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 March 31, 1998
                               --------------

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

                                BALANCE SHEETS
                     March 31, 1998 and December 31, 1997
                                  (UNAUDITED)

                                    ASSETS

                                                1998            1997
                                            --------------  --------------
Cash and cash equivalents                   $   1,255,135   $   1,805,138
Prepaid expenses                                    1,760
Accounts and accrued interest receivable            5,712           9,810
                                            --------------  --------------
                                            $   1,262,607   $   1,814,948
                                            ==============  ==============

                         LIABILITIES AND PARTNERS' CAPITAL 

Accounts payable                            $      28,814   $      17,493
Due to affiliates                                  24,606          20,684
                                            --------------  --------------
    Total liabilities                              53,420          38,177
                                            --------------  --------------
Commitments and contingencies

Limited Partners' capital (57,074
  Interests issued and outstanding)             1,279,118       1,846,702
General Partner's (deficit)                       (69,931)        (69,931)
                                            --------------  --------------
    Total partners' capital                     1,209,187       1,776,771
                                            --------------  --------------
                                            $   1,262,607   $   1,814,948
                                            ==============  ==============

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, 1998 and 1997
                                  (UNAUDITED)


                                                 1998            1997
                                            --------------  --------------
Income:
  Rental and service                                        $     603,951
  Interest on short-term investments        $      18,174         150,355
  Other income                                                    558,712
                                            --------------  --------------
    Total income                                   18,174       1,313,018
                                            --------------  --------------
Expenses:
  Interest on mortgage notes payable                              176,932
  Depreciation                                                    105,764
  Amortization of deferred expenses                                 6,324
  Property operating                               20,945         318,050
  Real estate taxes                                                48,500
  Property management fees                                         31,378
  Administrative                                   62,872          77,495
                                            --------------  --------------
    Total expenses                                 83,817         764,443
                                            --------------  --------------
(Loss) income before gain on sales of 
  properties and extraordinary item               (65,643)        548,575

Gain on sales of properties                                    13,452,026
                                            --------------  --------------
(Loss) income before extraordinary item           (65,643)     14,000,601

Extraordinary item:
  Debt extinguishment expense                        None        (255,492)
                                            --------------  --------------
Net (loss) income                           $     (65,643)  $  13,745,109
                                            ==============  ==============
Income before extraordinary
  item allocated to General Partner                  None   $      89,118
                                            ==============  ==============
(Loss) income before extraordinary
  item allocated to Limited Partners        $     (65,643)  $  13,911,483
                                            ==============  ==============
(Loss) income before extraordinary
  item per Limited Partnership Interest
  (57,074 issued and outstanding)
  - Basic and Diluted                       $       (1.14)  $      243.75
                                            ==============  ==============

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, 1998 and 1997
                                  (UNAUDITED)
                                  (CONTINUED)

                                                1998            1997
                                            --------------  --------------

Extraordinary item allocated to
  General Partner                                    None   $      (1,626)
                                            ==============  ==============
Extraordinary item allocated to
  Limited Partners                                   None   $    (253,866)
                                            ==============  ==============
Extraodinary item per Limited 
  Partnership Interest (57,074
  issued and outstanding)
  - Basic and Diluted                                None   $       (4.45)
                                            ==============  ==============
Net income allocated to 
  General Partner                                    None   $      87,492
                                            ==============  ==============
Net (loss) income allocated to 
  Limited Partners                          $     (65,643)  $  13,657,617
                                            ==============  ==============
Net (loss) income per Limited
  Partnership Interest (57,074 issued and
  outstanding) - Basic and Diluted          $       (1.15)  $      239.30
                                            ==============  ==============
Distribution to Limited Partners            $     501,941   $     240,852
                                            ==============  ==============
Distribution per Limited Partnership 
  Interest (57,074 issued and outstanding)  $        8.79   $        4.22
                                            ==============  ==============

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, 1998 and 1997
                                  (UNAUDITED)

                                                 1998            1997
                                            --------------  --------------
Operating activities:
  Net (loss) income                         $     (65,643)  $  13,745,109
  Adjustments to reconcile net
    (loss) income to net cash (used in) or
    provided by operating activities:
      Extraordinary item:
        Debt extinguishment expense                               255,492
      Gain on sales of properties                             (13,452,026)
      Depreciation of properties                                  105,764
      Amortization of deferred expenses                             6,324
      Net change in:
        Escrow deposits                                           288,785
        Accounts receivable                         4,098         (53,933)
        Prepaid expenses                           (1,760)         51,280
        Accounts payable                           11,321         (64,333)
        Due to affiliates                           3,922          (2,092)
        Accrued liabilities                                      (294,801)
        Security deposits                                         (90,753)
                                            --------------  --------------
  Net cash (used in) or provided by 
    operating activities                          (48,062)        494,816
                                            --------------  --------------
Investing activities:
  Proceeds from sales of properties                            16,970,380
  Payment of selling costs                                       (980,544)
                                                            --------------
  Net cash provided by investing activities                    15,989,836
                                                            --------------
Financing activities:
  Distribution to Limited Partners               (501,941)       (240,852)
  Principal payments on mortgage notes
    payable                                                       (13,775)
  Release of improvement escrows                                  127,988
                                            --------------  --------------
  Net cash used in financing activities          (501,941)       (126,639)
                                            --------------  --------------

