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 fiscal  quarter ended
                  March 31, 1998.

         [  ]     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 0-14599


              PLMTRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME
               FUND (Exact name of registrant as specified in its
                                    charter)


California                                           94-2946248
(State or other jurisdiction of                    (I.R.S. Employer
incorporation or organization)                    Identification No.)

One Market, Steuart Street Tower,
Suite 800, San Francisco, CA                            94105-1301
(Address of principal                                   (Zip Code)
executive offices)


       Registrant's telephone number, including area code: (415) 974-1399
                        ---------------------------------

         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>




             PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB INCOME FUND
                                 BALANCE SHEETS

<TABLE>
<CAPTION>


                                                                          March 31,             December 31,
                                                                             1998                   1997
                                                                       ---------------------------------------
<S>                                                                     <C>                     <C>           
Assets


Equipment held for operating leases, at cost                            $      288,612          $      304,133
Less accumulated depreciation                                                 (288,538)               (304,133)
                                                                      --------------------------------------------
    Net equipment                                                                   74                      --

Cash and cash equivalents                                                       50,510                 358,630
Accounts receivable, net of allowance for doubtful accounts of
      $1,527 in 1998 and $3,965 in 1997                                          8,209                  20,038
Prepaid insurance                                                                  305                     494
                                                                      --------------------------------------------

      Total assets                                                      $       59,098          $      379,162
                                                                      ============================================


Liabilities and capital


Liabilities:

Accounts payable and accrued expenses                                   $        5,334          $       18,311
Due to affiliates                                                                   --                   4,641
  Total liabilities                                                              5,334                  22,952

Capital:
Beneficiaries or limited partners (22,276 units)                                53,764                 356,210
Beneficiary or General Partner                                                      --                      --
                                                                      --------------------------------------------
  Total capital                                                                 53,764                 356,210
                                                                      --------------------------------------------

      Total liabilities and capital                                     $       59,098          $      379,162
                                                                      ============================================

</TABLE>


















                       See accompanying notes to financial
                                  statements.

 

<PAGE>




           PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
                              STATEMENTS OF INCOME
                      For the Three Months Ended March 31,

<TABLE>
<CAPTION>



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

<S>                                                                     <C>                 <C>         
Revenues

Lease revenue                                                           $     13,458        $     98,483
Interest and other income                                                      3,310               3,528
Net gain on disposition of equipment                                           1,366             114,482
                                                                      --------------------------------------
  Total revenues                                                              18,134             216,493

Expenses

Depreciation                                                                      --              23,510
Management fees to affiliate                                                      --              13,922
Repairs and maintenance                                                        2,173              16,249
Insurance expense                                                                189               1,057
General and administrative expenses to affiliates                              4,235               4,364
Other general and administrative expenses                                      7,792              27,185
Recovery of bad debts                                                         (2,439)               (106)
  Total expenses                                                              11,950              86,181

Net income                                                              $      6,184        $    130,312
                                                                      ======================================

Allocation of net income

Beneficiaries or limited partners                                       $      3,098        $    129,009
Beneficiary or General Partner                                                 3,086               1,303
                                                                      --------------------------------------

      Total                                                             $      6,184        $    130,312
                                                                      ======================================

Net income per weighted-average unit
      outstanding (22,276 units)                                        $       0.14        $       5.79
                                                                      ======================================

Cash distributions                                                      $         --        $     97,172
                                                                      ======================================

Cash distribution per weighted-average
      unit outstanding                                                  $         --        $       4.32
                                                                      ======================================

Special cash distributions                                              $    308,630        $         --
                                                                      ======================================

Special cash distribution per weighted-average
       unit outstanding                                                 $      13.72        $         --
                                                                      ======================================

Total cash distribution per weighted-average
       unit outstanding                                                 $      13.72        $       4.32
                                                                      ======================================

</TABLE>

                       See accompanying notes to financial
                                  statements.


