses related to one of
the properties sold during 1997.

Primarily due to a decrease in accounting and legal fees, administrative
expenses decreased during 1999 when compared to 1998.

Liquidity and Capital Resources
-------------------------------

The cash position of the Partnership decreased by approximately $25,000 as of
March 31, 1999 when compared to December 31, 1998 due to the payment of 
<PAGE>
administrative expenses, which was partially offset by interest income earned
on short-term investments.

The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. The Partnership sold its final real estate investment in February
1997. The Partnership has retained a portion of the cash from the property
sales to satisfy obligations of the Partnership as well as to establish a 
reserve for contingencies. The timing of the termination of the Partnership and 
final distribution of cash will depend upon the nature and extent of liabilities
and contingencies which exist or may arise. Such contingencies may include legal
and other fees and costs stemming from litigation involving the Partnership.
There can be no assurances as to the time frame for the conclusion of
contingencies which exist or may arise.

Limited Partners have received cumulative distributions totaling $859.67 per
$1,000 Interest, as well as certain tax benefits. Of this amount, $173.34 has
been from Net Cash Receipts and $686.33 has been from Net Cash Proceeds. No
additional distributions are anticipated to be made prior to the termination of
the Partnership. However, after paying final partnership expenses, any
remaining cash reserves will be distributed. Limited Partners will not recover
all of their original investment.  

The Partnership sold all of its remaining real property investments and
distributed a majority of the proceeds from these sales to Limited Partners in
1996 and 1997. Since the Partnership no longer has any operating assets, the
number of computer systems and programs necessary to operate the Partnership
has been significantly reduced. The Partnership relies on third party vendors
to perform most of its functions and has implemented a plan to determine the
Year 2000 compliance status of these key vendors. The Partnership is within its
timeline for having these plans completed prior to the year 2000.

The Partnership's plan to determine the Year 2000 compliance status of its key
vendors involves the solicitation of information from these vendors through the
use of surveys, follow-up discussions and review of data where needed. The  
Partnership has sent out surveys to these vendors and received back a majority
of these surveys. While the Partnership cannot guarantee Year 2000 compliance
by its key vendors, and in many cases will be relying on statements from these
vendors without independent verification, preliminary surveys indicate that the
key vendors performing services for the Partnership are aware of the issues and
are working on a solution to achieve compliance before the year 2000. The
Partnership is in the process of developing a contingency plan in the event any
of its key vendors are not Year 2000 compliant prior to the year 2000. As part
of its contingency plan, the Partnership will identify replacement vendors in
the event that current vendors are not substantially Year 2000 compliant by
June 30, 1999. The Partnership does not believe that failure by any of its key
vendors to be Year 2000 compliant by the year 2000 would have a material effect
on the business, financial position or results of operations of the
Partnership.
<PAGE>
                         BALCOR CURRENT INCOME FUND-85
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                          PART II - OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K
-----------------------------------------

(a) Exhibits:

(4) Amended and Restated Form of Subscription Agreement set forth as
Exhibit 4.1 to Amendment No. 5 to the Registrant's Registration Statement on
Form S-11 dated August 16, 1985 (Registration No. 2-95910), and Form of
Confirmation regarding Interests in the Partnership set forth as Exhibit 4.2 to
the Partnership's Report on Form 10-Q for the quarter ended June 30, 1992 are
incorporated herein by reference.

(27) Financial Data Schedule of the Registrant for the quarter ending March 31,
1999 is attached hereto.

(b) Reports on Form 8-K:  No reports were filed on Form 8-K during the quarter
ended March 31, 1999.
<PAGE>
SIGNATURES

Pursuant to the requirements 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 CURRENT INCOME FUND-85
                              A REAL ESTATE LIMITED PARTNERSHIP



                              By: /s/Thomas E. Meador
                                  -----------------------------               
                                  Thomas E. Meador
                                  President and Chief Executive Officer 
                                  (Principal Executive Officer) of Balcor 
                                  Current Income Partners-85, the General 
                                  Partner



                              By: /s/Jayne A. Kosik
                                  ------------------------------
                                  Jayne A. Kosik
                                  Senior Managing Director and Chief Financial
                                  Officer (Principal Accounting and Financial 
                                  Officer) of Balcor Current Income 
                                  Partners-85, the General Partner



Date: May 6, 1999
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