UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549



Form 10-Q



(Mark One)

[X]

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



For the quarterly period ended June 30, 2008





[ ]

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 0-14530





DAVIDSON INCOME REAL ESTATE, L.P.

(Exact Name of Registrant as Specified in Its Charter)







|                                |                    
|------------------------------- | -------------------
|Delaware                        | 62-1242144         
|(State or other jurisdiction of | (I.R.S. Employer   
|incorporation or organization)  | Identification No.)



55 Beattie Place, PO Box 1089

Greenville, South Carolina  29602

(Address of principal executive offices)



(864) 239-1000

(Issuer's telephone number)





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.

[X] Yes  [ ] No



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                                                                        |                              
|----------------------------------------------------------------------- | -----------------------------
|Large accelerated filer [ ]                                             | Accelerated filer [ ]        
|Non-accelerated filer [ ]
(Do not check if a smaller reporting company) | Smaller reporting company [X]



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[ ] Yes  [X] No









PART I  FINANCIAL INFORMATION





ITEM 1.

FINANCIAL STATEMENTS





DAVIDSON INCOME REAL ESTATE, L.P.



CONSOLIDATED BALANCE SHEETS

(in thousands, except unit data)



|                                               |             |             
|---------------------------------------------- | ----------- | ------------
|                                               | June 30,    | December 31,
|                                               | 2008        | 2007        
|                                               | (Unaudited) | (Note)      
|Assets                                         |             |             
|Cash and cash equivalents                      | $    353    | $    841    
|Receivables and deposits                       | 78          | 78          
|Other assets                                   | 130         | 141         
|Investment in joint venture (Note D)           | 38          | --          
|Investment properties:                         |             |             
|Land                                           | 2,477       | 2,477       
|Buildings and related personal property        | 14,946      | 14,777      
|                                               | 17,423      | 17,254      
|Less accumulated depreciation                  | (10,906)    | (10,540)    
|                                               | 6,517       | 6,714       
|                                               | $7,116      | $7,774      
|                                               |             |             
|Liabilities and Partners' (Deficiency) Capital |             |             
|Liabilities                                    |             |             
|Accounts payable                               | $     61    | $     43    
|Tenant security deposit liabilities            | 33          | 34          
|Accrued property taxes                         | 152         | 279         
|Other liabilities                              | 117         | 144         
|Deficit in joint venture (Note D)              | --          | 1,055       
|Mortgage notes payable                         | 6,815       | 6,980       
|                                               | 7,178       | 8,535       
|                                               |             |             
|Partners' (Deficiency) Capital                 |             |             
|General partners                               | (774)       | (795)       
|Limited partners (26,776 units issued and      |             |             
|outstanding)                                   | 712         | 34          
|                                               | (62)        | (761)       
|                                               | $7,116      | $7,774      



Note:

The consolidated balance sheet at December 31, 2007 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.



See Accompanying Notes to Consolidated Financial Statements















DAVIDSON INCOME REAL ESTATE, L.P.



CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per unit data)



|                                    |                    |                  |         |         
|----------------------------------- | ------------------ | ---------------- | ------- | --------
|                                    | Three Months Ended | Six Months Ended
|                                    | June 30,           | June 30,        
|                                    | 2008               | 2007             | 2008    | 2007    
|Revenues:                           |                    |                  |         |         
|                                    |                    |                  |         |         
|Rental income                       | $   603            | $   583          | $ 1,198 | $ 1,162 
|Other income                        | 47                 | 65               | 145     | 123     
|Total revenues                      | 650                | 648              | 1,343   | 1,285   
|                                    |                    |                  |         |         
|Expenses:                           |                    |                  |         |         
|Operating                           | 327                | 327              | 688     | 643     
|General and administrative          | 47                 | 52               | 86      | 98      
|Depreciation                        | 185                | 176              | 366     | 351     
|Interest                            | 86                 | 173              | 174     | 344     
|Property taxes                      | 76                 | 8                | 152     | 115     
|Total expenses                      | 721                | 736              | 1,466   | 1,551   
|                                    |                    |                  |         |         
|Loss before equity in income (loss) |                    |                  |         |         
|of joint venture and                |                    |                  |         |         
|discontinued operations             | (71)               | (88)             | (123)   | (266)   
|Equity in income (loss) of joint    |                    |                  |         |         
|venture                             | 2,313              | (27)             | 2,301   | (43)    
|Income (loss) before discontinued   |                    |                  |         |         
|operations                          | 2,242              | (115)            | 2,178   | (309)   
|Loss from discontinued operations   |                    |                  |         |         
|(Note A and B)                      | --                 | (98)             | --      | (140)   
|Gain on sale of discontinued        |                    |                  |         |         
|operations (Note B)                 | --                 | 5,716            | --      | 5,716   
|Net income                          | $2,242             | $5,503           | $2,178  | $5,267  
|                                    |                    |                  |         |         
|Net income allocated to general     |                    |                  |         |         
|partners (3%)                       | $    67            | $   165          | $    65 | $   158 
|Net income allocated to limited     |                    |                  |         |         
|partners (97%)                      | 2,175              | 5,338            | 2,113   | 5,109   
|                                    | $2,242             | $5,503           | $2,178  | $5,267  
|Per limited partnership unit:       |                    |                  |         |         
|Income (loss) from continuing       |                    |                  |         |         
|operations                          | $ 81.23            | $ (4.19)         | $ 78.91 | $(11.21)
|Loss from discontinued operations   | --                 | (3.53)           | --      | (5.06)  
|Gain on sale of discontinued        |                    |                  |         |         
|operations                          | --                 | 207.07           | --      | 207.07  
|                                    | $81.23             | $199.35          | $78.91  | $190.80 
|                                    |                    |                  |         |         
|Distributions per limited           |                    |                  |         |         
|partnership unit                    | $53.59             | $--              | $53.59  | $--     



See Accompanying Notes to Consolidated Financial Statements

















DAVIDSON INCOME REAL ESTATE, L.P.



CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIENCY) CAPITAL

(Unaudited)

(in thousands, except unit data)













|                               |             |          |          |         
|------------------------------ | ----------- | -------- | -------- | --------
|                               | Limited     |          |          |         
|                               | Partnership | General  | Limited  |         
|                               | Units       | Partners | Partners | Total   
|                               |             |          |          |         
|Original capital contributions | 26,776      | $1       | $26,776  | $26,777 
|                               |             |          |          |         
|Partners' (deficiency) capital |             |          |          |         
|at December 31, 2007           | 26,776      | $  (795) | $    34  | $  (761)
|                               |             |          |          |         
|Distribution to partners       | --          | (44)     | (1,435)  | (1,479) 
|                               |             |          |          |         
|Net income for the six months  |             |          |          |         
|ended June 30, 2008            | --          | 65       | 2,113    | 2,178   
|                               |             |          |          |         
|Partners' (deficiency) capital |             |          |          |         
|at June 30, 2008               | 26,776      | $(774)   | $712     | $(62)   



See Accompanying Notes to Consolidated Financial Statements













DAVIDSON INCOME REAL ESTATE, L.P.



CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

|                                                            |                  |        
|----------------------------------------------------------- | ---------------- | -------
|                                                            | Six Months Ended
|                                                            | June 30,        
|                                                            | 2008             | 2007   
|Cash flows from operating activities:                       |                  |        
|Net income                                                  | $ 2,178          | $ 5,267
|Adjustments to reconcile net income to net cash provided by |                  |        
|(used in) operating activities:                             |                  |        
|Gain on sale of investment property                         | --               | (5,716)
|Depreciation                                                | 366              | 561    
|Loss on extinguishment of debt                              | --               | 9      
|Amortization of loan costs                                  | 10               | 18     
|Equity in (income) loss of joint venture                    | (2,301)          | 43     
|Change in accounts:                                         |                  |        
|Receivables and deposits                                    | --               | (100)  
|Other assets                                                | 1                | 3      
|Accounts payable                                            | (3)              | 49     
|Tenant security deposit liabilities                         | (1)              | (41)   
|Accrued property taxes                                      | (127)            | (151)  
|Other liabilities                                           | (27)             | (17)   
|Due to affiliates                                           | --               | (406)  
|Net cash provided by (used in) operating activities         | 96               | (481)  
|                                                            |                  |        
|Cash flows from investing activities:                       |                  |        
|Net proceeds from sale of investment property               | --               | 8,823  
|Distribution from joint venture                             | 1,208            | --     
|Property improvements and replacements                      | (148)            | (245)  
|Net withdrawals from restricted escrows                     | --               | 6      
|Net cash provided by investing activities                   | 1,060            | 8,584  
|                                                            |                  |        
|Cash flows from financing activities:                       |                  |        
|Payments on mortgage notes payable                          | (165)            | (195)  
|Repayment of mortgage note payable                          | --               | (2,611)
|Distributions to partners                                   | (1,479)          | --     
|Advances from affiliates                                    | --               | 123    
|Payment on advances from affiliates                         | --               | (2,931)
|Net cash used in financing activities                       | (1,644)          | (5,614)
|                                                            |                  |        
|Net (decrease) increase in cash and cash equivalents        | (488)            | 2,489  
|Cash and cash equivalents at beginning of period            | 841              | 279    
|Cash and cash equivalents at end of period                  | $353             | $2,768 
|                                                            |                  |        
|Supplemental disclosure of cash flow information:           |                  |        
|Cash paid for interest                                      | $165             | $884   
|Supplemental disclosure of non-cash activity:               |                  |        
|Property improvements and replacements in accounts          |                  |        
|payable                                                     | $24              | $16    



At December 31, 2007 and 2006, approximately $3,000 and $6,000 of property improvements and replacements were included in accounts payable and are included in property improvements and replacements at June 30, 2008 and 2007, respectively.



See Accompanying Notes to Consolidated Financial Statements













DAVIDSON INCOME REAL ESTATE, L.P.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note A  Basis of Presentation



The accompanying unaudited consolidated financial statements of Davidson Income Real Estate, L.P. (the "Partnership" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X.  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 six month periods ended June 30, 2008, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2008. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007. The Managing General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust.



In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the accompanying consolidated statements of operations for both the three and six months ended June 30, 2007 reflect the operations of Lakeside Apartments as discontinued operations as a result of the sale of the property on June 29, 2007 (see Note B).



Note B  Disposition of Investment Property



On June 29, 2007, the Partnership sold one of its investment properties, Lakeside Apartments, to a third party.  In addition to Lakeside Apartments, affiliates of the third party also purchased nine other apartment complexes, all of which were owned by entities affiliated with AIMCO Properties, L.P., an affiliate of the Managing General Partner. The total sales price for Lakeside Apartments and the other properties was approximately $95,800,000 of which approximately $8,850,000 was allocated to Lakeside Apartments.  The net proceeds realized by the Partnership was approximately $8,823,000 after payment of closing costs.  The Partnership used approximately $2,611,000 to repay the mortgage encumbering the property.  The Partnership realized a gain of approximately $5,716,000 as a result of the sale. The propertys operations of approximately $98,000 and $140,000 are shown as loss from discontinued operations for the three and six months ended June 30, 2007, respectively, and include revenues of approximately $366,000 and $700,000, respectively. In addition, the Partnership recorded a loss on extinguishment of debt of approximately $9,000 as a result of the write off of unamortized loan costs of approximately $4,000 and a termination fee of approximately $5,000.  This amount is included in loss from discontinued operations for the three and six months ended June 30, 2007.



Note C  Transactions with Affiliated Parties



The Partnership has no employees and depends on the Managing General Partner and its affiliates for the management and administration of all Partnership activities.  The Partnership Agreement provides for (i) payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership.



Affiliates of the Managing General Partner receive 5% of gross receipts from both of the Partnership's investment properties as compensation for providing property management services.  The Partnership paid to such affiliates approximately $66,000 and $97,000 for the six months ended June 30, 2008 and 2007, respectively, which is included in operating expenses and loss from discontinued operations.