<PAGE>




             PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB INCOME FUND
                        STATEMENTS OF CHANGES IN CAPITAL
             For the period from December 31, 1996 to March 31, 1998

<TABLE>
<CAPTION>




                                                      
                                                       Beneficiaries         Beneficiary
                                                         (formerly            (formerly
                                                         Limited               General
                                                        Partners)              Partner)                  Total
                                                    -----------------------------------------------------------------

<S>                                                    <C>                     <C>                     <C>           
Capital (deficit) as of December 31, 1996              $    578,736            $    (93,194)           $      485,542

Net income                                                  487,976                 100,371                   588,347

Cash distributions                                          (96,200)                   (972)                  (97,172)

Special distributions                                      (614,302)                 (6,205)                 (620,507)
                                                     -------------------------------------------------------------------

  Capital as of December 31, 1997                           356,210                      --                   356,210

Net income                                                    3,098                   3,086                     6,184

Special distributions                                      (305,544)                 (3,086)                 (308,630)
                                                     -------------------------------------------------------------------

  Capital as of March 31, 1998                         $     53,764            $         --            $       53,764
                                                     ===================================================================

</TABLE>
























                       See accompanying notes to financial
                                  statements.



<PAGE>




           PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
                            STATEMENTS OF CASH FLOWS
                      For the Three Months Ended March 31,

<TABLE>
<CAPTION>



                                                                           1998                   1997
                                                                       ------------------------------------
<S>                                                                     <C>                     <C>         
Operating activities
Net income                                                              $      6,184            $    130,312
Adjustments to reconcile net income
    to net cash provided by operating activities:
  Depreciation                                                                    --                  23,510
  Net gain on disposition of equipment                                        (1,366)               (114,482)
  Changes in operating assets and liabilities:
    Accounts receivable, net                                                   7,704                   8,190
    Prepaid insurance                                                            189                     686
    Accounts payable and accrued expenses                                    (12,977)                 (3,863)
    Due to affiliates                                                         (4,641)                     --
    Lessee deposits and engine reserves                                           --                  13,385
                                                                      -----------------------------------------
      Net cash (used in) provided by operating activities                     (4,907)                 57,738
                                                                      -----------------------------------------

Investing activities
Proceeds from disposition of equipment                                         5,417                 174,706
      Net cash provided by investing activities                                5,417                 174,706
                                                                      -----------------------------------------

Financing activities
Cash distributions paid to Beneficiaries (formerly limited
      partners)                                                             (305,544)                (96,200)
Cash distributions paid to Beneficiary (formerly General Partner)             (3,086)                   (972)
                                                                      -----------------------------------------
      Net cash used in financing activities                                 (308,630)                (97,172)
                                                                      -----------------------------------------

Net (decrease) increase in cash and cash equivalents                        (308,120)                135,272
Cash and cash equivalents at beginning of period                             358,630                 269,628
                                                                      -----------------------------------------
Cash and cash equivalents at end of period                              $     50,510            $    404,900
                                                                      =========================================

</TABLE>














                       See accompanying notes to financial
                                  statements.



<PAGE>



           PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
                          NOTES TO FINANCIAL STATEMENTS
                                 March 31, 1998

1.   Liquidation of the Partnership

     With  the  disposal  of  the  majority  of  the  equipment  portfolio,  the
     Partnership's remaining assets were transferred into a liquidating trust on
     January 1, 1998. The sole  Beneficiaries  of the liquidating  trust are the
     limited  partners and the General Partner.  The Trustees,  as designated by
     the General Partner, are three officers of the General Partner. The amounts
     reflected as assets and  liabilities of the Trust have not been adjusted to
     reflect  liquidation values. The equipment portfolio that is actively being
     marketed for sale by the  Trustees  continues to be carried at the lower of
     depreciated  cost or fair value less estimated  cost of disposal.  Although
     the Trustees estimate that there will be distributions to the Beneficiaries
     after final disposal of assets and settlement of  liabilities,  the amounts
     cannot  be  determined  prior to actual  disposal  of the  equipment.  Cash
     receipts (including proceeds from the sale of assets) in excess of expected
     obligations   and   reasonable   reserves  will  be   distributed   to  the
     Beneficiaries  in the  liquidating  trust  from time to time,  and not less
     often than annually. Upon final liquidation,  the liquidating trust will be
     dissolved.