Net change in cash and cash equivalents          (550,003)     16,358,013
Cash and cash equivalents at beginning
  of period                                     1,805,138       2,509,984
                                            --------------  --------------

Cash and cash equivalents at end of period  $   1,255,135   $  18,867,997
                                            ==============  ==============

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 Policies:

(a) The loss allocation between the Limited Partners and the General Partner
has been adjusted for financial statement purposes during 1998 in order that
the capital account balances more accurately reflect their remaining economic
interests as provided for in the Partnership Agreement.

(b) A reclassification has been made to the previously reported 1997 statements
in order to provide comparability with the 1998 statements. This
reclassification has not changed the 1997 results. 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, 1998, 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. During 1997, the Partnership sold its remaining three properties.
The Partnership has retained a portion of the cash from the property sales to
satisfy obligations of the Partnership as well as 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
including, but not limited to, the lawsuit discussed in Note 5 of Notes to the
Financial Statements. Due to this litigation, the Partnership will not be
dissolved and reserves will be held by the Partnership until the conclusion of
all contingencies. There can be no assurances as to the time frame for
conclusion of these contingencies.

3. Interest Expense:

During the three months ended March 31, 1997, the Partnership incurred and paid
interest expense on mortgage notes payable of $176,932.

4. Transactions with Affiliates:

Fees and expenses paid and payable by the Partnership to affiliates during the
quarter ended March 31, 1998 are:

                                       Paid        Payable      
                                    ------------  ---------         

   Reimbursement of expenses to
     the General Partner, at cost  $      5,869   $  24,606

5. Contingency:
<PAGE>
The Partnership is currently involved in a lawsuit whereby the Partnership and
certain affiliates have been named as defendants alleging certain state
securities and common law violations with regard to the property acquisition
process of the Partnership, and to the adequacy and accuracy of disclosures of
information concerning, as well as the marketing efforts related to the
offering of the Limited Partnership Interests of the Partnership. The
defendants continue to vigorously contest this action. A plaintiff class has
not yet been certified, and no determination of the merits has been made. It is
not determinable at this time whether or not an unfavorable decision in this
action would have a material adverse impact on the financial position,
operations and liquidity of the Partnership. The Partnership believes that it
has meritorious defenses to contest the claims.
<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, 1998, 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 1997 for a more complete understanding of
the Partnership's financial position.

Operations
----------

Summary of Operations
---------------------
Administrative expenses and expenses incurred related to properties sold during
1997 were higher than interest income earned on short-term investments. This
was the primary reason the Partnership recognized a net loss during the quarter
ended March 31, 1998. During the quarter ended March 31, 1997, the Partnership
sold three properties and recognized significant gains in connection with these
sales which resulted in the Partnership generating net income during 1997.
Further discussion of the Partnership's operations are summarized below.

1998 Compared to 1997
---------------------

Discussions of fluctuations between 1998 and 1997 refer to the quarters ended
March 31, 1998 and 1997.

The Partnership sold the American Way Mall, Providence Square Apartments and
Storage USA of Norcross Self-Storage Facility during the quarter ended March
31, 1997. As a result, the Partnership recognized gains totaling $13,452,026
during 1997. As a result of these sales, rental and service income, interest
expense on mortgage notes payable, depreciation, amortization, real estate
taxes and property management fees ceased during 1997.

Due to higher cash balances during 1997 as a result of the investment of
proceeds received in connection with the property sales prior to distribution
to Limited Partners, interest income on short-term investments decreased during
1998 as compared to 1997.    

Other income was recognized in 1997 in connection with the sale of the American
Way Mall. The agreement of sale provided that, if the purchaser transferred any
portion of the property to a specified third party prior to February 25, 1997, 
<PAGE>
the Partnership was entitled to a portion of the net proceeds from the
transfer. The purchaser transferred a portion of the property and as a result,
the Partnership received $421,774 pursuant to the agreement of sale. In
addition, the Partnership received a real estate tax refund of $136,938 for the
American Way Mall's 1995 real estate taxes.

Property operating expense decreased as of March 31, 1998 as compared to 1997
due to the sales of the Partnership's three remaining properties in 1997. The
Partnership paid additional expenditures during 1998 related to one of the
properties sold during 1997.

Due to lower accounting and portfolio management fees as a result of the prior
year's property sales, administrative expense decreased during 1998 as compared
to 1997. 
 
In connection with the February 1997 sale of Providence Square Apartments, the
Partnership wrote off the remaining unamortized deferred financing fees in the
amount of $255,492. This amount was recognized as an extraordinary item and
classified as debt extinguishment expense for financial statement purposes
during 1997. 

