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

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


                 For the quarterly period ended March 31, 1997

                                       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)

                                 March 31, 1997



Assets
  Cash and cash equivalents:
     Unrestricted                                                $    713
     Restricted--tenant security deposits                             100
  Accounts receivable                                                  11
  Escrows for taxes                                                   130
  Restricted escrows                                                  415
  Other assets                                                        367
  Investment properties:
    Land                                           $  4,120
    Buildings and related personal property          19,860
                                                     23,980
    Less accumulated depreciation                    (9,473)       14,507

  Investment in Joint Venture                                         277

                                                                 $ 16,520

Liabilities and Partners' Capital (Deficit)
Liabilities
  Accounts payable                                               $     31
  Tenant security deposits                                            100
  Accrued taxes                                                       160
  Other liabilities                                                    94
  Mortgage notes payable                                           12,087

Partners' Capital (Deficit)
  General partners                                 $   (647)
     Limited partners (26,776 units
     issued and outstanding)                          4,695         4,048

                                                                 $ 16,520

          See Accompanying Notes to Consolidated Financial Statements

b)                      DAVIDSON INCOME REAL ESTATE, L.P.

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





                                                     Three Months Ended
                                                         March 31,
                                                    1997           1996
Revenues:
 Rental income                                      $ 1,116        $ 1,127
 Interest income                                         10             11
 Other income                                            51             49
  Total revenues                                      1,177          1,187

Expenses:
 Operating                                              365            381
 General and administrative                              51             57
 Maintenance                                            153            127
 Depreciation                                           218            206
 Interest                                               253            285
 Property taxes                                         119            112
  Total expenses                                      1,159          1,168

Equity in income of joint venture                        21             14

  Net income                                        $    39        $    33

Net income allocated to general partners (3%)       $     1        $     1
Net income allocated to limited partners (97%)           38             32

                                                    $    39        $    33

Net income per limited partnership unit             $  1.41        $  1.19

          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)


                                   Limited
                                 Partnership   General     Limited
                                    Units      Partners    Partners      Total

Original capital contributions       26,776    $     1     $ 26,776   $ 26,777

Partners' capital (deficit)
  at December 31, 1996               26,776    $  (645)       4,756      4,111

Distributions paid to partners                      (3)         (99)      (102)

Net income for the three months
  ended March 31, 1997                               1           38         39

Partners' capital (deficit)
  at March 31, 1997                  26,776    $  (647)    $  4,695   $  4,048

          See Accompanying Notes to Consolidated Financial Statements

d)                       DAVIDSON INCOME REAL ESTATE, L.P.

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


                                                        Three Months Ended
                                                             March 31,
                                                         1997         1996
Cash flows from operating activities:
  Net income                                            $   39      $   33
  Adjustments to reconcile net income to net
   cash provided by operating activities:
    Depreciation                                           218         206
    Amortization of discounts and loan costs                19          21
    Equity in income of joint venture                      (21)        (14)
    Change in accounts:
      Restricted cash                                        1          (7)
      Accounts receivable                                    9          (2)
      Escrows for taxes                                    142         156
      Other assets                                          (1)         (3)
      Accounts payable                                     (33)       (120)
      Tenant security deposit liabilities                   (1)          7
      Accrued taxes                                       (136)       (138)
      Other liabilities                                     (5)        (37)

         Net cash provided by operating activities         231         102

Cash flows from investing activities:
  Property improvements and replacements                   (66)       (112)
  Deposits to restricted escrows                           (19)         (3)
  Receipts from restricted escrows                          11           8
  Distributions from joint venture                          35           7

        Net cash used in investing activities              (39)       (100)

Cash flows from financing activities:
  Loan costs paid                                           (2)         --
  Payments on mortgage notes payable                       (30)        (37)
  Distributions paid                                      (102)       (140)

         Net cash used in financing activities            (134)       (177)

Net increase (decrease) in cash and cash equivalents        58        (175)

Cash and cash equivalents at beginning of period           655         876
Cash and cash equivalents at end of period              $  713      $  701

Supplemental disclosure of cash flow information:
  Cash paid for interest                                $  229      $  264

          See Accompanying Notes to Consolidated Financial Statements

e)                      DAVIDSON INCOME REAL ESTATE, L.P.