     For tax purposes,  the  liquidating  trust will continue to be treated as a
     partnership under Internal Revenue Regulation Section  301.7701-3(b)(1)(i).
     Partnership  tax  returns  will be filed  until all the  liquidating  trust
     assets are distributed. 

     The Trustees  applied to the  Securities and Exchange  Commission  (SEC) to
     terminate the Trust's  obligation  to file future  reports on Form 10-Q and
     Form 10-K. If approved by the SEC, the Trustees will discontinue all future
     filings of these reports. 

2.   Opinion of Management

     In the  opinion  of the  Trustees,  the  accompanying  unaudited  financial
     statements  contain all  adjustments  necessary,  consisting  primarily  of
     normal recurring  accruals,  to present fairly the Trust's or Partnership's
     financial  position  as of  March  31,  1998 and  December  31,  1997,  the
     statements  of  operations  and cash flows for the three months ended March
     31, 1998 and 1997,  and the statements of changes in capital for the period
     from  December 31, 1996 to March 31,  1998.  Certain  information  and note
     disclosures   normally  included  in  financial   statements   prepared  in
     accordance  with  generally  accepted   accounting   principles  have  been
     condensed  or  omitted  from the  accompanying  financial  statements.  For
     further  information,  reference should be made to the financial statements
     and notes  thereto  included in the Annual Report on Form 10-K for the year
     ended December 31, 1997, on file at the Securities and Exchange Commission.

3.   Equipment

     The components of owned equipment are as follows:

<TABLE>
<CAPTION>

                                                         March 31,             December 31,

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


<S>                                                    <C>                      <C>          
Trailers                                               $     288,612            $     304,133
Less accumulated depreciation                               (288,538 )               (304,133 )
                                                     --------------------------------------------
    Net equipment                                      $          74            $          --
                                                     ============================================

</TABLE>

     All of the  equipment  owned by the Trust or  Partnership  was operating in
PLM-affiliated  short-term  rental  facilities as of March 31, 1998 and December
31, 1997.

  

<PAGE>




           PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
                          NOTES TO FINANCIAL STATEMENTS
                                 March 31, 1998

3.   Equipment (continued)

     During the first quarter of 1998, the Trust repossessed a trailer, that had
     been sold for a gain of $4,051 in 1997, due to a collection problem.

     During the three months ended March 31, 1998, the Trust sold or disposed of
     trailers  with an  aggregate  net book value of $0 for  proceeds of $5,417.
     During the three  months  ended March 31,  1997,  the  Partnership  sold or
     disposed of railcars, trailers, and marine containers with an aggregate net
     book value of $60,224 for proceeds of $174,706.

4.   Cash Distributions

     The Trust paid special  distributions of $13.72 per  weighted-average  unit
     during the first quarter of 1998. The Partnership  paid cash  distributions
     of $4.32 per weighted-average unit during the first quarter of 1997.




<PAGE>




           PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
                             (A Limited Partnership)
                                 BALANCE SHEETS
<TABLE>
<CAPTION>


                                                                         March 31,             December 31,
                                                                            1998                   1997
                                                                       --------------------------------------
<S>                                                                     <C>                     <C>           
Assets


Equipment held for operating leases, at cost                            $      951,998          $    1,295,164
Less accumulated depreciation                                                 (946,948)             (1,291,640)
                                                                      -------------------------------------------
    Net equipment                                                                5,050                   3,524

Cash and cash equivalents                                                      131,076                 191,228
Accounts receivable, net of allowance for doubtful accounts of
      $3,695 in 1998 and $3,227 in 1997                                         14,841                  25,630
Prepaid insurance                                                                  559                     913
                                                                      -------------------------------------------

      Total assets                                                      $      151,526          $      221,295
                                                                      ===========================================


