SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549
                          ----------------------

                               FORM 10-KSB/A
                               AMENDMENT NO.1 


    [X] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 

    For the fiscal year ended December 31, 1997

    [ ] 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 0-6877


                       SANTA FE FINANCIAL CORPORATION
                       ------------------------------
                (Name of Small Business Issuer in Its Charter)

            Nevada                                     95-2452529
  -------------------------------                   ------------------
  (State or Other Jurisdiction of                   (IRS Employer
   Incorporation or Organization)                    Identification No.)

   2251 San Diego Avenue, Suite A-151
   San Diego, California                                92110-2926        
  ---------------------------------------           ------------------
  (Address of Principal Executive Offices)              (Zip Code)    

                               (619) 298-7201
              ---------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Exchange Act: None

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

                          $.10 Par Value Common Stock
                          ----------------------------
                                (Title of Class)

    Check whether the issuer: (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 

    Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B contained in this form, and will not be contained, to the 
best of registrant's knowledge, in definitive proxy or information statements 
incorporated by reference in Part III of this Form 10-KSB or any amendments to 
this Form 10-KSB.  [X]

    The issuer's revenues for its most recent fiscal year were $3,048,216.

<PAGE> 2

    The aggregate market value of the common equity held by non-affiliates of 
issuer computed by reference to the price at which the stock sold on March 
25, 1998 was $11,670,253.

The number of shares outstanding of issuers's $.10 Par Value Common Stock,
as of March 13, 1997, was 638,019.

<PAGE> 11

Item 7. Financial Statements

INDEX TO FINANCIAL STATEMENTS                                    PAGE

Report of Independent Accountants-Price Waterhouse LLP            12
Report of Ernst & Young LLP, Independent Auditors                 12(a)
Consolidated Balance Sheet - December 31, 1997                    13
Consolidated Statements of Income - Years Ended                   14
  December 31, 1997 and 1996 
Consolidated Statements of Shareholders' Equity                   15
Consolidated Statements of Cash Flows - Years Ended               16 
  December 31, 1997 and 1996
Notes to Consolidated Financial Statements                        17

<PAGE> 12

                   Report of Independent Accountants

March 25, 1998


To the Board of Directors and
Shareholders of Santa Fe Financial Corporation

In our opinion, the accompanying consolidated balance sheet and the related 
statements of income, of cash flows, and changes in shareholders' equity 
present fairly, in all material respects, the financial position of the Santa 
Fe Financial Corporation and its subsidiaries at December 31, 1997, and the 
results of their operations and their cash flows for the year ended December 
31, 1997, in conformity with generally accepted accounting principles.  These 
consolidated financial statements are the responsibility of the Company's 
management; our responsibility is to express an opinion on these consolidated 
financial statements based on our audit.  We conducted our audit of these 
statements in accordance with generally accepted auditing standards which 
require that we plan and perform the audit to obtain reasonable assurance 
about whether the consolidated financial statements are free of material 
misstatement.  An audit includes examining, on a test basis, evidence 
supporting the amounts and disclosures in the consolidated financial 
statements, assessing the accounting principles used and significant estimates 
made by management, and evaluating the overall financial statement 
presentation.  We believe that our audit provides a reasonable basis for the 
opinion expressed above.  The consolidated financial statements of  Santa Fe 
Financial Corporation for the year ended December 31, 1996 were audited by 
other independent accountants whose report dated February 21, 1997 expressed 
an unqualified opinion on those statements.


/s/ Price Waterhouse LLP
<PAGE> 12(a)

               Report of Ernst & Young LLP, Independent Auditors


Board of Directors and Shareholders
Santa Fe Financial Corporation

We have audited the accompanying statement of income, shareholders' equity and 
cash flows for the year ended December 31, 1996 of Santa Fe Financial 
Corporation.  These financial statements are the responsibility of the 
Company's management.  Our responsibility is to express an opinion on these 
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the consolidated financial 
statements are free of material misstatement.  An audit includes examining, on 
a test basis, evidence supporting the amounts and disclosures in the financial 
statements.  An audit also includes assessing the accounting principles used 
and significant estimates made by management, as well as evaluating the 
overall financial statement presentation.  We believe that our audit provides 
a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in 
all material respects, the consolidated results of operations and cash flows 
for the year ended December 31, 1996 of Santa Fe Financial Corporation, 
in conformity with generally accepted accounting principles. 


