UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549

                           FORM 10-KSB

             Annual Report Under Section 13 or 15(d)
             of The Securities Exchange Act of 1934

          For the Fiscal Year Ended:  December 31, 2003

                Commission file number:  0-16555

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
         (Name of Small Business Issuer in its Charter)

        State of Minnesota                41-1571166
(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)

Securities registered pursuant to Section 12(b) of the Act:
                                 Name of each exchange on
     Title of each class             which registered
             None                          None

Securities registered pursuant to Section 12(g) of the Act:

                      Limited Partnership Units
                        (Title of class)

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 past 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

Check if disclosure of delinquent filers in response to Rule  405
of  Regulation  S-B  is  not  contained  in  this  Form,  and  no
disclosure  will  be contained, to the best of  the  registrant's
knowledge,   in   definitive  proxy  or  information   statements
incorporated by reference in Part III of this Form 10-KSB or  any
amendment to this Form 10-KSB.

The  Issuer's  revenues  for year ended December  31,  2003  were
$419,338.

As  of  February 29, 2004, there were 13,193.18 Units of  limited
partnership interest in the registrant outstanding and  owned  by
nonaffiliates  of  the registrant, which Units had  an  aggregate
market  value (based solely on the price at which they were  sold
since there is no ready market for such Units) of $13,193,180.

               DOCUMENTS INCORPORATED BY REFERENCE

 The registrant has not incorporated any documents by reference
                        into this report.

         Transitional Small Business Disclosure Format:
                         Yes        No [X]

                             PART I

ITEM 1.   DESCRIPTION OF BUSINESS.

         AEI  Real  Estate  Fund  XVI  Limited  Partnership  (the
"Partnership" or the "Registrant") is a limited partnership which
was  organized pursuant to the laws of the State of Minnesota  on
February  6,  1987.   The  registrant is comprised  of  AEI  Fund
Management XVI, Inc. (AFM) as Managing General Partner, Robert P.
Johnson, the President and sole director and shareholder of  AFM,
as  the Individual General Partner, and purchasers of partnership
units  as Limited Partners.  The Partnership offered for sale  up
to  $15,000,000  of limited partnership interests  (the  "Units")
(15,000  Units  at  $1,000 per Unit) pursuant to  a  registration
statement effective December 15, 1986.  The Partnership commenced
operations  on  February  6, 1987 when minimum  subscriptions  of
2,000 Limited Partnership Units ($2,000,000) were accepted.   The
Partnership's  offering  terminated November  6,  1987  when  the
maximum  subscription limit of 15,000 Limited  Partnership  Units
($15,000,000) was reached.

        The Partnership was organized to acquire, initially on  a
debt-free   basis,  existing  and  newly  constructed  commercial
properties located in the United States, to lease such properties
to  tenants under triple net leases, to hold such properties  and
to  eventually sell such properties.  From subscription proceeds,
the  Partnership  purchased twenty properties, including  partial
interests  in  eleven  properties,  totaling  $12,910,857.    The
balance  of the subscription proceeds was applied to organization
and    syndication   costs,   working   capital   reserves    and
distributions,  which  represented  a  return  of  capital.   The
properties  are  all commercial, single tenant  buildings  leased
under triple net leases.

        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.  The votes are scheduled to be counted  on
April  12, 2004.  If a majority of the voting Units are voted  in
favor  of the proposal, the Managing General Partner will proceed
with  the  planned  liquidation  of  the  Partnership.   If   the
Partnership sells its remaining property in 2004, the Partnership
anticipates liquidation to occur by December 31, 2004.

Leases

       Although there are variations in the specific terms of the
leases,  the following is a summary of the general terms  of  the
Partnership's  leases.   The properties  are  leased  to  various
tenants  under  triple  net  leases,  which  are  classified   as
operating  leases.   Under  a triple net  lease,  the  lessee  is
responsible  for  all real estate taxes, insurance,  maintenance,
repairs  and  operating expenses for the property.   The  initial
lease terms are for 10 to 20 years.  The leases provide for  base
annual  rental  payments,  payable in monthly  installments,  and
contain  rent  clauses which entitle the Partnership  to  receive
additional rent in future years based on stated rent increases or
if  gross  receipts  for  the property exceed  certain  specified
amounts, among other conditions.

ITEM 1.   DESCRIPTION OF BUSINESS.  (Continued)

Property Activity

        In  August 2000, Renaissant Development Corp. (RDC),  the
lessee of the Applebee's restaurant in Victoria, Texas filed  for
reorganization.   RDC closed the restaurant, rejected  the  Lease
and  returned possession of the property to the Partnership.  For
the  period  from January 1, 2002 through July 2, 2002,  and  the
year  ended  December 31, 2001, the Partnership did  not  collect
scheduled  rent  of  $82,477 and $142,687,  respectively.   These
amounts  were not accrued for financial reporting purposes.   The
Partnership  listed the property for sale or  lease.   While  the
property  was  vacant, the Partnership was responsible  for  real
estate taxes and other costs required to maintain the property.

        As  of  December 31, 2000, based on an analysis of market
conditions in the area, it was determined the fair value  of  the
Victoria  property  was approximately $800,000.   In  the  fourth
quarter  of  2000,  a  charge  to  operations  for  real   estate
impairment  of  $353,062 was recognized, which is the  difference
between the book value at December 31, 2000 of $1,153,062 and the
estimated  fair  value  of  $800,000.  The  charge  was  recorded
against the cost of the building and equipment.

        In  April 2002, the Partnership received an offer to  buy
the  restaurant for $725,000 from an unrelated third  party.   In
the first quarter of 2002, a charge to operations for real estate
impairment  of $106,745 was recognized, which was the  difference
between  the  book  value at March 31, 2002 of $776,745  and  the
estimated  net  sales  proceeds  of  $670,000.   The  charge  was
recorded against the cost of the land and building.  On  July  3,
2002,  the  sale closed with the Partnership receiving  net  sale
proceeds of $673,665, which resulted in a net gain of $3,665.

        In  November 2000, the Partnership sold 9,576 square feet
of  land  from  the  Fuddruckers' property  in  Omaha,  Nebraska,
pursuant  to  a  Right-Of-Way Agreement with the  City  of  Omaha
Public Works.  The Partnership received net proceeds of $216,593,
which  resulted in a gain of $168,838.  The original cost of  the
parcel of land was $47,755.  The Partnership believed the City of
Omaha  undervalued the land and negotiated to receive  additional
proceeds.  In March 2002, the City of Omaha approved a settlement
and  paid  the Partnership additional gross proceeds of  $69,795,
which resulted in a net gain of $59,273.

        In May 2003, the Partnership entered into an agreement to
sell the Fuddruckers restaurant to an unrelated third party.   On
August  29, 2003, the sale closed with the Partnership  receiving
net sale proceeds of $1,584,901, which resulted in a net gain  of
$1,047,913.    At  the  time  of  sale,  the  cost  and   related
accumulated    depreciation   was   $1,103,787   and    $566,799,
respectively.

       In July 2002, the Partnership entered into an agreement to
sell  the  Creative  Years daycare center  for  $230,000  to  the
lessee.   In  the fourth quarter of 2002, a charge to  operations
for  real estate impairment of $63,177 was recognized, which  was
the  difference  between  book value  at  December  31,  2002  of
$288,177  and  the estimated net sale proceeds of $225,000.   The
charge  was  recorded against the cost of the land and  building.
On  August  13,  2003,  the  sale  closed  with  the  Partnership
receiving net sale proceeds of $228,440, which resulted in a  net
gain  of  $8,249.   At  the time of sale, the  cost  and  related
accumulated depreciation was $419,951 and $199,760, respectively.

ITEM 1.   DESCRIPTION OF BUSINESS.  (Continued)

        On December 31, 2002, the Lease term for the Grand Rapids
Teachers  Credit Union in Wyoming, Michigan expired.  Originally,
the lessee planned to move out of the building and relocate to  a
new  building in the area.  On a month-to-month basis, the lessee
rented a portion of the property for $1,250 per month while their
new   building  was  constructed.   The  Partnership  listed  the
property for sale with a local real estate broker.  Subsequently,
the  Credit Union decided to purchase the property for  $400,000.
On March 28, 2003, the sale closed with the Partnership receiving
net  sale proceeds of $399,184, which resulted in a net  gain  of
$41,624.   At  the time of sale, the cost and related accumulated
depreciation   was  $626,240  and  $268,680,  respectively.    At
December  31,  2002, the property was classified as  Real  Estate
Held for Sale.

         In  February  2003,  the  Partnership  entered  into  an
agreement  to sell the two JEMCARE daycare centers in  Arlington,
Texas  to  the lessee for $175,000 for the property  on  Arkansas
Lane  and  $325,000 for the property on Matlock Avenue.   In  the
fourth  quarter of 2002, a charge to operations for  real  estate
impairment  of  $114,648  was  recognized  for  the  property  on
Arkansas  Lane, which was the difference between  book  value  at
December 31, 2002 of $282,648 and the estimated net sale proceeds
of  $168,000.  A charge to operations for real estate  impairment
of  $131,740 was recognized for the property located  on  Matlock
Avenue,  which was the difference between book value at  December
31,  2002  of  $449,740 and the estimated net  sale  proceeds  of
$318,000.  The charges were recorded against the cost of the land
and  building.   On  March  7, 2003, the  sale  closed  with  the
Partnership  receiving  net sale proceeds  of  $172,822  for  the
property  on  Arkansas Lane, which resulted  in  a  net  gain  of
$5,935.   At  the time of sale, the cost and related  accumulated
depreciation  was  $335,827  and  $168,940,  respectively.    The
Partnership received $321,970 for the property on Matlock Avenue,
which resulted in a net gain of $5,212.  At the time of sale, the
cost  and  related  accumulated  depreciation  was  $471,902  and
$155,144, respectively.

        In May 2003, the Partnership entered into an agreement to
sell the Arby's restaurant in Grand Rapids, Michigan for $285,000
to  an  unrelated third party.  In the second quarter of 2003,  a
charge  to operations for real estate impairment of $123,823  was
recognized,  which was the difference between the book  value  at
June 30, 2003 of $378,823 and the estimated net sales proceeds of
$255,000.  The charge was recorded against the cost of  the  land
and  building.   On  July  11, 2003, the  sale  closed  with  the
Partnership  receiving  net  sale  proceeds  of  $256,443,  which
resulted in a net gain of $1,443.  At the time of sale, the  cost
and  related accumulated depreciation was $529,057 and  $274,057,
respectively.

