SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C.  20549
                                
                           FORM 10-QSB
                                
           Quarterly Report Under Section 13 or 15(d)
             of The Securities Exchange Act of 1934
                                
              For the Quarter Ended:  June 30, 1997
                                
                Commission file number:  0-14264
                                
                                
            AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
(Exact Name of Small Business Issuer as Specified in its Charter)


      State of Minnesota                   41-1525197
(State or other Jurisdiction of         (I.R.S. Employer
Incorporation or Organization)        Identification No.)


  1300 Minnesota World Trade Center, St. Paul, Minnesota 55101
            (Address of Principal Executive Offices)
                                
                         (612) 227-7333
                   (Issuer's telephone number)
                                
                                
                         Not Applicable
 (Former name, former address and former fiscal year, if changed
                       since last report)
                                
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
                                
         Transitional Small Business Disclosure Format:
                                
                      Yes            No   [X]
                                
                                
                                
                                
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
                                
                                
                              INDEX
                                
                                
                                                     

PART I. Financial Information

 Item 1. Balance Sheet as of June 30, 1997 and December 31, 1996    

          Statements for the Periods ended June 30, 1997 and 1996:

            Income                                     

            Cash Flows                                 

            Changes in Partners' Capital               

          Notes to Financial Statements               

 Item 2. Management's Discussion and Analysis    

PART II. Other Information

 Item 1. Legal Proceedings                          

 Item 2. Changes in Securities                      

 Item 3. Defaults Upon Senior Securities            

 Item 4. Submission of Matters to a Vote of Security  Holders

 Item 5. Other Information                          

 Item 6. Exhibits and Reports on Form 8-K           

<PAGE>                                
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP

                          BALANCE SHEET
                                
               JUNE 30, 1997 AND DECEMBER 31, 1996
                                
                           (Unaudited)
                                
                             ASSETS

                                                        1997           1996

CURRENT ASSETS:
   Cash and Cash Equivalents                       $   302,844    $   299,844
   Receivables                                           9,591          6,780
                                                    -----------    -----------
        Total Current Assets                           312,435        306,624
                                                    -----------    -----------
INVESTMENTS IN REAL ESTATE:
   Land                                              1,492,533      1,667,493
   Buildings and Equipment                           2,786,406      3,000,246
   Accumulated Depreciation                         (1,368,391)    (1,414,181)
                                                    -----------    -----------
        Net Investments in Real Estate               2,910,548      3,253,558
                                                    -----------    -----------
             Total Assets                          $ 3,222,983    $ 3,560,182
                                                    ===========    ===========
                                
                                
                      LIABILITIES AND PARTNERS' CAPITAL
                                
CURRENT LIABILITIES:
   Payable to AEI Fund Management, Inc.            $   107,660    $    99,733
   Land Remediation Estimate                           211,000        211,000
   Distributions Payable                                68,244         91,293
   Unearned Rent                                        12,459              0
                                                    -----------    -----------
        Total Current Liabilities                      399,363        402,026
                                                    -----------    -----------
PARTNERS' CAPITAL (DEFICIT):
   General Partners                                    (36,361)       (33,015)
   Limited Partners, $1,000 Unit value;
      7,500 Units authorized and issued;
      6,744 Units outstanding                        2,859,981      3,191,171
                                                    -----------    -----------
        Total Partners' Capital                      2,823,620      3,158,156
                                                    -----------    -----------
           Total Liabilities and Partners' Capital $ 3,222,983    $ 3,560,182
                                                    ===========    ===========



 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
                                
                       STATEMENT OF INCOME
                                
                  FOR THE PERIODS ENDED JUNE 30
                                
                           (Unaudited)
                                
                                
                                   Three Months Ended        Six Months Ended
                                  6/30/97      6/30/96     6/30/97     6/30/96

INCOME:
   Rent                        $  118,972   $  140,500  $  257,642  $  283,578
   Investment Income                5,227        3,784      11,282       7,371
                                ----------   ----------  ----------  ----------
        Total Income              124,199      144,284     268,924     290,949
                                ----------   ----------  ----------  ----------

EXPENSES:
   Partnership Administration - 
     Affiliates                    28,212       20,330      48,142      47,556
   Partnership Administration 
     and Property Management -
     Unrelated Parties             17,334       20,301      44,579      39,957
   Depreciation                    18,396       34,710      40,164      69,419
                                ----------   ----------  ----------  ----------
        Total Expenses             63,942       75,341     132,885     156,932
                                ----------   ----------  ----------  ----------