                                                       /s/ ERNST & YOUNG LLP


San Diego, California
February 21, 1997

<PAGE> 13
<TABLE>
<CAPTION>

SANTA FE FINANCIAL CORPORATION

Balance Sheet
------------------------------------------------------------------------------

                                                         December 31, 1997
                                                         -----------------
<S>                                                         <C> 
Assets

  Cash and cash equivalents                                 $    382,021
  Restricted cash                                                129,264
  Investment in marketable securities                         14,438,617
  Investment in Justice Investors                              5,605,110
  Rental property                                              1,917,021
  Other investments                                              352,432
  Note receivables                                               275,888  
  Other Assets                                                   356,663
                                                              ----------
    Total assets                                            $ 23,457,016
                                                              ==========


Liabilities and Shareholders' Equity

Liabilities
  Due to securities broker                                  $  5,666,507
  Mortgage payable                                             1,246,613 
  Accounts payable and accrued expenses                          223,044
  Other liabilities                                              233,621
                                                              ----------
    Total liabilities                                          7,369,785
                                                              ----------
  Minority interest                                            3,403,939      
                                                              ----------

Commitments and contingencies

Shareholders' equity:
  6% Cumulative, convertible, voting preferred
    stock, par value $.10 per share
    Authorized shares - 1,000,000
    Issued and outstanding - 31,800
    Liquidation preference of $858,600                             3,180
  Common stock, par value $.10 per share
    Authorized shares - 2,000,000
    Issued and outstanding - 638,019                              63,802
  Additional paid-in-capital                                   8,807,942
  Unrealized gain on investment securities,
    net of deferred taxes                                        187,269
  Retained earnings                                            3,621,099
                                                              ----------
    Total shareholders' equity                                12,683,292
                                                              ----------

    Total liabilities and shareholders' equity              $ 23,457,016
                                                              ==========

See accompanying notes to financial statements.
</TABLE>

<PAGE> 14
<TABLE>
<CAPTION>


SANTA FE FINANCIAL CORPORATION.

Statements of Income
------------------------------------------------------------------------------


                                                           Years ended
                                                           December 31, 
                                                      1997            1996
                                                  -----------     -----------
<S>                                               <C>             <C>
Revenues                                         
  Equity in net income of Justice Investors       $ 2,560,805     $ 1,860,190
  Dividend and interest income                        824,524         610,878
  Net investment losses                              (539,615)        (32,514)
  Other income                                        202,502         113,506
                                                    ---------       ---------
                                                    3,048,216       2,552,060
                                                    ---------       ---------

Costs and expenses 
  Litigation                                          265,863         440,235
  General and administrative                          597,390         419,187
  Professional and outside services                   175,270          92,137
  Margin interest expense                             134,298               -
  Depreciation expense                                  3,885           7,847
                                                    ---------       ---------
                                                    1,176,706         959,406
                                                    ---------       ---------
Income before taxes and minority interest           1,871,510       1,592,654

Income taxes                                          831,993         671,494
                                                    ---------       ---------
Income before minority interest                     1,039,517         921,160

Minority interest                                     448,168         360,477
                                                    ---------       ---------
Net income                                         $  591,349      $  560,683
                                                    =========       =========
  Basic earnings per share                         $     0.93      $     0.90
                                                    =========       =========

  Weighted average number of shares outstanding       638,019         620,559
                                                    =========       =========

See accompanying notes to financial statements

</TABLE>

<PAGE> 15
<TABLE>
<CAPTION>

SANTA FE FINANCIAL CORPORATION

Statement of Shareholders' Equity
-----------------------------------------------------------------------------------------------

             Preferred Stock          Common Stock             
             -------------------------------------              Unrealized
             Shares               Shares            Additional  gain on    
             out-                 out-              paid-in     marketable   Retained
             standing  Amount    standing  Amount   capital     securities   earnings    Total
             