An affiliate of the Managing General Partner charged the Partnership for reimbursement of accountable administrative expenses amounting to approximately $42,000 and $79,000 for the six months ended June 30, 2008 and 2007, respectively, which are included in general and administrative expenses and investment properties and gain on sale of discontinued operations.  The portion of these reimbursements included in investment properties and gain on sale of discontinued operations for the six months ended June 30, 2008 and 2007 are construction management services provided by an affiliate of the Managing General Partner of approximately $6,000 and $19,000, respectively.



During the six months ended June 30, 2008, there were no advances or associated accrued interest owed to AIMCO Properties, L.P., an affiliate of the Managing General Partner. During the six months ended June 30, 2007, AIMCO Properties, L.P. advanced approximately $123,000 to the Partnership to pay accounts payable at Lakeside Apartments. Interest on the advances is charged at prime plus 1%. Interest expense on the advances was approximately $157,000 for the six months ended June 30, 2007. During the six months ended June 30, 2007, the Partnership repaid AIMCO Properties, L.P. approximately $3,560,000 which included $629,000 in accrued interest. There were no advances outstanding at June 30, 2008 and December 31, 2007.  The Partnership may receive additional advances of funds from AIMCO Properties, L.P. although AIMCO Properties, L.P. is not obligated to provide such advances. For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission.



The Partnership Agreement provides for payment of a fee to the Managing General Partner for managing the affairs of the Partnership.  The fee is 2% of adjusted cash from operations, as defined in the Partnership Agreement.  The fee is payable only after the Partnership has distributed, to all limited partners, adjusted cash from operations in any year equal to 10% of their adjusted invested capital as defined in the partnership agreement.  No fees were earned for the six months ended June 30, 2008 and 2007 or payable at June 30, 2008 and December 31, 2007.



The Partnership insures its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty, general liability, and vehicle liability.  The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner.  During the six months ended June 30, 2008, the Partnership was charged by AIMCO and its affiliates approximately $30,000 for hazard insurance coverage and fees associated with policy claims administration.  Additional charges will be incurred by the Partnership during 2008 as other insurance policies renew later in the year.  The Partnership was charged by AIMCO and its affiliates approximately $123,000 for insurance coverage and fees associated with policy claims administration during the year ended December 31, 2007.



Note D  Investment/Deficit in Joint Venture Investment



The Partnership owns a 17.5% interest in the Sterling Crest Joint Venture (the Joint Venture) with Davidson Growth Plus, L.P., an affiliate of the Managing General Partner, which owns the remaining 82.5% of the Joint Venture. On June 10, 2008, the Joint Venture sold its investment property, Brighton Crest Apartments, to a third party for a gross sales price of approximately $21,500,000. The net proceeds realized by the Joint Venture were approximately $21,239,000 after payment of closing costs of approximately $261,000. The Joint Venture distributed approximately $6,904,000 to its partners during June 2008, of which the Partnerships share was approximately $1,208,000.



There were no distributions received from the Joint Venture during the six months ended June 30, 2007.  During the six months ended June 30, 2008 and 2007, the Partnership recognized approximately $2,301,000 and $(43,000) of equity in income (loss) of the Joint Venture, respectively.  At December 31, 2007, the Partnership had received distributions and recognized equity in losses of the Joint Venture in excess of its general partnership interest and had an investment deficit of approximately $1,055,000. At June 30, 2008, the Partnerships investment in the Joint Venture is approximately $38,000.



The following table represents the net income (loss) of the Sterling Crest Joint Venture for the six months ended June 30, 2008 and 2007 (in thousands):



|                                    |                           |        
|----------------------------------- | ------------------------- | -------
|                                    | Six Months Ended June 30,
|                                    | 2008                      | 2007   
|                                    |                           |        
|Operating revenues                  | $ 1,203                   | $ 1,260
|Operating expenses                  | (1,443)                   | (1,501)
|Operating loss                      | (240)                     | (241)  
|Debt extinguishment costs           | (2,800)                   | --     
|Gain on sale of investment property | 15,455                    | --     
|                                    |                           |        
|Net income (loss)                   | $12,415                   | $(241) 



Note E  Casualty



On April 10, 2008 Covington Pointe Apartments suffered damages to several of its apartment units as a result of severe winds which resulted in roofs blowing off the apartment units.  The current estimate of the damages incurred is approximately $40,000. Subsequent to June 30, 2008, the Partnership received approximately $43,000 in insurance proceeds, including approximately $3,000 in lost rents, related to this casualty. The Partnership expects that it will recognize a casualty gain of approximately $36,000 during the third quarter of 2008, as a result of the receipt of approximately $40,000 in insurance proceeds net of the write-off of undepreciated assets of approximately $4,000.



Note F  Contingencies



In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its Managing General Partner and several of their affiliated partnerships and corporate entities. The action purported to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) that are named as nominal defendants, challenging, among other things, the acquisition of interests in certain Managing General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities that were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary damages and equitable relief, including judicial dissolution of the Partnership. In addition, during the third quarter of 2001, a complaint captioned Heller v. Insignia Financial Group (the "Heller action") was filed against the same defendants that are named in the Nuanes action. On or about August 6, 2001, plaintiffs filed a first amended complaint. The Heller action was brought as a purported derivative action, and asserted claims for, among other things, breach of fiduciary duty, unfair competition, conversion, unjust enrichment, and judicial dissolution. On January 28, 2002, the trial court granted defendants motion to strike the complaint.  Plaintiffs took an appeal from this order.



On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. On June 13, 2003, the court granted final approval of the settlement and entered judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector ("Objector") filed an appeal (the Appeal) seeking to vacate and/or reverse the order approving the settlement and entering judgment thereto. On May 4, 2004, the Objector filed a second appeal challenging the courts use of a referee and its order requiring Objector to pay those fees.



On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.  With regard to the settlement and judgment entered thereto, the Court of Appeals vacated the trial courts order and remanded to the trial court for further findings on the basis that the state of the record is insufficient to permit meaningful appellate review.  The matter was transferred back to the trial court on June 21, 2005.  With regard to the second appeal, the Court of Appeals reversed the order requiring the Objector to pay referee fees. With respect to the related Heller appeal, on July 28, 2005, the Court of Appeals reversed the trial courts order striking the first amended complaint.