        Subsequent to December 31, 2003, the Partnership sold its
25% interest in the Jiffy Lube automotive center in Dallas, Texas
to  an unrelated third party.  The Partnership received net  sale
proceeds of approximately $80,000.

       The Partnership has reached a verbal agreement to sell its
83.6514%  interest in the Children's World daycare center  to  an
unrelated  third party.  The Partnership and third party  are  in
the  process  of  negotiating a written purchase agreement.   The
sale is subject to contingencies, including the completion of the
purchase agreement and the buyer's due diligence, and may not  be
completed.  If the sale is completed, the Partnership expects  to
receive net sale proceeds of approximately $925,000.

ITEM 1.   DESCRIPTION OF BUSINESS.  (Continued)

Major Tenants

        During 2003, three tenants each contributed more than ten
percent  of  the Partnership's total rental revenue.   The  major
tenants  in aggregate contributed 83% of total rental revenue  in
2003.  With the planned liquidation of the Partnership, the major
tenant information will no longer be applicable.

Competition

        The  Partnership is a minor factor in the commercial real
estate  business.   There are numerous entities  engaged  in  the
commercial  real  estate  business which have  greater  financial
resources  than  the  Partnership.  At the time  the  Partnership
elects to dispose of its properties, the Partnership will  be  in
competition  with other persons and entities to find  buyers  for
its properties.

Employees

        The  Partnership  has  no direct  employees.   Management
services   are  performed  for  the  Partnership  by   AEI   Fund
Management, Inc., an affiliate of AFM.

ITEM 2.   DESCRIPTION OF PROPERTIES.

Investment Objectives

        The  Partnership's investment objectives are  to  acquire
existing or newly-developed commercial properties throughout  the
United  States that offer the potential for (i) preservation  and
protection  of  the  Partnership's capital; (ii)  partially  tax-
deferred  cash distributions from operations which  may  increase
through  rent  participation clauses or mandated rent  increases;
and  (iii) long-term capital gains through appreciation in  value
of   the  Partnership's  properties  realized  upon  sale.    The
Partnership  does not have a policy, and there is no  limitation,
as  to the amount or percentage of assets that may be invested in
any  one  property.  However, to the extent possible, the General
Partners  attempt  to  diversify the type  and  location  of  the
Partnership's properties.

Description of Properties

       The Partnership's properties are commercial, single tenant
buildings.  The properties were acquired on a debt-free basis and
are  leased to various tenants under triple net leases, which are
classified  as  operating  leases.   The  Partnership  holds   an
undivided  fee simple interest in the properties.   At  any  time
prior to selling the properties, the Partnership may mortgage one
or  more  of its properties in amounts not exceeding 50%  of  the
fair market value of the property.

ITEM 2.DESCRIPTION OF PROPERTIES.  (Continued)

        The  Partnership's properties are subject to the  general
competitive conditions incident to the ownership of single tenant
investment  real estate.  Since each property is leased  under  a
long-term   lease,   there  is  little  competition   until   the
Partnership  decides to sell the property.   At  this  time,  the
Partnership will be competing with other real estate  owners,  on
both a national and local level, in attempting to find buyers for
the   properties.   In  the  event  of  a  tenant  default,   the
Partnership would be competing with other real estate owners, who
have  property vacancies, to attract a new tenant  to  lease  the
property.   The Partnership's tenants operate in industries  that
are  very  competitive and can be affected  by  factors  such  as
changes  in regional or local economies, seasonality and  changes
in consumer preference.

        The  following table is a summary of the properties  that
the Partnership acquired and owned as of December 31, 2003.

                           Total Historical                 Annual    Annual
                  Purchase    Property                      Lease     Rent Per
Property            Date   Acquisition Costs   Lessee       Payment   Sq. Ft.

Children's World
Daycare Center                                Knowledge
 Sterling Heights, MI                         Learning
 (83.6514%)       11/25/87    $ 729,486   Enterprises, Inc. $ 121,020  $23.43

Jiffy Lube Auto Care Center
 Dallas, TX                                Jiffy Lube of
 (25%)            12/10/87    $154,892     Maryland, Inc.   $  25,095  $37.60


        The  properties  listed above with  a  partial  ownership
percentage  are  owned with affiliates of the  Partnership.   AEI
Real  Estate  Fund  85-B Limited Partnership owns  the  remaining
interest in the Children's World daycare center.  AEI Real Estate
Fund XVII Limited Partnership owns the remaining interests in the
Jiffy Lube.

        Each  Partnership owns a separate, undivided interest  in
the  properties.   No  specific agreement  or  commitment  exists
between the Partnerships as to the management of their respective
interests in the properties, and the Partnership that holds  more
than  a  50% interest does not control decisions over  the  other
Partnership's interest.

        The  initial  Lease terms are 20 years.   The  Children's
World  Lease contains renewal options which may extend the  Lease
term  an  additional  10 years.  The Jiffy Lube  Lease  does  not
contain any renewal options.

       Pursuant to the Lease Agreements, the tenants are required
to provide proof of adequate insurance coverage on the properties
they  occupy.   The General Partners believe the  properties  are
adequately covered by insurance and consider the properties to be
well-maintained and sufficient for the Partnership's operations.

ITEM 2.DESCRIPTION OF PROPERTIES.  (Continued)

         For  tax  purposes,  the  Partnership's  properties  are
depreciated  under the Modified Accelerated Cost Recovery  System
(MACRS).  The largest depreciable component of a property is  the
building  which  is depreciated, using the straight-line  method,
over  31.5  years.   The remaining depreciable  components  of  a
property  are personal property and land improvements  which  are
depreciated,  using an accelerated method, over 5 and  15  years,
respectively.  Since the Partnership has tax-exempt Partners, the
Partnership is subject to the rules of Section 168(h)(6)  of  the
Internal  Revenue  Code  which  requires  a  percentage  of   the
properties' depreciable components to be depreciated over  longer
lives  using  the  straight-line  method.   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.
These adjustments were not recognized for tax purposes.

        During  the last five years, all properties listed  above
were 100% occupied.

ITEM 3.   LEGAL PROCEEDINGS.

       None.

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

       None.


                             PART II

ITEM 5.   MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS
          AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.

        As  of  December  31, 2003, there were 1,425  holders  of
record  of the registrant's Limited Partnership Units.  There  is
no  other  class  of  security outstanding  or  authorized.   The
registrant's  Units  are  not a traded security  in  any  market.
However,  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 total number  of  Units
outstanding at the beginning of the year.  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 2003, the Partnership did not redeem any units from
the  Limited  Partners.   During  2002,  eight  Limited  Partners
redeemed  a  total  of  69.67 Partnership Units  for  $10,137  in
accordance  with  the  Partnership  Agreement.   The  Partnership
acquired  these  Units using Net Cash Flow from  operations.   In
prior  years,  a total of 174 Limited Partners redeemed  1,735.15
Partnership  Units for $1,115,407.  The redemptions increase  the
remaining   Limited   Partners'   ownership   interest   in   the
Partnership.   As  a  result  of these  redemption  payments  and
pursuant  to  the  Partnership Agreement,  the  General  Partners
received distributions of $103 in 2002.

ITEM 5.   MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS
          AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.
          (Continued)

       Cash distributions of $29,452 and $15,529 were made to the
General Partners and $2,915,809 and $1,537,378 were made  to  the
Limited   Partners   in   2003  and  2002,   respectively.    The
distributions  were made on a quarterly basis and  represent  Net
Cash   Flow,  as  defined,  except  as  discussed  below.   These
distributions  should  not be compared  with  dividends  paid  on
capital stock by corporations.

        As  part  of the Limited Partner distributions  discussed
above,  the Partnership distributed $2,636,270 and $1,284,189  of
proceeds from property sales in 2003 and 2002, respectively.  The
distributions  reduced  the  Limited Partners'  Adjusted  Capital
Contributions.

ITEM 6.   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   success  of  the  General  Partners  of   locating
     properties with favorable risk return characteristics;

     the effect of tenant defaults; and

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


ITEM 6.MANAGEMENT'S DISCUSSION AND ANALYSIS  (Continued)

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.

       Effective  October  1, 2003, the Partnership  adopted  the
liquidation basis of accounting because, pending the approval  of
the   Limited  Partners,  the  General  Partners  anticipate  the
liquidation  of the Partnership during 2004.  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.  At December 31,  2003,  the
estimated real estate values were based upon a subsequent sale of
a property and an estimated value based upon sale negotiations in
progress  for  another property.  Any changes in these  estimates
could cause material changes in the net assets in liquidation.

       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.

ITEM 6.MANAGEMENT'S DISCUSSION AND ANALYSIS  (Continued)

Results of Operations

        For the years ended December 31, 2003 and 2002, while  in
the  operating and liquidation phases, the Partnership recognized
rental income of $419,338 and $490,486, respectively.  During the
same  periods,  the  Partnership recognized  interest  income  of
$8,595   and  $14,350,  respectively.   In  2003,  rental  income
decreased as a result of property sales.

        At  December  31,  2003,  the Partnership  recognized  an
adjustment  of  estimated  value  of  $2,249,763  resulting  from
adopting the liquidation basis of accounting and recording  their
assets  at estimated net realizable value and liabilities at  the
amount estimated to be paid.

        For the years ended December 31, 2003 and 2002, while  in
the  operating  and liquidation phases, the Partnership  incurred
Partnership  administration expenses from affiliated  parties  of
$73,401   and   $165,175,  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 $13,710 and $61,783, 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 2003, when compared to  2002,  is
mainly  the  result  of  expenses incurred  in  2002  related  to
properties that were sold in 2002.

        Inflation  has  had  a  minimal  effect  on  income  from
operations.   Leases  may contain rent increases,  based  on  the
increase  in  the  Consumer Price Index over a specified  period,
which  will result in an increase in rental income over the  term
of  the  leases.   In addition, leases may contain  rent  clauses
which  entitle  the  Partnership to receive  additional  rent  in
future  years  if gross receipts for the property exceed  certain
specified  amounts.  Increases in sales volumes of  the  tenants,
due to inflation and real sales growth, may result in an increase
in rental income over the term of the leases.  Inflation also may
cause the real estate to appreciate in value.  However, inflation
and  changing prices may have an adverse impact on the  operating
margins  of  the  properties' tenants, which could  impair  their
ability  to  pay rent and subsequently reduce the Net  Cash  Flow
available for distributions.

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.  The votes are scheduled to be counted  on
April  12, 2004.  If a majority of the voting Units are voted  in
favor  of the proposal, the Managing General Partner will proceed
with  the  planned  liquidation  of  the  Partnership.   If   the
Partnership sells its remaining property in 2004, the Partnership
anticipates liquidation to occur by December 31, 2004.

