================================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


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

                  For the quarterly period ended June 30, 1998

                         Commission file number 0-14438

              INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
                        A CALIFORNIA LIMITED PARTNERSHIP
             (Exact name of registrant as specified in its charter)


        CALIFORNIA                                              13-3239107
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)


                   411 West Putnam Avenue, Greenwich, CT 06830
                    (Address of principal executive offices)

                                 (203) 862-7444
              (Registrant's telephone number, including area code)

                                      None
              (Former name, former address and former fiscal year,
                         if changed since last report)

Indicate by check 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>
              INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
                            FORM 10-Q - JUNE 30, 1998

                                      INDEX

                                                                      

         Part I. Financial Information:

         Balance Sheets - June 30, 1998 and December 31, 1997         

         Statements of Operations -- Three and Six Months Ended
             June 30, 1998 and 1997                                   

         Statement of Partners' Equity -- Six Months Ended
             June 30, 1998                                            

         Statements of Cash Flows -- Six Months Ended
             June 30, 1998 and 1997                                   

         Notes to Financial Statements                                

         Management's Discussion and Analysis of Financial
             Condition and Results of Operations                      

         Part II. Other Information:

         Legal Proceedings, Exhibits and Reports on Form 8-K          


<PAGE>
<TABLE>
<CAPTION>
              INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
                            FORM 10-Q - JUNE 30, 1998

                                 BALANCE SHEETS


                                                  June 30, 1998    December 31, 1997
                                                  -------------    -----------------
<S>                                                <C>               <C>        
ASSETS

Real estate - net ..........................       $33,557,174       $33,033,710
Cash and cash equivalents ..................         4,480,101         4,350,887
Other assets ...............................         1,934,858         2,033,252
Receivables ................................            77,567           182,568
                                                   -----------       -----------

                                                   $40,049,700       $39,600,417
                                                   ===========       ===========


LIABILITIES AND PARTNERS' EQUITY

Accounts payable and accrued expenses ......       $ 1,576,146       $ 1,183,720
Distributions payable ......................           395,799           395,799
Due to affiliates ..........................           276,110           577,739
                                                   -----------       -----------

                                                     2,248,055         2,157,258
                                                   -----------       -----------

Commitments and contingencies

PARTNERS' EQUITY:

     Limited partners' equity (400,010
         units issued and outstanding) .....        35,910,612        35,570,050
     General partners' equity ..............         1,891,033         1,873,109
                                                   -----------       -----------

                                                    37,801,645        37,443,159
                                                   -----------       -----------

                                                   $40,049,700       $39,600,417
                                                   ===========       ===========

</TABLE>
                        See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
                        INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
                                      FORM 10-Q - JUNE 30, 1998

                                      STATEMENTS OF OPERATIONS


                                            For the Three Months Ended      For the Six Months Ended
                                                     June 30,                       June 30,  
                                             -------------------------     -------------------------                    
                                                1998           1997           1998           1997
                                             ----------     ----------     ----------     ----------

<S>                                          <C>            <C>            <C>            <C>       
Rental Revenue .........................     $2,186,065     $2,398,074     $4,766,610     $4,754,602
                                             ----------     ----------     ----------     ----------

Costs and Expenses:

     Operating expenses ................      1,068,805        857,590      1,905,620      1,729,608
     Depreciation and amortization .....        329,293        309,935        658,586        619,870
     Partnership management fee ........        227,043        227,043        454,086        454,086
     Administrative expenses ...........        330,192        204,098        555,942        406,358
     Property management fee ...........         64,102         71,264        140,686        140,333
                                             ----------     ----------     ----------     ----------

                                              2,019,435      1,669,930      3,714,920      3,350,255
                                             ----------     ----------     ----------     ----------

Income before interest and other income         166,630        728,144      1,051,690      1,404,347

     Interest income ...................         52,743         48,429         78,944         91,095

     Other income ......................         16,250         31,340         19,450         46,630
                                             ----------     ----------     ----------     ----------

Net income .............................     $  235,623     $  807,913     $1,150,084     $1,542,072
                                             ==========     ==========     ==========     ==========

Net income attributable to:

     Limited partners ..................     $  223,842     $  767,517     $1,092,580     $1,464,968

     General partners ..................         11,781         40,396         57,504         77,104
                                             ----------     ----------     ----------     ----------