On August 18, 2005, Objector and his counsel filed a motion to disqualify the trial court based on a peremptory challenge and filed a motion to disqualify for cause on October 17, 2005, both of which were ultimately denied and/or struck by the trial court.  On or about October 13, 2005 Objector filed a motion to intervene and on or about October 19, 2005 filed both a motion to take discovery relating to the adequacy of plaintiffs as derivative representatives and a motion to dissolve the anti-suit injunction in connection with settlement.  On November 14, 2005, Plaintiffs filed a Motion For Further Findings pursuant to the remand ordered by the Court of Appeals. Defendants joined in that motion.  On February 3, 2006, the Court held a hearing on the various matters pending before it and ordered additional briefing from the parties and Objector. On June 30, 2006, the trial court entered an order confirming its approval of the class action settlement and entering judgment thereto after the Court of Appeals had remanded the matter for further findings.  The substantive terms of the settlement agreement remain unchanged.  The trial court also entered supplemental orders on July 1, 2006, denying Objectors Motion to File a Complaint in Intervention, Objectors Motion for Leave of Discovery and Objectors Motion to Dissolve the Anti-Suit Injunction.  Notice of Entry of Judgment was served on July 10, 2006.



On August 31, 2006, the Objector filed a Notice of Appeal to the Courts June 30, 2006 and July 1, 2006 orders. The matter was argued and submitted and the Court of Appeal issued an opinion on February 20, 2008 affirming the order approving the settlement and judgment entered thereto. On March 12, 2008, the Court of Appeal denied Appellants Petition for Re-Hearing. On May 21, 2008, the California Supreme Court denied Appellants Petition for Review.  Objector has until August 19,2008 to file a petition for certiorari with the United States Supreme Court.



The Managing General Partner does not anticipate that any costs to the Partnership, whether legal or settlement costs, associated with these cases will be material to the Partnerships overall operations.



As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the Managing General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (FLSA) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (overtime claims).  The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company failed to compensate maintenance workers for time that they were required to be "on-call" (on-call claims).  In March 2007, the court in the District of Columbia decertified the collective action.  In July 2007, plaintiffs counsel filed individual cases in Federal court in 22 jurisdictions.  In the second quarter 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining on-call claims and the attorneys fees claimed by plaintiffs counsel.  As a result, the lawsuits asserted in the 22 Federal courts will be dismissed.  At this time, affiliates of the Managing General Partner are attempting to obtain additional information to determine the most equitable allocation of settlement amounts and attorneys fees.  The Managing General Partner is uncertain as to the amount of loss, if any, allocable to the Partnership.  Therefore, the Partnership cannot estimate whether a loss will occur or a potential range of loss.



The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment properties that are not of a routine nature arising in the ordinary course of business.



Environmental



Various Federal, state and local laws subject property owners or operators to liability for management, and the costs of removal or remediation, of certain hazardous substances present on a property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release

or presence of the hazardous substances. The presence of, or the failure to manage or remedy properly, hazardous substances may adversely affect occupancy at affected apartment communities and the ability to sell or finance affected properties. In addition to the costs associated with investigation and remediation actions brought by government agencies, and potential fines or penalties imposed by such agencies in connection therewith, the presence of hazardous substances on a property could result in claims by private plaintiffs for personal injury, disease, disability or other infirmities. Various laws also impose liability for the cost of removal, remediation or disposal of hazardous substances through a licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous substances is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of its properties, the Partnership could potentially be liable for environmental liabilities or costs associated with its properties.



Mold



The Partnership is aware of lawsuits against owners and managers of multifamily properties asserting claims of personal injury and property damage caused by the presence of mold, some of which have resulted in substantial monetary judgments or settlements.  The Partnership has only limited insurance coverage for property damage loss claims arising from the presence of mold and for personal injury claims related to mold exposure.  Affiliates of the Managing General Partner have implemented policies, procedures, third-party audits and training and the Managing General Partner believes that these measures will prevent or eliminate mold exposure and will minimize the effects that mold may have on residents.  To date, the Partnership has not incurred any material costs or liabilities relating to claims of mold exposure or to abate mold conditions.  Because the law regarding mold is unsettled and subject to change the Managing General Partner can make no assurance that liabilities resulting from the presence of or exposure to mold will not have a material adverse effect on the Partnerships consolidated financial condition or results of operations.

















ITEM 2.

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



The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements in certain circumstances. Certain information included in this Report contains or may contain information that is forward-looking, including, without limitation, statements regarding the effect of redevelopments, the Partnerships future financial performance, including the Partnerships ability to maintain current or meet projected occupancy and rent levels, and the effect of government regulations. Actual results may differ materially from those described in the forward-looking statements and, in addition, will be affected by a variety of risks and factors that are beyond the Partnerships control including, without limitation: natural disasters such as hurricanes; national and local economic conditions; the general level of interest rates; energy costs; the terms of governmental regulations that affect the Partnerships property and interpretations of those regulations; the competitive environment in which the Partnership operates; financing risks, including the risk that the Partnerships cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for tenants in such markets; insurance risks; development risks; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by the Partnership.   Readers should carefully review the Partnerships consolidated financial statements and the notes thereto, as well as the risk factors described in the documents the Partnership files from time to time with the Securities and Exchange Commission.



The Partnership's investment properties consist of two apartment complexes at June 30, 2008.  The following table sets forth the average occupancy of the properties for the six months ended June 30, 2008 and 2007:



|                            |                   |     
|--------------------------- | ----------------- | ----
|                            | Average Occupancy
|Property                    | 2008              | 2007
|                            |                   |     
|Bexley House Apartments     | 99%               | 97% 
|Columbus, Ohio              |                   |     
|Covington Pointe Apartments | 96%               | 97% 
|Dallas, Texas               |                   |     



The Partnerships financial results depend upon a number of factors including the ability to attract and maintain tenants at the investment properties, interest rates on mortgage loans, costs incurred to operate the investment properties, general economic conditions and weather. 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 expenses.  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, the Managing General Partner may use rental concessions and rental rate reductions to offset softening market conditions, accordingly, there is no guarantee that the Managing General Partner will be able to sustain such a plan. Further, a number of factors that are outside the control of the Partnership such as the local economic climate and weather can adversely or positively affect the Partnerships financial results.



