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:  September 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 September 30, 1997 and December 31, 1996 

          Statements for the Periods ended September 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
                                
            SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
                                
                           (Unaudited)
                                
                             ASSETS

                                                     1997              1996

CURRENT ASSETS:
   Cash and Cash Equivalents                    $   337,881       $   299,844
   Receivables                                        4,971             6,780
                                                 -----------       -----------
        Total Current Assets                        342,852           306,624
                                                 -----------       -----------
INVESTMENTS IN REAL ESTATE:
   Land                                           1,446,391         1,667,493
   Buildings and Equipment                        2,714,725         3,000,246
   Accumulated Depreciation                      (1,386,788)       (1,414,181)
                                                 -----------       -----------
        Net Investments in Real Estate            2,774,328         3,253,558
                                                 -----------       -----------
             Total Assets                       $ 3,117,180       $ 3,560,182
                                                 ===========       ===========
                                
                                
                        LIABILITIES AND PARTNERS' CAPITAL
                                
CURRENT LIABILITIES:
   Payable to AEI Fund Management, Inc.         $    16,756       $    99,733
   Land Remediation Estimate                        211,000           211,000
   Distributions Payable                             68,244            91,293
   Unearned Rent                                     13,199                 0
                                                 -----------       -----------
        Total Current Liabilities                   309,199           402,026
                                                 -----------       -----------
PARTNERS' CAPITAL (DEFICIT):
   General Partners                                 (36,517)          (33,015)
   Limited Partners, $1,000 Unit value;
    7,500 Units authorized and issued;
    6,744 Units outstanding                       2,844,498         3,191,171
                                                 -----------       -----------
      Total Partners' Capital                     2,807,981         3,158,156
                                                 -----------       -----------
        Total Liabilities and Partners' Capital $ 3,117,180       $ 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 SEPTEMBER 30
                                
                           (Unaudited)
                                
                                
                                Three Months Ended        Nine Months Ended
                             9/30/97        9/30/96     9/30/97       9/30/96

INCOME:
   Rent                     $  119,539   $  142,208    $  377,181   $  425,786
   Investment Income             3,995        4,018        15,277       11,389
                             ----------   ----------    ----------   ----------
        Total Income           123,534      146,226       392,458      437,175
                             ----------   ---------     ----------   ----------

EXPENSES:
   Partnership Administration - 
    Affiliates                  23,742       25,503        71,884       73,059
   Partnership Administration 
    and Property Management - 
    Unrelated Parties (Note 3) (95,939)     232,385       (51,360)     272,342
   Depreciation                 18,397       34,331        58,561      103,750
   Real Estate Impairment
    (Note 3)                   117,823            0       117,823            0
                             ----------   ----------    ----------   ----------
        Total Expenses          64,023      292,219       196,908      449,151
                             ----------   ----------    ----------   ----------

OPERATING INCOME (LOSS)         59,511     (145,993)      195,550      (11,976)

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

NET INCOME (LOSS)           $   59,511   $ (145,993)   $  304,697   $  (11,976)
                             ==========   ==========    ==========   ==========

NET INCOME (LOSS) ALLOCATED:
   General Partners         $      595   $   (2,920)   $    3,047   $     (240)
   Limited Partners             58,916     (143,073)      301,650      (11,736)
                             ----------   ----------    ----------   ----------
                            $   59,511   $ (145,993)   $  304,697   $  (11,976)
                             ==========   ==========    ==========   ==========

NET INCOME (LOSS) PER
  LIMITED PARTNERSHIP UNIT
  (6,744 and 6,819 weighted average
   Units outstanding in 1997 
   and 1996 respectively)  $     8.74    $   (20.98)   $    44.73   $    (1.72)
                            ==========    ==========    ==========   ==========

 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 SEPTEMBER 30
                                
                           (Unaudited)
                                
                                                       1997            1996

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net Income (Loss)                               $   304,697     $  (11,976)

   Adjustments to Reconcile Net Income
   To Net Cash Provided by Operating Activities:
     Depreciation                                       58,561        103,750
     Real Estate Impairment                            117,823              0
     Gain on Sale of Real Estate                      (109,147)             0
     Decrease in Receivables                             1,809             49
     Increase (Decrease) in Payable to
        AEI Fund Management, Inc.                      (82,977)        45,862
     Increase in Environmental Claim                         0        211,000
     Increase in Unearned Rent                          13,199         17,157
                                                    -----------    -----------
        Total Adjustments                                 (732)       377,818
                                                    -----------    -----------
        Net Cash Provided By
        Operating Activities                           303,965        365,842
                                                    -----------    -----------

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                          (654,872)      (301,592)
                                                    -----------    -----------
        Net Cash Used For
        Financing Activities                          (677,921)      (321,801)
                                                    -----------    -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS               38,037         44,041

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

CASH AND CASH EQUIVALENTS, end of period           $   337,881    $   346,655
                                                    ===========    ===========



 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 SEPTEMBER 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                  (3,016)      (298,576)    (301,592)

  Net Loss                         (240)       (11,736)     (11,976)
                               ----------   -----------  -----------  ---------
BALANCE, September 30, 1996   $ (32,525)   $ 3,251,776  $ 3,219,251    6,819.00
                               ==========   ===========  ===========  =========


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

  Distributions                  (6,549)      (648,323)    (654,872)

  Net Income                      3,047        301,650      304,697
                               ----------   -----------  -----------  ---------
BALANCE, September 30, 1997   $ (36,517)   $ 2,844,498  $ 2,807,981    6,743.96
                               ==========   ===========  ===========  =========


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

     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 of approximately 2,450 square
     feet  on  an  a 19,388 square foot parcel of land.   It  was
     acquired  in August, 1986 subject to a long-term triple  net
     Lease  for  20  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.  That 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.
     