Liabilities and partners' capital


Liabilities:
Accounts payable and accrued expenses                                   $        4,595          $        9,928
Due to affiliates                                                                7,026                   7,026
  Total liabilities                                                             11,621                  16,954

Partners' capital:
Limited partners (33,727 units)                                                139,905                 204,341
General Partner                                                                     --                      --
                                                                      -------------------------------------------
  Total partners' capital                                                      139,905                 204,341
                                                                      -------------------------------------------

      Total liabilities and partners' capital                           $      151,526          $      221,295
                                                                      ===========================================

</TABLE>


















                       See accompanying notes to financial
                                  statements.

 

<PAGE>



           PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
                             (A Limited Partnership)
                              STATEMENTS OF INCOME
<TABLE>
<CAPTION>

                                                                                         For the Three Months
                                                                                           Ended March 31,

                                                                                        1998              1997
                                                                                  ----------------------------------
<S>                                                                                  <C>                <C>          
Revenues
Lease revenue                                                                        $     30,716       $      72,195
Interest and other income                                                                   2,636               4,318
Net gain on disposition of equipment                                                       58,617              40,958
                                                                                    ------------------------------------
  Total revenues                                                                           91,969             117,471

Expenses
Depreciation                                                                                  109              55,082
Management fees to affiliate                                                               21,079              21,079
Repairs and maintenance                                                                     4,609              14,825
Insurance expense                                                                             354               1,431
General and administrative expenses to affiliates                                           9,029              23,305
Other general and administrative expenses                                                   6,723              12,760
Provision for (recovery of) bad debts                                                         468                 (21)
                                                                                    ------------------------------------
  Total expenses                                                                           42,371             128,461

Equity in net income of unconsolidated special-purpose entities                            27,196              12,956
                                                                                    ------------------------------------

      Net income                                                                     $     76,794       $       1,966
                                                                                    ====================================

Partners' share of net income
Limited partners                                                                     $     75,382       $       1,946
General Partner                                                                             1,412                  20
                                                                                    ------------------------------------

      Total                                                                          $     76,794       $       1,966
                                                                                    ====================================

Net income per weighted-average limited partnership
      unit (33,727 units)                                                            $       2.24       $        0.06
                                                                                    ====================================

Cash distributions                                                                   $         --       $      75,660
                                                                                    ====================================

Cash distribution per weighted-average
   limited partnership unit                                                          $         --       $        2.22
                                                                                    ====================================

Special cash distributions                                                           $    141,230       $     100,000
                                                                                    ====================================

Special cash distributions per weighted-average
   limited partnership unit                                                          $       4.15       $        2.94
                                                                                    ====================================

Total cash distributions per weighted-average
   limited partnership unit                                                          $       4.15       $        5.16
                                                                                    ====================================

</TABLE>



                       See accompanying notes to financial
                                  statements.

 

<PAGE>



             PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC INCOME FUND
                             (A Limited Partnership)
                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
               For the period from December 31, 1996 to March 31,
                                      1998

<TABLE>
<CAPTION>



                                                         Limited                 General
                                                         Partners                Partner                 Total
                                                     ---------------------------------------------------------------

<S>                                                    <C>                       <C>                    <C>           
Partners' capital (deficit) as of
      December 31, 1996                                $     913,500             $  (140,776)           $      772,724

Net income                                                   193,401                 149,893                   343,294

Cash distributions                                           (74,903)                   (757)                  (75,660)

Special distributions                                       (827,657)                 (8,360)                 (836,017)
                                                     --------------------------------------------------------------------

  Partners' capital as of December 31, 1997                  204,341                      --                   204,341

Net income                                                    75,382                   1,412                    76,794

Special distributions                                       (139,818)                 (1,412)                 (141,230)
                                                     --------------------------------------------------------------------

  Partners' capital at March 31, 1998                  $     139,905             $        --            $      139,905
                                                     ====================================================================

</TABLE>

























                       See accompanying notes to financial
                                  statements.