Results of Operations



The Partnership had net income of approximately $2,242,000 and $2,178,000 for the three and six months ended June 30, 2008, respectively, compared to net income of approximately $5,503,000 and $5,267,000 for the three and six months ended June 30, 2007, respectively.  The decrease in net income for both periods is primarily due to a decrease in the recognition of a gain on sale of discontinued operations partially offset by an increase in the Partnerships share of income from its joint venture investment and a decrease in loss from discontinued operations.



In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the accompanying consolidated statements of operations for both the three and six months ended June 30, 2007 reflect the operations of Lakeside Apartments as discontinued operations as a result of the sale of the property on June 29, 2007.



On June 29, 2007, the Partnership sold one of its investment properties, Lakeside Apartments, to a third party.  In addition to Lakeside Apartments, affiliates of the third party also purchased nine other apartment complexes, all of which were owned by entities affiliated with AIMCO Properties, L.P., an affiliate of the Managing General Partner of the Partnership. The total sales price for Lakeside Apartments and the other properties was approximately $95,800,000 of which approximately $8,850,000 was allocated to Lakeside Apartments.  The net proceeds realized by the Partnership was approximately $8,823,000 after payment of closing costs.  The Partnership used approximately $2,611,000 to repay the mortgage encumbering the property.  The Partnership realized a gain of approximately $5,716,000 as a result of the sale. The propertys operations of approximately $98,000 and $140,000 are shown as loss from discontinued operations for the three and six months ended June 30, 2007, respectively, and include revenues of approximately $366,000 and $700,000, respectively. In addition, the Partnership recorded a loss on extinguishment of debt of approximately $9,000 as a result of the write off of unamortized loan costs of approximately $4,000 and a termination fee of approximately $5,000.  This amount is included in loss from discontinued operations for the three and six months ended June 30, 2007.



The Partnership owns a 17.5% interest in the Sterling Crest Joint Venture (the Joint Venture) with Davidson Growth Plus, L.P., an affiliate of the Managing General Partner, which owns the remaining 82.5% of the Joint Venture. On June 10, 2008, the Joint Venture sold its investment property, Brighton Crest Apartments, to a third party for a gross sales price of approximately $21,500,000. The net proceeds realized by the Joint Venture were approximately $21,239,000 after payment of closing costs of approximately $261,000. The Joint Venture distributed approximately $6,904,000 to its partners during June 2008, of which the Partnerships share was approximately $1,208,000.



There were no distributions received from the Joint Venture during the six months ended June 30, 2007.  During the six months ended June 30, 2008 and 2007, the Partnership recognized approximately $2,301,000 and $(43,000) of equity in income (loss) of the Joint Venture, respectively.  At December 31, 2007, the Partnership had received distributions and recognized equity in losses of the Joint Venture in excess of its general partnership interest and had an investment deficit of approximately $1,055,000. At June 30, 2008, the Partnerships investment in the Joint Venture is approximately $38,000.



Excluding the gain on sale and loss from discontinued operations along with the equity in income (loss) of joint venture the Partnership had a loss of approximately $71,000 and $123,000 for the three and six months ended June 30, 2008, respectively, compared to a loss of approximately $88,000 and $266,000 for the three and six months ended June 30, 2007, respectively.  The decrease in loss before equity in income (loss) of joint venture and discontinued operations for the three months ended June 30, 2008 is due to a decrease in total expenses.   Total revenues remained relatively constant for the three month period as an increase in rental income was offset by a decrease in other income.   The decrease in loss before equity in income (loss) of joint venture and discontinued operations for the six months ended June 30, 2008 is due to a decrease in total expenses and an increase in total revenues.



Total revenues increased for the six months ended June 30, 2008 due to increases in both rental and other income.  Rental income increased due to increases in the average rental rate at both investment properties and an increase in occupancy at Bexley House Apartments partially offset by a decrease in occupancy at Covington Pointe Apartments.  Other income increased due to an increase in lease cancellation fees and resident utility reimbursements at Covington Pointe Apartments and interest income due to higher cash balances.



Total expenses decreased for the six months ended June 30, 2008 due to a decrease in interest expense partially offset by increases in operating and property tax expenses. Depreciation and general and administrative expenses remained relatively constant for the comparable period. Total expenses decreased for the three months ended June 30, 2008 due to a decrease in interest expense, partially offset by an increase in property tax expense. Operating, depreciation and general and administrative expenses remained relatively constant for the comparable period. Interest expense decreased for both the three and six month periods due to a decrease in interest incurred on advances from AIMCO Properties, L.P., an affiliate of the Managing General Partner, as a result of such advances being fully repaid during the second quarter of 2007.  Property tax expense increased for both the three and six month periods due to the receipt of a refund during the second quarter of 2007 of prior year taxes due to a decrease in the assessed value of Bexley House Apartments.  Operating expense increased for the six month periods due to increases in maintenance and property expenses.  Maintenance expense increased primarily due to increases in building improvements, gate repairs, HVAC parts and supplies and clean up costs related to vandalism at Covington Pointe Apartments.  Property expense increased due to increases in utility and payroll costs at Bexley House Apartments.



Included in general and administrative expense for the six months ended June 30, 2008 and 2007 are management reimbursements to the Managing General Partner as allowed under the Partnership Agreement. Also included in general and administrative expenses are costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement.



Liquidity and Capital Resources



At June 30, 2008, the Partnership had cash and cash equivalents of approximately $353,000 compared to approximately $2,768,000 at June 30, 2007.  Cash and cash equivalents decreased approximately $488,000 since December 31, 2007 due to approximately $1,644,000 of cash used in financing activities, partially offset by approximately $1,060,000 and $96,000 of cash provided by investing and operating activities, respectively. Cash used in financing activities consisted of payments of principal on the mortgages encumbering the Partnership's investment properties and distributions to partners. Cash provided by investing activities consisted of a distribution received from the Partnerships investment in a Joint Venture, partially offset by property improvements and replacements.  The Partnership invests its working capital reserves in interest bearing accounts.



