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, 1996
                                
                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.)

  1300 Minnesota World Trade Center, St. Paul, Minnesota 55101
            (Address of Principal Executive Offices)

                         (612) 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. [X]

The  Issuer's  revenues  for year ended December  31,  1996  were
$1,050,609.

As  of  February 28, 1997, there were 13,994.70 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 $13,994,700.

               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  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.

       The Partnership will hold its properties until the General
Partners  determine  that the sale or other  disposition  of  the
properties   is   advantageous  in  view  of  the   Partnership's
investment  objectives.  In deciding whether to sell  properties,
the  General  Partners will consider factors  such  as  potential
appreciation,  net  cash flow and income tax considerations.   In
addition,  certain lessees have been granted options to  purchase
properties  after  a  specified portion of  the  lease  term  has
elapsed.   It is anticipated that the Partnership will  sell  its
properties  within twelve years after acquisition.  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 of
the fair market value of the property.

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  noncancelable  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.

       Several of the leases provide the lessee with two to three
five-year   renewal  options  subject  to  the  same  terms   and
conditions  as  the  initial lease.  Certain  lessees  have  been
granted  options  to  purchase the property.   Depending  on  the
lease,  the purchase price is either determined by a formula,  or
is  the  greater of the fair market value of the property or  the
amount determined by a formula.  In all cases, if the option were
to  be  exercised  by  the lessee, the purchase  price  would  be
greater than the original cost of the property.

ITEM 1.   DESCRIPTION OF BUSINESS. (Continued)

        The  Partnership owned a 30.8078% interest in  a  Sizzler
restaurant at the King's Island Theme Park near Cincinnati, Ohio.
In  January,  1994,  the Partnership closed  the  restaurant  and
listed  it  for  sale  or  lease.   On  January  23,  1997,   the
Partnership  sold its interest in the property  to  an  unrelated
third  party.   The  Partnership received net sales  proceeds  of
approximately  $149,000,  which  resulted  in  a  net   loss   of
approximately  $216,300, which was recognized as  a  real  estate
impairment  in  1996.   Prior to the sale,  the  Partnership  was
responsible for the real estate taxes and other costs required to
maintain the property.  No rent was received in 1996 or 1995 from
the property.

       In June, 1994, Fuddruckers, Inc., the restaurant concept's
franchisor,   acquired   the  operations   of   the   Fuddruckers
restaurants  in  St.  Louis, Missouri and  Omaha,  Nebraska,  and
assumed the lease obligations from the original lessee.  As  part
of  the  agreement, the Partnership amended the Leases to  reduce
the  base  rent.   In consideration for the lease assumption  and
amendment, the Partnership received a lump sum payment  from  the
original lessee of $299,723.  Fuddruckers, Inc. is owned by  DAKA
International, which has a net worth in excess of $77 million  at
December 28, 1996, making it a much higher credit lessee than the
original lessee.

        The  Partnership owns a 35% interest in a  J.T.  McCord's
restaurant  in  Mesquite, Texas and a 100%  interest  in  a  J.T.
McCord's  restaurant  in Irving, Texas.  In December,  1995,  the
Partnership  took possession of the properties after  the  lessee
was  unable to perform under the terms of the Lease.   In  March,
1997,  the  restaurant in Mesquite was re-leased to Texas  Sports
City Cafe, Ltd. under a triple net lease agreement with a primary
term  of  12 years which may be renewed for up to two consecutive
five-year  periods.  The Partnership's share of the  annual  base
rent  is  $17,500  for the first lease year and $31,500  for  the
second  lease year, with rent increases in each subsequent  lease
year  of  either three percent of the prior year's rent or  three
percent  of gross receipts in years two and three and six percent
of  gross receipts thereafter, to the extent they exceed the base
rent.   The  property in Irving is currently listed for  sale  or
lease.   While  the properties are being re-leased or  sold,  the
Partnership  is responsible for the real estate taxes  and  other
costs required to maintain the properties.

        The  Partnership also owns a 55.0958% interest in a  J.T.
McCord's restaurant in Waco, Texas, which was previously  closed.
In June 1995, the Partnership re-leased the restaurant to Tex-Mex
Cocina  of Waco, L.C.  The Lease Agreement has a primary term  of
eighteen  months with an annual rental payment of  $29,752.   The
Partnership could also receive additional rent if gross  receipts
from  the  property exceed certain specified amounts.  The  Lease
contains  renewal  options which may extend  the  lease  term  an
additional 10 years.  The property is now operated as a  Zapata's
Cantina & Cafe.