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

The cash position of the Partnership decreased by approximately $550,000 as of
March 31, 1998 when compared to December 31, 1997 primarily due to the January
1998 distribution to Limited Partners of remaining available Net Cash Proceeds.
The Partnership used cash totaling approximately $48,000 from its operating
activities to pay administrative expenses and operating expenses related to a
sold property which was partially offset by interest income earned on
short-term investments. The Partnership used cash of approximately $502,000 to
fund the distribution to the Limited Partners in January 1998 in its financing
activities. 

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. During 1997, the Partnership sold its remaining three properties.
The Partnership has retained a portion of the cash from the property sales to
satisfy obligations of the Partnership as well as 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
including, but not limited to, the lawsuit discussed in Note 5 of Notes to the
Financial Statements. Due to this litigation, the Partnership will not be
dissolved and reserves will be held by the Partnership until the conclusion of
all contingencies. There can be no assurances as to the time frame for
conclusion of these contingencies.

To date, Limited Partners have received distributions of Net Cash Receipts of
$173.34 and Net Cash Proceeds of $686.33, totaling $859.67 per $1,000 Interest.
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.
<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 September 30, 1992
are incorporated herein by reference.

(10)(a)(i) Agreement of Sale and attachment thereto relating to the sale of the
El Dorado Hills Apartments previously filed as Exhibit 2(a) to the
Partnership's Current Report on Form 8-K dated June 7, 1996 is incorporated
herein by reference.

(ii) First Amendment to Agreement of Sale relating to the sale of El Dorado
Hills Apartments previously filed as Exhibit (10)(a)(ii) to the Partnership's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, is
incorporated herein by reference.

(iii) Second Amendment to Agreement of Sale and Escrow Agreement relating to
the sale of El Dorado Hills Apartments previously filed as Exhibit (10)(a)(iii)
to the Partnership's Quarterly Report on Form 10-Q for the quarter ended June
30, 1996, is incorporated herein by reference.

(b)(i) Agreement of Sale and attachment thereto relating to the sale of the
American Way Mall previously filed as Exhibit 2(b) to the Partnership's Current
Report on Form 8-K dated June 7, 1996, is incorporated herein by reference.

(ii) First Amendment to Agreement of Sale relating to the sale of the American
Way Mall previously filed as Exhibit (10)(b)(ii) to the Partnership's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996, is incorporated herein
by reference.

(iii) Second Amendment to Agreement of Sale relating to the sale of the
American Way Mall previously filed as Exhibit (99)(b) to the Partnership's
Current Report on Form 8-K dated September 26, 1996, is incorporated herein by
reference.

(iv) Third Amendment to Agreement of Sale relating to the sale of American Way
Mall, previously filed as Exhibit (10)(b)(iv) to the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1996, is incorporated
herein by reference.
<PAGE>
(v) Fourth Amendment to Agreement of Sale relating to the sale of American Way
Mall, previously filed as Exhibit (10)(b)(v) to the Partnership's Annual Report
on Form 10-K for the year ended December 31, 1996, is incorporated herein by
reference.

(c)(i) Agreement of Sale and attachment thereto relating to the sale of
Providence Square Apartments previously filed as Exhibit (2)(a) to the
Partnership's Current Report on Form 8-K dated September 26, 1996 is
incorporated herein by reference.

(ii) Agreement relating to the sale of Providence Square Apartments, previously
filed as Exhibit (2)(b) to the Partnership's Current Report on Form 8-K dated
September 26, 1996 is incorporated herein by reference.

(iii) Amendment No. 1 to Agreement of Sale relating to the sale of Providence
Square Apartments, previously filed as Exhibit (2)(c) to the Partnership's
Current Report on Form 8-K dated September 26, 1996 is incorporated herein by
reference.

(iv) Letter Agreement relating to the sale of Providence Square Apartments,
previously filed as Exhibit (2)(d) to the Partnership's Current Report on Form
8-K dated September 26, 1996 is incorporated herein by reference.

(v) Amendment No. 2 to Agreement of Sale relating to the sale of Providence
Square Apartments, previously filed as Exhibit (10)(c)(v) to the Partnership's
Annual Report on Form 10-K for the year ended December 31, 1996, is
incorporated herein by reference.

(vi) Letter dated December 17, 1996 relating to the sale of Providence Square
Apartments, previously filed as Exhibit (10)(c)(vi) to the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1996, is incorporated
herein by reference.

(vii) Amendment No. 3 to Agreement of Sale relating to the sale of Providence
Square Apartments, previously filed as Exhibit (10)(c)(vii) to the
Partnership's Annual Report on Form 10-K for the year ended December 31, 1996,
is incorporated herein by reference.

(27) Financial Data Schedule of the Registrant for the quarter ending March 31,
1998 is attached hereto.

(b) Reports on Form 8-K:  No reports were filed on Form 8-K during the quarter
ended March 31, 1998.
<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 
                                     Officer) of Balcor Current Income 
                                     Partners-85, the General Partner


Date: April 29,1998
      --------------------
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