             
             ------------------------------------------------------------------------------------
<S>           <C>       <C>      <C>      <C>      <C>          <C>      <C>         <C>
Balance at  
December 31,
1995             -         -     548,019  $54,802  $5,856,137   $    -   $2,606,077  $ 8,517,016

Issuance
of common
stock                             90,000    9,000   2,421,000                          2,430,000

Net income                                                                  560,683      560,683

Dividends  
paid                                                                       (137,010)    (137,010)
Increase in
unrealized
gain on
marketable
securities,
net of tax                                                      203,991                  203,991
             
             
            ------------------------------------------------------------------------------------
 
Balance at
December 31,
1996               -         -   638,019   63,802   8,277,137   203,991   3,029,750   11,574,680


Issuance of
preferred
stock          31,800    3,180                        855,420                            858,600

Purchase and
retirement of
Portsmouth
Square,Inc.
stock                                              (324,615)                            (324,615)

Net income                                                                591,349        591,349

Decrease in
unrealized
gain on
marketable
securities,
net of tax                                                     (16,722)                  (16,722)
             
              
             -----------------------------------------------------------------------------------
Balance at
December 31,
1997           31,800  3,180  638,019  $63,802   $8,807,942   $187,269   $3,621,099  $12,683,292
             
              
             -----------------------------------------------------------------------------------
                             

See accompanying notes to financial statements.
</TABLE>

<PAGE> 16
<TABLE>
<CAPTION>

SANTA FE FINANCIAL CORPORATION

Statements of Cash Flows
------------------------------------------------------------------------------

                                                     For the years ended
                                                         December 31,
                                                   1997               1996
                                                -----------       -----------
<S>                                             <C>               <C>
Operating activities
Net income                                      $   591,349       $   560,683
Adjustments to reconcile net income to
  net cash used by operating activities:
    Equity in net income of Justice Investors    (2,560,805)       (1,860,190)
    Minority interest                               448,168           360,477
    Amortization of excess of market value
      Over carrying value                           (88,706)          (88,706)
    Depreciation                                      3,885             7,847
    Loss on fixed asset disposal                        154                 -
    Net investment losses                           539,615            32,514
    Change in operating assets and liabilities:
      Other assets                                  (80,338)         (156,968)
      Accounts payable and accrued expenses             808            33,526
      Other liabilities                               3,086            (3,063)
                                                 ----------        ---------- 
       Net cash used in operating activities     (1,142,784)       (1,113,880)


Investing activities
Cash distributions from Justice Investors         2,196,180         1,254,960
Purchase of investment securities               (31,338,454)      (11,692,895)
Purchase of other investments                      (400,000)                -
Proceeds from sales of investment securities     25,690,738         2,532,702
Purchases of property, furniture and equipment            -            (3,392)
Purchase of interest in Woodland Village, Inc.
  consolidation of cash balance at 12/31/97          25,599                 -
                                                 ----------         ---------
    Net cash used in investing activities        (3,825,937)       (7,908,625)
                                                 ----------         ---------

Financing activities
Increase in due to securities broker              5,666,507                -
Purchase and retirement of common stock            (324,615)               -
Notes receivables                                    14,794            15,073
Proceeds from the issuance of common stock                -         2,430,000
Dividends paid                                            -          (137,010)
Dividends paid to minority shareholders of
  Portsmouth Square, Inc.                          (133,295)         (175,011)
                                                 ----------        ---------- 
    Net cash provided by financing activities     5,223,391         2,133,052
                                                 ----------         ---------
Net increase (decrease) in cash and 
  cash equivalents                                  254,670        (6,889,453)
Cash and cash equivalents at the
  beginning of the year                             127,351         7,016,804
                                                 ----------        ----------
Cash and cash equivalents at end of year        $   382,021       $   127,351
                                                 ==========        ==========

Supplemental information
Income taxes paid, net of refunds               $   815,000       $   685,003
                                                 ==========        ==========
Margin interest paid                            $   134,298       $         -
                                                 ==========        ==========
Noncash activities
  Issuance of preferred stock in 
    exchange for Woodland                       $   858,600       $         -
                                                 ==========        ==========


See accompanying notes to financial statements.  