        In  July, 1996, the Partnership entered into an agreement
to  sell  the  J.T. McCord's in Mesquite, Texas to  an  unrelated
third party.  In September, 1996, the Agreement was terminated by
the purchaser.

       In December, 1994, the lessee of the Applebee's restaurant
in  Charleston, South Carolina, exercised an option in the  Lease
Agreement  to purchase the property.  On December 15,  1994,  the
sale  closed with the Partnership receiving net sale proceeds  of
$1,613,288 which resulted in a net gain of $691,525.  At the time
of  sale,  the cost and related accumulated depreciation  of  the
property was $1,126,780 and $205,017, respectively.


ITEM 1.   DESCRIPTION OF BUSINESS. (Continued)

       In March, 1995, the lessee of the Applebee's restaurant in
Columbia,  South  Carolina, exercised  an  option  in  the  Lease
Agreement to purchase the property.  On July 28, 1995,  the  sale
closed  with  the  Partnership receiving  net  sale  proceeds  of
$990,453  which resulted in a net gain of $437,915.  At the  time
of  sale,  the cost and related accumulated depreciation  of  the
property was $723,823 and $171,285, respectively.

       On October 25, 1995, the Partnership sold two of the Jiffy
Lube Auto Care Centers to the lessee.  The Partnership recognized
net  sale proceeds of $322,443, which resulted in a net  gain  of
$80,500  for  the Jiffy Lube in Garland, Texas.  At the  time  of
sale,  the  cost  and  related accumulated  depreciation  of  the
property was $301,884 and $59,941, respectively.  The Partnership
recognized net sale proceeds of $161,218, which resulted in a net
gain of $35,705 for one of the Jiffy Lube's in Dallas, Texas.  At
the  time  of sale, the cost and related accumulated depreciation
of the property was $154,781 and $29,268.

        In  July  1995, the lessee of the Super 8  Motel  in  Hot
Springs, Arkansas, exercised an option in the Lease Agreement  to
purchase  the property.  On March 29, 1996, the sale closed  with
the  Partnership  receiving net sale proceeds of  $663,386  which
resulted  in a net gain of $215,017.  The Partnership  recognized
$18,534  of  this  gain  in  1995 due to  nonrefundable  deposits
received  from the purchaser.  At the time of sale, the cost  and
related accumulated depreciation of the property was $583,653 and
$135,284, respectively.

         In   January,   1996,   the  Cheddar's   restaurant   in
Indianapolis,  Indiana was destroyed by a fire.  The  Partnership
reached an agreement with the tenant and insurance company  which
calls  for  termination of the Lease, demolition of the  building
and  payment to the Partnership of $407,282 for the building  and
equipment  and $49,688 for lost rent.  The property will  not  be
rebuilt  and  the  Partnership listed the  land  for  sale.   The
Partnership recognized net disposition proceeds of $406,892 which
resulted  in  a net gain of $88,207.  At the time of disposition,
the  cost  and related accumulated depreciation was $496,967  and
$178,282,  respectively.  The Partnership's cost of the  land  is
$253,747.

        In  November,  1995,  the  Partnership  entered  into  an
Agreement  to  purchase  an Applebee's  restaurant  in  Victoria,
Texas.   The  property  was  acquired  on  March  22,  1996   for
$1,335,555.   The  property is leased to  Renaissant  Development
Corporation  under a Lease Agreement with a primary  term  of  20
years and annual rental payments of approximately $151,000.

       In August, 1996, the Partnership entered into an agreement
to  purchase  a  Caribou Coffee store in Atlanta,  Georgia.   The
purchase  price will be approximately $1,231,000.   The  property
will  be  leased to Caribou Coffee Company, Inc.  under  a  Lease
Agreement  with  a  primary term of 18 years  and  annual  rental
payments  of approximately $141,500.  Through December 31,  1996,
the Partnership had advanced $701,662 for the construction of the
property  and was charging interest on the Note at  the  rate  of
7.0%.   The Partnership has incurred net costs of $20,933 related
to  the  acquisition  of  the  property.   The  costs  have  been
capitalized   and  will  be  allocated  to  land,  building   and
equipment.

