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
-----
     EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 1999
                               --------------
                                      OR

     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
-----
     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
    -----     -----

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

                                BALANCE SHEETS
                      June 30, 1999 and December 31, 1998
                                  (UNAUDITED)

                                    ASSETS

                                                1999             1998
                                            --------------- --------------
Cash and cash equivalents                   $    1,197,312  $   1,240,940
Accrued interest receivable                          4,639          5,252
                                            --------------- --------------
                                            $    1,201,951  $   1,246,192
                                            =============== ==============



                      LIABILITIES AND PARTNERS' CAPITAL

Accounts payable                            $       36,501  $      52,055
Due to affiliates                                   18,720         18,794
                                            --------------- --------------
     Total liabilities                              55,221         70,849
                                            --------------- --------------
Commitments and contingencies

Limited Partners' capital (57,074
  Interests issued and outstanding)              1,216,661      1,245,274
General Partner's deficit                          (69,931)       (69,931)
                                            --------------- --------------
     Total partners' capital                     1,146,730      1,175,343
                                            --------------- --------------
                                            $    1,201,951  $   1,246,192
                                            =============== ==============

The accompanying notes are an integral part of the financial statements.

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

                       STATEMENTS OF INCOME AND EXPENSES
                for the six months ended June 30, 1999 and 1998
                                  (UNAUDITED)


                                                 1999           1998
                                            --------------- --------------
Income:
  Interest on short-term investments        $       28,686  $      34,689
  Other income                                                     34,037
                                            --------------- --------------
    Total income                                    28,686         68,726
                                            --------------- --------------

Expenses:
  Property operating                                               21,298
  Administrative                                    57,299        105,734
                                            --------------- --------------
    Total expenses                                  57,299        127,032
                                            --------------- --------------
Net loss                                    $      (28,613) $     (58,306)
                                            =============== ==============
Net loss allocated to General Partner                 None           None
                                            =============== ==============
Net loss allocated to Limited Partners      $      (28,613) $     (58,306)
                                            =============== ==============
Net loss per Limited Partnership Interest
  (57,074 issued and outstanding)
  - Basic and Diluted                       $        (0.50) $       (1.02)
                                            =============== ==============
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.

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

                       STATEMENTS OF INCOME AND EXPENSES
                 for the quarters ended June 30, 1999 and 1998
                                  (UNAUDITED)

                                                 1999            1998
                                            --------------- --------------
Income:
  Interest on short-term investments        $       14,095  $      16,515
  Other income                                                     34,037
                                            --------------- --------------
    Total income                                    14,095         50,552
                                            --------------- --------------

Expenses:
  Property operating                                                  353
  Administrative                                    26,955         42,862
                                            --------------- --------------
    Total expenses                                  26,955         43,215
                                            --------------- --------------
Net (loss) income                           $      (12,860) $       7,337
                                            =============== ==============
Net (loss) income allocated to General
  Partner                                             None           None
                                            =============== ==============
Net (loss) income allocated to Limited
  Partners                                  $      (12,860) $       7,337
                                            =============== ==============
Net (loss) income per Limited Partnership
  Interest (57,074 issued and outstanding)
  - Basic and Diluted                       $        (0.22) $        0.13
                                            =============== ==============

The accompanying notes are an integral part of the financial statements.

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

                             STATEMENTS OF CASH FLOWS
                for the six months ended June 30, 1999 and 1998
                                  (UNAUDITED)

                                                 1999            1998
                                            --------------- --------------
Operating activities:
  Net loss                                  $      (28,613) $     (58,306)
  Adjustments to reconcile net loss
    to net cash used in operating
    activities:
      Net change in:
        Accounts and accrued interest
          receivable                                   613          4,354
        Accounts payable                           (15,554)         4,267
        Due to affiliates                              (74)         8,636
                                            --------------- --------------
  Net cash used in operating activities            (43,628)       (41,049)
                                            --------------- --------------
Financing activity:
  Distribution to Limited Partners                               (501,941)
                                                            --------------
  Cash used in financing activity                                (501,941)
                                                            --------------
Net change in cash and cash equivalents            (43,628)      (542,990)
Cash and cash equivalents at beginning
  of period                                      1,240,940      1,805,138
                                            --------------- --------------
Cash and cash equivalents at end of period  $    1,197,312  $   1,262,148
                                            =============== ==============

The accompanying notes are an integral part of the financial statements.

                         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 six months and quarter
ended June 30, 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 property sales to
satisfy obligations of the Partnership as well as to establish a reserve for
contingencies. As previously reported, the Lenore Klein case was dismissed by
the Superior Court of New Jersey in March 1999. The Madison Avenue litigation
was filed in May 1999. See Note 4 of Notes to Financial Statements for
additional information regarding the Madison Avenue litigation. Despite the
existence of the Madison Avenue litigation, the Partnership currently plans to
dissolve by September 30, 1999 and distribute remaining cash reserves to the
partners in accordance with the partnership agreement. In the event that a new
contingency (such as a lawsuit) arises prior to September 30, 1999, the
Partnership may not be dissolved and may continue in existence until such new
contingency is resolved. The Partnership does not consider the Madison Avenue
case to be a matter that would preclude the dissolution of the Partnership in
1999.