Net income .............................     $  235,623     $  807,913     $1,150,084     $1,542,072
                                             ==========     ==========     ==========     ==========

Net income per unit of limited
     partnership interest (400,010 units     
     outstanding) ......................     $     0.56     $     1.92     $     2.73     $     3.66
                                             ==========     ==========     ==========     ==========
</TABLE>
                        See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>

                          INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
                                        FORM 10-Q - JUNE 30, 1998

                                      STATEMENT OF PARTNERS' EQUITY


                                                           General         Limited
                                                          Partners'        Partners'
                                                           Equity           Equity             Total
                                                       ------------      ------------      ------------
<S>                                                    <C>               <C>               <C>         
Balance, January 1, 1998 .........................     $  1,873,109      $ 35,570,050      $ 37,443,159

Net income for the six
     months ended June 30, 1998 ..................           57,504         1,092,580         1,150,084

Distributions as a return of capital for the six
     months ended June 30, 1998 ($1.88 per limited  
     partnership unit) ...........................          (39,580)         (752,018)         (791,598)
                                                       ------------      ------------      ------------

Balance, June 30, 1998 ...........................     $  1,891,033      $ 35,910,612      $ 37,801,645
                                                       ============      ============      ============

</TABLE>
                        See notes to financial statements

<PAGE>
<TABLE>
<CAPTION>
                  INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
                                FORM 10-Q - JUNE 30, 1998

                                STATEMENTS OF CASH FLOWS


                                                         For the Six Months Ended 
                                                                 June 30,
                                                     --------------------------------
                                                           1998            1997
                                                       -----------      -----------
<S>                                                    <C>              <C>        
Cash Flows From Operating Activities:

     Net income ..................................     $ 1,150,084      $ 1,542,072
     Adjustments to reconcile net income
     to net cash provided by operating activities:
         Depreciation and amortization ...........         658,586          619,870
         Straight-line adjustment for stepped
           Lease rentals .........................           2,000          (26,456)
     Changes in assets and liabilities:
         Accounts payable and accrued expenses ...         392,426          267,444
         Receivables .............................         105,001          (14,418)
         Due to affiliates .......................        (301,629)        (879,453)
         Other assets ............................         (39,986)        (125,219)
                                                       -----------      -----------

     Net cash provided by operating activities ...       1,966,482        1,383,840
                                                       -----------      -----------

Cash Flows From Investing Activities:

     Improvements to real estate .................      (1,045,670)        (474,190)
                                                       -----------      -----------

Cash Flows From Financing Activities:

     Distributions to partners ...................        (791,598)        (568,435)
                                                       -----------      -----------

Increase In Cash And Cash Equivalents ............         129,214          341,215

Cash And Cash Equivalents, Beginning of Year .....       4,350,887        4,870,517
                                                       -----------      -----------

Cash And Cash Equivalents, End of Quarter ........     $ 4,480,101      $ 5,211,732
                                                       ===========      ===========

</TABLE>
                        See notes to financial statements
<PAGE>
                  INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
                                FORM 10-Q - JUNE 30, 1998

                          NOTES TO FINANCIAL STATEMENTS

l.       GENERAL

         The accompanying financial statements,  notes and discussions should be
         read in conjunction  with the financial  statements,  related notes and
         discussions  contained in the Partnership's  annual report on Form 10-K
         for the year ended December 31, 1997.

         The financial  information  contained herein is unaudited;  however, in
         the opinion of management,  all adjustments  (consisting only of normal
         recurring  adjustments)  necessary  for a  fair  presentation  of  such
         financial information have been included.

2.       SIGNIFICANT ACCOUNTING POLICIES

         Impairment of Assets

         The Partnership  evaluates the recoverability of the net carrying value
         of its real estate and related assets at least annually, and more often
         if  circumstances  dictate.  If this review indicates that the carrying
         value of the property may not be recoverable, the Partnership estimates
         the future cash flows  expected to result from the use of the  property
         and  its  eventual  disposition,  generally  over a  five-year  holding
         period. In performing this review, management takes into account, among
         other things, the existing occupancy, the expected leasing prospects of
         the  property  and the  economic  situation  in the  region  where  the
         property is located.

         If the sum of the  expected  future cash flows,  undiscounted,  is less
         than the carrying amount of the property, the Partnership recognizes an
         impairment  loss,  and reduces the carrying  amount of the asset to its
         estimated fair value. Fair value is the amount at which the asset could
         be bought or sold in a current  transaction  between  willing  parties,
         that  is,  other  than in a  forced  or  liquidation  sale.  Management
         estimates fair value using discounted cash flows or market comparables,
         as most appropriate for each property. Independent certified appraisers
         are utilized to assist management, when warranted.