ITEM 1.   DESCRIPTION OF BUSINESS. (Continued)

Major Tenants

        During  1996,  five  of  the Partnership's  lessees  each
contributed  more  than  ten percent of the  Partnership's  total
rental  revenue.  The major tenants in aggregate contributed  71%
of  the  Partnership's  total rental  revenue  in  1996.   It  is
anticipated  that, based on the minimum rental payments  required
under  the  leases, each major tenant will continue to contribute
more  than ten percent of the Partnership's total rental  revenue
in  1997 and future years.  Any failure of these major tenants or
business  concepts could materially affect the Partnership's  net
income and cash distributions.

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 all commercial,  single
tenant  buildings.  All the properties were acquired on  a  debt-
free  basis and are leased to various tenants under noncancelable
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.   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, 1996.
<TABLE>
<C>                       <S>      <S>          <S>           <S>         <S>     
                                     Total Property              Annual     Annual
                           Purchase   Acquisition                Lease     Rent Per
Property                     Date       Costs        Lessee      Payment    Sq. Ft.

Creative Years Early                             Creative Years
Learning Center                                  Early Learning
 Houston, TX               4/8/87  $   483,128   Centers, Inc.  $   62,596  $  9.09

Grand Rapids Teachers                            Grand Rapids
Credit Union                                       Teachers
 Wyoming, MI               5/1/87  $   626,239   Credit Union   $   32,370  $  9.37

Arby's Restaurant                                   RTM Mid-
 Grand Rapids, MI          5/1/87  $   652,880   America, Inc.  $   24,000  $  6.89

Fuddruckers Restaurant
 Omaha, NE               11/16/87  $ 1,151,543 Fuddruckers, Inc.$  145,081  $ 20.94

Children's World
Daycare Center                                     Children's
 Sterling Heights, MI                            World Learning
 (83.6514%)              11/25/87  $   729,486    Centers, Inc. $  105,117  $ 20.35

Jiffy Lube Auto Care Center
 Westmoreland Avenue                              Jiffy Lube
 Dallas, TX                                    International of
 (25%)                   12/10/87  $   154,891 of Maryland, Inc.$   18,975  $ 28.43

JEMCARE
 Arkansas Lane
 Arlington, TX           12/10/87  $   450,475    JEMCARE, Inc. $   53,451  $ 10.61

Zapata's Cantina & Cafe
 Waco, TX                                        Tex-Mex Cocina
 (55.0958%)              12/16/87  $   674,285   of Waco, L.C.  $   29,752  $  8.89

J.T. McCord's Restaurant
 Irving, TX              12/16/87  $ 1,147,333       (F1)

J.T. McCord's Restaurant                             Texas
 Mesquite, TX                                     Sports City
 (35%)   (1)             12/16/87  $   520,109     Cafe, Ltd.   $   17,500  $  7.07

JEMCARE
 Matlock Avenue
 Arlington, TX           12/16/87  $   603,641    JEMCARE, Inc. $   44,570  $  6.47

Cheddar's Restaurant
 Indianapolis, IN
 (50%)                    2/16/88  $   253,747         (F2)

Fuddruckers Restaurant
 St. Louis, MO
 (40%)                    3/25/88  $   761,053 Fuddruckers, Inc.$   92,164  $ 26.40

Sizzler Restaurant
 Cincinnati, OH
 (30.8078%)               1/30/90  $   468,140         (F3)

Applebee's Restaurant                          Southland Restaurant
 Slidell, LA                                       Development
 (73%)                     5/5/93  $   746,465  Company, L.L.C. $  107,524  $ 32.15

                                                   Renaissant
Applebee's Restaurant                             Development
 Victoria, TX             3/22/96  $ 1,335,555       Corp.      $  151,110  $ 30.26


<F1> The  property  is vacant and listed for sale  or  lease.   The
     Mesquite property was re-leased
     March 15, 1997.
<F2> The  property was destroyed by fire and the land is listed for
     sale.
<F3> Property held for sale was sold on January 23, 1997.
</TABLE>

        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  in  Sterling
Heights,  Michigan.  AEI Real Estate Fund XV Limited  Partnership
owns the remaining interest in the restaurant in Waco, Texas, and
the  Fuddrucker's  restaurant in St. Louis, Missouri.   AEI  Real
Estate Fund XVII Limited Partnership owns the remaining interests
in  the  Jiffy  Lube  property, the J.T. McCord's  restaurant  in
Mesquite,  Texas, and the Cheddar's restaurant.  AEI Real  Estate
Funds  XVII  and  XVIII Limited Partnerships  own  the  remaining
interest  in the Sizzler restaurant.  AEI Real Estate Fund  XVIII
Limited Partnership owns the remaining interest in the Applebee's
restaurant in Slidell, Louisiana.

