UNITED STATES
               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, 2005

                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.)


    30 East 7th Street, Suite 1300, St. Paul, Minnesota 55101
            (Address of Principal Executive Offices)

                          (651) 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.  Statement of Net Assets Available for Liquidation
          as of June 30, 2005 and December 31, 2004

          Statement of Liquidating Activities for the
          Periods ended June 30, 2005 and 2004

          Notes to Financial Statements

 Item 2.  Management's Discussion and Analysis

 Item 3.  Controls and Procedures

PART II.  Other Information

 Item 1.  Legal Proceedings

 Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

 Item 3.  Defaults Upon Senior Securities

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

 Item 5.  Other Information

 Item 6.  Exhibits

          Signatures

<PAGE>
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
        STATEMENT OF NET ASSETS AVAILABLE FOR LIQUIDATION
               JUNE 30, 2005 AND DECEMBER 31, 2004

                           (Unaudited)

                                                 2005           2004
ASSETS:
  Cash                                        $         0   $   322,261
  Investments in Real Estate                            0     1,529,000
                                               -----------   -----------
          Total Assets                                  0     1,851,261
                                               -----------   -----------

LIABILITIES:
  Payable to AEI Fund Management, Inc.                  0         2,108
  Land Remediation Estimate                             0       211,000
  Distributions Payable                                 0        44,101
                                               -----------   -----------
          Total Liabilities                             0       257,209
                                               -----------   -----------
NET ASSETS (PARTNERS' CAPITAL) IN LIQUIDATION,
  including 0 and 6,423 Limited Partnership Units
  outstanding, respectively                   $         0   $ 1,594,052
                                               ===========   ===========

 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 LIQUIDATING ACTIVITIES
                  FOR THE PERIODS ENDED JUNE 30
                           (Unaudited)

                                 Three Months Ended      Six Months Ended
                                6/30/05       6/30/04   6/30/05     6/30/04
SOURCES OF ADDITIONAL CASH:
  Rent                          $      571  $   27,458  $   18,505 $   77,372
  Lease Settlement Income                0      16,693           0     33,360
  Interest Income                    8,428       1,517      12,821      2,806
  Proceedsfrom Sale of Real Estate 746,286     322,121   1,532,926    322,121
                                 ----------  ----------  ---------- ----------
      Total Sources of
       Additional Cash             755,285     367,789   1,564,252    435,659
                                 ----------  ----------  ---------- ----------
USES OF ADDITIONAL CASH:
  Partnership Administration -
    Affiliates                       6,060      12,019      17,153     28,057
  Partnership Administration and Property
     Management - Unrelated Parties  9,750      21,710      12,696     35,122
  Tennessee Excise Tax              61,911           0      61,911          0
  Distributions to Partners      1,750,652      46,439   1,794,753     96,197
                                 ----------  ----------  ---------- ----------
   Total Uses of Additional Cash 1,828,373      80,168   1,886,513    159,376
                                 ----------  ----------  ---------- ----------
INCREASE (DECREASE) IN NET
  ASSETS IN LIQUIDATION
  BEFORE ADJUSTMENTS            (1,073,088)    287,621    (322,261)   276,283
                                 ----------  ----------  ---------- ----------
ADJUSTMENTS OF ESTIMATED VALUES:
  Increase (Decrease) in Net Realizable values of:
   Receivables                           0           0           0        (41)
   Payable to AEI Fund
     Management, Inc.                6,900       4,529       2,108     (1,068)
   Land Remediation Estimate       211,000           0     211,000          0
   Distributions Payable           549,152    (458,612)     44,101   (458,638)
   Deferred Income                       0           0           0    (16,667)
   Net Realizable Value of
     Real Estate Sold(748,000)    (315,000) (1,529,000)   (315,000)
                                 ----------  ----------  ---------- ----------
      Total Adjustment of
         Estimated Values           19,052    (769,083) (1,271,791)  (791,414)
                                 ----------  ----------  ---------- ----------
DECREASE IN NET ASSETS
   IN LIQUIDATION               (1,054,036)   (481,462) (1,594,052)  (515,131)

BEGINNING NET ASSETS
   IN LIQUIDATION                1,054,036   1,427,112   1,594,052  1,460,781
                                 ----------  ----------  ---------- ----------
ENDING NET ASSETS
   IN LIQUIDATION               $        0  $  945,650  $        0 $  945,650
                                 ==========  ==========  ========== ==========

 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, 2005

                           (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.  Robert P. Johnson, the President and  sole
     director  and  shareholder of NLM, serves as the  Individual
     General  Partner.   AEI  Fund  Management,  Inc.  (AEI),  an
     affiliate  of NLM, performs the administrative and operating
     functions for the Partnership.