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 investment properties to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state and local legal and regulatory requirements. The Managing General Partner monitors developments in the area of legal and regulatory compliance.  Capital improvements planned for each of the Partnerships properties are detailed below.



Bexley House Apartments



During the six months ended June 30, 2008, the Partnership completed approximately $18,000 of capital improvements at Bexley House Apartments, consisting primarily of interior model enhancements, window replacements and washer and dryer replacements. These improvements were funded from operating cash flow.  The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during the remainder of 2008. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property.



Covington Pointe Apartments



During the six months ended June 30, 2008, the Partnership completed approximately $151,000 of capital improvements at Covington Pointe Apartments, consisting primarily of air conditioning, flooring covering, kitchen and bath upgrades, appliance and roof replacements. These improvements were funded from operating cash flow. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during the remainder of 2008. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property.



Capital expenditures will be incurred only if cash is available from operations or Partnership reserves.  To the extent that capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term.



The Partnership's assets are thought to be generally sufficient for any near-term needs (exclusive of capital improvements) of the Partnership. The mortgage indebtedness encumbering the Partnerships investment properties of approximately $6,815,000 is amortized over varying periods, with a balloon payment of approximately $4,416,000 due in July 2010 for Covington Pointe Apartments. The mortgage encumbering Bexley House Apartments matures in July 2021 at which time the loan is scheduled to be fully amortized. The Managing General Partner will attempt to refinance and/or sell the properties prior to such maturity dates. If the properties cannot be refinanced or sold for a sufficient amount, the Partnership may risk losing such properties through foreclosure.



The Partnership distributed the following amounts during the six months ended June 30, 2008 and 2007 (in thousands, except per unit data).



|         |               |             |               |            
|-------- | ------------- | ----------- | ------------- | -----------
|         | Six Months    | Per Limited | Six Months    | Per Limited
|         | Ended         | Partnership | Ended         | Partnership
|         | June 30, 2008 | Unit        | June 30, 2007 | Unit       
|         |               |             |               |            
|Sale (1) | $1,479        | $53.59      | $--           | $--        



(1)

Additional sale proceeds from the 2007 sale of Lakeside Apartments and the 2008 distribution of sale proceeds from the Sterling Crest Joint Venture sale of its investment property.



Future cash distributions will depend on the levels of net cash generated from operations, and the timing of debt maturities, property sales and/or refinancings.  The Partnerships cash available for distribution is reviewed on a monthly basis.



There can be no assurance, however, that the Partnership will generate sufficient funds from operations after capital expenditures to permit additional distributions to its partners during the remainder of 2008 or subsequent periods.



Other



In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 13,236.50 limited partnership units (the "Units") in the Partnership representing 49.43% of the outstanding Units at June 30, 2008.  A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers.  Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 49.43% of the outstanding Units, AIMCO and its affiliates are in a position to influence all voting decisions with respect to the Partnership. Although the Managing General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the Managing General Partner, as managing general partner, to the Partnership and its limited partners may come into conflict with the duties of the Managing General Partner to AIMCO as its sole stockholder.



Critical Accounting Policies and Estimates



The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require the Partnership to make estimates and assumptions. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity.



Impairment of Long-Lived Assets



Investment properties are recorded at cost, less accumulated depreciation, unless the carrying amount of the asset is not recoverable.  If events or circumstances indicate that the carrying amount of a property may not be recoverable, the Partnership will make an assessment of its recoverability by comparing the carrying amount to the Partnerships estimate of the undiscounted future cash flows, excluding interest charges, of the property.   If the carrying amount exceeds the aggregate undiscounted future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property.



Real property investment is subject to varying degrees of risk.  Several factors may adversely affect the economic performance and value of the Partnerships investment properties.  These factors include, but are not limited to, general economic climate; competition from other apartment communities and other housing options; local conditions, such as loss of jobs or an increase in the supply of apartments that might adversely affect apartment occupancy or rental rates; changes in governmental regulations and the related cost of compliance; increases in operating costs (including real estate taxes) due to inflation and other factors, which may not be offset by increased rents; and changes in tax laws and housing laws, including the enactment of rent control laws or other laws regulating multi-family housing.  Any adverse changes in these factors could cause impairment of the Partnerships assets.



Revenue Recognition



The Partnership generally leases apartment units for twelve-month terms or less.  The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area.  Rental income attributable to leases, net of any concessions, is recognized on a straight-line basis over the term of the lease.  The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants.



ITEM 4T.

CONTROLS AND PROCEDURES



(a)

Disclosure Controls and Procedures. The Partnerships management, with the participation of the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnerships principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnerships disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnerships principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnerships disclosure controls and procedures are effective.



(b)

Changes in Internal Control Over Financial Reporting. There have been no significant changes in the Partnerships internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Partnerships internal control over financial reporting.













PART II - OTHER INFORMATION





ITEM 1.

LEGAL PROCEEDINGS



In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its Managing General Partner and several of their affiliated partnerships and corporate entities. The action purported to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) that are named as nominal defendants, challenging, among other things, the acquisition of interests in certain Managing General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities that were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary damages and equitable relief, including judicial dissolution of the Partnership. In addition, during the third quarter of 2001, a complaint captioned Heller v. Insignia Financial Group (the "Heller action") was filed against the same defendants that are named in the Nuanes action. On or about August 6, 2001, plaintiffs filed a first amended complaint. The Heller action was brought as a purported derivative action, and asserted claims for, among other things, breach of fiduciary duty, unfair competition, conversion, unjust enrichment, and judicial dissolution. On January 28, 2002, the trial court granted defendants motion to strike the complaint.  Plaintiffs took an appeal from this order.