        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.

ITEM 2.   PROPERTIES. (Continued)

        The  initial  Lease  terms are 20 years  except  for  the
Houston  daycare center, the JEMCARE properties (10  years),  the
Credit  Union  (11 years), the Arby's (15 years),  and  the  Waco
property  discussed  below.  Several of the Leases  have  renewal
options  which may extend the Lease term an additional  9  to  15
years.

        The  Partnership acquired lease guarantee insurance  from
United  Guaranty  Commercial Insurance Company of  Iowa  for  the
three  J.T. McCord's, the Houston, Texas daycare center, and  one
of  the  Arlington, Texas daycare centers.  The  policies  insure
approximately 80% of the annual payments for periods of ten years
for  the  daycare centers and a twelve month period  (over  seven
years)  for  the  other  properties.  The rent  guarantee  begins
thirty  days after the occurrence of all the following:  (1)  the
lessee is at least thirty days in default in the payment of rent;
(2)  the  lessee  has  been removed from the  property;  (3)  the
property  has been listed for rent with a real estate broker  and
"For  Rent"  signs  have  been posted on the  property;  and  (4)
certain other minor conditions.  Once these conditions have  been
satisfied, the Partnership will receive lease insurance  payments
until either the property is re-leased or the policy expires.  On
December 15, 1994, the policies on the J.T. McCord's expired.

       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.

         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 or 40 years depending on the date when it was placed in
service.  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.  In general the federal tax basis of the properties
for  tax depreciation purposes is the same as the basis for  book
depreciation purposes.

        During the last five years or since the date of purchase,
if  purchased  after December 31, 1991, all properties  were  100
percent occupied by the lessees noted, with the exception of  the
Sizzler  property, which was 100 percent occupied until  January,
1994,  the  J.T.  McCord's properties,  which  were  100  percent
occupied until December, 1995, and the Cheddar's property,  which
was  100 perent occupied until January, 1996.  In June, 1995, the
Partnership  re-leased  the J.T. McCord's,  Waco  property.   The
Sizzler  property,  the Irving J.T. McCord's, and  Mesquite  J.T.
McCord's  have  been 100% vacant since January,  1994,  December,
1995,  and  December  1995,  respectively.   The  Mesquite   J.T.
McCord's was re-leased on March 15, 1997.

ITEM 3.   LEGAL PROCEEDINGS.

          None.

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

          None.


                             PART II

ITEM 5.   MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND
          RELATED SECURITY HOLDER MATTERS.

        As  of  December  31, 1996, there were 1,514  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 purchase 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 1996, thirteen Limited Partners redeemed a total of
113   Partnership  Units  for  $69,640  in  accordance  with  the
Partnership  Agreement.  In prior years, a total of seventy-seven
Limited  Partners redeemed 892.3 Partnership Units for  $715,655.
The   redemptions   increase  the  remaining  Limited   Partners'
ownership interest in the Partnership.

        Cash distributions of $9,189 and $10,531 were made to the
General  Partners  and $840,000 and $962,829  were  made  to  the
Limited   Partners   in   1996  and  1995,   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 $692,793  and  $643,138  of
proceeds from property sales in 1996 and 1995, respectively.  The
distributions  reduced  the  Limited Partners'  Adjusted  Capital
Contributions.

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS.

Results of Operations

        For  the  years  ended December 31, 1996  and  1995,  the
Partnership  recognized rental income of $973,784 and $1,009,008,
respectively.   During the same periods, the  Partnership  earned
investment income of $76,825 and $77,846, respectively.  In 1996,
rental  income  decreased  as  a result  of  the  property  sales
discussed below and no rental income was recognized for the  J.T.
McCord's  properties in Irving and Mesquite, Texas.  The decrease
in  rental income was partially offset by rental income  received
from  re-leasing  the  property in  Waco,  Texas,  rental  income
received  from  the  Applebee's  in  Victoria,  Texas,  and  rent
increases on six properties.