</TABLE>

<PAGE> 17


SANTA FE FINANCIAL CORPORATION

Notes to the Consolidated Financial Statements
------------------------------------------------------------------------------

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Description of Business 

Santa Fe Financial Corporation's (the Company) operations have been primarily 
limited to partnership income from its investment in Justice Investors (see 
Note 3) and income from various investment activities.  On December 31, 1997, 
the Company acquired a controlling 55.4% interest in Intergroup Woodland 
Village, Inc. (Woodland) from a related party (See Note 10), The InterGroup 
Corporation (InterGroup).  Woodland's major asset is a 100-unit apartment 
complex located in Cincinnati, Ohio. 


Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its 
65.5% owned subsidiary, Portsmouth Square, Inc. (PSI), and its 55.4% owned 
subsidiary, Woodland Village, Inc.  All material intercompany accounts and 
transactions have been eliminated in consolidation.

The acquisition of PSI was accounted for as a purchase and the assets and 
minority interest of PSI were recorded at their fair values.  The Company's 
cost was less than its pro rata interest in the fair value of PSI's net assets 
by approximately $3.6 million. The excess of fair value over the allocated 
carrying amount of the investment in PSI is being amortized to other income 
over 40 years.  The remaining unamortized amount at December 31, 1997 and 1996 
was approximately $2.7 million and $2.8 million respectively.

The Company acquired Woodland on December 31, 1997 and accounted for the 
transaction under the purchase method of accounting.  Therefore, Woodland's 
revenues and expenses for 1997 and 1996 are not included in the Company's 
consolidated statements of income.  The December 31, 1997 balances of 
Woodland's asset and liability accounts are included in the consolidated 
balance sheet.  


Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with maturity of three 
months or less when purchased to be cash equivalents.  Restricted cash is 
comprised of amounts held by lenders for payment of real estate taxes, 
insurance, repairs and replacements of the rental property, and tenant 
security deposits.

Investment in Marketable Securities

The Company has classified its portfolio of marketable investment securities 
as available-for-sale and reported it at fair value, as primarily determined 
by quoted market prices, with unrealized gains and losses, net of deferred 
taxes, reported in a separate component of shareholders' equity.  Any 
unrealized gains or losses related to "naked" short positions are recognized 
in earnings in the current period. The Company borrows funds from securities 
brokers to purchase marketable securities under standard margin agreements.

The cost of securities sold is based on the first-in, first out basis. 
Realized gains and losses are included in net investment income losses.   
Interest on securities classified as available-for-sale is included in 
investment and interest income.

<PAGE> 18

Rental Property

Rental property is stated at cost.  Depreciation of rental property is 
provided on the straight-line method based upon estimated useful lives of five 
to forty years for buildings and improvements and five to ten years for 
equipment.  Expenditures for repairs and maintenance are charged to expense as 
incurred and major improvements are capitalized.

The carrying value of real estate is assessed regularly by management based on 
operating performance of  the property, including the review of occupancy 
levels, operating budgets, estimated useful life and estimated future cash 
flows.  An impairment loss would be recognized when the sum of the expected 
future net cash flows is less than the carrying amount of the asset.  No such 
impairment losses have been recognized.

Furniture and Fixtures

Furniture and fixtures are stated on the basis of cost.  Depreciation is 
computed by the straight-line method over the estimated useful lives of the 
assets, which range from three to five years.

Revenue Recognition

During 1997 and 1996, the major source of the Company's revenue was its 49.8% 
interest in Justice Investors, a limited partnership which owns and leases a 
hotel in San Francisco, California in which the Company's subsidiary, PSI, is 
both a limited and general partner.  PSI and the Company account for the 
investment on the equity basis.

Earnings per Share

Effective December 31, 1997, the Company adopted a new accounting standard 
which replaces retroactively the presentation of primary earnings per share 
(EPS) and fully diluted EPS.  The new basic EPS represents net income divided 
by the weighted average common shares outstanding during the period excluding 
any potential dilutive effects.  Diluted EPS gives effect to all potential 
issuances of common stock that would have caused basic EPS to be lower as if 
the issuance had already occurred.  As of December 31, 1997 and 1996, the 
Company did not have any potentially dilutive securities outstanding.