ITEM 6.MANAGEMENT'S DISCUSSION AND ANALYSIS  (Continued)

        During  the  period from October 1, 2003 to December  31,
2003,  while  in  the  liquidation phase, the  Partnership's  Net
Assets  in  Liquidation increased $450,670 mainly as a result  of
the  adjustment to increase Investments in Real Estate from their
historical bases to their estimated net realizable value.  During
the  period from January 1, 2003 to September 30, 2003, while  in
the  operating  phase, the Partnership's cash balances  increased
$2,021,357  as  a  result  of cash generated  from  the  sale  of
property, which was partially offset by distributions paid to the
Partners  in  excess of cash generated from operating activities.
During  the year ended December 31, 2002, the Partnership's  cash
balances decreased $598,328 as a result of distributions paid  to
the  Partners  in  excess of cash generated  from  operating  and
investing activities.  The source of the excess distributions was
proceeds from property sales completed in prior years.

        In  August 2000, Renaissant Development Corp. (RDC),  the
lessee of the Applebee's restaurant in Victoria, Texas filed  for
reorganization.   RDC closed the restaurant, rejected  the  Lease
and  returned possession of the property to the Partnership.  For
the  period  from January 1, 2002 through July 2, 2002,  and  the
year  ended  December 31, 2001, the Partnership did  not  collect
scheduled  rent  of  $82,477 and $142,687,  respectively.   These
amounts  were not accrued for financial reporting purposes.   The
Partnership  listed the property for sale or  lease.   While  the
property  was  vacant, the Partnership was responsible  for  real
estate taxes and other costs required to maintain the property.

        As  of  December 31, 2000, based on an analysis of market
conditions in the area, it was determined the fair value  of  the
Victoria  property  was approximately $800,000.   In  the  fourth
quarter  of  2000,  a  charge  to  operations  for  real   estate
impairment  of  $353,062 was recognized, which is the  difference
between the book value at December 31, 2000 of $1,153,062 and the
estimated  fair  value  of  $800,000.  The  charge  was  recorded
against the cost of the building and equipment.

        In  April 2002, the Partnership received an offer to  buy
the  restaurant for $725,000 from an unrelated third  party.   In
the first quarter of 2002, a charge to operations for real estate
impairment  of $106,745 was recognized, which was the  difference
between  the  book  value at March 31, 2002 of $776,745  and  the
estimated  net  sales  proceeds  of  $670,000.   The  charge  was
recorded against the cost of the land and building.  On  July  3,
2002,  the  sale closed with the Partnership receiving  net  sale
proceeds of $673,665, which resulted in a net gain of $3,665.

        In  November 2000, the Partnership sold 9,576 square feet
of  land  from  the  Fuddruckers' property  in  Omaha,  Nebraska,
pursuant  to  a  Right-Of-Way Agreement with the  City  of  Omaha
Public Works.  The Partnership received net proceeds of $216,593,
which  resulted in a gain of $168,838.  The original cost of  the
parcel of land was $47,755.  The Partnership believed the City of
Omaha  undervalued the land and negotiated to receive  additional
proceeds.  In March 2002, the City of Omaha approved a settlement
and  paid  the Partnership additional gross proceeds of  $69,795,
which resulted in a net gain of $59,273.

ITEM 6.MANAGEMENT'S DISCUSSION AND ANALYSIS  (Continued)

        In May 2003, the Partnership entered into an agreement to
sell the Fuddruckers restaurant to an unrelated third party.   On
August  29, 2003, the sale closed with the Partnership  receiving
net sale proceeds of $1,584,901, which resulted in a net gain  of
$1,047,913.    At  the  time  of  sale,  the  cost  and   related
accumulated    depreciation   was   $1,103,787   and    $566,799,
respectively.

        In June 1994, the Partnership received a lump sum payment
of $159,539 as compensation for certain modifications made to the
Fuddruckers Lease.  The lump sum payment was recognized as income
over  the Lease term using the straight line method.  As a result
of  the  sale, the Lease Agreement was assigned to the buyer  and
the Partnership recognized the balance of the deferred income  of
$52,511 in the third quarter of 2003.

       In July 2002, the Partnership entered into an agreement to
sell  the  Creative  Years daycare center  for  $230,000  to  the
lessee.   In  the fourth quarter of 2002, a charge to  operations
for  real estate impairment of $63,177 was recognized, which  was
the  difference  between  book value  at  December  31,  2002  of
$288,177  and  the estimated net sale proceeds of $225,000.   The
charge  was  recorded against the cost of the land and  building.
On  August  13,  2003,  the  sale  closed  with  the  Partnership
receiving net sale proceeds of $228,440, which resulted in a  net
gain  of  $8,249.   At  the time of sale, the  cost  and  related
accumulated depreciation was $419,951 and $199,760, respectively.

        On December 31, 2002, the Lease term for the Grand Rapids
Teachers  Credit Union in Wyoming, Michigan expired.  Originally,
the lessee planned to move out of the building and relocate to  a
new  building in the area.  On a month-to-month basis, the lessee
rented a portion of the property for $1,250 per month while their
new   building  was  constructed.   The  Partnership  listed  the
property for sale with a local real estate broker.  Subsequently,
the  Credit Union decided to purchase the property for  $400,000.
On March 28, 2003, the sale closed with the Partnership receiving
net  sale proceeds of $399,184, which resulted in a net  gain  of
$41,624.   At  the time of sale, the cost and related accumulated
depreciation   was  $626,240  and  $268,680,  respectively.    At
December  31,  2002, the property was classified as  Real  Estate
Held for Sale.

         In  February  2003,  the  Partnership  entered  into  an
agreement  to sell the two JEMCARE daycare centers in  Arlington,
Texas  to  the lessee for $175,000 for the property  on  Arkansas
Lane  and  $325,000 for the property on Matlock Avenue.   In  the
fourth  quarter of 2002, a charge to operations for  real  estate
impairment  of  $114,648  was  recognized  for  the  property  on
Arkansas  Lane, which was the difference between  book  value  at
December 31, 2002 of $282,648 and the estimated net sale proceeds
of  $168,000.  A charge to operations for real estate  impairment
of  $131,740 was recognized for the property located  on  Matlock
Avenue,  which was the difference between book value at  December
31,  2002  of  $449,740 and the estimated net  sale  proceeds  of
$318,000.  The charges were recorded against the cost of the land
and  building.   On  March  7, 2003, the  sale  closed  with  the
Partnership  receiving  net sale proceeds  of  $172,822  for  the
property  on  Arkansas Lane, which resulted  in  a  net  gain  of
$5,935.   At  the time of sale, the cost and related  accumulated
depreciation  was  $335,827  and  $168,940,  respectively.    The
Partnership received $321,970 for the property on Matlock Avenue,
which resulted in a net gain of $5,212.  At the time of sale, the
cost  and  related  accumulated  depreciation  was  $471,902  and
$155,144, respectively.

ITEM 6.MANAGEMENT'S DISCUSSION AND ANALYSIS  (Continued)

        In May 2003, the Partnership entered into an agreement to
sell the Arby's restaurant in Grand Rapids, Michigan for $285,000
to  an  unrelated third party.  In the second quarter of 2003,  a
charge  to operations for real estate impairment of $123,823  was
recognized,  which was the difference between the book  value  at
June 30, 2003 of $378,823 and the estimated net sales proceeds of
$255,000.  The charge was recorded against the cost of  the  land
and  building.   On  July  11, 2003, the  sale  closed  with  the
Partnership  receiving  net  sale  proceeds  of  $256,443,  which
resulted in a net gain of $1,443.  At the time of sale, the  cost
and  related accumulated depreciation was $529,057 and  $274,057,
respectively.

        Subsequent to December 31, 2003, the Partnership sold its
25% interest in the Jiffy Lube automotive center in Dallas, Texas
to  an unrelated third party.  The Partnership received net  sale
proceeds of approximately $80,000.

       The Partnership has reached a verbal agreement to sell its
83.6514%  interest in the Children's World daycare center  to  an
unrelated  third party.  The Partnership and third party  are  in
the  process  of  negotiating a written purchase agreement.   The
sale is subject to contingencies, including the completion of the
purchase agreement and the buyer's due diligence, and may not  be
completed.  If the sale is completed, the Partnership expects  to
receive net sale proceeds of approximately $925,000.

       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.  Redemption  payments
are  paid  to  redeeming Partners in the fourth quarter  of  each
year.

        For  the  years  ended December 31, 2003  and  2002,  the
Partnership  declared distributions of $2,945,261 and $1,552,907,
respectively, which were distributed 99% to the Limited  Partners
and  1%  to the General Partners.  The Limited Partners  received
distributions  of  $2,915,809  and  $1,537,378  and  the  General
Partners  received distributions of $29,452 and $15,529  for  the
periods, respectively.

         During   2003  and  2002,  the  Partnership  distributed
$2,662,899 and $1,297,160 of net sale proceeds to the Limited and
General  Partners,  which represented  a  return  of  capital  of
$199.79 and $96.83 per Limited Partnership Unit, respectively.

        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 total number  of  Units
outstanding at the beginning of the year.  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.

ITEM 6.MANAGEMENT'S DISCUSSION AND ANALYSIS  (Continued)

       During 2003, the Partnership did not redeem any units from
the  Limited  Partners.   During  2002,  eight  Limited  Partners
redeemed  a  total  of  69.67 Partnership Units  for  $10,137  in
accordance  with  the  Partnership  Agreement.   The  Partnership
acquired  these  Units using Net Cash Flow from  operations.   In
prior  years,  a total of 174 Limited Partners redeemed  1,735.15
Partnership  Units for $1,115,407.  The redemptions increase  the
remaining   Limited   Partners'   ownership   interest   in   the
Partnership.   As  a  result  of these  redemption  payments  and
pursuant  to  the  Partnership Agreement,  the  General  Partners
received distributions of $103 in 2002.

       The continuing rent payments from the properties, together
with  cash  generated from property sales, should be adequate  to
fund continuing distributions and meet other obligations.

ITEM 7.   FINANCIAL STATEMENTS.

       See accompanying index to financial statements.