       In May, 1990, Flagship, Inc. (Flagship), the lessee of the
J.T.   McCord's  properties,  filed  for  reorganization,   after
occupying the properties for approximately five years.  In March,
1993,  the Partnership, along with affiliated Partnerships  which
also  own  J.T.  McCord's  properties,  filed  its  own  plan  of
reorganization (the "Plan") with the Court.  That  Plan  provided
for  an  assignee of the Partnerships (a replacement  tenant)  to
purchase the assets of Flagship and operate the restaurants  with
financial  assistance  from  the  Partnerships.   This  Plan  was
expected  to  allow  the  Partnerships  to  avoid  closing  these
properties, allow operations to continue uninterrupted, and avoid
further  costly litigation with Flagship and its creditors.   The
Plan  was confirmed by the Court and the creditors April 16, 1993
and became effective July 20, 1993.

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

        To  entice  the assignee, WIM, Inc. (WIM) to operate  the
restaurants  and enter into the Lease Agreements, the Partnership
provided funds to renovate the restaurants and paid for operating
expenses.   The  Partnership's share of renovation and  operating
expenses  during this period was $755,773, which was expensed  in
the fourth quarter of 1994.  However, WIM was not able to operate
the  properties profitably and was unable to make rental payments
as  provided  in  the Lease Agreements.  To reduce  expenses  and
minimize  the  losses  produced by  these  properties,  the  Waco
restaurant  was  closed  and listed for sale  or  lease  and  the
Partnership  amended the agreements for the Irving  and  Mesquite
locations  to provide for WIM to make annual rental  payments  of
the  greater  of  $60,000 or 5.5% of sales beginning  October  1,
1994.  In December, 1995, the Partnership took possession of  the
properties after WIM was unable to perform under the terms of the
Leases.   The properties are currently listed for sale or  lease.
While the properties are being re-leased or sold, the Partnership
is responsible for the real estate taxes and other costs required
to maintain the properties.

        As  part  of the Plan, the Partnerships, which own  these
properties,  were  responsible  for  an  annual  payment  to  the
Creditors  Trust  of approximately $110,000  for  the  next  five
years.   The  Partnership's  share  of  the  annual  payment  was
$69,702.   In 1994, the Partnership expensed $302,652  to  record
this   liability   and  administrative  costs  related   to   the
bankruptcy.

       In 1995, the Partnership negotiated a settlement, with the
trustee,  for a lump sum payment of the minimum amount  due  over
the remaining term of the Plan for release of the Partnership and
WIM   from   any   other  financial  obligations  and   reporting
requirements  to  the trustee.  The settlement  of  $215,442  was
completed in the fourth quarter of 1995.

        In June 1995, the Partnership re-leased the Waco property
to  Tex-Mex  Cocina  of  Waco, L.C.  The Lease  Agreement  has  a
primary term of eighteen months with an annual rental payment  of
$29,752.  The Partnership could also receive additional  rent  if
gross   receipts  from  the  property  exceed  certain  specified
amounts.  The Lease contains renewal options which may extend the
lease  term an additional 10 years.  The property is now operated
as a Zapata's Cantina & Cafe.

        In  July, 1996, the Partnership entered into an agreement
to  sell  the  J.T. McCord's in Mesquite, Texas to  an  unrelated
third party.  In September, 1996, the Agreement was terminated by
the  purchaser.  The property was listed for sale or lease  until
March, 1997 when it was re-leased to Texas Sports City Cafe, Ltd.
under  a  triple net lease agreement with a primary  term  of  12
years  which  may be renewed for up to two consecutive  five-year
periods.   The  Partnership's share of the annual  base  rent  is
$17,500 for the first lease year and $31,500 for the second lease
year, with rent increases in each subsequent lease year of either
three  percent of the prior year's rent or three percent of gross
receipts in years two and three and six percent of gross receipts
thereafter, to the extent they exceed the base rent.

        The  Partnership owned a 30.8078% interest in  a  Sizzler
restaurant at the King's Island Theme Park near Cincinnati, Ohio.
In  January,  1994,  the Partnership closed  the  restaurant  and
listed  it  for  sale  or  lease.   On  January  23,  1997,   the
Partnership  sold its interest in the property  to  an  unrelated
third  party.   The  Partnership received net sales  proceeds  of
approximately  $149,000,  which  resulted  in  a  net   loss   of
approximately  $216,300, which was recognized as  a  real  estate
impairment  in  1996.   Prior to the sale,  the  Partnership  was
responsible for the real estate taxes and other costs required to
maintain the property.  No rent was received in 1996 or 1995 from
the  property.  At December 31, 1996, the property was classified
on the balance sheet as Real Estate Held for Sale.