     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 in place when  the
     property  was operated as a gasoline station, prior  to  the
     Partnership's ownership.
     
     An  estimate  for  site  remediation  work,  which  includes
     contaminated  soil  removal, tank  removal,  soil  sampling,
     backfilling and reporting, of $211,000 was received from  an
     environmental engineering firm.  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 materially differ  from
     the estimate.
     
     The  Partnership  obtained an independent appraisal  of  the
     property  which  showed a value of $125,000.   A  charge  to
     operations  for  real  estate  impairment  of  $116,252  was
     recognized  in  the  fourth quarter of 1996,  which  is  the
     difference  between  book  value at  December  31,  1995  of
     $241,252  and  the appraised market value of $125,000.   The
     charge was recorded against the carrying amount of the land.
     
     Since  1995, the Partnership has not paid real estate  taxes
     on  the  Park  Forest  property while it was  unsuccessfully
     appealing  the  real estate tax valuation of  the  property.
     During  this period of time the Partnership accrued $128,958
     of  real  estate taxes, of which $86,399 was accrued  as  of
     December  31, 1996.  In 1997, Cook County sold the  property
     for   unpaid  taxes  to  an  unrelated  third  party.    The
     Partnership can prevent the sale of the property  by  paying
     the  balance  of taxes due.  However, since  the  taxes  due
     exceed   the   fair  market  value  of  the  property,   the
     Partnership   does   not  intend   to   pay   these   taxes.
     Consequently, the Partnership reversed the accrual for these
     taxes resulting in a $86,399 credit to 1997 expenses for the
     taxes accrued in a prior year.  As a result, the balance  of
     the  Partnership  Administration and Property  Management  -
     Unrelated  Parties expenses is a credit balance  of  $51,360
     for  the  nine months ended September 30, 1997.   Since  the
     Partnership intends to allow the tax sale to be completed, a
     charge   to   operations  for  an  additional  real   estate
     impairment  of $117,823 was recognized in the third  quarter
     of 1997, to write down the carrying value of the property to
     zero.
     
                                
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                           (Continued)
                                
(3)  Investments in Real Estate - (Continued)

     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 nine months ended September 30, 1997 and 1996, the
Partnership  recognized rental income of $377,181  and  $425,786,
respectively.  During  the same periods, the  Partnership  earned
investment income of $15,277 and $11,389, 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 nine months ended September 30, 1997 and 1996,
the  Partnership  paid  Partnership  administration  expenses  to
affiliated  parties of $71,884 and $73,059, 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 $(51,360) and $272,342, 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  decrease
in  these expenses in 1997 relates to the Park Forest real estate
tax and reclamation costs discussed below.

        The  Fair  Muffler  property,  located  in  Park  Forest,
Illinois,  is  a one-story brick building of approximately  2,450
square  feet on an a 19,388 square foot parcel of land.   It  was
acquired in August, 1986 subject to a long-term triple net  Lease
for  20 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.   That
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.


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

        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  in  place when the property  was  operated  as  a
gasoline station, prior to the Partnership's ownership.

        An  estimate  for site remediation work,  which  includes
contaminated   soil   removal,  tank  removal,   soil   sampling,
backfilling  and  reporting, of $211,000  was  received  from  an
environmental  engineering  firm.  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
materially differ from the estimate.

        The Partnership obtained an independent appraisal of  the
property  which  showed  a  value  of  $125,000.   A  charge   to
operations  for real estate impairment of $116,252 was recognized
in  the  fourth quarter of 1996, which is the difference  between
book  value  at  December 31, 1995 of $241,252 and the  appraised
market  value of $125,000.  The charge was recorded  against  the
carrying amount of the land.

      Since 1995, the Partnership has not paid real estate  taxes
on the Park Forest property while it was unsuccessfully appealing
the  real  estate  tax  valuation of the property.   During  this
period  of  time the Partnership accrued $128,958 of real  estate
taxes, of which $86,399 was accrued as of December 31, 1996.   In
1997,  Cook  County  sold the property for  unpaid  taxes  to  an
unrelated third party.  The Partnership can prevent the  sale  of
the  property by paying the balance of taxes due.  However, since
the  taxes due exceed the fair market value of the property,  the
Partnership  does  not intend to pay these taxes.   Consequently,
the Partnership reversed the accrual for these taxes resulting in
a  $86,399  credit to 1997 expenses for the taxes  accrued  in  a
prior  year.   As  a  result,  the  balance  of  the  Partnership
Administration  and  Property  Management  -  Unrelated   Parties
expenses is a credit balance of $51,360 for the nine months ended
September  30, 1997.  Since the Partnership intends to allow  the
tax  sale  to  be  completed,  a  charge  to  operations  for  an
additional  real estate impairment of $117,823 was recognized  in
the  third quarter of 1997, to write down the carrying  value  of
the property to zero.

        As  of  September 30, 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.

        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.


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

Liquidity and Capital Resources

        During  the  nine months ended September  30,  1997,  the
Partnership's cash balances increased $38,037.  Net cash provided
by  operating  activities  decreased from  $365,842  in  1996  to
$303,965 in 1997.

        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 nine months of 1996, the Partnership  made
distributions at a 6.27% rate which resulted in distributions  to
the  Partners  of  $301,592.   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 $250,832 for the first nine 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.

       On October 1, 1997, five Limited Partners redeemed a total
of  33  Partnership  Units for $15,905  in  accordance  with  the
Partnership  Agreement.   The Partnership  acquired  these  Units
using Net Cash Flow from operations.  In prior years, a total  of
seventy-two  Limited Partners redeemed 755.84  Partnership  Units
for  $590,626.   The  redemptions increase the remaining  Limited
Partners' ownership interest in the Partnership.

       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 September 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:  November 11, 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)