         Impairment  write-downs  recorded by the  Partnership do not affect the
         tax basis of the assets and are not  included in the  determination  of
         taxable income or loss.

         Because the expected cash flows used to evaluate the  recoverability of
         the assets and their fair values are based upon  projections  of future
         economic  events,  such as  property  occupancy  rates,  rental  rates,
         operating cost inflation and market  capitalization  rates, the amounts
         ultimately  realized at disposition may differ  materially from the net
         carrying  values at the balance sheet dates.  The cash flows and market
         comparables  used in this process are based on good faith estimates and
         assumptions   developed  by   management.   Unanticipated   events  and
         circumstances  may  occur  and some  assumptions  may not  materialize;
         therefore,  actual results may materially vary from the estimates.  The
         Partnership  may in the future provide  additional  write-downs,  which
         could be material,  if real estate markets or local economic conditions
         change.
<PAGE>
                  INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
                                FORM 10-Q - JUNE 30, 1998

                          NOTES TO FINANCIAL STATEMENTS

2.       SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Certain  reclassifications  were  made  to  the  prior  year  financial
         statements in order to conform them to the current period presentation.

         Results of  operations  for the six months  ended June 30, 1998 are not
         necessarily  indicative  of the results to be  expected  for the entire
         year.

3.       CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES

         The Managing General Partner of the Partnership, Resources High Equity,
         Inc.  is  a   wholly-owned   subsidiary  of  Presidio   Capital  Corp.,
         ("Presidio"). Presidio AGP Corp., which is a wholly-owned subsidiary of
         Presidio is the Associate  General Partner  (together with the Managing
         General  Partner,  the "General  Partners").  The General  Partners and
         affiliates  of the  General  Partners  are also  engaged in  businesses
         related to the  acquisition  and operation of real estate.  Presidio is
         also the  parent  of other  corporations  (and  affiliated  with  other
         entities)  that are or may in the future be engaged in businesses  that
         may be in competition with the Partnership.  Accordingly,  conflicts of
         interest may arise between the Partnership  and such other  businesses.
         Subject  to the  right  of  the  limited  partners  under  the  Limited
         Partnership  Agreement,  Presidio controls the Partnership  through its
         indirect  ownership of the General  Partners.  Effective July 31, 1998,
         Presidio is  indirectly  controlled  by  NorthStar  Capital  Investment
         Corp., a Maryland corporation.

         Effective  as of August 28, 1997,  Presidio has a management  agreement
         with NorthStar Presidio Management Company LLC ("NorthStar  Presidio"),
         an affiliate of NorthStar Capital Investment Corp.,  pursuant to which,
         NorthStar  Presidio will provide the day-to-day  management of Presidio
         and its direct and indirect  subsidiaries  and affiliates.  For the six
         months ended June 30, 1998, reimbursable expense due NorthStar Presidio
         amounted to $47,300.

         The  Partnership  has a property  management  services  agreement  with
         Resources Supervisory  Management Corp. ("Resources  Supervisory"),  an
         affiliate  of  the  General  Partners,  to  perform  certain  functions
         relating to the  management  of the  properties of the  Partnership.  A
         portion  of the  property  management  fees were  paid to  unaffiliated
         management  companies  which are engaged for the purpose of  performing
         the management functions for certain properties. For the quarters ended
         June 30, 1998 and 1997,  Resources  Supervisory was entitled to receive
         $64,102 and $71,264 respectively, of which $52,535 and $51,139 was paid
         to  unaffiliated   management   companies,   respectively  for  on-site
         management and the balance was retained by Resources Supervisory.

         For the administration of the Partnership, the Managing General Partner
         is  entitled  to receive  reimbursement  of expenses up to a maximum of
         $150,000  per year.  For each of the  quarters  ended June 30, 1998 and
         1997, the Managing General Partner was entitled to receive $37,500.

         For  managing  the affairs of the  Partnership,  the  Managing  General
         Partner is entitled  to receive an annual  partnership  management  fee
         equal  to  1.05% of the  amount  of  original  gross  proceeds  paid or
         allocable to the acquisition of property by the  Partnership.  For each
         of the  quarters  ended June 30, 1998 and 1997,  the  Managing  General
         Partner was entitled to receive $227,043.