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

       In June, 1994, Fuddruckers, Inc., the restaurant concept's
franchisor,   acquired   the  operations   of   the   Fuddruckers
restaurants  in  St.  Louis, Missouri and  Omaha,  Nebraska,  and
assumed the lease obligations from the original lessee.  As  part
of  the  agreement, the Partnership amended the Leases to  reduce
the base rent from $109,033 to $92,164 for the St. Louis property
and $167,699 to $145,081 for the Omaha property.  The Partnership
could  receive  additional rent in the future  if  10%  of  gross
receipts   from  the  properties  exceed  the  base   rent.    In
consideration  for  the  lease  assumption  and  amendment,   the
Partnership received a lump sum payment from the original  lessee
of  $299,723.  The lump sum payment will be recognized as  income
over  the  remainder of the Lease terms which expire January  31,
2008  and  November  30,  2007, using the straight  line  method.
Fuddruckers, Inc. is owned by DAKA International, which has a net
worth in excess of $77 million at December 28, 1996, making it  a
much higher credit lessee than the original lessee.

        During  the years ended December 31, 1996 and  1995,  the
Partnership   paid   Partnership   administration   expenses   to
affiliated parties of $202,324 and $223,782, respectively.  These
administration  expenses  include  costs  associated   with   the
management of the properties, processing distributions, reporting
requirements  and correspondence to the Limited Partners.  During
the   same   periods,   the  Partnership   incurred   Partnership
administration  and property management expenses  from  unrelated
parties  of $130,473 and $138,202, 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.

       As of December 31, 1996, the Partnership's annualized cash
distribution  rate  was  6.5%,  based  on  the  Adjusted  Capital
Contribution.   Distributions of Net Cash  Flow  to  the  General
Partners were subordinated to the Limited Partners as required in
the  Partnership  Agreement.  As a result, 99%  of  distributions
were  allocated  to  Limited  Partners  and  1%  to  the  General
Partners.

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

Liquidity and Capital Resources

        During  1996,  the Partnership's cash balances  decreased
$1,228,532.  Net Cash provided by operating activities  increased
from  $543,413 in 1995 to $681,414 in 1996 mainly as a result  of
net timing differences in the collection of payments from lessees
and  the payment of expenses.  In 1996 and 1995, net cash  income
before  depreciation and real estate impairment was approximately
the  same.   The reduction in revenue in 1996, when  compared  to
1995, was offset by a reduction in expenses in 1996.

        The  major components of the Partnership's cash flow from
investing activities are investments in real estate and  proceeds
from  the sale of real estate.  In 1996 and 1995, the Partnership
generated  cash flow from the sale of real estate,  as  discussed
below,  of  $1,051,744 and $1,455,148, respectively.  During  the
same  periods, the Partnership expended $2,043,337  and  $14,813,
respectively,   to  invest  in  real  properties  (inclusive   of
acquisition  expenses)  as the Partnership  reinvested  the  cash
generated from the property sales.

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

       In March, 1995, the lessee of the Applebee's restaurant in
Columbia,  South  Carolina, exercised  an  option  in  the  Lease
Agreement to purchase the property.  On July 28, 1995,  the  sale
closed  with  the  Partnership receiving  net  sale  proceeds  of
$990,453  which resulted in a net gain of $437,915.  At the  time
of  sale,  the cost and related accumulated depreciation  of  the
property was $723,823 and $171,285, respectively.

       On October 25, 1995, the Partnership sold two of the Jiffy
Lube Auto Care Centers to the lessee.  The Partnership recognized
net  sale proceeds of $322,443, which resulted in a net  gain  of
$80,500  for  the Jiffy Lube in Garland, Texas.  At the  time  of
sale,  the  cost  and  related accumulated  depreciation  of  the
property was $301,884 and $59,941, respectively.  The Partnership
recognized net sale proceeds of $161,218, which resulted in a net
gain of $35,705 for one of the Jiffy Lube's in Dallas, Texas.  At
the  time  of sale, the cost and related accumulated depreciation
of the property was $154,781 and $29,268.

