FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                       QUARTERLY OR TRANSITIONAL REPORT
                 (As last amended by 34-32231, eff. 6/3/93.)


                   U. S. SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                FORM 10-QSB/A

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


              For the quarterly period ended September 30, 1996

                                      or

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


              For the transition period from.........to.........

                        Commission file number 0-14530


                      DAVIDSON INCOME REAL ESTATE, L.P.
      (Exact name of small business issuer as specified in its charter)
         Delaware                                       62-1242144
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                        Identification No.)

One Insignia Financial Plaza, P.O. Box 1089
      Greenville, South Carolina                            29602
(Address of principal executive offices)                  (Zip Code)


                   Issuer's telephone number (864) 239-1000


Check whether the issuer (1) 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      .

                         PART I - FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS


a)                      DAVIDSON INCOME REAL ESTATE, L.P.

                            CONSOLIDATED BALANCE SHEET
                                   (Unaudited)
                         (in thousands, except unit data)

                                September 30, 1996


Assets
  Cash and cash equivalents:
     Unrestricted                                               $ 1,085
     Restricted--tenant security deposits                           111
  Accounts receivable                                                 9
  Escrows for taxes                                                 274
  Restricted escrows                                                211
  Other assets                                                      350
  Investment properties:
     Land                                           $ 4,120
     Buildings and related personal property         19,661
                                                     23,781
     Less accumulated depreciation                   (9,036)     14,745

  Investment in Joint Venture                                       272

                                                                $17,057

Liabilities and Partners' Capital (Deficit)
Liabilities
  Accounts payable                                              $    44
  Tenant security deposits                                          111
  Accrued taxes                                                     346
  Other liabilities                                                 192
  Mortgage notes payable                                         12,136

Partners' Capital (Deficit)
  General partners                                  $  (642)
  Limited partners (26,776 units
     issued and outstanding)                          4,870       4,228

                                                                $17,057

          See Accompanying Notes to Consolidated Financial Statements


b)                         DAVIDSON INCOME REAL ESTATE, L.P.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)
                      (in thousands, except per unit data)



                                      Three Months Ended     Nine Months Ended
                                       September 30,           September 30,
                                       1996        1995       1996        1995
Revenues:
  Rental income                      $ 1,132     $ 1,072    $ 3,373     $ 3,165
  Other income                            65          69        188         179
     Total revenues                    1,197       1,141      3,561       3,344
Expenses:
  Operating                              370         349      1,131       1,060
  General and administrative              45          58        157         173
  Maintenance                            179         144        443         379
  Depreciation                           214         197        631         582
  Interest                               260         287        829         860
  Property taxes                         144         104        370         317
     Total expenses                    1,212       1,139      3,561       3,371
Equity in income of
  joint venture                           25           7         59          38

    Net income                       $    10     $     9    $    59     $    11

Net income allocated
  to general partners (3%)           $    --     $    --    $     2     $    --
Net income allocated
  to limited partners (97%)               10           9         57          11
                                     $    10     $     9    $    59     $    11

Net income per limited
  partnership unit                   $   .35     $   .34    $  2.13     $   .41


           See Accompanying Notes to Consolidated Financial Statements


c)                          DAVIDSON INCOME REAL ESTATE, L.P.

        CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
                                  (Unaudited)
                        (in thousands, except unit data)
<TABLE>
<CAPTION>
                                   Limited
                                 Partnership   General       Limited
                                    Units      Partners      Partners      Total
<S>                                <C>        <C>           <C>         <C>
Original capital contributions      26,776     $     1       $ 26,776    $ 26,777

Partners' capital (deficit)
  at December 31, 1995              26,776     $  (633)      $  5,182    $  4,549

Distributions paid to partners                     (11)          (369)       (380)

Net income for the nine months
  ended September 30, 1996                           2             57          59

Partners' capital (deficit)
  at September 30, 1996             26,776     $  (642)      $  4,870    $  4,228
<FN>
          See Accompanying Notes to Consolidated Financial Statements
</TABLE>

d)                     DAVIDSON INCOME REAL ESTATE, L.P.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
                                 (in thousands)


                                                      Nine Months Ended
                                                        September 30,
                                                       1996      1995

Cash flows from operating activities:
  Net income                                         $    59   $    11
  Adjustments to reconcile net income to net
   cash provided by operating activities:
     Depreciation                                        631       582
     Amortization of discounts and loan costs             57        61
     Equity in income of joint venture                   (59)      (38)
     Change in accounts:
       Restricted cash                                    (8)      (15)
       Accounts receivable                                 1         5
       Escrows for taxes                                   7        69
       Accounts payable                                 (159)      (66)
       Tenant security deposit liabilities                 9        13
       Accrued taxes                                      51       (30)
       Other liabilities                                  55       (38)

        Net cash provided by operating activities        644       554

Cash flows from investing activities:
  Property improvements and replacements                (324)     (216)
  Deposits to restricted escrows                          (7)      (12)
  Receipts from restricted escrows                        55        27
  Distributions from joint venture                       112       175