         The  General  Partners  are  allocated  5% of  the  net  income  of the
         Partnership,  which  amounted to $11,781  and $40,396 for the  quarters
         ended June 30, 1998 and 1997,  respectively.  They are also entitled to
         receive 5% of distributions,  which amounted to $19,790 for each of the
         quarters ended June 30, 1998 and 1997.
<PAGE>
                  INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
                                FORM 10-Q - JUNE 30, 1998

                          NOTES TO FINANCIAL STATEMENTS

3.       CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)

         During the liquidation  stage of the Partnership,  the Managing General
         Partner or an affiliate may be entitled to receive certain fees,  which
         are  subordinated  to the limited  partners  receiving  their  original
         invested  capital  and  certain  specified  minimum  returns  on  their
         investment.  All fees  received by the General  Partners are subject to
         certain limitations as set forth in the Partnership Agreement.

         From July 1996 through March 12, 1998,  Millenium  Funding II Corp.,  a
         wholly owned indirect subsidiary of Presidio, purchased 39,123 units of
         the  Partnership  from  various  limited  partners,   which  represents
         approximately 9.8% of the outstanding  limited partnership units of the
         Partnership.

         In  connection  with a tender offer for units of the  Partnership  made
         March 12, 1998 (the  "Offer") by Olympia  Investors,  L.P.,  a Delaware
         limited partnership  controlled by Carl Ichan ("Olympia"),  Olympia and
         Presidio   entered  into  an  agreement,   dated  March  6,  1998  (the
         "Agreement").  On July 28, 1998, Olympia announced that it had accepted
         for payment 32,078 units properly  tendered pursuant to the Offer. As a
         consequence  of the Agreement,  Presidio may be deemed to  beneficially
         own the units owned by Olympia.

         Subsequent to the expiration of the Offer,  Millennium Funding II Corp.
         purchased 3,000 limited partnership units in August 1998.

4.       REAL ESTATE

         The following  table is a summary of the  Partnership's  real estate as
         of:
<TABLE>
<CAPTION>
                                          June 30, 1998     December 31, 1997
                                          ------------         ------------  
<S>                                       <C>                  <C>           
       Land .........................     $ 11,056,966         $ 11,056,966  
       Building and improvements ....       37,830,378           36,784,708  
                                          ------------         ------------  
                                            48,887,344           47,841,674  
       Less: Accumulated depreciation      (15,330,170)         (14,807,964) 
                                          ------------         ------------  
                                                                             
                                          $ 33,557,174         $ 33,033,710  
                                          ============         ============  
</TABLE>

                                                              
         No write-downs  for  impairment  were recorded for the six months ended
         June 30, 1998 or 1997.
<PAGE>
                  INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
                                FORM 10-Q - JUNE 30, 1998

                          NOTES TO FINANCIAL STATEMENTS


5.       DISTRIBUTIONS PAYABLE
<TABLE>
<CAPTION>
                                              June 30, 1998     December 31, 1997
                                              -------------     -----------------
<S>                                            <C>                 <C>      
           Limited partners ($.94 per unit)     $ 376,009           $ 376,009
           General partners                        19,790              19,790
                                                ---------           ---------

                                                $ 395,799           $ 395,799
                                                =========           =========
</TABLE>


         Such  distributions  were paid in the quarters  subsequent  to June 30,
1998 and December 31, 1997, respectively.

6.       DUE TO AFFILIATES
<TABLE>
<CAPTION>
                                                     June 30, 1998      December 31, 1997
                                                     -------------      -----------------
<S>                                                     <C>                   <C>       
   Partnership management fee .....................     $227,043              $227,044  
   Reorganization and litigation cost reimbursement                                     
   (Note 7) .......................................         --                 210,000  
   Property management fee ........................       11,567               103,195  
   Non-accountable expense reimbursement ..........       37,500                37,500  
                                                        --------              --------  
                                                                                        
                                                        $276,110              $577,739  
                                                        ========              ========  
                                                                             
</TABLE>

         Such amounts were paid in the quarters  subsequent to June 30, 1998 and
         December 31, 1997, respectively.