OPERATING INCOME                   60,257       68,943     136,039     134,017

GAIN ON SALE OF REAL ESTATE             0            0     109,147           0
                                ----------   ----------  ----------  ----------

NET INCOME                     $   60,257   $   68,943  $  245,186  $  134,017
                                ==========   ==========  ==========  ==========

NET INCOME ALLOCATED:
   General Partners            $      603   $      689  $    2,452  $    1,340
   Limited Partners                59,654       68,254     242,734     132,677
                                ----------   ----------  ----------  ----------
                               $   60,257   $   68,943  $  245,186  $  134,017
                                ==========   ==========  ==========  ==========

NET INCOME PER
  LIMITED PARTNERSHIP UNIT
  (6,744 and 6,819 weighted 
  average Units outstanding 
  in 1997 and 1996,
  respectively)                $     8.84   $    10.01  $   35.99   $    19.46
                                ==========   ==========  ==========  ==========



 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>                                
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
                                
                     STATEMENT OF CASH FLOWS
                                
                  FOR THE PERIODS ENDED JUNE 30
                                
                           (Unaudited)
                                

                                                        1997           1996

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net   Income                                     $  245,186     $  134,017

   Adjustments to Reconcile Net Income to Net Cash
   Provided by Operating Activities:
     Depreciation                                       40,164         69,419
     Gain on Sale of Real Estate                      (109,147)             0
     (Increase) Decrease in Receivables                 (2,811)            49
     Increase in Payable to
        AEI Fund Management, Inc.                        7,927         49,082
     Increase in Unearned Rent                          12,459         17,157
                                                    -----------    -----------
        Total Adjustments                              (51,408)       135,707
                                                    -----------    -----------
        Net Cash Provided By
        Operating Activities                           193,778        269,724
                                                    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds From Sale of Real Estate                   411,993              0
                                                    -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Decrease in Distributions Payable                   (23,049)       (20,209)
   Distributions to Partners                          (579,722)      (201,061)
                                                    -----------    -----------
        Net Cash Used For
        Financing Activities                          (602,771)      (221,270)
                                                    -----------    -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS                3,000         48,454

CASH AND CASH EQUIVALENTS, beginning of period         299,844        302,614
                                                    -----------    -----------

CASH AND CASH EQUIVALENTS, end of period           $   302,844    $   351,068
                                                    ===========    ===========



 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>                                
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
                                
            STATEMENT OF CHANGES IN PARTNERS' CAPITAL
                                
                  FOR THE PERIODS ENDED JUNE 30
                                
                           (Unaudited)
                                
                                

                                                                     Limited
                                                                   Partnership
                               General      Limited                   Units
                               Partners     Partners     Total     Outstanding


BALANCE, December 31, 1995   $ (29,269)  $ 3,562,088  $ 3,532,819    6,819.00

  Distributions                 (2,010)     (199,051)    (201,061)

  Net Income                     1,340       132,677      134,017
                              ---------   -----------  -----------  ----------
BALANCE, June 30, 1996       $ (29,939)  $ 3,495,714  $ 3,465,775    6,819.00
                              =========   ===========  ===========  ==========


BALANCE, December 31, 1996   $ (33,015)  $ 3,191,171  $ 3,158,156    6,743.96

  Distributions                 (5,798)     (573,924)    (579,722)

  Net Income                     2,452       242,734      245,186
                              ---------   -----------  -----------  -----------
BALANCE, June 30, 1997       $ (36,361)  $ 2,859,981  $2,823,620     6,743.96
                              =========   ===========  ===========  ===========



 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
                                
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                          JUNE 30, 1997
                                
                                
                           (Unaudited)
                                

(1)  The  condensed  statements included herein have been  prepared
     by  the Partnership, without audit, pursuant to the rules  and
     regulations  of  the Securities and Exchange  Commission,  and
     reflect   all  adjustments  which  are,  in  the  opinion   of
     management,  necessary to a fair statement of the  results  of
     operations for the interim period, on a basis consistent  with
     the  annual audited statements.  The adjustments made to these
     condensed   statements  consist  only  of   normal   recurring
     adjustments.   Certain information, accounting  policies,  and
     footnote    disclosures   normally   included   in   financial
     statements  prepared  in  accordance with  generally  accepted
     accounting principles have been condensed or omitted  pursuant
     to  such  rules  and  regulations,  although  the  Partnership
     believes  that  the  disclosures  are  adequate  to  make  the
     information  presented not misleading.  It is  suggested  that
     these  condensed financial statements be read  in  conjunction
     with  the  financial statements and the summary of significant
     accounting  policies  and  notes  thereto  included   in   the
     Partnership's latest annual report on Form 10-KSB.
 