          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  INDEX TO FINANCIAL STATEMENTS



Report of Independent Auditors

Statement of Net Assets Available for Liquidation at December 31, 2003

Balance Sheet as of December 31, 2002

Statement of Liquidating Activities for the Period From
   October 1, 2003 to December 31, 2003

Statements for the Period From January 1, 2003 to September 30, 2003
   and for the Year Ended December 31, 2002:

     Income

     Cash Flows

     Changes in Partners' Capital

Notes to Financial Statements



                 REPORT OF INDEPENDENT AUDITORS


To the Partners:
AEI Real Estate Fund XVI Limited Partnership
St. Paul, Minnesota


      We  have audited the accompanying balance sheet of AEI Real
Estate   Fund  XVI  Limited  Partnership  (a  Minnesota   limited
partnership) as of December 31, 2002, and the related  statements
of  income, cash flows and changes in partners' capital  for  the
year  then  ended and the statements of income,  cash  flows  and
changes in partners' capital for the period from January 1,  2003
to September 30, 2003.  We also have audited the statement of net
assets  available  for liquidation of AEI Real  Estate  Fund  XVI
Limited  Partnership  as of December 31, 2003,  and  the  related
statement  of liquidating activities for the period from  October
1, 2003 to December 31, 2003.  These financial statements are the
responsibility  of the Company's management.  Our  responsibility
is  to express an opinion on these financial statements based  on
our audits.

     We   conducted  our  audits  in  accordance  with   auditing
standards  generally accepted in the United  States  of  America.
Those  standards require that we plan and perform  the  audit  to
obtain   reasonable   assurance  about  whether   the   financial
statements are free of material misstatement.  An audit  includes
examining,  on a test basis, evidence supporting the amounts  and
disclosures in the financial statements.  An audit also  includes
assessing   the   accounting  principles  used  and   significant
estimates  made by management, as well as evaluating the  overall
financial  statement presentation.  We believe  that  our  audits
provide a reasonable basis for our opinion.

      As  described in the Notes to the financial statements, the
General  Partners of AEI Real Estate Fund XVI Limited Partnership
anticipate  the  liquidation  of  the  Partnership  during  2004.
Because  liquidation  is  imminent, the Partnership  changed  its
basis  of  accounting after September 30, 2003,  from  the  going
concern basis to the liquidation basis.

      In our opinion, the financial statements referred to in the
first  paragraph  present fairly, in all material  respects,  the
financial   position  of  AEI  Real  Estate  Fund   XVI   Limited
Partnership  as  of  December 31, 2002, and the  results  of  its
operations and its cash flows for the year then ended and for the
period  from  January 1, 2003, to September  30,  2003,  its  net
assets available for liquidation as of December 31, 2003, and the
statement  of liquidating activities for the period from  October
1,  2003  to  December  31, 2003, in conformity  with  accounting
principles  generally accepted in the United  States  of  America
applied  on  the bases of accounting described in  the  preceding
paragraph.


                           Boulay,Heutmaker, Zibell & Co. P.L.L.P.
                                Certified Public Accountants


Minneapolis, Minnesota
January 23, 2004
<PAGE>
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

        STATEMENT OF NET ASSETS AVAILABLE FOR LIQUIDATION

                        DECEMBER 31, 2003





ASSETS:
  Cash                                            $   726,243
  Receivables                                             210
  Investments in Real Estate                        1,005,000
                                                   -----------
          Total Assets                              1,731,453
                                                   -----------

LIABILITIES:
  Payable to AEI Fund Management, Inc.                  6,291
  Distributions Payable                                73,724
  Deferred Income                                       2,091
                                                   -----------
          Total Liabilities                            82,106
                                                   -----------
   NET ASSETS (PARTNERS' CAPITAL) IN LIQUIDATION,
    including 13,195 Limited Partnership Units
    outstanding                                   $ 1,649,347
                                                   ===========


 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                          BALANCE SHEET

                        DECEMBER 31, 2002

                             ASSETS

CURRENT ASSETS:
  Cash and Cash Equivalents                        $   503,979
  Receivables                                            9,242
                                                    -----------
      Total Current Assets                             513,221
                                                    -----------
INVESTMENTS IN REAL ESTATE:
  Land                                               1,091,754
  Buildings and Equipment                            2,776,970
  Accumulated Depreciation                          (1,704,551)
                                                    -----------
                                                     2,164,173
  Real Estate Held for Sale                            357,560
                                                    -----------
      Net Investments in Real Estate                 2,521,733
                                                    -----------
          Total Assets                             $ 3,034,954
                                                    ===========

                LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
  Payable to AEI Fund Management, Inc.             $    58,418
  Distributions Payable                                109,228
  Deferred Income                                       13,983
                                                    -----------
      Total Current Liabilities                        181,629
                                                    -----------

DEFERRED INCOME - Net of Current Portion                46,565

PARTNERS' CAPITAL:
  General Partners                                           0
  Limited Partners, $1,000 per Unit;
     15,000 Units authorized and issued;
     13,195 Units outstanding in 2002                2,806,760
                                                    -----------
      Total Partners' Capital                        2,806,760
                                                    -----------
        Total Liabilities and Partners' Capital    $ 3,034,954
                                                    ===========

 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

               STATEMENT OF LIQUIDATING ACTIVITIES

    FOR THE PERIOD FROM OCTOBER 1, 2003 TO DECEMBER 31, 2003




SOURCES OF ADDITIONAL CASH:
  Rent                                             $    36,004
  Investment Income                                      1,911
                                                    -----------
      Total Sources of Additional Cash                  37,915
                                                    -----------

USES OF ADDITIONAL CASH:
  Partnership Administration - Affiliates               14,077
  Partnership Administration and Property
     Management - Unrelated Parties                      1,823
  Distributions to Partners                          1,821,108
                                                    -----------
      Total Uses of Additional Cash                  1,837,008
                                                    -----------
DECREASE IN NET ASSETS IN LIQUIDATION
   BEFORE ADJUSTMENTS                               (1,799,093)
                                                    -----------
ADJUSTMENTS OF ESTIMATED VALUES:
Increase in Net Realizable values of:
   Receivables and Deferred Income, Net                    210
   Real Estate                                         502,263
   Payable to AEI Fund Management, Inc.                  7,005
   Distributions Payable                             1,740,285
                                                    -----------
         Total Adjustment of Estimated Values        2,249,763
                                                    -----------

INCREASE IN NET ASSETS IN LIQUIDATION                  450,670

BEGINNING NET ASSETS IN LIQUIDATION
    (PARTNERS' CAPITAL AT SEPTEMBER 30, 2003)        1,198,677
                                                    -----------
ENDING NET ASSETS IN LIQUIDATION                   $ 1,649,347
                                                    ===========


 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                       STATEMENT OF INCOME

    FOR THE PERIOD FROM JANUARY 1, 2003 TO SEPTEMBER 30, 2003
            AND FOR THE YEAR ENDED DECEMBER 31, 2002

                                                  2003         2002

INTEREST INCOME                               $     6,684   $    14,350

INCOME FROM DISCONTINUED OPERATIONS:
  Rental Income                                   375,624       490,486
  Partnership Administration - Affiliates         (58,829)     (165,175)
  Partnership Administration and Property
     Management - Unrelated Parties               (11,887)      (61,783)
  Depreciation                                    (41,790)      (99,084)
  Real Estate Impairment                         (123,823)     (416,310)
  Gain on Sale of Real Estate                   1,110,376        62,938
                                               -----------   -----------
     Total Income (Loss) from
       Discontinued Operations                  1,249,671      (188,928)
                                               -----------   -----------

NET INCOME (LOSS)                             $ 1,256,355   $  (174,578)
                                               ===========   ===========

NET INCOME (LOSS) ALLOCATED:
  General Partners                            $    28,644   $    58,015
  Limited Partners                              1,227,711      (232,593)
                                               -----------   -----------
                                              $ 1,256,355   $  (174,578)
                                               ===========   ===========

INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT:
  Continuing Operations                       $       .50   $      1.07
  Discontinued Operations                           92.54        (18.63)
                                               -----------   -----------
      Total                                   $     93.04   $    (17.56)
                                               ===========   ===========

Weighted Average Units Outstanding                 13,195        13,247
                                               ===========   ===========


 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                     STATEMENT OF CASH FLOWS

    FOR THE PERIOD FROM JANUARY 1, 2003 TO SEPTEMBER 30, 2003
            AND FOR THE YEAR ENDED DECEMBER 31, 2002

                                                  2003          2002

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Income (Loss)                            $ 1,256,355   $  (174,578)

  Adjustments To Reconcile Net Income
  To Net Cash Provided By Operating Activities:
     Depreciation                                   41,790        99,084
     Real Estate Impairment                        123,823       416,310
     Gain on Sale of Real Estate                (1,110,376)      (62,938)
     Decrease in Receivables                         9,242        21,301
     Decrease in Payable to
        AEI Fund Management, Inc.                  (45,122)      (21,539)
     Decrease in Deferred Income                   (58,458)      (27,652)
                                                -----------   -----------
       Total Adjustments                        (1,039,101)      424,566
                                                -----------   -----------
       Net Cash Provided By
           Operating Activities                    217,254       249,988
                                                -----------   -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from Sale of Real Estate              2,963,760       732,938
                                                -----------   -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Increase (Decrease) in Distributions Payable   1,704,781       (18,107)
  Distributions to Partners                     (2,864,438)   (1,552,907)
  Redemption Payments                                    0       (10,240)
                                                -----------   -----------
       Net Cash Used For
           Financing Activities                 (1,159,657)   (1,581,254)
                                                -----------   -----------
NET INCREASE (DECREASE) IN CASH
   AND CASH EQUIVALENTS                          2,021,357      (598,328)

CASH AND CASH EQUIVALENTS, beginning of period     503,979     1,102,307
                                                -----------   -----------
CASH AND CASH EQUIVALENTS, end of period       $ 2,525,336   $   503,979
                                                ===========   ===========


 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

            STATEMENT OF CHANGES IN PARTNERS' CAPITAL

    FOR THE PERIOD FROM JANUARY 1, 2003 TO SEPTEMBER 30, 2003
            AND FOR THE YEAR ENDED DECEMBER 31, 2002


                                                                    Limited
                                                                  Partnership
                             General     Limited                     Units
                             Partners    Partners       Total     Outstanding


BALANCE, December 31, 2001  $ (42,383)  $ 4,586,868  $ 4,544,485   13,264.85

  Distributions               (15,529)   (1,537,378)  (1,552,907)

  Redemption Payments            (103)      (10,137)     (10,240)     (69.67)

  Operating Loss               (4,750)     (232,766)    (237,516)

  Gain on Sale of Real Estate  62,765           173       62,938
                             ---------   -----------  ----------- -----------
BALANCE, December 31, 2002          0     2,806,760    2,806,760   13,195.18

  Distributions               (28,644)   (2,835,794)  (2,864,438)

  Net Income                   28,644     1,227,711    1,256,355
                             ---------   -----------  ----------- -----------
BALANCE, September 30, 2003 $       0   $ 1,198,677  $ 1,198,677   13,195.18
                             =========   ===========  =========== ===========


 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2003 AND 2002

(1)  Organization -

     AEI  Real  Estate Fund XVI Limited Partnership (Partnership)
     was  formed  to  acquire and lease commercial properties  to
     operating tenants.  The Partnership's operations are managed
     by AEI Fund Management XVI, Inc. (AFM), the Managing General
     Partner.  Robert P. Johnson, the President and sole director
     and  shareholder  of  AFM, serves as the Individual  General
     Partner  and an affiliate of AFM, AEI Fund Management,  Inc.
     (AEI),  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  February  6,  1987  when  minimum
     subscriptions    of   2,000   Limited   Partnership    Units
     ($2,000,000)  were  accepted.  The  offering  terminated  on
     November  6,  1987  when the maximum subscription  limit  of
     15,000  Limited  Partnership Units was reached.   Under  the
     terms  of  the  Limited Partnership Agreement,  the  Limited
     Partners   and   General  Partners  contributed   funds   of
     $15,000,000 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.