        In  July  1995, the lessee of the Super 8  Motel  in  Hot
Springs, Arkansas, exercised an option in the Lease Agreement  to
purchase  the property.  On March 29, 1996, the sale closed  with
the  Partnership  receiving net sale proceeds of  $663,386  which
resulted  in a net gain of $215,017.  The Partnership  recognized
$18,534  of  this  gain  in  1995 due to  nonrefundable  deposits
received  from the purchaser.  At the time of sale, the cost  and
related accumulated depreciation of the property was $583,653 and
$135,284, respectively.

         In   January,   1996,   the  Cheddar's   restaurant   in
Indianapolis,  Indiana was destroyed by a fire.  The  Partnership
reached an agreement with the tenant and insurance company  which
calls  for  termination of the Lease, demolition of the  building
and  payment to the Partnership of $407,282 for the building  and
equipment  and $49,688 for lost rent.  The property will  not  be
rebuilt  and  the  Partnership listed the  land  for  sale.   The
Partnership recognized net disposition proceeds of $406,892 which
resulted  in  a net gain of $88,207.  At the time of disposition,
the  cost  and related accumulated depreciation was $496,967  and
$178,282,  respectively.  The Partnership's cost of the  land  is
$253,747.

       During 1996 and 1995, the Partnership distributed $699,791
and  $730,214,  respectively, of the net  sale  proceeds  to  the
Limited  and General Partners as part of their regular  quarterly
distributions and to pay for the redemption of Partnership Units.
The  distributions represented a return of capital of $49.17  and
$50.98  per Limited Partnership Unit, respectively.  The majority
of  the  remaining net proceeds will be reinvested in  additional
properties.

        In  November,  1995,  the  Partnership  entered  into  an
agreement  to  purchase  an Applebee's  restaurant  in  Victoria,
Texas.   The  property  was  acquired  on  March  22,  1996   for
$1,335,555.   The  property is leased to  Renaissant  Development
Corporation  under a Lease Agreement with a primary  term  of  20
years and annual rental payments of approximately $151,000.

       In August, 1996, the Partnership entered into an agreement
to  purchase  a  Caribou Coffee store in Atlanta,  Georgia.   The
purchase  price will be approximately $1,231,000.   The  property
will  be  leased to Caribou Coffee Company, Inc.  under  a  Lease
Agreement  with  a  primary term of 18 years  and  annual  rental
payments  of approximately $141,500.  Through December 31,  1996,
the Partnership had advanced $701,662 for the construction of the
property  and was charging interest on the Note at  the  rate  of
7.0%.   The Partnership has incurred net costs of $20,933 related
to  the  acquisition  of  the  property.   The  costs  have  been
capitalized   and  will  be  allocated  to  land,  building   and
equipment.

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

       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.   The  redemption payments generally are funded  with  cash
that  would  normally  be paid as part of the  regular  quarterly
distributions.    As   a   result,   total   distributions    and
distributions payable have fluctuated from year to  year  due  to
cash  used  to  fund redemption payments.  Effective  October  1,
1995, the Partnership's distribution rate was reduced from 7%  to
6%.   As  a  result, distributions during 1995 were  higher  when
compared to the same period in 1996.

        The  Partnership may acquire Units from Limited  Partners
who  have tendered their Units to the Partnership. Such Units may
be  acquired at a discount.  The Partnership is not obligated  to
purchase  in  any  year  more than 5%  of  the  number  of  Units
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 1996, thirteen Limited Partners redeemed a total of
113   Partnership  Units  for  $69,640  in  accordance  with  the
Partnership  Agreement.   The Partnership  acquired  these  Units
using Net Cash Flow from operations.  In prior years, a total  of
seventy-seven  Limited Partners redeemed 892.3 Partnership  Units
for  $715,655.   The  redemptions increase the remaining  Limited
Partners' ownership interest in the Partnership.

       The continuing rent payments from the properties, together
with  cash generated from the property sales, should be  adequate
to  fund  continuing  distributions and  meet  other  Partnership
obligations on both a short-term and long-term basis.

ITEM 7.   FINANCIAL STATEMENTS.

       See accompanying Index to Financial Statements.
                                