(2)  Organization -

     AEI  Real Estate Fund 85-B Limited Partnership (Partnership)
     was  formed  to  acquire and lease commercial properties  to
     operating tenants.  The Partnership's operations are managed
     by  Net  Lease  Management 85-B, Inc.  (NLM),  the  Managing
     General Partner of the Partnership.  Robert P. Johnson,  the
     President  and  sole  shareholder  of  NLM,  serves  as  the
     Individual General Partner of the Partnership.  An affiliate
     of   NLM,   AEI   Fund   Management,  Inc.,   performs   the
     administrative and operating functions for the Partnership.
     
     The   terms   of  the  Partnership  offering  call   for   a
     subscription  price of $1,000 per Limited Partnership  Unit,
     payable   on  acceptance  of  the  offer.   The  Partnership
     commenced  operations  on September 17,  1985  when  minimum
     subscriptions    of   1,300   Limited   Partnership    Units
     ($1,300,000)  were  accepted.   The  Partnership's  offering
     terminated on February 4, 1986 when the maximum subscription
     limit  of  7,500 Limited Partnership Units ($7,500,000)  was
     reached.
     
     Under  the  terms of the Limited Partnership Agreement,  the
     Limited  Partners and General Partners contributed funds  of
     $7,500,000  and $1,000, respectively.  During the  operation
     of the Partnership, any Net Cash Flow, as defined, which the
     General Partners determine to distribute will be distributed
     90% to the Limited Partners and 10% to the General Partners;
     provided,  however, that such distributions to  the  General
     Partners will be subordinated to the Limited Partners  first
     receiving an annual, noncumulative distribution of Net  Cash
     Flow equal to 10% of their Adjusted Capital Contribution, as
     defined,  and, provided further, that in no event  will  the
     General Partners receive less than 1% of such Net Cash  Flow
     per  annum.  Distributions to Limited Partners will be  made
     pro rata by Units.
     
                                
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                           (Continued)
                                
(2)  Organization - (Continuted)

     Any  Net  Proceeds  of Sale, as defined, from  the  sale  or
     financing of the Partnership's properties which the  General
     Partners determine to distribute will, after provisions  for
     debts  and  reserves, be paid in the following  manner:  (i)
     first,  99%  to the Limited Partners and 1% to  the  General
     Partners until the Limited Partners receive an amount  equal
     to:  (a)  their Adjusted Capital Contribution  plus  (b)  an
     amount  equal  to 6% of their Adjusted Capital  Contribution
     per  annum, cumulative but not compounded, to the extent not
     previously distributed from Net Cash Flow; (ii) next, 99% to
     the  Limited  Partners and 1% to the General Partners  until
     the Limited Partners receive an amount equal to 14% of their
     Adjusted Capital Contribution per annum, cumulative but  not
     compounded, to the extent not previously distributed;  (iii)
     next, to the General Partners until cumulative distributions
     to the General Partners under Items (ii) and (iii) equal 15%
     of cumulative distributions to all Partners under Items (ii)
     and (iii).  Any remaining balance will be distributed 85% to
     the  Limited  Partners  and  15% to  the  General  Partners.
     Distributions to the Limited Partners will be made pro  rata
     by Units.
     
     For  tax  purposes,  profits  from  operations,  other  than
     profits  attributable  to  the  sale,  exchange,  financing,
     refinancing   or  other  disposition  of  the  Partnership's
     property,  will  be  allocated first in the  same  ratio  in
     which,  and  to the extent, Net Cash Flow is distributed  to
     the Partners for such year.  Any additional profits will  be
     allocated 90% to the Limited Partners and 10% to the General
     Partners.   In the event no Net Cash Flow is distributed  to
     the  Limited  Partners,  90% of  each  item  of  Partnership
     income,  gain  or credit for each respective year  shall  be
     allocated to the Limited Partners, and 10% of each such item
     shall be allocated to the General Partners.  Net losses from
     operations will be allocated 98% to the Limited Partners and
     2% to the General Partners.
     