     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.


          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2003 AND 2002

(1)  Organization - (Continued)

     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.

     Subsequent  to  December  31,  2003,  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.
     The votes are scheduled to be counted on April 12, 2004.  If
     a  majority  of the voting Units are voted in favor  of  the
     proposal, the Managing General Partner will proceed with the
     planned  liquidation of the Partnership.  If the Partnership
     sells  its  remaining  property  in  2004,  the  Partnership
     anticipates liquidation to occur by December 31, 2004.


          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2003 AND 2002

(2)  Summary of Significant Accounting Policies -

     Financial Statement Presentation

       Because   liquidation  is  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.

     Accounting Estimates

       Management  uses  estimates and assumptions  in  preparing
       these  financial statements in accordance  with  generally
       accepted  accounting  principles.   Those  estimates   and
       assumptions may affect the reported amounts of assets  and
       liabilities,  the  disclosure  of  contingent  assets  and
       liabilities,  and  the  reported revenues,  expenses,  and
       sources  and  uses  of  additional cash.   Actual  results
       could differ from those estimates.

       The  Partnership regularly assesses whether market  events
       and conditions indicate that it is reasonably possible  to
       recover  the carrying amounts of its investments  in  real
       estate  from  future operations and sales.   A  change  in
       those  market events and conditions could have a  material
       effect on the carrying amount of its real estate.

     Cash Concentrations of Credit Risk

       The  Partnership's  cash  is deposited  primarily  in  one
       financial institution and at times during the year it  may
       exceed FDIC insurance limits.

     Statement of Cash Flows

       For  purposes  of  reporting cash  flows,  cash  and  cash
       equivalents  may include cash in checking,  cash  invested
       in   money   market  accounts,  certificates  of  deposit,
       federal  agency notes and commercial paper with a term  of
       three months or less.

     Receivables

       Credit  terms are extended to tenants in the normal course
       of  business.   The  Partnership performs  ongoing  credit
       evaluations  of  its customers' financial  condition  and,
       generally, requires no collateral.


          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2003 AND 2002

(2)  Summary of Significant Accounting Policies - (Continued)

       Receivables   are   recorded  at   their   estimated   net
       realizable  value.  The Partnership follows  a  policy  of
       providing  an  allowance for doubtful  accounts;  however,
       based on historical experience, and its evaluation of  the
       current status of receivables, the Partnership is  of  the
       belief  that  such  accounts will be  collectible  in  all
       material  respects and thus an allowance is not necessary.
       Accounts  are considered past due if payment is  not  made
       on  a  timely  basis in accordance with the  Partnership's
       credit  terms.   Receivables considered uncollectible  are
       written off.

     Income Taxes

       The  income or loss of the Partnership for federal  income
       tax  reporting  purposes is includable in the  income  tax
       returns  of the partners.  In general, no recognition  has
       been  given to income taxes in the accompanying  financial
       statements.

       The  tax  return, the qualification of the Partnership  as
       such  for  tax  purposes, and the amount of  distributable
       Partnership  income or loss are subject to examination  by
       federal   and  state  taxing  authorities.   If  such   an
       examination  results  in  changes  with  respect  to   the
       Partnership  qualification or in changes to  distributable
       Partnership  income  or loss, the taxable  income  of  the
       partners would be adjusted accordingly.

     Real Estate

       The  Partnership's real estate is leased under triple  net
       leases   classified  as  operating  leases.   The   leases
       provide  for  base  annual  rental  payments  payable   in
       monthly  installments.  The Partnership recognizes  rental
       revenue  according to the terms of the individual  leases.
       For  leases  which  contain stated rental  increases,  the
       increases  are  recognized in the year in which  they  are
       effective.   Contingent  rental  payments  are  recognized
       when  the  contingencies on which the payments  are  based
       are  satisfied  and the rental payments become  due  under
       the terms of the leases.

       Real  estate is recorded at the lower of cost or estimated
       net   realizable  value  at  December  31,  2002  and   at
       estimated  net  realizable value  at  December  31,  2003.
       Through  September 30, 2003, the Partnership compared  the
       carrying   amount  of  its  properties  to  the  estimated
       probability-weighted future cash flows expected to  result
       from  the property and its eventual disposition.   If  the
       sum  of  the expected future cash flows was less than  the
       carrying   amount   of  the  property,   the   Partnership
       recognizes an impairment loss by the amount by  which  the
       carrying amount of the property exceeds the fair value  of
       the property.

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2003 AND 2002

(2)  Summary of Significant Accounting Policies - (Continued)

       The  Partnership  has capitalized as Investments  in  Real
       Estate   certain   costs  incurred  in  the   review   and
       acquisition  of the properties.  The costs were  allocated
       to the land, buildings and equipment.

       The   buildings  and  equipment  of  the  Partnership  are
       depreciated  using the straight-line method for  financial
       reporting purposes based on estimated useful lives  of  30
       years and 10 years, respectively.

       In  accordance  with  Statement  of  Financial  Accounting
       Standards  No.  144,  Accounting  for  the  Impairment  or
       Disposal  of Long-Lived Assets, upon complete disposal  of
       a  property or classification of a property as Real Estate
       Held  for  Sale,  the Partnership includes  the  operating
       results   and   sale  of  the  property  in   discontinued
       operations.   In  addition,  the Partnership  reclassifies
       the  prior periods operating results and any partial sales
       of the property to discontinued operations.

     Reclassification

       Certain  items  in  the prior year's financial  statements
       have  been  reclassified to conform to 2003  presentation.
       These   reclassifications  had  no  effect  on   Partners'
       capital, net income or cash flows.

     Newly Issued Pronouncements

       The    Partnership   has   considered    the    accounting
       pronouncements  issued  after  December   2002   and   has
       determined that none of these pronouncements will  have  a
       material impact on its financial statements.

(3)  Related Party Transactions -

     The  Partnership owns an 83.6514% interest in  a  Children's
     World  Daycare  Center.   The  remaining  interest  in  this
     property  is  owned  by AEI Real Estate  Fund  85-B  Limited
     Partnership,  an  affiliate  of  the  Partnership.   As   of
     December 31, 2003, the Partnership owns a 25% interest in  a
     Jiffy  Lube.   The  remaining interest in this  property  is
     owned  by AEI Real Estate Fund XVII Limited Partnership,  an
     affiliate of the Partnership.

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2003 AND 2002

(3)  Related Party Transactions - (Continued)

     Each  Partnership owns a separate undivided interest in  the
     properties.   No  specific agreement  or  commitment  exists
     between  the  Partnerships as to  the  management  of  their
     respective  interests in the properties, and the Partnership
     that  holds  more  than  a  50% interest  does  not  control
     decisions  over  the  other  Partnership's  interest.    The
     financial   statements  reflect  only   this   Partnership's
     percentage  share  of  the properties'  land,  building  and
     equipment, liabilities, revenues and expenses.

     AEI   and  AFM  received  the  following  compensation   and
     reimbursements for costs and expenses from the Partnership:

                                    Total Incurred by the Partnership
                                     for the Years Ended December 3l

                                                  2003         2002

a.AEI and AFM are reimbursed for all costs
  incurred in connection with managing the
  Partnership's operations, maintaining the
  Partnership's books and communicating
  the results of operations to the Limited
  Partners.                                   $  73,401    $ 165,175
                                               ========     ========
b.AEI and AFM are reimbursed for all direct
  expenses they have paid on the Partnership's
  behalf to third parties relating to Partnership
  administration and property management.
  These expenses included printing costs, legal
  and filing fees, direct administrative costs,
  outside audit and accounting costs, taxes,
  insurance and other property costs.         $  13,710    $  61,783
                                               ========     ========
c.AEI is reimbursed for all costs incurred in
  connection with the sale of property.       $  18,720    $     921
                                               ========     ========

     The  payable  to  AEI Fund Management, Inc.  represents  the
     balance due for the services described in 3a, b and c.  This
     balance is non-interest bearing and unsecured and is  to  be
     paid in the normal course of business.

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2003 AND 2002

(4)  Investments in Real Estate -

     The  Partnership  leases its properties to  various  tenants
     through triple net leases, which are classified as operating
     leases.  Under a triple net lease, the lessee is responsible
     for  all  real estate taxes, insurance, maintenance, repairs
     and  operating expenses of the property.  The initial  Lease
     terms  are  20  years.  The Children's World Lease  contains
     renewal   options  which  may  extend  the  Lease  term   an
     additional 10 years.  The Jiffy Lube Lease does not  contain
     any  renewal  options.   The Leases  contain  clauses  which
     entitle the Partnership to receive additional rent in future
     years  based  on stated rent increases or if gross  receipts
     for  the  property exceed certain specified  amounts,  among
     other conditions.

     The  Partnership's properties are commercial,  single-tenant
     buildings.  The properties were constructed in 1986 or  1987
     and  acquired in 1987.  There have been no costs capitalized
     as improvements subsequent to the acquisitions.

     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,  2003,
     the   estimated  real  estate  values  were  based  upon   a
     subsequent  sale of a property and an estimated value  based
     upon  sale  negotiations in progress for  another  property.
     The  adjustment  increased Investments  in  Real  Estate  by
     $502,263.   It  is  at least reasonably  possible  that  the
     amounts  expected to be realized in the liquidation  process
     will change in the near term.