On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. On June 13, 2003, the court granted final approval of the settlement and entered judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector ("Objector") filed an appeal (the Appeal) seeking to vacate and/or reverse the order approving the settlement and entering judgment thereto. On May 4, 2004, the Objector filed a second appeal challenging the courts use of a referee and its order requiring Objector to pay those fees.



On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.  With regard to the settlement and judgment entered thereto, the Court of Appeals vacated the trial courts order and remanded to the trial court for further findings on the basis that the state of the record is insufficient to permit meaningful appellate review.  The matter was transferred back to the trial court on June 21, 2005.  With regard to the second appeal, the Court of Appeals reversed the order requiring the Objector to pay referee fees. With respect to the related Heller appeal, on July 28, 2005, the Court of Appeals reversed the trial courts order striking the first amended complaint.



On August 18, 2005, Objector and his counsel filed a motion to disqualify the trial court based on a peremptory challenge and filed a motion to disqualify for cause on October 17, 2005, both of which were ultimately denied and/or struck by the trial court.  On or about October 13, 2005 Objector filed a motion to intervene and on or about October 19, 2005 filed both a motion to take discovery relating to the adequacy of plaintiffs as derivative representatives and a motion to dissolve the anti-suit injunction in connection with settlement.  On November 14, 2005, Plaintiffs filed a Motion For Further Findings pursuant to the remand ordered by the Court of Appeals. Defendants joined in that motion.  On February 3, 2006, the Court held a hearing on the various matters pending before it and ordered additional briefing from the parties and Objector. On June 30, 2006, the trial court entered an order confirming its approval of the class action settlement and entering judgment thereto after the Court of Appeals had remanded the matter for further findings.  The substantive terms of the settlement agreement remain unchanged.  The trial court also entered supplemental orders on July 1, 2006, denying Objectors Motion to File a Complaint in Intervention, Objectors Motion for Leave of Discovery and Objectors Motion to Dissolve the Anti-Suit Injunction.  Notice of Entry of Judgment was served on July 10, 2006.



On August 31, 2006, the Objector filed a Notice of Appeal to the Courts June 30, 2006 and July 1, 2006 orders. The matter was argued and submitted and the Court of Appeal issued an opinion on February 20, 2008 affirming the order approving the settlement and judgment entered thereto. On March 12, 2008, the Court of Appeal denied Appellants Petition for Re-Hearing.  On May 21, 2008, the California Supreme Court denied Appellants Petition for Review.  Objector has until August 19,2008 to file a petition for certiorari with the United States Supreme Court.



The Managing General Partner does not anticipate that any costs to the Partnership, whether legal or settlement costs, associated with these cases will be material to the Partnerships overall operations.



As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the Managing General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (FLSA) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (overtime claims).  The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company failed to compensate maintenance workers for time that they were required to be "on-call" (on-call claims).  In March 2007, the court in the District of Columbia decertified the collective action.  In July 2007, plaintiffs counsel filed individual cases in Federal court in 22 jurisdictions.  In the second quarter 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining on-call claims and the attorneys fees claimed by plaintiffs counsel.  As a result, the lawsuits asserted in the 22 Federal courts will be dismissed.  At this time, affiliates of the Managing General Partner are attempting to obtain additional information to determine the most equitable allocation of settlement amounts and attorneys fees.  The Managing General Partner is uncertain as to the amount of loss, if any, allocable to the Partnership.  Therefore, the Partnership cannot estimate whether a loss will occur or a potential range of loss.



ITEM 6.

EXHIBITS



See Exhibit Index.















SIGNATURES







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



|                      |                                             
|--------------------- | --------------------------------------------
|                      | DAVIDSON INCOME REAL ESTATE, L.P.           
|                      |                                             
|                      | By:   Davidson Diversified Properties, Inc.,
|                      | Managing General Partner                    
|                      |                                             
|Date: August 14, 2008 | By:   /s/Martha L. Long                     
|                      | Martha L. Long                              
|                      | Senior Vice President                       
|                      |                                             
|Date: August 14, 2008 | By:   /s/Stephen B. Waters                  
|                      | Stephen B. Waters                           
|                      | Vice President                              



















DAVIDSON INCOME REAL ESTATE, L.P.



EXHIBIT INDEX





Exhibit



3

Agreement of Limited Partnership is incorporated by reference to Exhibit A to the Prospectus of the Registrant dated July 26, 1985 as filed with the Commission pursuant to Rule 424(b) under the Act.



3A

Amendment to Partnership Agreement dated October 1, 1985 is incorporated by reference to Exhibit 3A to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987.



4

Certificate of Limited Partnership dated April 29, 1985 is incorporated by reference to Exhibit 4 to the Registrant's Registration Statement on Form S-11 dated May 7, 1985.



4A

Certificate of Amendment to Certificate of Limited Partnership dated July 16, 1985 is incorporated by reference to Exhibit 4B in Amendment No. 1 to Registration Statement No. 2-97539, dated July 24, 1985.



10L

Contract for Sale of Real Estate for The Bexley House dated July 16, 1986 between Bexley House, Limited, an Ohio limited partnership and Tennessee Trust Company is incorporated by reference to Exhibit 10(a) to the Registrant's Current Report on Form 8-K dated September 30, 1986.



10M

Reinstatement and Amendment of Contract for Sale of Real Estate for The Bexley House dated September 4, 1986 between Bexley House, Limited, an Ohio limited partnership and Tennessee Trust Company, a Tennessee corporation, is incorporated by reference to Exhibit 10(b) to the Registrant's Current Report on Form 8-K dated September 30, 1986.



10N

Amendment to Reinstated and Amended for Sale of Real Estate for The Bexley House dated September 19, 1986 between Bexley House, Limited, an Ohio limited partnership and Tennessee Trust Company, a Tennessee corporation, is incorporated by reference to Exhibit 10(c) to the Registrant's Current Report on Form 8-K dated September 30, 1986.



10O

Assignment of Contract for Sale of Real Estate for The Bexley House dated September 30, 1986 between Tennessee Trust Company and the Registrant is incorporated by reference to Exhibit 10(d) to the Registrant's Current Report on Form 8-K dated September 30, 1986.