<PAGE>




           PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
                             (A Limited Partnership)
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                               For the Three Months
                                                                                 Ended March 31,
                                                                            1998                  1997
                                                                       ------------------------------------
<S>                                                                     <C>                     <C>        
Operating activities
Net income                                                              $    76,794             $     1,966
Adjustment to reconcile net income to net cash
     provided by (used in) operating activities:
  Depreciation                                                                  109                  55,082
  Net gain on disposition of equipment                                      (58,617 )               (40,958)
  Equity in net income from unconsolidated special-purpose
      entity                                                                (27,196 )               (12,956)
  Changes in operating assets and liabilities
    Accounts receivable, net                                                 13,789                  11,215
    Prepaid insurance                                                           354                   1,006
    Accounts payable and accrued expenses                                    (5,333 )                (3,010)
                                                                      -----------------------------------------
Net cash (used in) provided by operating activities                            (100 )                12,345
                                                                      -----------------------------------------

Investing activities
Proceeds from disposition of equipment                                       53,982                  51,023
Distributions from unconsolidated special-purpose entity                     27,196                  39,706
                                                                      -----------------------------------------
Net cash provided by investing activities                                    81,178                  90,729
                                                                      -----------------------------------------

Financing activities
Cash distributions paid to limited partners                                (139,818 )              (173,903)
Cash distributions paid to General Partner                                   (1,412 )                (1,757)
                                                                      -----------------------------------------
Net cash used in financing activities                                      (141,230 )              (175,660)
                                                                      -----------------------------------------

Net decrease in cash and cash equivalents                                   (60,152 )               (72,586)
Cash and cash equivalents at beginning of period                            191,228                 416,360
                                                                      -----------------------------------------
Cash and cash equivalents at end of period                              $   131,076             $   343,774
                                                                      =========================================

Supplemental information
Sale proceeds included in accounts receivable                           $      3,000            $         --
                                                                      =========================================

</TABLE>













                       See accompanying notes to financial
                                  statements.


<PAGE>




           PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                 March 31, 1998

1.   Liquidation and Special Distributions

     During the first quarter of 1995, the  Partnership  completed its 10th year
     of  operations.  Since that date,  the General  Partner  has been  actively
     marketing the remaining  equipment  portfolio with the intent of maximizing
     sale proceeds. As sale proceeds are received the General Partner intends to
     periodically declare special  distributions to distribute the sale proceeds
     to the  partners.  During  the  liquidation  phase of the  Partnership  the
     equipment  will  continue to be leased under  operating  leases until sold.
     Operating cash flows, to the extent they exceed Partnership expenses,  will
     continue to be  distributed on a quarterly  basis to partners.  The amounts
     reflected  for  assets and  liabilities  of the  Partnership  have not been
     adjusted to reflect  liquidation  values. The equipment portfolio continues
     to be carried at the lower of depreciated cost or fair value less estimated
     cost to dispose.  Although the General Partner estimates that there will be
     distributions  after  liquidation  of assets and  liabilities,  the amounts
     cannot  be  accurately  determined  prior  to  actual  liquidation  of  the
     equipment.  Any excess proceeds over expected Partnership  obligations will
     be distributed  to the Partners  throughout the  liquidation  period.  Upon
     final liquidation, the Partnership will be dissolved.

     During the three  months ended March 31, 1998,  and 1997,  the  Partnership
     paid special distributions of $4.15 and $2.94 per weighted-average  limited
     partnership  unit,  respectively.  During the three  months ended March 31,
     1997,  the  Partnership  paid  regular  cash  distributions  of  $2.22  per
     weighted-average limited partnership unit. 