     The historical cost and related accumulated depreciation and
     estimated  net  realizable  values  of  the  properties   at
     December 31, 2003 are as follows:

                           Historical Cost Basis           Liquidation Basis
                                Buildings and       Accumulated  Net Realizable
Property                  Land   Equipment   Total  Depreciation     Value

Children's World,
  Sterling Heights, MI $ 138,133 $ 591,353 $ 729,486 $ 333,862  $  925,000
Jiffy Lube, Dallas, TX    65,919    88,973   154,892    53,062      80,000
                        --------- --------- --------- ---------  ----------
                       $ 204,052 $ 680,326 $ 884,378 $ 386,924  $1,005,000
                        ========= ========= ========= =========  ==========


          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2003 AND 2002

(4)  Investments in Real Estate - (Continued)

     For  properties owned as of December 31, 2003,  the  minimum
     future rent payments required by the leases are as follows:

                       2004           $  146,115
                       2005              146,115
                       2006              146,115
                       2007              121,465
                                       ----------
                                      $  559,810
                                       ==========

     In  2003  and  2002,  the Partnership recognized  contingent
     rents of $13,145 and $38,846, respectively.

(5)  Deferred Income -

     In  June  1994, Fuddruckers, Inc., the restaurant  concept's
     franchisor,  acquired  the  operations  of  the  Fuddruckers
     restaurant  in  Omaha,  Nebraska  and  assumed   the   lease
     obligations  from  the  original lessee.   As  part  of  the
     agreement,  the Partnership amended the Lease to reduce  the
     base  rent from $167,699 to $145,081.  In consideration  for
     the lease assumption and amendment, the Partnership received
     a  lump  sum  payment from the original lessee of  $159,539.
     The  lump  sum  payment was recognized as  income  over  the
     remainder  of the Lease term, which expires on November  30,
     2007, using the straight line method.

     Through June 30, 2003 and December 31, 2002, the Partnership
     had  recognized  $107,028 and $101,082  of  the  payment  as
     income.   On  August  29,  2003  the  Partnership  sold  the
     property and the Lease Agreement was assigned to the  buyer.
     As  a result, the Partnership recognized the balance of  the
     deferred income related to that property of $52,511  in  the
     third  quarter of 2003.  At December 31, 2003, the remaining
     deferred  income of $2,091 was prepaid rent related  to  the
     Jiffy Lube.

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2003 AND 2002

(6)  Major Tenants -

     The following schedule presents rent revenue from individual
     tenants,   or  affiliated  groups  of  tenants,   who   each
     contributed more than ten percent of the Partnership's total
     rent revenue for the years ended December 31:

                                                 2003       2002
      Tenants                  Industry

     Fuddruckers, Inc.        Restaurant      $ 169,411   $ 154,563
     Knowledge Learning
       Enterprises, Inc.      Child Care        119,131     116,619
     Creative Years Early
       Learning Centers, Inc. Child Care         59,314         N/A
     JEMCARE, Inc.            Child Care            N/A      93,289
                                               ---------   ---------

     Aggregate rent revenue of major tenants  $ 347,856   $ 364,471
                                               =========   =========

     Aggregate rent revenue of major tenants as
     a percentage of total rent revenue              83%         74%
                                               =========   =========

(7) Discontinued Operations -

     In  August  2000,  Renaissant Development Corp.  (RDC),  the
     lessee of the Applebee's restaurant in Victoria, Texas filed
     for reorganization.  RDC closed the restaurant, rejected the
     Lease  and  returned  possession  of  the  property  to  the
     Partnership.   For the period from January 1,  2002  through
     July  2,  2002,  and the year ended December 31,  2001,  the
     Partnership  did not collect scheduled rent of  $82,477  and
     $142,687, respectively.  These amounts were not accrued  for
     financial  reporting purposes.  The Partnership  listed  the
     property for sale or lease.  While the property was  vacant,
     the  Partnership was responsible for real estate  taxes  and
     other costs required to maintain the property.

     As  of  December  31, 2000, based on an analysis  of  market
     conditions in the area, it was determined the fair value  of
     the  Victoria property was approximately $800,000.   In  the
     fourth  quarter  of  2000, a charge to operations  for  real
     estate  impairment of $353,062 was recognized, which is  the
     difference  between the book value at December 31,  2000  of
     $1,153,062  and the estimated fair value of  $800,000.   The
     charge  was  recorded against the cost of the  building  and
     equipment.

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2003 AND 2002

(7) Discontinued Operations - (Continued)

     In  April 2002, the Partnership received an offer to buy the
     restaurant for $725,000 from an unrelated third  party.   In
     the  first quarter of 2002, a charge to operations for  real
     estate impairment of $106,745 was recognized, which was  the
     difference  between  the book value at  March  31,  2002  of
     $776,745  and the estimated net sales proceeds of  $670,000.
     The  charge  was recorded against the cost of the  land  and
     building.   On  July  3,  2002, the  sale  closed  with  the
     Partnership  receiving net sale proceeds of $673,665,  which
     resulted in a net gain of $3,665.

     In  November 2000, the Partnership sold 9,576 square feet of
     land  from  the  Fuddruckers' property in  Omaha,  Nebraska,
     pursuant to a Right-Of-Way Agreement with the City of  Omaha
     Public  Works.   The Partnership received  net  proceeds  of
     $216,593,  which  resulted  in  a  gain  of  $168,838.   The
     original  cost  of  the  parcel of land  was  $47,755.   The
     Partnership believed the City of Omaha undervalued the  land
     and  negotiated  to receive additional proceeds.   In  March
     2002,  the City of Omaha approved a settlement and paid  the
     Partnership  additional  gross proceeds  of  $69,795,  which
     resulted in a net gain of $59,273.

     In  May  2003, the Partnership entered into an agreement  to
     sell the Fuddruckers restaurant to an unrelated third party.
     On  August  29,  2003, the sale closed with the  Partnership
     receiving net sale proceeds of $1,584,901, which resulted in
     a net gain of $1,047,913.  At the time of sale, the cost and
     related   accumulated  depreciation   was   $1,103,787   and
     $566,799, respectively.

     In  July 2002, the Partnership entered into an agreement  to
     sell  the Creative Years daycare center for $230,000 to  the
     lessee.   In  the  fourth  quarter  of  2002,  a  charge  to
     operations  for  real  estate  impairment  of  $63,177   was
     recognized, which was the difference between book  value  at
     December  31,  2002 of $288,177 and the estimated  net  sale
     proceeds  of $225,000.  The charge was recorded against  the
     cost of the land and building.  On August 13, 2003, the sale
     closed  with the Partnership receiving net sale proceeds  of
     $228,440,  which resulted in a net gain of $8,249.   At  the
     time  of sale, the cost and related accumulated depreciation
     was $419,951 and $199,760, respectively.

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2003 AND 2002

(7) Discontinued Operations - (Continued)

     On  December  31, 2002, the Lease term for the Grand  Rapids
     Teachers   Credit   Union  in  Wyoming,  Michigan   expired.
     Originally,  the lessee planned to move out of the  building
     and  relocate to a new building in the area.  On a month-to-
     month basis, the lessee rented a portion of the property for
     $1,250  per  month while their new building was constructed.
     The  Partnership listed the property for sale with  a  local
     real  estate broker.  Subsequently, the Credit Union decided
     to  purchase the property for $400,000.  On March 28,  2003,
     the  sale  closed  with the Partnership receiving  net  sale
     proceeds  of  $399,184, which resulted  in  a  net  gain  of
     $41,624.   At  the  time  of  sale,  the  cost  and  related
     accumulated   depreciation  was   $626,240   and   $268,680,
     respectively.   At  December  31,  2002,  the  property  was
     classified as Real Estate Held for Sale.

     In  February 2003, the Partnership entered into an agreement
     to  sell the two JEMCARE daycare centers in Arlington, Texas
     to the lessee for $175,000 for the property on Arkansas Lane
     and  $325,000  for the property on Matlock Avenue.   In  the
     fourth  quarter  of  2002, a charge to operations  for  real
     estate  impairment  of  $114,648  was  recognized  for   the
     property on Arkansas Lane, which was the difference  between
     book  value  at  December  31,  2002  of  $282,648  and  the
     estimated  net  sale  proceeds of  $168,000.   A  charge  to
     operations  for  real  estate  impairment  of  $131,740  was
     recognized for the property located on Matlock Avenue, which
     was  the difference between book value at December 31,  2002
     of $449,740 and the estimated net sale proceeds of $318,000.
     The  charges were recorded against the cost of the land  and
     building.   On  March  7, 2003, the  sale  closed  with  the
     Partnership receiving net sale proceeds of $172,822 for  the
     property on Arkansas Lane, which resulted in a net  gain  of
     $5,935.    At  the  time  of  sale,  the  cost  and  related
     accumulated   depreciation  was   $335,827   and   $168,940,
     respectively.   The Partnership received  $321,970  for  the
     property on Matlock Avenue, which resulted in a net gain  of
     $5,212.    At  the  time  of  sale,  the  cost  and  related
     accumulated   depreciation  was   $471,902   and   $155,144,
     respectively.

     In  May  2003, the Partnership entered into an agreement  to
     sell  the  Arby's restaurant in Grand Rapids,  Michigan  for
     $285,000 to an unrelated third party.  In the second quarter
     of  2003,  a charge to operations for real estate impairment
     of $123,823 was recognized, which was the difference between
     the  book  value  at  June  30, 2003  of  $378,823  and  the
     estimated  net sales proceeds of $255,000.  The  charge  was
     recorded against the cost of the land and building.  On July
     11, 2003, the sale closed with the Partnership receiving net
     sale  proceeds of $256,443, which resulted in a net gain  of
     $1,443.    At  the  time  of  sale,  the  cost  and  related
     accumulated   depreciation  was   $529,057   and   $274,057,
     respectively.

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2003 AND 2002

(7) Discontinued Operations - (Continued)

     Subsequent  to December 31, 2003, the Partnership  sold  its
     25%  interest in the Jiffy Lube automotive center in Dallas,
     Texas to an unrelated third party.  The Partnership received
     net sale proceeds of approximately $80,000.

     The  Partnership has reached a verbal agreement to sell  its
     83.6514% interest in the Children's World daycare center  to
     an  unrelated third party.  The Partnership and third  party
     are  in  the  process  of  negotiating  a  written  purchase
     agreement.  The sale is subject to contingencies,  including
     the completion of the purchase agreement and the buyer's due
     diligence,  and  may  not  be completed.   If  the  sale  is
     completed,  the  Partnership expects  to  receive  net  sale
     proceeds of approximately $925,000.