     For  tax purposes, profits arising from the sale, financing,
     or  other disposition of the Partnership's property will  be
     allocated  in  accordance with the Partnership Agreement  as
     follows:  (i) first, to those Partners with deficit balances
     in  their capital accounts in an amount equal to the sum  of
     such  deficit  balances; (ii) second,  99%  to  the  Limited
     Partners  and 1% to the General Partners until the aggregate
     balance in the Limited Partners' capital accounts equals the
     sum  of the Limited Partners' Adjusted Capital Contributions
     plus  an  amount  equal  to 14% of  their  Adjusted  Capital
     Contributions  per annum, cumulative but not compounded,  to
     the  extent  not previously allocated; (iii) third,  to  the
     General Partners until cumulative allocations to the General
     Partners equal 15% of cumulative allocations.  Any remaining
     balance  will  be allocated 85% to the Limited Partners  and
     15%  to the General Partners.  Losses will be allocated  98%
     to the Limited Partners and 2% to the General Partners.
     
     The  General Partners are not required to currently  fund  a
     deficit capital balance. Upon liquidation of the Partnership
     or  withdrawal  by  a General Partner, the General  Partners
     will  contribute to the Partnership an amount equal  to  the
     lesser of the deficit balances in their capital accounts  or
     1%  of total Limited Partners' and General Partners' capital
     contributions.
     
                                
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                           (Continued)
                                
(3)  Investments in Real Estate -

     The Fair Muffler property, located in Park Forest, Illinois,
     is  a  one-story  brick  building with  approximately  2,450
     square feet on an approximately 19,388 square foot parcel of
     land.   It was acquired in August, 1986 and leased  under  a
     long-term  triple net Lease for twenty years.  In 1989,  the
     lessee  filed  for bankruptcy and the Partnership  re-leased
     the  property  to  a Fair Muffler franchisee  who  had  been
     operating  the  property  as  a sublessee.   The  franchisee
     continued to operate the property until December, 1996.   In
     January, 1997, it was leased on a month-to-month basis to  a
     car care operator for $2,600 per month.  The Partnership  is
     reviewing its available options which include selling or re-
     leasing  the  property.  However, other real estate  in  the
     immediate  area  has  been taken  back  by  lenders  and  is
     maintaining  a high vacancy rate.  In 1996, in  anticipation
     of  selling  the  property,  the  Partnership  conducted  an
     environmental  soil  contamination  investigation   of   the
     property.   The  investigation  revealed  contamination   of
     approximately  2,750  cubic  yards  exceeding  Tier  1  soil
     migration  to Class II groundwater, which will  need  to  be
     remediated.   The  contamination  has  been  identified   as
     petroleum  constituents and is believed to have been  caused
     by  underground storage tanks when the property was operated
     as   a  gasoline  station,  which  occurred  prior  to   the
     Partnership's ownership.
     
     An  estimate, prepared by an environmental engineering firm,
     of   approximately  $211,000  has  been  received  for  site
     remediation  work.  The estimate includes contaminated  soil
     removal,  tank  removal,  soil  sampling,  backfilling   and
     reporting.   The  Partnership has engaged legal  counsel  to
     investigate   what  sources,  if  any,  are  available   for
     indemnification of these reclamation costs.   In  the  third
     quarter of 1996, the Partnership accrued a current liability
     of  $211,000  to  remediate  the  site.   It  has  not  been
     determined when the reclamation work will begin or how  long
     it  will  take to complete.  It is reasonably possible  that
     the actual costs could differ from the estimate and that the
     difference could be material.
     
     On  February  17, 1997, the Partnership sold  the  Auto  Max
     property  to  an  unrelated third  party.   The  Partnership
     received net sale proceeds of $411,993, which resulted in  a
     net  gain  of $109,147.  At the time of sale, the  cost  and
     related   accumulated  depreciation  of  the  property   was
     $388,800  and  $85,954, respectively.  In April,  1997,  the
     Partnership distributed $404,040 of the net sale proceeds to
     the  Limited and General Partners which represented a return
     of   capital   of  $59.31  per  Limited  Partnership   Unit,
     respectively.
     