         Net cash used in investing activities          (164)      (26)

Cash flows from financing activities:
  Proceeds from interim refinancing                    4,100        --
  Repayment of mortgage notes payable                 (3,812)       --
  Payments on mortgage notes payable                    (101)     (104)
  Distributions paid to partners                        (380)     (300)
  Loan costs                                             (78)       --

         Net cash used in financing activities          (271)     (404)

Net increase in cash and cash equivalents                209       124

Cash and cash equivalents at beginning of period         876     1,147
Cash and cash equivalents at end of period           $ 1,085   $ 1,271

Supplemental disclosure of cash flow information:
  Cash paid for interest                             $   744   $   834


           See Accompanying Notes to Consolidated Financial Statements

e)                       DAVIDSON INCOME REAL ESTATE, L.P.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)




NOTE A - BASIS OF PRESENTATION

The accompanying unaudited financial statements of Davidson Income Real Estate,
L.P. (the "Partnership") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB and Item 310(b) of Regulation S-B.  Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.  In the
opinion of Davidson Diversified Properties, Inc. (the "Managing General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.  Operating results for the
three and nine month periods ended September 30, 1996, are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 1996. For further information, refer to the financial statements
and footnotes thereto included in the Partnership's annual report on Form 10-KSB
for the year ended December 31, 1995.

Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.


NOTE B  - TRANSACTIONS WITH AFFILIATED PARTIES

The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities.  The Partnership Agreement provides for payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership.  Property management fees paid to
affiliates of Insignia Financial Group, Inc. during the nine months ended
September 30, 1996 and 1995, are included in operating expenses on the
Consolidated Statement of Operations and are reflected in the following table.
The managing general partner and its affiliates received reimbursements and fees
as reflected in the following table:

                                                  Nine Months Ended
                                                     September 30,
                                                     1996     1995
                                                    (in thousands)

Property management fees                              $175     $165

Reimbursement for services of affiliates               100      107


Included in "reimbursements for services of affiliates" for 1996 and 1995, are
$4,000 and $1,000 respectively in reimbursements for construction oversight
costs.

The Partnership insures its properties under a master policy through an agency
and insurer unaffiliated with the Managing General Partner.  An affiliate of the
Managing General Partner acquired, in the acquisition of a business, certain
financial obligations from an insurance agency which was later acquired by the
agent who placed the current year's master policy.  The current agent assumed
the financial obligations to the affiliate of the Managing General Partner who
receives payments on these obligations from the agent.  The amount of the
partnership's insurance premiums accruing to the benefit of the affiliate of the
Managing General Partner by virtue of the agent's obligations is not
significant.

NOTE C - MORTGAGE

Lakeside Apartments' mortgage indebtedness of approximately $3,812,000 matured
July 1, 1996.  The principal and accrued interest of approximately $3,846,000
was refinanced through a temporary bridge loan on July 1, 1996.  The Partnership
negotiated the temporary bridge loan in the amount of approximately $4,100,000
with Lehman Brothers Holding, Inc.  The initial agreement required that the loan
mature September 1, 1996, with a possible extension to October 1, 1996.  A
subsequent amendment has extended the maturity date to November 15, 1996.  At
its sole discretion, Lehman Brothers may grant a one-time extension of the
amended maturity date to December 31, 1996, if permanent refinancing has not
been obtained.  The loan has a floating interest rate with a rate of 7.94% at
September 30, 1996.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The Partnership's investment properties consist of four apartment complexes.
The following table sets forth the average occupancy of the properties for the
nine months ended September 30, 1996 and 1995:

                                             Average
                                            Occupancy
Property                                 1996        1995

Northsprings Apartments
  Atlanta, Georgia                        97%         96%

Lakeside Apartments
  Charlotte, North Carolina               96%         97%

Bexley House Apartments
  Columbus, Ohio                          97%         90%

Covington Pointe Apartments
  Dallas, Texas                           95%         89%

The increase in occupancy at Bexley House is attributed to property improvements
and an increase in services provided to the tenants.  The increase in occupancy
at Covington Pointe stems primarily from additional advertising.

The Partnership's net income for the nine months ended September 30, 1996, was
approximately $59,000, with the three months ended September 30, 1996, having
net income of approximately $10,000.  The Partnership reported net income of
approximately $11,000 and $9,000 for the corresponding periods in 1995.  The
increase in net income is primarily attributable to increased rental income as a
result of monthly rental rate increases at all of the Partnership's investment
properties and increases in occupancy at Bexley House of 7%, Covington Pointe of
6% and Northsprings Apartments of 1% as discussed above.  Also, general and
administrative expense decreased approximately $13,000 and $16,000 for the three
and nine months ended September 30, 1996, due to a decrease in reimbursements to
affiliates.  Partially offsetting the increase in net income was an increase in
maintenance expense of approximately $35,000 and $64,000 for the three and nine
months ended September 30, 1996, and property tax expense of approximately
$40,000 and $53,000 respectively. Maintenance expense increased at Covington
Pointe for exterior and interior building repairs and parking lot repairs needed
to effectively compete in a market saturated with newly constructed complexes.
Northsprings and Lakeside incurred additional maintenance expense in 1996 due to
interior painting, water devise repairs, and landscaping to remain competitive
in their respective markets. Property tax expense increased reflecting payment
by Northsprings of a 1995 bill previously under appeal.