Accounting Standard on Impairment of Long-Lived Assets

During 1996, the Company adopted an accounting standard for the impairment of 
long-lived assets and for long-lived assets to be disposed of.  This standard 
requires the Company to record impairment losses on long-lived assets used in 
operations when indicators of impairment are present and the undiscounted 
cash 
flows estimated to be generated by those assets are less than their carrying 
amount.  There was no effect on the financial statements from the adoption of 
this standard.

Use of Estimates

The preparation of financial statements in conformity with generally accepted 
accounting principals requires management to make estimates and assumptions 
that affect the reported amounts of assets and liabilities and disclosure of 
contingent assets and liabilities at the date of the financial statements and 
the reported amounts of revenues and expenses during the reporting period.  
Actual results could differ from the estimates.

<PAGE> 19

Income Taxes

Deferred income taxes are determined using the liability method.  A deferred 
tax asset or liability is determined based on the difference between the 
financial statement and tax basis of assets and liabilities as measured by the 
enacted tax rates which will be in effect when these differences reverse.  
Deferred tax expense is the result of changes in the asset and /or liability 
for deferred taxes.

Reclassifications

Certain prior year balances have been reclassified to conform to the current 
year presentation.


NOTE 2 - INVESTMENT IN MARKETABLE SECURITIES

The following is a summary of the Company's investment in marketable 
securities:
<TABLE>
<CAPTION>

                                        Gross          Gross
                                     Unrealized      Unrealized       Fair
                          Cost          Gains          Losses         Value
                       ----------    ----------      ----------     ---------
<S>                   <C>            <C>           <C>            <C> 
December 31, 1997
Equity securities     $11,511,052    $1,527,232    $(1,341,717)   $11,696,567
Mutual funds              634,431         7,955              -        642,386
Corporate bonds         1,827,369       127,406         (5,985)     1,948,790
Government debt
 securities               152,933           246         (2,305)       150,874
                       ----------     ---------      ---------     ----------
                      $14,125,785    $1,662,839    $(1,350,007)   $14,438,617
                       ==========     =========      =========     ==========



                                        Gross          Gross
                                     Unrealized      Unrealized       Fair
                          Cost          Gains          Losses         Value
                       ----------    ----------      ----------     --------- 
December 31, 1996
Equity securities     $ 4,441,423    $  319,531    $   (89,176)   $ 4,671,778
Corporate bonds         4,279,664       135,981        (23,761)     4,391,884
Government debt
 securities               246,595           645         (2,450)       244,790
                       ----------     ---------      ---------     ----------
                      $ 8,967,682    $  456,157    $  (115,387)   $ 9,308,452
                       ==========     =========      =========     ==========
</TABLE>


Gross realized gains and losses on sales of investments totaled $1,364,437 and 
$1,904,052 respectively, during the year ended December 31, 1997, and $126,062 
and $158,576, respectively, during the year ended December 31, 1996.  At 
December 31, 1997, the Company had short investment positions totaling 
approximately $1,863,000, all of which were covered by long positions.

<PAGE> 20

The amortized cost and fair value of debt securities at December 31, 1997, by 
contractual maturity, are shown below:

                                                    Cost        Fair Value
                                                  ---------      ----------
 Due in one year or less                         $  738,822      $  794,313 
 Due after one year through five years              291,389         292,740
 Due after five years through ten years             533,648         578,350
 Due after ten years                                416,443         425,261
                                                  ---------       ---------
                                                 $1,980,302      $2,099,664
                                                  =========       =========


NOTE 3 - INVESTMENT IN JUSTICE INVESTORS

The major source of revenue of PSI is its 49.8% interest in Justice Investors, 
a limited partnership which owns and leases a hotel in San Francisco, 
California, and in which PSI is both a limited and general partner.  PSI 
records its investment on the equity basis. Condensed financial statements for 
Justice Investors are presented below.
<TABLE>
<CAPTION>