<PAGE>
                 INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
                                FORM 10-Q - JUNE 30, 1998

                          NOTES TO FINANCIAL STATEMENTS


7.       COMMITMENTS AND CONTINGENCIES

         On or about  May 11,  1993  High  Equity  Partners  L.P.  -  Series  86
         ("HEP-86"), an affiliated partnership,  was advised of the existence of
         an action (the  "California  Action")  in which a  complaint  (the "HEP
         Complaint") was filed in the Superior Court for the State of California
         for the County of Los  Angeles  (the  "Court") on behalf of a purported
         class  consisting  of all  of the  purchasers  of  limited  partnership
         interests  in the  Partnership.  On April 7, 1994 the  plaintiffs  were
         granted leave to file an amended complaint (the "Amended Complaint") on
         behalf  of  a  class  consisting  of  all  the  purchasers  of  limited
         partnership  interest  in  HEP-86,  the  Partnership,  and High  Equity
         Partners L.P. - Series 88 ("HEP-88"), another affiliated partnership.

         On  November  30,  1995,  after  the  Court  preliminarily  approved  a
         settlement of the California  Action but  ultimately  declined to grant
         final  approval and after the Court granted  motions to intervene,  the
         original and  intervening  plaintiffs  filed a  Consolidated  Class and
         Derivative Action Complaint (the "Consolidated  Complaint") against the
         managing  general  partner  of HEP-85  and  HEP-88  and the  Investment
         General Partner of HEP-86; the Administrative General Partner of HEP-86
         (the "General Partners"); a subsidiary of the indirect corporate parent
         of the  General  Partners;  and the  indirect  corporate  parent of the
         General Partners.  The Consolidated Complaint alleged various state law
         class and derivative  claims,  including claims for breach of fiduciary
         duties;  breach of contract;  unfair and fraudulent  business practices
         under California Bus. & Prof. Code Sec. 17200; negligence; dissolution,
         accounting and  receivership;  fraud; and negligent  misrepresentation.
         The  Consolidated  Complaint  alleged,  among  other  things,  that the
         General  Partners  caused  a waste  of the HEP  partnership  assets  by
         collecting  management  fees in lieu of pursuing a strategy to maximize
         the value of the investments  owned by the limited  partners;  that the
         General  Partners  breached  their duty of loyalty  and due care to the
         limited partners by expropriating management fees from the partnerships
         without trying to run the HEP  partnerships  for the purposes for which
         they are intended; that the General Partners acted improperly to enrich
         themselves in their position of control over the HEP  partnerships  and
         that their actions  prevented  non-affiliated  entities from making and
         completing tender offers to purchase units in the HEP partnership; that
         by refusing to seek the sale of the HEP partnerships'  properties,  the
         General Partners  diminished the value of the limited  partners' equity
         in the HEP  partnerships;  that the  General  Partners  took a  heavily
         overvalued   partnership   asset   management  fee;  and  that  limited
         partnership  units were sold and marketed  through the use of false and
         misleading statements.
<PAGE>
                INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
                                FORM 10-Q - JUNE 30, 1998

                          NOTES TO FINANCIAL STATEMENTS


7.       COMMITMENTS AND CONTINGENCIES (CONTINUED)

         The Court entered an order on January 14, 1997 rejecting the settlement
         and  concluding  that there had not been an adequate  showing  that the
         settlement  was fair and  reasonable.  On February 24, 1997,  the Court
         granted  the request of one  plaintiffs'  law firm to withdraw as class
         counsel.  Thereafter,  in June 1997, the plaintiffs again amended their
         complaint  (the  "Second  Amended  Complaint").  The  Seconded  Amended
         Complaint  asserts  substantially  the same claims as the  Consolidated
         Complaint,  except  that it no longer  contains  causes  of action  for
         fraud,  for  negligent   misrepresentation,   or  for  negligence.  The
         defendants   served  answers  denying  the  allegations  and  asserting
         numerous  affirmative  defenses.  In February 1998, the Court certified
         three plaintiff classes  consisting of the current unit holders in each
         of the three HEP partnerships.  On March 11, 1998, the Court stayed the
         California  Action  temporarily  to  permit  the  parties  to engage in
         renewed settlement discussions.  On July 30, 1998, the Court lifted the
         stay.

         The Limited  Partnership  Agreement provides for indemnification of the
         General  Partners and their  affiliates in certain  circumstances.  The
         Partnership  has agreed to  reimburse  the General  Partners  for their
         actual costs  incurred in defending  this  litigation  and the costs of
         preparing settlement materials.  Through June 30, 1998, the Partnership
         paid the General Partners a total of $1,034,510 for these costs.