     During 2003 and 2002, the Partnership distributed $2,662,899
     and  $1,297,160  of  net sale proceeds to  the  Limited  and
     General  Partners, which represented a return of capital  of
     $199.79   and   $96.83   per   Limited   Partnership   Unit,
     respectively.   The  remaining net  sale  proceeds  will  be
     distributed to the Partners in the future.

(8) Partners' Capital -

     Cash  distributions of $29,452 and $15,529 were made to  the
     General Partners and $2,915,809 and $1,537,378 were made  to
     the  Limited Partners for the years ended December 31,  2003
     and 2002, respectively.  The Limited Partners' distributions
     represent  $220.98 and $116.05 per Limited Partnership  Unit
     outstanding  using 13,195 and 13,247 weighted average  Units
     in 2003 and 2002, respectively.  The distributions represent
     $94.80  and  $-0-  per Unit of Net Income  and  $126.18  and
     $116.05  per Unit of return of contributed capital  in  2003
     and 2002, respectively.

     As  part  of  the  Limited  Partner distributions  discussed
     above, the Partnership distributed $2,636,270 and $1,284,189
     of   proceeds  from  property  sales  in  2003   and   2002,
     respectively.   The   distributions  reduced   the   Limited
     Partners' Adjusted Capital Contributions.

     Distributions  of  Net  Cash Flow to  the  General  Partners
     during  2003  and  2002  were subordinated  to  the  Limited
     Partners  as  required in the Partnership Agreement.   As  a
     result,  99% of distributions were allocated to the  Limited
     Partners and 1% to the General Partners.


          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2003 AND 2002

(8) Partners' Capital - (Continued)

     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 total 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  2003, the Partnership did not redeem any units  from
     the  Limited Partners.  During 2002, eight Limited  Partners
     redeemed  a total of 69.67 Partnership Units for $10,137  in
     accordance  with the Partnership Agreement.  The Partnership
     acquired  these  Units using Net Cash Flow from  operations.
     The  redemptions  increase the remaining  Limited  Partners'
     ownership interest in the Partnership.  As a result of these
     redemption   payments  and  pursuant  to   the   Partnership
     Agreement,  the  General Partners received distributions  of
     $103 in 2002.

     After  the  effect of redemptions and the return of  capital
     from   the   sale   of   property,  the   Adjusted   Capital
     Contribution,  as defined in the Partnership  Agreement,  is
     $400.39 per original $1,000 invested.

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2003 AND 2002

(9)  Income Taxes -

     The   following  is  a  reconciliation  of  net  income  for
     financial reporting purposes to income reported for  federal
     income tax purposes for the years ended December 31:

                                                  2003        2002
     Net Income (Loss) for Financial Reporting Purposes
      Through September 30, 2003 and
      December 31, 2002, respectively         $ 1,256,355   $(174,578)

     Decrease in Net Assets in Liquidation
      Before Adjustment                        (1,799,093)          0

     Distributions to Partners During the
      Liquidation Phase                         1,821,108           0

     Liquidation Basis of Accounting Not
      Recognized for Tax Reporting Purposes      (121,891)          0

     Depreciation for Tax Purposes
      Over Depreciation for Financial
      Reporting Purposes                           (1,798)     (3,504)

     Income Accrued for Tax Purposes
      Over (Under) Income for Financial
      Reporting Purposes                         (142,241)      9,587

     Real Estate Impairment Loss
      Not Recognized for Tax Purposes             123,823     416,310

     Gain on Sale of Real Estate for Tax
      Purposes Over (Under) Gain for Financial
      Reporting Purposes                         (794,295)   (522,088)
                                               -----------   ----------
           Taxable Income (Loss) to Partners  $   341,968   $(274,273)
                                               ===========   ==========


          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 2003 AND 2002

(9)  Income Taxes - (Continued)

     The  following is a reconciliation of Partners' capital  for
     financial  reporting purposes to Partners' capital  reported
     for federal income tax purposes for the years ended December
     31:

                                                2003          2002
     Partners' Capital for
      Financial Reporting Purposes          $ 1,649,347   $ 2,806,760

     Liquidation Basis of Accounting Not
      Recognized for Tax Reporting Purposes    (507,546)            0

     Adjusted Tax Basis of Investments
      in Real Estate Over Net Investments
      in Real Estate for Financial
      Reporting Purposes                         20,795       816,889

     Income Accrued for Tax Purposes Over
      Income for Financial
      Reporting Purposes                          2,091       144,332

     Syndication Costs Treated as
      Reduction of Capital for
      Financial Reporting Purposes            1,981,686     1,981,686
                                             -----------   -----------
           Partners' Capital for
              Tax Reporting Purposes        $ 3,146,373   $ 5,749,667
                                             ===========   ===========
(10) Fair Value of Financial Instruments -

     The estimated fair values of the financial instruments, none
     of which are held for trading purposes, are as follows at
     December 31:

                                     2003                   2002
                            Carrying       Fair    Carrying      Fair
                             Amount       Value     Amount      Value

     Money Market Funds    $ 726,243   $ 726,243   $ 503,979   $ 503,979
                            ---------   ---------   ---------   ---------
       Total Cash and
         Cash Equivalents  $ 726,243   $ 726,243   $ 503,979   $ 503,979
                            =========   =========   =========   =========


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
        ACCOUNTING AND FINANCIAL DISCLOSURE.

        None.

ITEM 8A.  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 III

ITEM 9.DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
       PERSONS;  COMPLIANCE WITH SECTION 16(a)  OF  THE  EXCHANGE
       ACT.

        The  registrant  is  a  limited partnership  and  has  no
officers,  directors, or direct employees.  The General  Partners
manage  and  control the Partnership's affairs and  have  general
responsibility  and  the  ultimate  authority  in   all   matters
affecting  the Partnership's business.  The General Partners  are
AEI  Fund  Management  XVI,  Inc.  (AFM),  the  Managing  General
Partner,   and  Robert  P.  Johnson,  Chief  Executive   Officer,
President  and  sole  director  and  shareholder  of   AFM,   the
Individual  General Partner.  AFM has only one  senior  financial
executive,  its  Chief Financial Officer.   The  Chief  Financial
Officer  reports  directly to Mr. Johnson and is accountable  for
his actions to Mr. Johnson.  Although Mr. Johnson and AFM require
that  all  of  their  personnel, including  the  Chief  Financial
Officer, engage in honest and ethical conduct, ensure full, fair,
accurate, timely, and understandable disclosure, comply with  all
applicable  governmental laws, rules and regulations, and  report
to  Mr. Johnson any deviation from these principles, because  the
organization  is  composed of only approximately 35  individuals,
because  the  management of a partnership by an entity  that  has
different  interests in distributions and income  than  investors
involves numerous conflicts of interest that must be resolved  on
a  daily  basis, and because the ultimate decision maker  in  all
instances  is Mr. Johnson, AFM has not adopted a formal  code  of
conduct.   Instead,  the materials pursuant  to  which  investors
purchase Units disclose these conflicts of interest in detail and
Mr.  Johnson,  as  the  CEO and sole director  of  AFM,  resolves
conflicts  to  the  best  of  his ability,  consistent  with  his
fiduciary obligations to AFM and the fiduciary obligations of AFM
to  the  Partnership.  The director and officers of  AFM  are  as
follows:


ITEM 9.DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
       PERSONS;  COMPLIANCE WITH SECTION 16(a)  OF  THE  EXCHANGE
       ACT.

        Robert  P.  Johnson, age 59, is Chief Executive  Officer,
President  and  sole director and has held these positions  since
the  formation of AFM in September 1986, and has been elected  to
continue  in these positions until December 2004.  From  1970  to
the  present, he has been employed exclusively in the  investment
industry,  specializing  in  tax-advantaged  limited  partnership
investments.   In  that  capacity, he has been  involved  in  the
development,  analysis, marketing and management  of  public  and
private investment programs investing in net lease properties  as
well  as  public  and  private investment programs  investing  in
energy  development.   Since  1971,  Mr.  Johnson  has  been  the
president,  a  director  and  a  registered  principal   of   AEI
Securities,  Inc.,  which  is  registered  with  the  SEC  as   a
securities broker-dealer, is a member of the National Association
of  Securities  Dealers,  Inc. (NASD) and  is  a  member  of  the
Security  Investors Protection Corporation (SIPC).   Mr.  Johnson
has  been president, a director and the principal shareholder  of
AEI  Fund  Management,  Inc., a real  estate  management  company
founded  by him, since 1978.  Mr. Johnson is currently a  general
partner  or principal of the general partner in thirteen  limited
partnerships and a managing member in three LLCs.

        Patrick  W.  Keene,  age 44, is Chief Financial  Officer,
Treasurer  and  Secretary  and has  held  these  positions  since
January  22,  2003  and  has been elected to  continue  in  these
positions  until December 2004.  Mr. Keene has been  employed  by
AEI  Fund  Management, Inc. and affiliated entities  since  1986.
Prior  to being elected to the positions above, he was Controller
of  the various entities.  From 1982 to 1986, Mr. Keene was  with
KPMG  Peat  Marwick  Certified Public Accountants,  first  as  an
auditor and later as a tax manager.  Mr. Keene is responsible for
all accounting functions of AFM and the registrant.

       Since Mr. Johnson serves as the Individual General Partner
of  the Partnership, as well as the sole director of AFM, all  of
the  duties  that  might be assigned to an  audit  committee  are
assigned  to Mr. Johnson.  Mr. Johnson is not an audit  committee
financial  expert, as defined.  As an officer and owner  of  AFM,
and  as  the  Individual General Partner, Mr. Johnson  is  not  a
"disinterested  director"  and may be  subject  to  a  number  of
conflicts of interests in his capacity as sole director of AFM.

        Before the independent auditors are engaged, Mr. Johnson,
as the sole director of AFM, approves all audit-related fees, and
all permissible nonaudit fees, for services of our auditors.

Section 16(a) Beneficial Ownership Reporting Compliance

        Under federal securities laws, the directors and officers
of  the  General  Partner of the Partnership, and any  beneficial
owner  of  more than 10% of a class of equity securities  of  the
Partnership,  are  required  to report  their  ownership  of  the
Partnership's equity securities and any changes in such ownership
to  the  Securities  and Exchange Commission (the  "Commission").
Specific due dates for these reports have been established by the
Commission, and the Partnership is required to disclose  in  this
Annual  Report on 10-KSB  any delinquent filing of  such  reports
and any failure to file such reports during the fiscal year ended
December  31,  2003.   With the exception of Patrick  Keene,  who
filed  his  initial report on Form 3 late, based upon information
provided  by  officers and directors of the General Partner,  all
officers, directors and 10% owners filed all reports on a  timely
basis in the 2003 fiscal year.