                              CONDENSED BALANCE SHEETS
          
                                                             December 31,
                                                          1997         1996
                                                          ----         ----
<S>                                                    <C>          <C>
Assets

Total current assets - Note A                          $  500,374   $  420,220
Property, plant and equipment, net of accumulated
 depreciation of $10,607,195 in 1997 and
 $10,188,059 in 1996                                    5,968,488    6,220,506
Loan fees and deferred lease costs, net of accumulated
 amortization of $85,741 in 1997 and $54,696 in 1996      224,671      255,716
                                                        ---------    ---------
                                                       $6,693,533   $6,896,442
                                                        =========    =========

Liabilities and partners' equity
Total current liabilities                              $  293,166   $  568,093
Long-term liabilities - Note B                          2,624,127    3,284,288
Partners' capital - Note C                              3,776,240    3,044,061
                                                        ---------    ---------
                                                       $6,693,533   $6,896,442
                                                        =========    =========


                         CONDENSED STATEMENTS OF OPERATIONS
          
                                                            December 31,
                                                         1997          1996
                                                         ----          ----
Revenues - Note A                                      $6,194,532   $4,758,778
Costs and expenses                                      1,052,354    1,023,457
                                                        ---------    ---------
 Net income                                            $5,142,178   $3,735,321
                                                        =========    =========
</TABLE>

<PAGE> 21

Note A - Revenues include $1,212,491 and $1,116,019 for the years ended 
December 31, 1997 and 1996, respectively, of garage rental income from the 
garage lessee who is also the managing general partner of Justice Investors.

Justice Investors and the hotel lessee entered into a new lease agreement 
effective January 1, 1995.  The hotel lease provides for Justice Investors to 
receive 20% of hotel room revenue, as defined in the lease, or an annual 
minimum guaranteed rent of $2,500,000 plus 50% of available cash, as defined 
in the lease, and expires December 31, 2004, with a five-year renewal option.  
The parking garage lease for which revenue is based upon a percentage of 
parking receipts, expires on November 30, 2010.

Note B - During 1995, Justice Investors refinanced its long-term debt 
obligations.  The long-term debt at December 31, 1997 and 1996 consists of a 
revolving, reducing line of credit agreement payable to Wells Fargo Bank.  The 
line of credit is collateralized by a trust deed on land, hotel property and 
the Partnership's interest in hotel and garage leases.  The line of credit 
agreement provides for maximum borrowings at December 31, 1997 of 
approximately $7,100,000 with an annual reduction of the maximum borrowings to 
approximately $4,500,000 at the December 31, 2004 maturity date and generally 
provides for interest at LIBOR plus 2% per annum (the annual rate on 
$4,000,000 of principal is guaranteed not to exceed 11.5%).

Note C - During each of the years ended December 31, 1997 and 1996, total 
annual distributions to partners amounted to approximately $4,410,000 and 
$2,520,000, respectively.


NOTE 4 - RENTAL PROPERTY

At December 31, 1997, rental property consisted of a 100-unit apartment 
complex named Woodland Apartments located in Cincinnati, Ohio and which is 
held by the Company's 55.4%-owned subsidiary Woodland.  The property is 
accounted for at cost and includes the following:

                                            December 31, 
                                               1997
                                            ------------

Investment in real estate:
  Land                                      $   283,476
  Buildings, improvements and equipment       2,920,653
  Accumulated depreciation on buildings,
    improvements and equipment               (1,287,108)
                                              ---------
                                             $1,917,021
                                              =========


NOTE 5 - DUE TO SECURITIES BROKER
Various securities brokers have advanced funds for the purchase of marketable 
securities under standard margin agreements.  The interest rate on advances or 
cash on deposit can vary daily with money market rates.  The interest rate on 
margin balances is based on the Federal Funds rate plus 0.875% (7.625% at 
December 31, 1997).  The interest rate on cash or deposits is based on the 
Federal Funds rate less 0.5% (6.25% at December 31, 1997).  The interest rate 
on interest rebates in connection with short positions is based on the Federal 
Funds rate less 0.375% (6.375% at December 31, 1997).