         The General  Partners  believe that each of the claims  asserted in the
         Second  Amended  Complaint  is  meritless  and  intend to  continue  to
         vigorously defend the California  Action. It is impossible at this time
         to predict  what the defense of the  California  Action will cost,  the
         Partnership's  financial  exposure  as a result of the  indemnification
         agreement  discussed  above,  and whether the costs of defending  could
         adversely affect the Managing General  Partner's ability to perform its
         obligations to the Partnership.

         On February 6,1998,  Everest Investors 8, LLC ("Everest")  commenced an
         action in the Superior  Court of the State of California for the County
         of Los Angeles (Case No. BC 185554),  against,  among  others,  the HEP
         partnerships,   Resources   Pension   Shares   5  LP   (an   affiliated
         partnership), the general partners of each of the partnerships, and DCC
         Securities Corp. In the action,  Everest  alleged,  among other things,
         that the partnerships and the general partners  breached the provisions
         of the  applicable  partnership  agreements  by refusing  to  recognize
         transfers to Everest of limited partnership units purportedly  acquired
         pursuant to tender  offers that had been made by Everest (the  "Everest
         Tender  Units").  Everest  sought  injunctive  relief (a) directing the
         recognition of transfers to Everest of the Everest Tender Units and the
         admission  of Everest as a limited  partner with respect to the Everest
         Tender Units and (b) enjoining the transfer of the Everest Tender Units
         to any either party. Everest seeks damages, including punitive damages,
         for alleged breach of contract, defamation and intentional interference
<PAGE>
                INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
                                FORM 10-Q - JUNE 30, 1998

                          NOTES TO FINANCIAL STATEMENTS


7.       COMMITMENTS AND CONTINGENCIES (CONTINUED)

         with   contractual   relations.   Everest's   motion  for  a  temporary
         restraining  order was  denied  on  February  6,  1998.  A  hearing  on
         Everest's  application for a preliminary  injunction had been scheduled
         for February 26, however, on February 20, 1998, Everest asked the Court
         to take its  application  off calendar.  The defendants  served answers
         denying the allegations and asserting  numerous  affirmative  defenses.
          

         On March 27, 1998,  Everest  commenced  an action in the United  States
         District  Court of the Central  District of California  against,  among
         others,  the general partners of the HEP  Partnerships.  In the action,
         Everest alleged, among other things, various violations of the Williams
         Act Section 14(d) of the Securities  Exchange Act of 1934 in connection
         with the general partners' refusal to recognize transfers to Everest of
         limited partnership units purportedly  acquired pursuant to the Everest
         tender  offers and the  letters  sent by the  general  partners  to the
         limited partners advising them of the general  partners'  determination
         that the Everest tender offers violated applicable securities laws. 

         During the quarter ended June 30, 1998, the  litigations  involving the
         Partnership and Everest were discontinued with prejudice.
<PAGE>
                INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
                                FORM 10-Q - JUNE 30, 1998

 
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

Working capital reserves are temporarily invested in short-term instruments and,
together with cash flow from  operations,  are expected to be sufficient to fund
future capital  improvements  to the  Partnership's  properties.  As of June 30,
1998, total working capital reserves amounted to approximately  $3,426,000.  The
Partnership  intends to  distribute  to its partners less than all of its future
cash flow from  operations  in order to assure  adequate  reserves  for  capital
improvements and capitalized lease procurement costs.

During the six months ended June 30, 1998, cash and cash  equivalents  increased
$129,214  as a result of cash  provided  by  operations  in  excess  of  capital
expenditures and distributions to partners.  The Partnership's primary source of
funds is cash flow  from the  operation  of its  properties  (principally  rents
received from  tenants)  which  amounted to $1,966,482  for the six months ended
June 30, 1998. The Partnership used $1,045,670 for capital  expenditures related
to  capital  and  tenant   improvements  to  the  properties  and  $791,598  for
distributions to partners for the six months ended June 30, 1998.

The  Partnership  expects to continue to utilize a portion of its cash flow from
operations to pay for various capital and tenant  improvements to the properties
and leasing commissions. Capital and tenant improvements and leasing commissions
may in the future exceed the  Partnership's  cash flow from operations.  In that
event,  the Partnership  would utilize the remaining  working capital  reserves,
reduce distributions, or sell one or more properties. Except as discussed above,
management  is  not  aware  of  any  other  trends,   events,   commitments   or
uncertainties that will have a significant impact on liquidity.