3. Transactions with Affiliates:

Fees and expenses paid and payable by the Partnership to affiliates during the
six months and quarter ended June 30, 1999 are:

                                           Paid
                                   -------------------------
                                     Six Months     Quarter    Payable
                                    ------------   --------- ----------

   Reimbursement of expenses to
     the General Partner, at cost     $  18,989     $ 9,610   $ 18,720

4. Contingency:

In May 1999, a lawsuit was filed against the Partnership, Madison Partnership
Liquidity Investors XX, et al. vs. The Balcor Company, et al. whereby the
Partnership and certain affiliates have been named as defendants. The
plaintiffs are entities that initiated tender offers to purchase and, in fact,

purchased units in eleven affiliated partnerships. The complaint alleges breach
of fiduciary duties and breach of contract under the partnership agreement and
seeks the winding up of the affairs of the Partnership, the establishment of a
liquidating trust, the appointment of an independent trustee for the trust and
the distribution of a portion of the cash reserves to limited partners. The
defendants intend to vigorously contest this action. The Partnership believes
that it has meritorious defenses to contest the claims. It is not determinable
at this time how the outcome of this action will impact the remaining cash
reserves of the Partnership.

                         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 June 30, 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 during 1999 consisted of administrative
expenses which were partially offset by interest income earned on short-term
investments. During the first quarter of 1998, the Partnership paid property
operating expenses related to one of the properties sold during 1997, and
during the second quarter of 1998, the Partnership also received a partial real
estate tax refund related to this property. As a result of these events and
lower administrative expenses in 1999, the Partnership's net loss decreased
during the six months ended June 30, 1999 as compared to the same period in
1998 and the Partnership recognized a net loss during the quarter ended June
30, 1999 as compared to net income during the same period in 1998. Further
discussion of the Partnership's operations is summarized below.

1999 Compared to 1998
---------------------
Unless otherwise noted, discussions of fluctuations between 1999 and 1998 refer
to both the six months and quarters ended June 30, 1999 and 1998.

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

During the quarter ended June 30, 1998, the Partnership received a partial real
estate tax refund of $34,037 for the American Way Mall. The property was sold
in 1997. This amount was recognized as other income for financial statement
purposes during 1998. In addition, the Partnership paid property operating
expenses in 1998 related to this property.

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

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

The cash position of the Partnership decreased by approximately $44,000 as of
June 30, 1999 when compared to December 31, 1998 due to the payment of
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 property sales to
satisfy obligations of the Partnership as well as to establish a reserve for
contingencies. As previously reported, the Lenore Klein case was dismissed by
the Superior Court of New Jersey in March 1999. The Madison Avenue litigation,
described in Part II, Item 1, of this report, was filed in May 1999. Despite
the existence of the Madison Avenue litigation, the Partnership currently plans
to dissolve by September 30, 1999 and distribute remaining cash reserves to the
partners in accordance with the partnership agreement. In the event that a new
contingency (such as a lawsuit) arises prior to September 30, 1999, the
Partnership may not be dissolved and may continue in existence until such new
contingency is resolved. The Partnership does not consider the Madison Avenue
case to be a matter that would preclude the dissolution of the Partnership in
1999.

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.
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 soliciting information from these vendors through the use of
surveys, follow-up discussions and review of data where needed. The Partnership
has received the surveys from these vendors. 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,
these surveys and discussions with the key vendors performing services for the
Partnership indicate that the key vendors are substantially Year 2000 compliant
as of June 30, 1999. The Partnership will continue to monitor the Year 2000
compliance of its key vendors during the third quarter of 1999. In addition,
the Partnership has developed a contingency plan in the event of non-compliance
by these key vendors in the Year 2000 which will be updated by September 30,
1999 based on the results of further surveys, discussions and testing of
systems, where applicable. 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.

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

                          PART II - OTHER INFORMATION

Item 1. Legal Proceedings
-------------------------

Madison Partnership Liquidity Investors XX, et al. vs. The Balcor Company,
-------------------------------------------------------------------------
et al.
------

On May 7, 1999, a proposed class action complaint was filed and on May 13, 1999
was served on the defendants, Madison Partnership Liquidity Investors XX, et
al. vs. The Balcor Company, et al. (Circuit Court, Chancery Division, Cook
County, Illinois, Docket No. 99CH08972). The Partnership, twenty-one additional
limited partnerships which were sponsored by The Balcor Company (together with
the Partnership, the "Affiliated Partnerships"), The Balcor Company, other
affiliated entities and one individual are named defendants in this action.
Plaintiffs are entities that initiated tender offers to purchase units and, in
fact, purchased units in eleven of the Affiliated Partnerships. The complaint
alleges breach of fiduciary duties and breach of contract under the partnership
agreements for each of the Affiliated Partnerships. The complaint seeks the
winding up of the affairs of the Affiliated Partnerships, the establishment of
a liquidating trust for each of the Affiliated Partnerships until a resolution
of all contingencies occurs, the appointment of an independent trustee for each
such liquidating trust and the distribution of a portion of the cash reserves
to limited partners. The complaint also seeks compensatory damages, punitive
and exemplary damages, and costs and expenses in pursuing the litigation. On
July 14, 1999, the defendants filed a Motion to Dismiss the complaint. A
briefing schedule on this motion has not yet been set.

The defendants intend to vigorously contest this action. No class has been
certified as of this date. The Partnership believes it has meritorious defenses
to contest the claims. It is not determinable at this time how the outcome of
this action will impact the remaining cash reserves of the Partnership.

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 six months ending June
30, 1999 is attached hereto.

(b) Reports on Form 8-K:  No reports were filed on Form 8-K during the quarter
ended June 30, 1999.

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: August 11, 1999
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