10P

Limited Warranty Deed dated September 28, 1986 between Bexley House, Ltd., an Ohio limited partnership and the Registrant is incorporated by reference to Exhibit 10(e) to the Registrant's Current Report on Form 8-K dated September 30, 1986.



10Q

Contract for Sale of Real Estate for Covington Pointe Apartments dated January 20, 1987 between F.G.M.C. Investment Corp., a Texas corporation Tennessee Trust Company, a Tennessee corporation, is incorporated by reference to Exhibit 10(a) to the Registrant's Current Report on Form 8-K dated March 10, 1987.













Exhibit



10R

Amendment to Contract for Purchase of Real Estate for Covington Pointe Apartments dated January 23, 1987 between F.G.M.C. Investment Corp., a Texas corporation Tennessee Trust Company, a Tennessee corporation, is incorporated by reference to Exhibit 10(b) to the Registrant's Current Report on Form 8-K dated March 10, 1987.



10S

Assignment of Contract for Purchase of Real Estate for Covington Pointe Apartments dated March 2, 1987 between Tennessee Trust Company and the Registrant is incorporated by reference to Exhibit 10(c) to the Registrant's Current Report on Form 8-K dated March 10, 1987.



10T

Contract for Purchase of Real Estate for Phase I of Sterling Crest Apartments dated March 10, 1987 between Sterling Crest Development Partners, Ltd., a Georgia limited partnership, and Tennessee Trust Company, a Tennessee corporation, is incorporated by reference to Exhibit 10(d) to the Registrant's Current Report on Form 8-K dated March 10, 1987.



10Y

Sterling Crest Joint Venture Agreement dated June 29, 1987 between the Registrant and Freeman Georgia Ventures, Inc. is incorporated by reference to Exhibit 10(b) to the Registrant's Current Report on Form 8-K dated June 30, 1987.



10Z

Assignment of Contract for Purchase of Real Estate for Phase I of Sterling Crest Apartments dated June 29, 1987 is incorporated by reference to Exhibit 10(c) to the Registrant's Current Report on Form 8-K dated June 30, 1987.



10AA

Warranty Deed dated June 30, 1987 between Sterling Crest Development Partners, Ltd. and Sterling Crest Joint Venture, is incorporated by reference to Exhibit 10(d) to the Registrant's Current Report on Form 8-K dated June 30, 1987.



10DD

Contract for Purchase of Real Estate for Phase II of Sterling Crest Apartments dated March 10, 1987 between Sterling Crest Development Partners, Ltd. and Tennessee Trust Company is incorporated by reference to Exhibit 10(a) to the Registrant's Report on Form 8-K dated December 29, 1987.



10FF

Assignment of Contract for Purchase of Real Estate and Tri-Party Agreement dated November 4, 1987 between Tennessee Trust Company and Sterling Crest Joint Venture relating to Sterling Crest Apartments, is incorporated by reference to Exhibit 10(c) to the Registrant's Report on Form 8-K dated December 29, 1987.



10GG

Amended and Restated Sterling Crest Joint Venture Agreement dated June 29, 1987 among the Registrant, Freeman Georgia Ventures, Inc., and Freeman Growth Plus, L.P., is incorporated by reference to Exhibit 10(d) to the Registrant's Report on Form 8-K dated December 29, 1987.











Exhibit



10RR

Multifamily Note dated December 15, 2000, between Davidson Income Real Estate, L.P., a Delaware limited partnership and Reilly Mortgage Group, Inc., a District of Columbia corporation, related to Bexley House Apartments, incorporated by reference to Form 10-KSB dated March 30, 2001.



10TT

Contracts related to refinancing of debt of Covington Pointe Apartments:



(a)

Multifamily Note dated June 26, 2003 between AIMCO Covington Pointe, L.P., a Delaware limited partnership, and Keycorp Real Estate Capital Markets, Inc., an Ohio corporation, incorporated by reference to Form 8-K dated June 26, 2003.



(b)

Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated June 26, 2003 between AIMCO Covington Pointe, L.P., a Delaware limited partnership, and Keycorp Real Estate Capital Markets, Inc., an Ohio corporation, incorporated by reference to Form 8-K dated June 26, 2003.



(c)

Replacement Reserve and Security Agreement dated June 26, 2003 between AIMCO Covington Pointe, L.P., a Delaware limited partnership, and Keycorp Real Estate Capital Markets, Inc., an Ohio corporation, incorporated by reference to Form 8-K dated June 26, 2003.



10WW

Purchase and Sale Contract between Brighton Crest, L.P., a South Carolina Limited Partnership and Titan Real Estate Investment Group, LLC, an Ohio limited liability company, dated April 1, 2008. Filed with Current Report on Form 8-K of Registrant dated April 1, 2008 and incorporated herein by reference.



10XX

Reinstatement of and Second Amendment to Purchase and Sale Contract between Brighton Crest, L.P., a South Carolina Limited Partnership and Tital Real Estate Investment Group, LLC, an Ohio limited liability company, dated June 5, 2008. Filed with Current Report on Form 8-K of Registrant dated June 5, 2008 and incorporated herein by reference.



31.1

Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



31.2

Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



32.1

Certification of equivalent of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.













Exhibit





99A

Agreement of Limited Partnership for Davidson IRE GP Limited Partnership between Davidson Diversified Properties, Inc. and Davidson Income Real Estate, L.P. entered into on September 15, 1993 is incorporated by reference to Exhibit 99A to the Registrant's Quarterly Report on Form 10-QSB for the quarter ended September 30, 1993.



99B

Agreement of Limited Partnership for Davidson IRE Associates, L.P. between Davidson IRE GP Limited Partnership and Davidson Income Real Estate, L.P. is incorporated by reference to Exhibit 99B to the Registrant's Quarterly Report on Form 10-QSB for the quarter ended September 30, 1993.



99C

Agreement of Limited Partnership for Bexley House L.P. between Davidson Income GP Limited Partnership and Davidson Income Real Estate, L.P. entered into on October 13, 1993 is incorporated by reference to Exhibit 99C to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1992.