The Partnership owns 17.5% of Sterling Crest Joint Venture.  Equity in the
income of the joint venture increased approximately $18,000 and $21,000 for the
three and nine months ended September 30, 1996, as a result of an increase in
the net income of Sterling Crest Joint Venture's investment property, Brighton
Crest.  The increase in net income was due to an increase in rental rates and an
increase in corporate unit income partially offset by an increase in operating
expense.  The increase in corporate unit income stemmed from additional rents to
patrons of the Olympic games.  Operating expense increased due to higher
utilities and corporate unit expense related to the additional rents.

As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of each of its investment
properties to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting the Partnership from increases in
expense.  As part of this plan, the Managing General Partner attempts to protect
the Partnership from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level.  However, due
to changing market conditions, which can result in the use of rental concessions
and rental reductions to offset softening market conditions, there is no
guarantee that the Managing General Partner will be able to sustain such a plan.

The Partnership had unrestricted cash of $1,085,000 at September 30, 1996,
versus $1,271,000 at September 30, 1995. Net cash provided by operating
activities increased as a result of the increase in net income as discussed
above.  Other liabilities increased due to an increase in prepaid rents due to
timing differences and an increase in accrued interest as a result of the
refinancing at Lakeside.  Offsetting the increase in cash provided by operations
was an increase in cash used for accounts payable due to the timing of payments
to vendors.  Net cash used in investing activities increased primarily as a
result of an increase in property improvements and replacements and a decrease
in distributions from the joint venture.  Offsetting these changes, net receipts
from restricted escrows increased in 1996 due to property improvements and
replacements at North Springs. Net cash used in financing activities decreased
due to the temporary refinancing of Lakeside Apartments which resulted in net
proceeds received.  Partially offsetting this decrease was an increase in
distributions to partners and in loan costs incurred via the refinancing
mentioned above.

The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and other operating needs of the Partnership.  Such assets are currently thought
to be sufficient for any near-term needs of the Partnership.  The mortgage
indebtedness of $12,136,000, net of discount, is amortized over varying periods
with required balloon payments ranging from November 1996 to October 2003, at
which time the properties will either be refinanced or sold.  Lakeside
Apartments' mortgage indebtedness of approximately $3,812,000 matured July 1,
1996.  The principal and accrued interest of approximately $3,846,000 was
refinanced through a temporary bridge loan on July 1, 1996.  The Partnership
negotiated the temporary bridge loan in the amount of approximately $4,100,000
with Lehman Brothers Holding Inc.  The initial agreement required that the loan
mature September 1, 1996, with a possible extension to October 1, 1996.  A
subsequent amendment has extended the maturity date to November 15, 1996.  At
its sole discretion, the lender may grant a one-time extension of the amended
maturity date to December 31, 1996, if permanent refinancing has not been
obtained.  The loan has a floating interest rate with a rate of 7.94% at
September 30, 1996.  Future cash distributions will depend on the levels of net
cash generated from operations, capital expenditure requirements, property sales
and the availability of cash reserves.  Distributions to partners during 1995,
and the nine months ended September 30, 1996, were $300,000 and $380,000,
respectively.

                            PART II - OTHER INFORMATION

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

         a) Exhibits:

            Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
            report.

            Exhibit 10QQ, contracts related to refinancing debt:

            (a) Multifamily Note dated July 1, 1996, between Davidson Income
                Real Estate, L.P., a Delaware limited partnership and Lehman
                Brothers Holdings, Inc. d/b/a Lehman Capital, a Division of
                Lehman Brothers Holdings, Inc.

            (b) Rider To Multifamily Note dated July 1, 1996, between Davidson
                Income Real Estate, L.P., a Delaware limited partnership and
                Lehman Brothers Holdings, Inc. d/b/a Lehman Capital, a Division
                of Lehman Brothers Holdings, Inc.

         b) Reports on Form 8-K:

            None filed during the quarter ended September 30, 1996.



                                     SIGNATURES

  In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



                             DAVIDSON INCOME REAL ESTATE, L.P.

                             By: DAVIDSON DIVERSIFIED PROPERTIES, INC.,
                                 as Managing General Partner

                             By:/s/ Carroll D. Vinson
                                Carroll D. Vinson
                                President

                             By:/s/ Robert D. Long, Jr.
                                Robert D. Long, Jr.
                                Vice President/CAO

                             Date:  January 10, 1997