     The   terms   of  the  Partnership  offering  call   for   a
     subscription  price of $1,000 per Limited Partnership  Unit,
     payable   on  acceptance  of  the  offer.   The  Partnership
     commenced  operations  on September 17,  1985  when  minimum
     subscriptions    of   1,300   Limited   Partnership    Units
     ($l,300,000)  were  accepted.  The  offering  terminated  on
     February  4,  1986  when the maximum subscription  limit  of
     7,500  Limited  Partnership Units 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 operations, 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 - (Continued)

     Any  Net  Proceeds  of Sale, as defined, from  the  sale  or
     financing of 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  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 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 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, 100% to the Limited 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)

(2)  Organization - (Continued)

     In  March  2004, the Managing General Partner  solicited  by
     mail  a  proxy statement seeking the consent of the  Limited
     Partners,  as  required by Section 6.1  of  the  Partnership
     Agreement,  to  initiate the final disposition,  liquidation
     and  distribution of all of the Partnership's properties and
     assets  within  the  next  year.  On  April  12,  2004,  the
     proposal  was  approved with a majority of  Units  voted  in
     favor  of  the proposal.  As a result, the Managing  General
     Partner  proceeded  with  the  planned  liquidation  of  the
     Partnership.   As  of  June 30, 2005,  the  Partnership  was
     liquidated.

     Financial Statement Presentation

     Because   liquidation   was   anticipated,  the  Partnership
     changed its basis of accounting  after  September 30,  2003,
     from  the  going  concern basis to  the  liquidation  basis.
     Effective  October 1, 2003,  the  Partnership  measures  its
     assets and liabilities  at  the amounts of cash expected  in
     liquidation and  reports  changes in estimates when they are
     known.  The  accounts  of the Partnership are maintained  on
     the  accrual  basis  of  accounting for both federal  income
     tax purposes and financial reporting purposes.

(3)  Investments in Real Estate -

     Effective  with  the  decision to  liquidate,  the  carrying
     amounts  of assets and liabilities were adjusted from  their
     historical bases to the amounts of cash expected from  their
     realization  and settlement.  Because of the expected  short
     liquidation period, the effects of discounting would not  be
     significant  and have been ignored.  At December  31,  2004,
     the  estimated  value  was based upon  subsequent  sales  of
     property   interests  and  comparable   sales   of   similar
     properties,  which resulted in an adjustment that  increased
     Investments in Real Estate by $659,000 in 2004.

(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.

          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
                  NOTES TO FINANCIAL STATEMENTS
                           (Continued)

(5)  Discontinued Operations -

     In  1996,  in  anticipation of selling a  property  in  Park
     Forest, Illinois, 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  in place when the property was operated as a gasoline
     station,  prior to the Partnership's ownership.  In  October
     1996,  an estimate for site remediation work, which included
     soil  removal, tank removal, soil sampling, backfilling  and
     reporting,  of  $211,000 was received from an  environmental
     engineering  firm.   It  has not been  determined  when  the
     reclamation  work  will begin, how  long  it  will  take  to
     complete  or  whether  there are any sources  available  for
     indemnification  of  the reclamation costs.   On  August  5,
     1998, the Partnership sold the property to the tenant.  As a
     result  of the liquidation of the Partnership, the liability
     for  the  potential reclamation work was  removed  from  the
     Partnership's balance sheet.

     In  June 2003, the Partnership received a verbal offer  from
     the lessee to buy the Arby's restaurant in Colorado Springs,
     Colorado  for $200,000.  In the second quarter  of  2003,  a
     charge  to operations for real estate impairment of  $27,888
     was  recognized, which was the difference between  the  book
     value  at  June  30, 2003 of $222,888 and the estimated  net
     sale  proceeds of $195,000.  The charge was recorded against
     the cost of the land and building.