<PAGE> 22

NOTE 6 - MORTGAGE NOTE PAYABLE

At December 31, 1997, the balance on Woodland's mortgage note payable was 
$1,246,613.  The mortgage is collateralized by a trust deed on the apartment 
complex.  Principal and interest payments of $11,133 are required monthly 
until maturity in July of 2004.  The fixed interest rate on the loan is 
9.25%.  The annual principal payments on the mortgage note payable for the 
five-year period commencing January 1, 1998 are approximately as follows:

          Year ending December 31,
          ------------------------
                   1998                $    19,000
                   1999                     21,000
                   2000                     23,000
                   2001                     25,000
                   2002                     28,000
                Thereafter               1,131,000
                                         ---------
                            Total       $1,247,000
                                         =========
 
               


NOTE 7 - INCOME TAXES:

The Company and PSI file separate tax returns for both federal and state 
purposes.  The provision for income taxes (primarily based on the operations 
of PSI), consist of the following:


                                                           Year ended
                                                           December 31,
                                                       1997            1996
                                                       ----            ----
 Federal                                            
   Current                                         $  689,632      $  524,879
   Deferred (credit)                                  (53,883)         (9,848)
                                                    ---------       ---------
                                                      635,749         515,031
                                                    =========       =========
   
 State
   Current                                            207,398         157,061
   Deferred (credit)                                  (11,154)           (598)
                                                    ---------       ---------
                                                      196,244         156,463
                                                    ---------       ---------
                                                   $  831,993      $  671,494
                                                    =========       =========

A reconciliation of the statutory federal income tax rate to the effective tax 
rate is as follows:

                                                              Year ended
                                                             December 31,
                                                          1997         1996
                                                          ----         ----
  Statutory federal tax rate                              34.0%        34.0%
  State income taxes, net of federal tax benefit           6.9          6.5
  Operating losses for which no tax benefit is derived     1.7            -
  Other                                                    1.9          1.7
                                                          ----         ----
          Effective tax rate                              44.5%        42.2%
                                                          ====         ====
<PAGE> 23

The components of the Company's deferred tax assets and liabilities as of 
December 31, 1997 and 1996 are as follows:

                                                   December 31, 
                                               1997            1996
                                               ----            ----
 Deferred tax assets                       
  Net operating loss carryforwards          $ 595,500       $ 479,800
  State income taxes                           70,515          53,345
  Capital loss carryforwards                  229,643          13,051
  Other miscellaneous differences               9,406          23,882
                                              -------         -------
 Gross deferred tax asset                     905,064         570,078
  Valuation allowance-deferred tax assets    (782,894)       (512,945)
                                              -------         -------
 Net deferred tax asset                     $ 122,170       $  57,133
                                              =======         =======
 Deferred tax liabilities                 
  Unrealized gain on marketable securities  $ 125,564       $ 136,777
                                              =======         ======= 

At December 31, 1997, the Company had net operating losses available for 
carryforward for federal and state income tax purposes of approximately 
$1,666,897 and $309,198, respectively.  The federal income tax loss 
carryforward will begin expiring in 2004, unless previously utilized.  In 
1993, California reduced the carryover period allowed for utilization of net 
operating loss carryovers from 15 years to 5 years.  Accordingly, the 
California tax loss carryforward began expiring in 1995.  The realization of 
future benefits from net operating loss carryforwards may be limited under the 
Internal Revenue Code if certain cumulative changes occur in the Company's 
ownership.  The Company has recorded a valuation allowance against those 
deferred tax assets which, in management's estimation, may not be realizable.


NOTE 8 - COMMITMENTS:

The Company has an operating lease agreement for office space through June 30, 
1999.  The agreement provides for an annual rent increase based on changes in 
the Consumer Price Index, not to exceed 5%.  At December 31, 1997, minimal 
rental payments due under the lease are as follows:

           1998                $ 33,600
           1999                  16,900
                                -------
                               $ 50,500
                                =======

Rent expense for the years ended December 31, 1997 and 1996 totaled 
approximately $33,600 and $35,000 respectively.