(4)  Payable to AEI Fund Management -

     AEI  Fund  Management, Inc. performs the administrative  and
     operating functions for the Partnership.  The payable to AEI
     Fund   Management  represents  the  balance  due  for  those
     services.    This  balance  is  non-interest   bearing   and
     unsecured  and  is  to  be  paid in  the  normal  course  of
     business.
     
     
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS

Results of Operations

        For  the  six  months ended June 30, 1997 and  1996,  the
Partnership  recognized rental income of $257,642  and  $283,578,
respectively.  During  the same periods, the  Partnership  earned
investment income of $11,282 and $7,371, respectively.  In  1997,
rental  income decreased mainly as a result of the  sale  of  the
Auto Max property discussed below.  The decrease in rental income
was  partially offset by additional investment income  earned  on
the net proceeds from the property sale.

        During  the six months ended June 30, 1997 and 1996,  the
Partnership   paid   Partnership   administration   expenses   to
affiliated  parties of $48,142 and $47,556, respectively.   These
administration  expenses  include  costs  associated   with   the
management of the properties, processing distributions, reporting
requirements  and correspondence to the Limited Partners.  During
the   same   periods,   the  Partnership   incurred   Partnership
administration  and property management expenses  from  unrelated
parties  of  $44,579 and $39,957, respectively.   These  expenses
represent  direct payments to third parties for legal and  filing
fees,  direct administrative costs, outside audit and  accounting
costs, taxes, insurance and other property costs.

        The  Fair  Muffler  property,  located  in  Park  Forest,
Illinois, is a one-story brick building with approximately  2,450
square  feet  on  an approximately 19,388 square foot  parcel  of
land.   It was acquired in August, 1986 and leased under a  long-
term  triple  net  Lease for twenty years.  In 1989,  the  lessee
filed  for bankruptcy and the Partnership re-leased the  property
to  a Fair Muffler franchisee who had been operating the property
as a sublessee.  The franchisee continued to operate the property
until December, 1996.  In January, 1997, it was leased on a month-
to-month basis to a car care operator for $2,600 per month.   The
Partnership  is  reviewing its available  options  which  include
selling  or re-leasing the property.  However, other real  estate
in  the  immediate  area has been taken back by  lenders  and  is
maintaining  a  high vacancy rate.  In 1996, in  anticipation  of
selling  the property, the Partnership conducted an environmental
soil   contamination   investigation  of   the   property.    The
investigation revealed contamination of approximately 2,750 cubic
yards  exceeding  Tier 1 soil migration to Class II  groundwater,
which  will  need to be remediated.  The contamination  has  been
identified as petroleum constituents and is believed to have been
caused  by  underground  storage  tanks  when  the  property  was
operated  as  a  gasoline station, which occurred  prior  to  the
Partnership's ownership.

        An  estimate,  prepared  by an environmental  engineering
firm,  of  approximately  $211,000 has  been  received  for  site
remediation  work.   The  estimate  includes  contaminated   soil
removal,  tank removal, soil sampling, backfilling and reporting.
The  Partnership  has engaged legal counsel to  investigate  what
sources,  if  any,  are  available for indemnification  of  these
reclamation costs.  In the third quarter of 1996, the Partnership
accrued  a  current liability of $211,000 to remediate the  site.
It  has not been determined when the reclamation work will  begin
or  how long it will take to complete.  It is reasonably possible
that the actual costs could differ from the estimate and that the
difference could be material.

       Effective April 1, 1997, the Partnership's annualized cash
distribution  rate  was  5.00%, based  on  the  Adjusted  Capital
Contribution.   Distributions of Net Cash  Flow  to  the  General
Partners were subordinated to the Limited Partners as required in
the Partnership Agreement.  As a result, 99% of distributions and
income  were allocated to Limited Partners and 1% to the  General
Partners.


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS.  (Continued)

        Inflation  has  had  a  minimal  effect  on  income  from
operations.   It is expected that increases in sales  volumes  of
the  tenants, due to inflation and real sales growth, will result
in  an  increase  in rental income over the term of  the  leases.
Inflation  also  may  cause  the  Partnership's  real  estate  to
appreciate in value.  However, inflation and changing prices  may
also  have  an  adverse impact on the operating  margins  of  the
properties' tenants which could impair their ability to pay  rent
and subsequently reduce the Partnership's Net Cash Flow available
for distributions.