     Subsequently,  the  lessee closed  the  restaurant,  stopped
     making  rent payments and broke off communications with  the
     Partnership.  At December 31, 2003, the lessee owed  $20,000
     for  past  due rent, which was not accrued.  The Partnership
     commenced  a legal action against the lessee to recover  all
     amounts  due  under  the  Lease.   In  February  2004,   the
     Partnership  reached  a  settlement  with  the  lessee.   In
     exchange   for  $75,000,  payable  over  six   months,   the
     Partnership  agreed to terminate the Lease and  dismiss  all
     claims  against  the  lessee.   On  February  4,  2004,  the
     Partnership  received  the  first  settlement   payment   of
     $25,000,  which was subject to a contingency  for  90  days.
     The  contingency expired and the Partnership applied $20,000
     of the payment against the past due rent discussed above and
     applied  $4,974  to unpaid real estate taxes  for  2003  and
     2004.   The  balance  was  recognized  as  Lease  Settlement
     Income.   During  the  next  five  months,  the  Partnership
     received  the remainder of the settlement in three  payments
     of  $16,667 each, which were subject to contingencies for 90
     days.  For the year ended December 31, 2004, the Partnership
     recognized  Lease Settlement Income of $50,027.   While  the
     property  was  vacant, the Partnership was  responsible  for
     costs required to maintain the property.

     In  March 2004, the Partnership entered into an agreement to
     sell  the property to an unrelated third party.  On June  2,
     2004,  the  sale closed with the Partnership  receiving  net
     sale  proceeds  of  $138,113.  At  December  31,  2003,  the
     estimated net realizable value was $135,000.


          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
                  NOTES TO FINANCIAL STATEMENTS
                           (Continued)

(5) Discontinued Operations - (Continued)

     In  March 2004, the Partnership entered into an agreement to
     sell  its 16.3486% interest in the Children's World  daycare
     center  in Sterling Heights, Michigan to an unrelated  third
     party.    On  May  26,  2004,  the  sale  closed  with   the
     Partnership  receiving net sale proceeds  of  $184,008.   At
     December  31, 2003, the estimated net realizable  value  was
     $180,000.

     In  February 2004, the Partnership entered into an agreement
     to  sell the Arby's restaurant in Jackson, Tennessee to  the
     lessee.   If  the sale was completed, the Partnership  would
     have  received net sale proceeds of approximately  $870,000.
     In  September  2004,  the lessee's plans  for  the  property
     changed and it advised the Partnership that it did not  want
     to  complete  the  purchase.  The Partnership  responded  by
     proposing an amendment to the lease to extend the lease term
     to  15 years, eliminate the lessee's option to purchase  the
     property  at  a fixed price, increase the annual  base  rent
     from  $95,842 to $105,000 and eliminate the percentage  rent
     clause.   The  lessee agreed to these terms  and  the  lease
     amendment took effect on October 1, 2004.   Based  on  these
     amended  lease terms, the Partnership recognized a  $659,000
     adjustment to increase the estimated net realizable value of
     the property to $1,529,000.

     During  the  first six months of 2005, the Partnership  sold
     the  Arby's  restaurant, in four separate  transactions,  to
     unrelated third parties.  The Partnership received total net
     sale  proceeds  of $1,532,926.  At December  31,  2004,  the
     estimated  net  realizable value of the interests  sold  was
     $1,529,000.  The State of Tennessee imposes an excise tax on
     the  taxable  income  of a partnership  that  is  earned  in
     Tennessee.   For  the six months ended June  30,  2005,  the
     Partnership  incurred $61,911 of excise tax related  to  the
     taxable gain on sale of the Arby's restaurant.

     During  the  first  six  months  of  2005,  the  Partnership
     distributed  $1,679,865 of net sale proceeds to the  Limited
     and  General Partners, which represented a return of capital
     of  $258.93 per Limited Partnership Unit.  In June 2004, the
     Partnership distributed $454,545 of net sale proceeds to the
     Limited and General Partners, which represented a return  of
     capital of $70.06 per Limited Partnership Unit.

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS

        The Management's Discussion and Analysis contains various
"forward  looking  statements"  within  the  meaning  of  federal
securities  laws  which  represent management's  expectations  or
beliefs  concerning future events, including statements regarding
anticipated  application of cash, expected  returns  from  rental
income,  growth  in revenue, taxation levels, the sufficiency  of
cash to meet operating expenses, rates of distribution, and other
matters.  These, and other forward looking statements made by the
Partnership,  must be evaluated in the context  of  a  number  of
factors that may affect the Partnership's financial condition and
results of operations, including the following:

    Market  and  economic conditions which affect the  value
    of  the  properties the Partnership owns and  the  cash
    from rental income such properties generate;

    the  federal  income tax consequences of rental  income,
    deductions,  gain  on  sales and other  items  and  the
    affects of these consequences for the Partners;

    resolution  by  the General Partners of  conflicts  with
    which they may be confronted;

    the effect of tenant defaults; and

    the  condition of the industries in which the  tenants  of
    properties owned by the Partnership operate.