2.   Opinion of Management

     In the  opinion of the  management  of PLM  Financial  Services  Inc.,  the
     General Partner,  the accompanying  unaudited financial  statements contain
     all  adjustments  necessary,   consisting  primarily  of  normal  recurring
     accruals,  to present  fairly the  Partnership's  financial  position as of
     March 31, 1998 and  December 31, 1997,  the  statements  of income and cash
     flows  for the  three  months  ended  March  31,  1998  and  1997,  and the
     statements of changes in partners' capital for the period from December 31,
     1996 to March 31, 1998. Certain  information and note disclosures  normally
     included in financial  statements  prepared in  accordance  with  generally
     accepted  accounting  principles  have been  condensed  or omitted from the
     accompanying  financial  statements.  For  further  information,  reference
     should be made to the financial  statements  and notes thereto  included in
     the  Partnership's  Annual Report on Form 10-K for the year ended  December
     31, 1997, on file at the Securities and Exchange Commission.

3.   Equipment

     The components of owned equipment are as follows:

<TABLE>
<CAPTION>

                                                         March 31,              December 31,
                                                            1998                    1997
                                                     -----------------------------------------

<S>                                                    <C>                     <C>          
Trailers                                               $     951,998           $   1,295,164
Less accumulated depreciation                               (946,948)             (1,291,640 )
                                                     -------------------------------------------
     Net equipment                                     $       5,050           $       3,524
                                                     ===========================================
</TABLE>

     All  of  the  equipment   owned  by  the   Partnership   was  operating  in
PLM-affiliated  short-term  rental  facilities as of March 31, 1998 and December
31, 1997.

<PAGE>


           PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
                             (A Limited Partnership)
                          NOTES TO FINANCIAL STATEMENTS
                                 March 31, 1998

3.   Equipment (continued)

     During the three  months  ended March 31,  1998,  the  Partnership  sold or
     disposed of trailers  with a net book value of $0 for  proceeds of $56,982.
     During the three  months  ended March 31,  1997,  the  Partnership  sold or
     disposed  of  trailers  with a net book value of $10,065  for  proceeds  of
     $51,023.

4.   Investment in Unconsolidated Special Purpose Entity

     The net investment in unconsolidated special-purpose entity consisted of an
     80%  interest in a commuter  aircraft as of March 31, 1998 and December 31,
     1997.  As of March 31, 1998 and December  31,  1997,  the net book value of
     this investment was $0.

     Subsequent Event

     During May of 1998, the General Partner sold the commuter aircraft in which
     the  Partnership  owned an 80% interest  for proceeds of $391,820.  The net
     book value of this investment was $0.

  

<PAGE>




ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

(I) RESULTS OF OPERATIONS

Comparison of the Trust's Operating Results for the Three Months Ended March 31,
1998 and 1997

TEP VIIB:

(A)      Owned Equipment Operations

Lease  revenues less direct  expenses  (defined as repairs and  maintenance  and
asset specific insurance  expenses) on owned equipment decreased for the quarter
ended March 31, 1998 when  compared  to the same period of 1997.  The  following
table presents lease revenues less direct expenses by owned equipment type:

<TABLE>
<CAPTION>

                                                                             For the Three Months
                                                                               Ended March 31,

                                                                           1998                1997
                                                                      -----------------------------------
<S>                                                                     <C>                  <C>       
Trailers                                                                $    11,285          $   76,569
Railcar equipment                                                                --               3,565
Marine containers                                                                --               1,343

</TABLE>

Trailers:  Trailer lease  revenues and direct  expenses were $13,458 and $2,173,
respectively,  for the  quarter  ended March 31,  1998,  compared to $93,461 and
$16,892,  respectively,  during the same period of 1997.  The number of trailers
has been  declining  over the past twelve months due to sales and  dispositions.
The  result  of  this  declining  fleet  has  been a  decrease  in  trailer  net
contribution.

Railcar  equipment:  Railcar  lease  revenues and direct  expenses were zero for
quarter ended March 31, 1998, compared to $3,661 and $96,  respectively,  during
the same period of 1997. The decrease in railcar contribution  resulted from the
sale of all of the remaining railcars during 1997.

Marine containers: Marine container lease revenues and direct expenses were zero
for the quarter ended March 31, 1998, compared to $1,361 and $18,  respectively,
during the same period of 1997. The decrease in marine  containers  contribution
resulted from the sale of all of the remaining containers during 1997.