RESULTS OF OPERATIONS

The  Partnership  experienced  a  decrease  in net  income for the three and six
months ended June 30, 1998  compared to the same periods in the prior year.  The
decrease  during the three months ended June 30, 1998 was due primarily to lower
rental  revenues,  higher costs and  expenses and lower other income  during the
current  period.  For the six  months  ended  June 30,  1998,  higher  costs and
expenses  and lower  interest  and other  income  resulted  in a decrease in net
income as compared to the six months ended June 30, 1997.

Rental  revenues  decreased at Southport  during the three months ended June 30,
1998 compared to 1997, due to certain  credits  related to prior years that were
issued during 1998. In addition,  rental  revenues were lower at Westbrook,  for
both the  three  and six  months  ended  June 30,  1998  primarily  due to lower
occupancy rates in 1998 as compared to the same periods in 1997.

Costs and expenses  increased  during the three and six month periods ended June
30,  1998  compared  to the same  periods in 1997,  primarily  due to  increases
operating expenses,  administrative expenses and depreciation expense. Operating
expenses  increased  during  1998 due to higher  repair  and  maintenance  costs
related  to  a  waterproofing  project  at  Southport.  Administrative  expenses
increased due to higher legal and accounting fees during 1998 related to ongoing
litigation  and a  possible  reorganization  of  the  Partnership.  Depreciation
increased due to significant capital additions in 1997.
<PAGE>
                INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
                                FORM 10-Q - JUNE 30, 1998

 
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS



Interest income  increased  slightly during the three months ended June 30, 1998
due to higher  rates on  invested  balances  during the  second  quarter of 1998
compared to the same  period in 1997.  For the six months  ended June 30,  1998,
however,  interest  income  decreased due to lower cash  balances.  Other income
decreased during the three and six months ended June 30, 1998 as compared to the
same periods in 1997 due to fewer investor transfers.

Inflation  is not  expected  to  have a  material  impact  on the  Partnership's
operations or financial position.

Legal Proceedings

The  Partnership is a party to certain  litigation.  See Note 7 to the financial
statements for a description thereof.

Forward-looking Statements

When  used  in this  quarterly  report  on  Form  10-Q,  the  words  "believes,"
"anticipates,"  "expects"  and  similar  expressions  are  intended  to identify
forward-looking  statements.  Statements looking forward in time are included in
this  quarterly  report on Form 10-Q pursuant to the "safe harbor"  provision of
the  Private  Securities  Litigation  Reform Act of 1995.  Such  statements  are
subject to certain risks and  uncertainties  which would cause actual results to
differ  materially,   including,   but  not  limited  to,  those  set  forth  in
"management's  discussion  and  analysis of financial  condition  and results of
operations."  Readers  are  cautioned  not to  place  undue  reliance  on  these
forward-looking  statements,  which  speak  only  as of  the  date  hereof.  The
Partnership  undertakes no obligation to publicly  revise these  forward-looking
statements to reflect events or circumstances occurring after the date hereof or
to reflect the occurrence of unanticipated events.


<PAGE>
                INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
                                FORM 10-Q - JUNE 30, 1998


                          Part II. - Other Information

Item 1 - Legal Proceedings

         (a)      See   Management's   Discussion   and  Analysis  of  Financial
                  Condition  and Results of  Operations  and Notes to  Financial
                  Statements - Note 7 which is herein incorporated by reference.

Item 6 - Exhibits and Reports on Form 8-K

         (a)      Exhibits: There were no exhibits filed.

         (b)      Reports on Form 8-K:
                  None

<PAGE>
                INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
                                FORM 10-Q - JUNE 30, 1998

 
 

                                   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.



                                                Integrated Resources High Equity
                                                Partners, Series 85,
                                                A California Limited Partnership




                                       By:      Resources High Equity, Inc.,
                                                Managing General Partner




Dated:   August 12, 1998               By:      /S/ Richard Sabella
                                                -------------------
                                                Richard Sabella
                                                President
                                                (Duly Authorized Officer)




Dated:   August 12, 1998               By:      /S/ Lawrence Schachter
                                                ----------------------
                                                Lawrence Schachter
                                                Senior Vice President and
                                                Chief Financial Officer
                                                (Principal Financial and
                                                Accounting Officer)