The Application of Critical Accounting Policies

        The preparation of the Partnership's financial statements
requires  management to make estimates and assumptions  that  may
affect the reported amounts of assets, liabilities, revenues  and
expenses,  and  related  disclosure  of  contingent  assets   and
liabilities. Management evaluates these estimates on  an  ongoing
basis,  including  those related to the carrying  value  of  real
estate  and  the  allocation  by AEI  Fund  Management,  Inc.  of
expenses  to  the  Partnership as opposed  to  other  funds  they
manage.

       Through  September  30,  2003, the  Partnership  purchased
properties and recorded them in the financial statements  at  the
lower  of  cost  or estimated realizable value.  The  Partnership
initially  recorded the properties at cost (including capitalized
acquisition   expenses).   The  Partnership   was   required   to
periodically  evaluate  the  carrying  value  of  properties   to
determine   whether   their  realizable  value   declined.    For
properties  the  Partnership would hold and  operate,  management
determined   whether  impairment  occurred   by   comparing   the
property's  probability-weighted cash flows to its  then  current
carrying   value.   For  properties  held  for  sale,  management
determined   whether  impairment  occurred   by   comparing   the
property's  estimated fair value less cost to sell  to  its  then
current  carrying value.  If the carrying value was greater  than
the  realizable value, an impairment loss was recorded to  reduce
the  carrying value of the property to its realizable  value.   A
change  in these assumptions or analysis may have caused material
changes in the carrying value of the properties.

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

       Effective  October  1, 2003, the Partnership  adopted  the
liquidation  basis  of  accounting because the  General  Partners
anticipated  the liquidation of the Partnership.   In  accordance
with the liquidation basis of accounting, assets are recorded  at
their estimated net realizable value (the amount of cash expected
to  be  received)  and  liabilities are recorded  at  the  amount
estimated  to be paid to creditors and Partners.  Any changes  in
this  estimate could cause material changes in the net assets  in
liquidation.

        The  Partnership accrues a liability for land remediation
costs  when  information obtained by the Partnership, through  an
environmental  study, indicates it is possible that  a  liability
has  been  incurred  and  the amount  of  the  liability  can  be
reasonably   estimated.   Future  environmental  study   results,
changes  in the party responsible for the liability, or estimates
of  actual  clean-up costs could cause material  changes  in  the
liability accrued.

       AEI Fund Management Inc. allocates expenses to each of the
funds  they manage primarily on the basis of the number of  hours
devoted  by  their employees to each fund's affairs.   They  also
allocate  expenses at the end of each month that are not directly
related to a fund's operations based upon the number of investors
in the fund and the fund's capitalization relative to other funds
they  manage.  The Partnership reimburses these expenses  subject
to detailed limitations contained in the Partnership Agreement.

         Management   of  the  Partnership  has   discussed   the
development  and selection of the above accounting estimates  and
the management discussion and analysis disclosures regarding them
with the managing partner of the Partnership.

Results of Operations

        For the six months ended June 30, 2005 and 2004, while in
the  liquidation phase, the Partnership recognized rental  income
of  $18,505 and $77,331, respectively.  During the same  periods,
the Partnership recognized interest income of $12,821 and $2,806,
respectively.  In 2005, rental income decreased as  a  result  of
property sales.

        For the six months ended June 30, 2005 and 2004, while in
the  liquidation  phase,  the  Partnership  incurred  Partnership
administration  expenses from affiliated parties of  $17,153  and
$28,057,  respectively.   These administration  expenses  include
costs   associated  with  the  management  of   the   properties,
processing    distributions,    reporting    requirements     and
correspondence  to  the Limited Partners.  As  the  Partnership's
asset  base  decreases due to property sales, it is  allocated  a
smaller  share  of  expenses  that  are  allocated  by  AEI  Fund
Management, Inc. based on the relative assets of the funds  under
management.   During  the same periods, the Partnership  incurred
Partnership administration and property management expenses  from
unrelated  parties  of $10,588 and $36,190, respectively.   These
expenses represent direct payments to third parties for legal and
filing  fees,  direct administrative costs, outside audit  costs,
taxes,  insurance and other property costs.  These expenses  were
higher  in 2004, when compared to 2005, as the result of expenses
incurred  in  2004  related to properties that were  subsequently
sold during 2004.