Liquidity and Capital Resources

         During   the  six  months  ended  June  30,  1997,   the
Partnership's cash balances increased $3,000.  Net cash  provided
by  operating  activities  decreased from  $269,724  in  1996  to
$193,778 in 1997 as a result of a decrease in income in 1997  and
net  timing  differences in the collection of payments  from  the
lessees and the payment of expenses.

        On  February 17, 1997, the Partnership sold the Auto  Max
property  to an unrelated third party.  The Partnership  received
net  sale proceeds of $411,993, which resulted in a net  gain  of
$109,147.   At the time of sale, the cost and related accumulated
depreciation   of   the  property  was  $388,800   and   $85,954,
respectively.   In  April,  1997,  the  Partnership   distributed
$404,040  of  the  net sale proceeds to the Limited  and  General
Partners  which  represented a return of capital  of  $59.31  per
Limited Partnership Unit, respectively.

       The Partnership's primary use of cash flow is distribution
and  redemption  payments to Partners.  The Partnership  declares
its  regular  quarterly  distributions before  the  end  of  each
quarter and pays the distribution in the first week after the end
of  each quarter.  The Partnership attempts to maintain a  stable
distribution rate from quarter to quarter.  However,  in  certain
quarters,   the   Partnership   will   increase   the   quarterly
distribution to pay out contingent rent received as a  result  of
an  increase  in  sales at a property.  The distribution  of  the
contingent  rent  can  cause  the  total  distributions  and  the
distribution payable to fluctuate from year to year.   Redemption
payments are paid to redeeming Partners in the fourth quarter  of
each year.

        In  the  first  six months of 1996, the Partnership  made
distributions at a 6.27% rate which resulted in distributions  to
the  Partners  of  $201,061.   In April,  1997,  the  Partnership
distributed  net sale proceeds of $404,040 to the Partners  as  a
special   distribution,  which  reduced  the  Limited   Partners'
Adjusted  Capital  Contribution.  Effective April  1,  1997,  the
Partnership  made  distributions at a 5.0% rate  on  the  reduced
capital  balance, which resulted in distributions to the Partners
of $179,722 for the first six months of 1997.

        The  Partnership may acquire Units from Limited  Partners
who  have tendered their Units to the Partnership. Such Units may
be  acquired at a discount.  The Partnership is not obligated  to
purchase  in  any  year  more than 5%  of  the  number  of  Units
originally sold.  In no event shall the Partnership be  obligated
to  purchase  Units if, in the sole discretion  of  the  Managing
General  Partner,  such  purchase would  impair  the  capital  or
operation of the Partnership.

        During  1996, four Limited Partners redeemed a  total  of
75.04  Partnership  Units  for $41,884  in  accordance  with  the
Partnership  Agreement.   The Partnership  acquired  these  Units
using Net Cash Flow from operations.  In prior years, a total  of
sixty-eight Limited Partners redeemed 680.8 Partnership Units for
$548,742.    The  redemptions  increase  the  remaining   Limited
Partners' ownership interest in the Partnership.


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS.  (Continued)

       The continuing rent payments from the properties, together
with  the Partnership's cash reserve, should be adequate to  fund
continuing  distributions and meet other Partnership obligations,
including  those  obligations  associated  with  remediation   of
contaminated  soil at the Fair Muffler property located  in  Park
Forest, Illinois, on both a short-term and long-term basis.

                                
                   PART II - OTHER INFORMATION
                                
ITEM 1. LEGAL PROCEEDINGS

       There  are no material pending legal proceedings to  which
  the  Partnership  is  a  party or of  which  the  Partnership's
  property is subject.

ITEM 2. CHANGES IN SECURITIES

         None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

        None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        None.

ITEM 5. OTHER INFORMATION

        None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        a. Exhibits -
                             Description

            27    Financial Data Schedule  for  period
                  ended June 30, 1997.

        b.   Reports filed on Form 8-K - None.

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


Dated:  August 5, 1997        AEI Real Estate Fund 85-B
                              Limited Partnership
                              By:  Net Lease Management 85-B,Inc.
                              Its: Managing General Partner



                              By: /s/ Robert P Johnson
                                      Robert P. Johnson
                                      President
                                      (Principal Executive Officer)



                              By: /s/ Mark E Larson
                                      Mark E. Larson
                                      Chief Financial Officer
                                      (Principal Accounting Officer)