                         NOTES TO 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 month period ended March 31, 1997, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 1997.  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, 1996.

Certain reclassifications have been made to the 1996 information to conform to
the 1997 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 three months ended March
31, 1997 and 1996, 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:

                                                   Three Months Ended
                                                       March 31,
                                                    1997        1996
                                                     (in thousands)

Property management fees                           $ 57          $ 58
Reimbursement for services of affiliates             30            33


Included in "reimbursements for services of affiliates" for 1997 and 1996, are
approximately $1,000 and $3,000, 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.

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
three months ended March 31, 1997 and 1996:

                                                        Average
                                                       Occupancy
Property                                            1997        1996

Northsprings Apartments
   Atlanta, Georgia                                  89%         97%

Lakeside Apartments
   Charlotte, North Carolina                         91%         98%

Bexley House Apartments
   Columbus, Ohio                                    97%         96%

Covington Pointe Apartments
   Dallas, Texas                                     92%         96%


The Managing General Partner attributes the decrease in occupancy at
Northsprings, Lakeside and Covington Pointe to increased building in the
respective markets.  With more apartment complexes in the areas, competition has
been stronger and large concessions are being offered by competing apartment
complexes.  First time home purchases have also contributed to the decrease in
occupancy at Covington Pointe.

Results of Operations

The Partnership's net income for the three months ended March 31, 1997, was
approximately $39,000 compared to approximately $33,000 for the corresponding
period in 1996.  The increase in net income is primarily attributable to an
increase in equity in income of joint venture which is discussed below.  Also
contributing to the increase in net income was a decrease in interest expense.
Interest expense decreased as a result of the refinancing of Lakeside at a lower
interest rate.  Offsetting the decrease in interest expense was an increase in
maintenance expense.  Maintenance expense increased due to major parking lot
repairs and interior painting at Lakeside Apartments. Included in maintenance
expense for the three months ended March 31, 1997 is approximately $49,000 of
major repairs and maintenance comprised primarily of the parking lot repairs at
Lakeside Apartments.

The Partnership owns 17.5% of Sterling Crest Joint Venture.  Equity in the
income of the joint venture increased 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 at Brighton Crest was primarily due to a decrease in
landscaping due to the completion of a major landscaping project in the first
quarter of 1996.

As part of the ongoing business plan of the Partnership, the Corporate 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 Corporate 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 Corporate General Partner will be able to sustain
such a plan.

Liquidity and Capital Resources

At March 31, 1997, the Partnership had unrestricted cash of approximately
$713,000 compared to approximately $701,000 at March 31, 1996.  Net cash
provided by operating activities increased primarily due to a decrease in cash
used in accounts payable and other liabilities due to the timing of payments to
vendors.  Also contributing to the increase in net cash provided by operating
activities is an increase in accounts receivable and an increase in restricted
cash.  Net cash used in investing activities decreased primarily due to a
decrease in property improvements and replacements at the investment properties.
An increase in distributions from the joint venture also contributed to the
decrease in net cash used in investing activities.  Finally, net cash used in
financing activities decreased as a result of a decrease in distributions paid
to partners.

The Partnership has no material capital programs scheduled to be performed in
1997, although certain routine capital expenditures and maintenance expenses
have been budgeted.  These capital expenditures and maintenance expenses will be
incurred only if cash is available from operations or is received from the
capital reserve 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 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 approximately $12,087,000 net of discount, is amortized over
varying periods with required balloon payments ranging from November 2002, to
November 2003, at which time the properties will either be refinanced or sold.
Distributions paid to partners during the three months ended March 31, 1997, and
1996, were approximately $102,000 and $140,000, respectively.  Future cash
distributions will depend on the levels of net cash generated from operations,
property sales, and the availability of cash reserves.


                            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.

          b)   Reports on Form 8-K:

               None filed during the quarter ended March 31, 1997.


                                   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:  May 5, 1997