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

        At  June  30,  2005 and 2004, the Partnership  recognized
adjustments  of estimated values of ($1,271,791) and  ($791,414),
respectively,  resulting from adopting the liquidation  basis  of
accounting  and recording its assets at estimated net  realizable
value and liabilities at the amount estimated to be paid.

        In  1996, in anticipation of selling a property  in  Park
Forest, Illinois, 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 in place when the  property
was  operated  as a gasoline station, prior to the  Partnership's
ownership.   In  October 1996, an estimate for  site  remediation
work,  which included soil removal, tank removal, soil  sampling,
backfilling  and  reporting, of $211,000  was  received  from  an
environmental engineering firm.  It has not been determined  when
the  reclamation  work  will begin, how  long  it  will  take  to
complete   or  whether  there  are  any  sources  available   for
indemnification of the reclamation costs.  On August 5, 1998, the
Partnership sold the property to the tenant.  As a result of  the
liquidation  of the Partnership, the liability for the  potential
reclamation  work  was  removed from  the  Partnership's  balance
sheet.

       In June 2003, the Partnership received a verbal offer from
the  lessee  to  buy  the Arby's restaurant in Colorado  Springs,
Colorado  for $200,000.  In the second quarter of 2003, a  charge
to   operations  for  real  estate  impairment  of  $27,888   was
recognized,  which was the difference between the book  value  at
June 30, 2003 of $222,888 and the estimated net sale proceeds  of
$195,000.  The charge was recorded against the cost of  the  land
and building.

        Subsequently,  the lessee closed the restaurant,  stopped
making  rent  payments  and  broke off  communications  with  the
Partnership.  At December 31, 2003, the lessee owed  $20,000  for
past  due rent, which was not accrued.  The Partnership commenced
a  legal  action  against the lessee to recover all  amounts  due
under  the  Lease.  In February 2004, the Partnership  reached  a
settlement  with  the lessee.  In exchange for  $75,000,  payable
over  six  months, the Partnership agreed to terminate the  Lease
and  dismiss all claims against the lessee.  On February 4, 2004,
the Partnership received the first settlement payment of $25,000,
which  was subject to a contingency for 90 days.  The contingency
expired  and  the  Partnership applied  $20,000  of  the  payment
against  the past due rent discussed above and applied $4,974  to
unpaid  real  estate taxes for 2003 and 2004.   The  balance  was
recognized  as  Lease Settlement Income.  During  the  next  five
months,  the Partnership received the remainder of the settlement
in  three  payments  of  $16,667  each,  which  were  subject  to
contingencies for 90 days.  For the year ended December 31, 2004,
the  Partnership recognized Lease Settlement Income  of  $50,027.
While  the  property was vacant, the Partnership was  responsible
for costs required to maintain the property.

        In  March 2004, the Partnership entered into an agreement
to  sell  the property to an unrelated third party.  On  June  2,
2004,  the  sale closed with the Partnership receiving  net  sale
proceeds  of  $138,113.  At December 31, 2003, the estimated  net
realizable value was $135,000.

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

Liquidity and Capital Resources

        In March 2004, the Managing General Partner solicited  by
mail  a  proxy  statement  seeking the  consent  of  the  Limited
Partners,   as  required  by  Section  6.1  of  the   Partnership
Agreement,  to  initiate the final disposition,  liquidation  and
distribution  of all of the Partnership's properties  and  assets
within  the  next  year.   On April 12, 2004,  the  proposal  was
approved with a majority of Units voted in favor of the proposal.
As  a  result,  the Managing General Partner proceeded  with  the
planned liquidation of the Partnership.  As of June 30, 2005, the
Partnership was liquidated.

         During   the  six  months  ended  June  30,  2005,   the
Partnership's  Net  Assets  in Liquidation  decreased  $1,594,052
mainly  as  a  result of cash distributions of net sale  proceeds
paid to the Partners.  During the six months ended June 30, 2004,
the  Partnership's  Net Assets in Liquidation decreased  $515,131
mainly  as  a  result of cash distributions of net sale  proceeds
paid to the Partners.

        In  March 2004, the Partnership entered into an agreement
to  sell  its  16.3486% interest in the Children's World  daycare
center in Sterling Heights, Michigan to an unrelated third party.
On  May  26, 2004, the sale closed with the Partnership receiving
net  sale  proceeds  of  $184,008.  At  December  31,  2003,  the
estimated net realizable value was $180,000.