ITEM 10.   EXECUTIVE COMPENSATION.

        The General Partner and affiliates are reimbursed at cost
for  all  services performed on behalf of the registrant and  for
all  third party expenses paid on behalf of the registrant.   The
cost for services performed on behalf of the registrant is actual
time  spent  performing such services plus  an  overhead  burden.
These  services include organizing the registrant  and  arranging
for  the  offer  and  sale  of Units,  reviewing  properties  for
acquisition and rendering administrative, property management and
property  sales services.  The amount and nature of such payments
are detailed in Item 12 of this annual report on Form 10-KSB.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

        The following table sets forth information pertaining  to
the   ownership  of  the  Units  by  each  person  known  by  the
Partnership to beneficially own 5% or more of the Units, by  each
General  Partner, and by each officer or director of the Managing
General Partner as of February 29, 2004:

     Name and Address                   Number of     Percent
   of Beneficial Owner                  Units Held    of Class

   AEI Fund Management XVI, Inc.            2            *
   1300 Wells Fargo Place
   30 East 7th Street, St. Paul, Minnesota 55101

   Robert P. Johnson                        0            0%
   1300 Wells Fargo Place
   30 East 7th Street, St. Paul, Minnesota 55101

   Patrick W. Keene                         0            0%
   1300 Wells Fargo Place
   30 East 7th Street, St. Paul, Minnesota 55101

*   Less than 1%

The  persons  set forth in the preceding table hold  sole  voting
power  and power of disposition with respect to all of the  Units
set forth opposite their names.  The General Partners know of  no
holders of more than 5% of the outstanding Units.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

        The  registrant,  AFM  and  its  affiliates  have  common
management and utilize the same facilities.  As a result, certain
administrative  expenses  are  allocated  among   these   related
entities.   All  of  such activities and any  other  transactions
involving the affiliates of the General Partner of the registrant
are  governed  by,  and  are conducted in  conformity  with,  the
limitations set forth in the Limited Partnership Agreement of the
registrant.   Reference  is  made to  Note  3  of  the  Financial
Statements,   as  presented,  and  is  incorporated   herein   by
reference,  for  details of related party  transactions  for  the
years ended December 31, 2003 and 2002.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
         (Continued)

        The  limitations  included in the  Partnership  Agreement
require   that  the  cumulative  reimbursements  to  the  General
Partners  and  their affiliates for administrative  expenses  not
allowed under the NASAA Guidelines ("Guidelines") will not exceed
the  sum of (i) the front-end fees allowed by the Guidelines less
the  front-end fees paid by the Partnership, (ii) the  cumulative
property management fees allowed by the Guidelines but not  paid,
(iii)  any real estate commission allowed by the Guidelines,  and
(iv)  10%  of  Net  Cash  Flow less the Net  Cash  Flow  actually
distributed to the General Partners.  The administrative expenses
not  allowed under the Guidelines include a controlling  person's
salary  and  fringe  benefits,  rent  and  depreciation.   As  of
December  31, 2003, the cumulative reimbursements to the  General
Partners and their affiliates did not exceed those amounts.

        The following table sets forth the forms of compensation,
distributions  and cost reimbursements paid by the registrant  to
the  General Partners or their Affiliates in connection with  the
operation  of  the Fund and its properties for  the  period  from
inception through December 31, 2003.

Person or Entity                                     Amount Incurred From
  Receiving                   Form and Method     Inception (February 6, 1987)
 Compensation                 of Compensation        To December 31, 2003

AEI Securities, Inc.  Selling Commissions equal to 9%        $1,500,000
                      of proceeds plus a 1% nonaccountable
                      expense allowance, most of which was
                      reallowed to Participating Dealers.

General Partners and  Reimbursement at Cost for other        $  487,080
Affiliates            Organization and Offering Costs.

General Partners and  Reimbursement at Cost for all          $  215,052
Affiliates            Acquisition Expenses

General Partners and  Reimbursement at Cost for all          $3,321,551
Affiliates            Administrative Expenses attributable
                      to the Fund, including all expenses
                      related to management and disposition
                      of  the Fund's properties and all other
                      transfer agency, reporting,   partner
                      relations   and   other administrative
                      functions.

General Partners and  Reimbursement at Cost for all expenses $   50,491
Affiliates            related to the disposition of the
                      Fund's properties.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
          (Continued)

Person or Entity                                     Amount Incurred From
  Receiving                   Form and Method     Inception (February 6, 1987)
 Compensation                 of Compensation        To December 31, 2003

General Partners      1% of Net Cash Flow in any fiscal      $ 124,813
                      year until the Limited Partners
                      have received annual, non-cumulative
                      distributions of Net Cash Flow equal
                      to 10% of their Adjusted Capital
                      Contributions and 10% of any remaining
                      Net Cash Flow in such fiscal year.

General Partners      15% of distribution of Net Proceeds    $  98,149
                      of Sale other than distributions
                      necessary to restore Adjusted
                      Capital Contributions and provide a 6%
                      cumulative return to Limited Partners.
                      The General Partners will receive only
                      1% of distributions of Net Proceeds
                      of Sale until the Limited Partners have
                      received an amount equal to: (a) their
                      Adjusted Capital Contributions, plus
                      (b) an amount equal to 14% of their
                      Adjusted Capital Contributions per
                      annum, cumulative but not compounded,
                      less (c) all previous cash distributions
                      to the Limited Partners.


                             PART IV

ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K.

            A.   Exhibits -
                             Description

     10.1  Purchase  Agreement dated April 11, 2002  between  the
     Partnership and Ford Tex Investments, Inc. relating  to  the
     Property  at  6409  North  Navarro  Road,  Victoria,   Texas
     (incorporated  by reference to Exhibit 10.1 of  Form  10-QSB
     filed April 30, 2002).

     10.2  Purchase Agreement dated February 1, 2003 between  the
     Partnership  and Jem Care, Inc. relating to the Property  at
     5900  Matlock  Avenue,  Arlington,  Texas  (incorporated  by
     reference to Exhibit 10.1 of Form 8-K filed March 8, 2003).

     10.3 Purchase  Agreement dated February 1, 2003 between  the
     Partnership  and Jem Care, Inc. relating to the Property  at
     1951  E.  Arkansas  Lane, Arlington, Texas (incorporated  by
     reference to Exhibit 10.2 of Form 8-K filed March 8, 2003).

     10.4 Purchase  Agreement  dated July 30,  2002  between  the
     Partnership  and  Edward  A. Routzong  and  Pamela  C.  Baca
     relating  to  the Property at 17135 Keith Harrow  Boulevard,
     Houston,  Texas (incorporated by reference to  Exhibit  10.4
     of Form 10-KSB filed March 26, 2003).

     10.5 Purchase Agreement dated February 28, 2003 between  the
     Partnership and Lake Michigan Credit Union relating  to  the
     Property  at 3870 S Division, Wyoming Michigan (incorporated
     by  reference  to Exhibit 10.1 of Form 8-K  filed  April  2,
     2003).

     10.6 Purchase  Agreement  dated May  22,  2003  between  the
     Partnership  and  55  28th Street SW  LLC  relating  to  the
     Property  at  850-28th  Street SE,  Grand  Rapids,  Michigan
     (incorporated  by reference to Exhibit 10.2 of  Form  10-QSB
     filed August 8, 2003).

     10.7 Purchase  Agreement  dated May  22,  2003  between  the
     Partnership  and Steven R. Schell relating to  the  Property
     at  7059  Dodge  Street,  Omaha, Nebraska  (incorporated  by
     reference  to  Exhibit 10.3 of Form 10-QSB filed  August  8,
     2003).

     10.8 Purchase Agreement dated December 23, 2003 between  the
     Partnership,  AEI Real Estate Fund XVII Limited  Partnership
     and  Alan  Rushforth  relating to the Property  at  1020  N.
     Westmoreland Road, Dallas, Texas.

     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.


       B. Reports on Form 8-K -   None.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

        The  following  is a summary of the fees  billed  to  the
Partnership  by  Boulay, Heutmaker, Zibell  &  Co.  P.L.L.P.  for
professional  services rendered for the years ended December  31,
2003 and 2002:

     Fee Category                             2003       2002

     Audit Fees                           $   5,813   $  6,305
     Audit-Related Fees                         500          0
     Tax Fees                                     0          0
     All Other Fees                               0          0
                                           ---------   --------
          Total Fees                      $   6,313   $  6,305
                                           =========   ========

Audit  Fees  - Consists of fees billed for professional  services
rendered  for  the  audit of the Partnership's  annual  financial
statements   and  review  of  the  interim  financial  statements
included  in  quarterly reports, and services that  are  normally
provided   by  Boulay,  Heutmaker,  Zibell  &  Co.  P.L.L.P.   in
connection with statutory and regulatory filings or engagements.

Audit-Related  Fees - Consists of fees billed for  assurance  and
related  services that are reasonably related to the  performance
of  the  audit  or  review of financial statements  and  are  not
reported under "Audit Fees." These services include consultations
concerning financial accounting and reporting standards.

Tax  Fees - Consists of fees billed for professional services for
federal and state tax compliance, tax advice and tax planning.

All Other Fees - Consists of fees for products and services other
than the services reported above.


Policy   for  Preapproval  of  Audit  and  Permissible  Non-Audit
Services of Independent Auditors

        Before  the  Independent  Auditors  are  engaged  by  the
Partnership to render audit or non-audit services, the engagement
is  approved  by  Mr.  Johnson acting as the Partnership's  audit
committee.

                           SIGNATURES

        In  accordance with Section 13 or 15(d) of  the  Exchange
Act, the registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.


                               AEI REAL ESTATE FUND XVI
                               Limited Partnership
                               By: AEI Fund Management XVI, Inc.
                                   Its Managing General Partner


March 19, 2004                 By: /s/ Robert P Johnson
                                       Robert  P. Johnson, President
                                       and Director
                                       (Principal Executive Officer)


        In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.

 Name                            Title                  Date


/s/ Robert P Johnson  President (Principal Executive Officer)  March 19, 2004
    Robert P.Johnson  and Sole Director of Managing General
                      Partner

/s/ Patrick W Keene    Chief Financial Officer and Treasurer   March 19, 2004
    Patrick W.Keene    (Principal Accounting Officer)