(B) Indirect Expenses Related to Owned Equipment Operations

Total  indirect  expenses  of $9,777  for the  quarter  ended  March  31,  1998,
decreased  from $69,175 for the same period in 1997.  Significant  variances are
explained as follows:

(a) A $23,510  decrease in depreciation  expenses  reflecting the disposition of
equipment  during  1998  and  1997  and  the  remaining  equipment  being  fully
depreciated.

(b) A  $19,522  decrease  in  general  and  administrative  expenses  was due to
decreased   accounting  costs  and  administrative  costs  associated  with  the
short-term  rental  facilities due to decreased volume of trailers  operating in
these facilities.

(c) A $13,922  decrease in management  fees to affiliates due to the transfer of
the remaining assets into a liquidating  trust. The Trustees are not entitled to
a management fee.

(d) A $2,333 decrease in bad debt expense primarily reflecting the Partnership's
recovery of certain receivable balances previously reserved for as bad debts.



<PAGE>



(C)  Net Gain on Disposition of Equipment

For the quarter ended March 31, 1998, the Trust realized a gain of $1,366 on the
sale or  disposition  of trailers.  For the quarter  ended March 31,  1997,  the
Partnership  realized a gain of $114,482 on the sale or disposition of trailers,
railcars and marine containers.

(D) Net Income

As a result of the  foregoing,  the net income of $6,184 in the first quarter of
1998  decreased  from net income of $130,312 in the first  quarter of 1997.  The
Trust's  ability to operate or liquidate  assets,  secure  leases,  and re-lease
those assets whose leases  expire during the duration of the Trust is subject to
many factors,  and the Trust's  performance  in the first quarter of 1998 is not
necessarily  indicative of future  periods.  In the first  quarter of 1998,  the
Trust distributed $305,544 to the beneficiaries,  or $13.72 per weighted-average
unit.

TEP VIIC:

(A)      Owned Equipment Operations

Lease  revenues less direct  expenses  (defined as repairs and  maintenance  and
asset specific insurance  expenses) on owned equipment decreased for the quarter
ended March 31, 1998 when  compared  to the same period of 1997.  The  following
table presents lease revenues less direct expenses by owned equipment type:

<TABLE>
<CAPTION>

                                                                             For the Three Months
                                                                               Ended March 31,

                                                                           1998                1997
                                                                      -----------------------------------
<S>                                                                     <C>                 <C>       
Trailers                                                                $   26,107          $   55,187
Marine containers                                                               --               1,298

</TABLE>

Trailers:  Trailer lease  revenues and direct  expenses were $30,716 and $4,609,
respectively,  for the  quarter  ended March 31,  1998,  compared to $70,855 and
$15,668, respectively during the same period during 1997. The number of trailers
owned by the  Partnership  has been declining over the past twelve months due to
sales and  dispositions.  The result of this declining fleet has been a decrease
in trailer net contribution.

Marine containers: Marine container lease revenues and direct expenses were zero
for the quarter ended March 31, 1998,  compared to $1,340 and $42,  respectively
during  the  same  period  during  1997.  The  decrease  in  marine   containers
contribution  resulted from the sale of all of the remaining  containers  during
1997.

(B) Indirect Expenses Related to Owned Equipment Operations

Total  indirect  expenses  of $37,762  for the  quarter  ended  March 31,  1998,
decreased from $112,751 for the same period in 1997.  Significiant variances are
explained as follows:

(a) A $54,973  decrease in depreciation  expenses  reflecting the disposition of
certain assets during 1998 and 1997.

(b) A  $20,313  decrease  in the  general  and  administrative  expenses  due to
decreased   accounting  costs  and  administrative  costs  associated  with  the
short-term  rental  facilities due to decreased volume of trailers  operating in
these facilities.




<PAGE>



(C) Net Gain on Disposition of Equipment

For the quarter ended March 31, 1998, the Partnership realized a gain of $58,617
on the sale or disposition of trailers.  During the three months ended March 31,
1997, the  Partnership  realized a gain of $40,958 on the sale or disposition of
trailers.