         In  February  2004,  the  Partnership  entered  into  an
agreement to sell its Arby's restaurant in Jackson, Tennessee  to
the  lessee.   If  the sale was completed, the Partnership  would
have  received net sale proceeds of approximately  $870,000.   In
September  2004, the lessee's plans for the property changed  and
it  advised the Partnership that it did not want to complete  the
purchase.  The Partnership responded by proposing an amendment to
the  lease  to  extend the lease term to 15 years, eliminate  the
lessee's  option  to  purchase the property  at  a  fixed  price,
increase  the  annual  base rent from  $95,842  to  $105,000  and
eliminate the percentage rent clause.  The lessee agreed to these
terms  and  the lease amendment took effect on October  1,  2004.
Based on these amended lease terms, the Partnership recognized  a
$659,000  adjustment  to  increase the estimated  net  realizable
value of the property to $1,529,000.

        During the first six months of 2005, the Partnership sold
the   Arby's  restaurant,  in  four  separate  transactions,   to
unrelated third parties.  The Partnership received total net sale
proceeds of $1,532,926.  At December 31, 2004, the estimated  net
realizable value of the interests sold was $1,529,000.  The State
of  Tennessee imposes an excise tax on the taxable  income  of  a
partnership  that  is earned in Tennessee.  For  the  six  months
ended  June 30, 2005, the Partnership incurred $61,911 of  excise
tax related to the taxable gain on sale of the Arby's restaurant.

       The Partnership's primary use of cash flow is distribution
payments  to  Partners.   The Partnership  declared  its  regular
quarterly distributions before the end of each quarter  and  paid
the distribution in the first week after the end of each quarter.
For  the six months ended June 30, 2005 and 2004, the Partnership
declared  distributions of $1,750,652 and $554,835, respectively,
which were distributed 99% to the Limited Partners and 1% to  the
General Partners.  The Limited Partners received distributions of
$1,733,145  and  $549,287  and  the  General  Partners   received
distributions   of   $17,507  and   $5,548   for   the   periods,
respectively.


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

        During  the  first  six months of 2005,  the  Partnership
distributed  $1,679,866 of net sale proceeds to the  Limited  and
General  Partners,  which represented  a  return  of  capital  of
$258.93  per  Limited  Partnership  Unit.   In  June  2004,   the
Partnership  distributed $454,545 of net  sale  proceeds  to  the
Limited  and  General  Partners, which represented  a  return  of
capital of $70.06 per Limited Partnership Unit.

ITEM 3. CONTROLS AND PROCEDURES.

       (a) Evaluation of disclosure controls and procedures

        Under  the  supervision  and with  the  participation  of
management, including its President and Chief Financial  Officer,
the  Managing  General Partner of the Partnership  evaluated  the
effectiveness  of  the  design and operation  of  its  disclosure
controls  and procedures (as defined in Rule 13a-14(c) under  the
Exchange  Act).   Based upon that evaluation, the  President  and
Chief Financial Officer of the Managing General Partner concluded
that,  as  of  the end of the period covered by this report,  the
disclosure  controls  and  procedures  of  the  Partnership   are
adequately  designed to ensure that information  required  to  be
disclosed  by  us  in  the reports we file or  submit  under  the
Exchange  Act  is recorded, processed, summarized  and  reported,
within the time periods specified in applicable rules and forms.

       (b)  Changes in internal controls

         There   were   no  significant  changes  made   in   the
Partnership's  internal controls during the  most  recent  period
covered  by  this  report 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

       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.UNREGISTERED  SALES  OF  EQUITY  SECURITIES  AND  USE  OF
        PROCEEDS

      None.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

      None.

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

      None.

                   PART II - OTHER INFORMATION
                           (Continued)

ITEM 5.OTHER INFORMATION

      None.

ITEM 6.EXHIBITS

                           Description

    31.1 Certification  of  Chief  Executive  Officer of General
    Partner pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and
    Section 302 of the Sarbanes-Oxley Act of 2002.

    31.2 Certification of  Chief  Financial  Officer  of General
    Partner pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a)) and
    Section 302 of the Sarbanes-Oxley Act of 2002.

    32   Certification  of  Chief Executive  Officer  and  Chief
    Financial Officer of General Partner pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002.



                           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.


Dated:  August 5, 2005        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/ Patrick W Keene
                                      Patrick W. Keene
                                      Chief Financial Officer
                                      (Principal Accounting Officer)