<PAGE> 24

NOTE 9 - SHAREHOLDERS' EQUITY

On August 12, 1997, shareholders approved an Amendment of the Company's 
Articles of Incorporation to increase the number of  authorized shares to 
3,000,000, which included 2,000,000 shares of common stock at $.10 par value 
and 1,000,000 shares of preferred stock at $.10 par value.  The Amendment was 
filed with the Nevada Secretary of State on December 4, 1997.

On December 31, 1997, the Company issued 31,800 shares of 6% cumulative, 
convertible voting preferred stock in exchange for a 55.4% interest in 
Woodland  from InterGroup.  The Preferred Stock has a liquidation preference 
of $27.00 per share.  Each share of preferred stock is convertible into one 
share of restricted $.10 par value common stock at an exercise price of 
$27.00, with an eight year conversion exercise period.  The preferred stock 
has voting rights as if converted into common stock. 


NOTE 10 - RELATED PARTY TRANSACTIONS

As of December 31, 1997, InterGroup owned 38.6% of the Company's outstanding 
common stock and 100% of the Company's preferred stock for a total of 41.6% of 
all outstanding voting stock.  In addition, the chairman and president of 
InterGroup, who is also the Company's chairman and chief executive officer, 
owned 3.9% of the Company's outstanding common stock at December 31, 1997.  
During 1997, the Company purchased an interest in Woodland from InterGroup 
(See Note 1).  At December 31, 1997, the Company had a receivable of  $27,200 
from InterGroup relating to this transaction.  Certain costs and expenses of 
InterGroup are allocated to the Company and its subsidiary, PSI, based on 
InterGroup's management's estimate of the pro rata utilization of resources.  
In 1997, these expenses were approximately $149,000.    


NOTE 11 - COMMITMENTS AND CONTINGENCIES

During 1997, the Company and the director defendants prevailed in their defense 
of a shareholders' derivative suit related to the private placement of 90,000 
shares of common stock and warrants for the purchase of an additional 90,000 
shares to InterGroup.  As prevailing parties, the Company and the director 
defendants made application to the Superior Court for recovery of the 
attorney's fees and costs expended in the successful defense of this 
litigation.  During March 1998, the trial court entered a judgment in favor of 
the Company and the director defendants and granted the applications for 
attorneys' fees and costs in the total amount of approximately $936,000.  It 
is expected that the plaintiffs will appeal that award.

During 1996, the Company's subsidiary, PSI, was served with a personal injury 
action in the San Francisco Superior Court.  The suit names more than 60 
defendants, including the managing general partner of Justice Investors and 
alleges injuries suffered as a result of exposure to asbestos-containing 
materials.  The complaint seeks an unspecified amount of damages.  PSI's 
insurance carrier is defending PSI  under a reservation of rights.  During 
1997, the trial court granted Portsmouth's motion for summary judgment; 
however a final judgment has not been entered to date.  Management of the 
Company believes that the ultimate resolution of this claim will not have a 
material adverse effect on the Company's consolidated financial position.

<PAGE>


                                SIGNATURES
                                ----------

   Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the registrant has duly caused this amendment to this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

                                      SANTA FE FINANCIAL CORPORATION


Date:  April 1, 1998               By /s/ John V. Winfield
       --------------                 ----------------------------------------
                                      John V. Winfield, Chairman of the Board,
                                      President and Chief Executive Officer

   Pursuant to the requirements of the Securities Exchange Act of 1934, this 
amendment this report has been signed below by the following persons on 
behalf of the registrant and in the capacities and on the dates indicated.


Date: April 1, 1998                   /s/ John V. Winfield
      --------------                  ---------------------------------------
                                      John V. Winfield, Chairman of the Board,
                                      President and Chief Executive Officer

Date: April 1, 1998                   /s/ L. Scott Shields
      --------------                  ---------------------------------------
                                      L. Scott Shields, Treasurer
                                      and Chief Financial Officer


Date: April 1, 1998                   /s/ John C. Love
      --------------                  ---------------------------------------
                                      John C. Love,
                                      Director


Date: April 1, 1998                   /s/ William J. Nance,
      --------------                  ---------------------------------------
                                      William J. Nance,
                                      Director