(D) Equity in Net Income of Unconsolidated Special-Purpose Entity

Equity in net income of  unconsolidated  special-purpose  entity of $27,196  and
$12,956 for the quarter  ended March 31, 1998 and March 31, 1997,  respectively,
represents the Partnership's share of income generated from the investment in an
entity  which owns an aircraft,  accounted  for under the equity  method.  As of
March  31,  1998  and  1997,  the  Partnership's  investment  in  unconsolidated
special-purpose  entity  consisted  of an 80% interest in an entity which owns a
commuter aircraft.

(E)      Net Income

The  Partnership's  net income increased to $76,794 in the first quarter of 1998
from $1,966 in the first quarter of 1997. The  Partnership's  ability to operate
or liquidate  assets,  secure  leases,  and  re-lease  those assets whose leases
expire during the duration of the  Partnership  is subject to many factors,  and
the  Partnership's  performance in the first quarter of 1998 is not  necessarily
indicative of future periods. In the first quarter of 1998, the Partnership made
special  distributions  of  $139,818  to the  limited  partners,  or  $4.15  per
weighted-average limited partnership unit.

(II) ASSET SALES

As discussed in Note 1 to each of the  accompany  financial  statements  and (V)
below, the remaining equipment is actively being marketed for sale.

(III) YEAR 2000 COMPLIANCE

The Trustees or General Partner are currently  addressing the year 2000 computer
software   issue  and  creating  a  timetable   for  carrying  out  any  program
modifications that may be required. It is not anticipated that the cost of those
modifications allocable to the Trust or Partnership will be material.

(IV)  ACCOUNTING PRONOUNCEMENTS

In  June  1997,  the  Financial   Accounting  Standards  Board  issued  two  new
statements:  SFAS No. 130,  "Reporting  Comprehensive  Income,"  which  requires
enterprises to report,  by major  component and in total,  all changes in equity
from  nonowner  sources;  and SFAS No. 131,  "Disclosures  about  Segments of an
Enterprise  and  Related  Information,"  which  establishes  annual and  interim
reporting  standards  for a public  company's  operating  segments  and  related
disclosures about its products, services, geographic areas, and major customers.
Both statements are effective for the Trust or  Partnership's  fiscal year ended
December 31, 1998. The effect of adoption of these statements will be limited to
the form and content of the Trust's or  Partnership's  disclosures  and will not
impact  the  Trust's  or  Partnership's  results of  operations,  cash flow,  or
financial position.

(V)   FUTURE OUTLOOK

With  the  majority  of the  equipment  portfolio  now  liquidated,  TEP  VIIB's
remaining assets were transferred into a liquidating trust as of January 1, 1998
(see Note 1) of the accompany  financial  statements.  Any excess  proceeds over
expected obligations will be distributed to the Beneficiaries in the liquidating
trust. For TEP VIIC, the General Partner is actively pursuing the sale of all of
the Partnerships' equipment with the intention of winding up the Partnership and
distributing all available cash to the Partners.




<PAGE>



(VI)     FORWARD-LOOKING INFORMATION

Except for historical  information contained herein, the discussion in this Form
10-Q contains  forward-looking  statements that involve risks and uncertainties,
such as statements of the Partnerships'  plans,  objectives,  expectations,  and
intentions.  The cautionary  statements made in this Form 10-Q should be read as
being applicable to all related forward-looking  statements wherever they appear
in this Form 10-Q. The Partnerships' actual results could differ materially from
those discussed here.























                                      (This space intentionally left blank.)



<PAGE>



                          PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  None.

         (b)      Reports on Form 8-K

                  None.


 

<PAGE>



Pursuant to the  requirements  of the  Securities  and Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                    PLM TRANSPORTATION EQUIPMENT
                                    PARTNERS VIIC 1985 INCOME FUND








Date:  May 14, 1998                 By:      /s/ Stephen M. Bess
                                             -------------------
                                             Stephen M. Bess
                                             Trustee



 

<PAGE>