                                
                                
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  INDEX TO FINANCIAL STATEMENTS






Independent Auditor's Report

Balance Sheet as of December 31, 1996 and 1995

Statements for the Years Ended December 31, 1996 and 1995:

     Income

     Cash Flows

     Changes in Partners' Capital

Notes to Financial Statements

                                
                                
                                
                  INDEPENDENT AUDITOR'S REPORT


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, 1996 and 1995 and  the  related
statements of income, cash flows and changes in partners' capital
for  the  years then ended.  These financial statements  are  the
responsibility    of   the   Partnership's    management.     Our
responsibility  is  to  express an  opinion  on  these  financial
statements based on our audits.

      We  conducted  our  audits  in  accordance  with  generally
accepted  auditing standards.  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.

      In  our opinion, the financial statements referred to above
present  fairly, in all material respects, the financial position
of  AEI  Real Estate Fund XVI Limited Partnership as of  December
31, 1996 and 1995, and the results of its operations and its cash
flows  for  the  years then ended, in conformity  with  generally
accepted accounting principles.




Minneapolis, Minnesota             /s/ Boulay, Heutmaker, Zibell & Co. P.L.L.P.
January 31, 1997                       Certified Public Accountants

<PAGE>
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
                          BALANCE SHEET
                                
                           DECEMBER 31
                                
                             ASSETS
                                
                                                       1996           1995

CURRENT ASSETS:
  Cash and Cash Equivalents                         $   645,302   $ 1,873,834
  Receivables                                            17,284        54,661
                                                     -----------   -----------
      Total Current Assets                              662,586     1,928,495
                                                     -----------   -----------
INVESTMENTS IN REAL ESTATE:
  Land                                                3,446,635     3,537,198
  Buildings and Equipment                             6,590,448     6,966,837
  Construction Advances                                 701,662             0
  Property Acquisition Costs                             20,933        14,813
  Accumulated Depreciation                           (2,148,068)   (2,274,424)
                                                     -----------   -----------
                                                      8,611,610     8,244,424
  Real Estate Held for Sale                             403,073             0
                                                     -----------   -----------
      Net Investments in Real Estate                  9,014,683     8,244,424
                                                     -----------   -----------
          Total Assets                              $ 9,677,269   $10,172,919
                                                     ===========   ===========

                    LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
  Payable to AEI Fund Management, Inc.              $   102,082   $   153,644
  Distributions Payable                                 190,647       190,172
  Deferred Income                                        22,212        22,212
                                                     -----------   -----------
      Total Current Liabilities                         314,941       366,028
                                                     -----------   -----------

DEFERRED INCOME  -  Net of Current Portion              221,981       244,193

PARTNERS' CAPITAL (DEFICIT):
  General Partners                                      (37,794)      (33,570)
  Limited Partners, $1,000 Unit value;
   15,000 Units authorized and issued;
   13,995 and 14,108 outstanding in 1996
   and 1995, respectively                             9,178,141     9,596,268
                                                     -----------   -----------
      Total Partners' Capital                         9,140,347     9,562,698
                                                     -----------   -----------
        Total Liabilities and Partners' Capital     $ 9,677,269   $10,172,919
                                                     ===========   ===========

 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 YEARS ENDED DECEMBER 3l


                                                        1996          1995

INCOME:
  Rent                                             $   973,784    $ 1,009,008
  Investment Income                                     76,825         77,846
                                                    -----------    -----------
      Total Income                                   1,050,609      1,086,854
                                                    -----------    -----------

EXPENSES:
  Partnership Administration - Affiliates              202,324        223,782
  Partnership Administration and Property
     Management - Unrelated Parties                    130,473        138,202
  Interest                                                   0         12,713
  Depreciation                                         289,724        317,059
  Real Estate Impairment                               216,300              0
                                                    -----------    -----------
      Total Expenses                                   838,821        691,756
                                                    -----------    -----------

OPERATING INCOME                                       211,788        395,098

GAIN ON SALE OF REAL ESTATE                            284,690        572,654
                                                    -----------    -----------

NET INCOME                                         $   496,478    $   967,752
                                                    ===========    ===========

NET INCOME ALLOCATED:
  General Partners                                 $     4,965    $     9,678
  Limited Partners                                     491,513        958,074
                                                    -----------    -----------
                                                   $   496,478    $   967,752
                                                    ===========    ===========

NET INCOME PER LIMITED PARTNERSHIP UNIT
(14,079 and 14,196 weighted average Units outstanding
  in 1996 and 1995, respectively)                  $     34.91    $     67.49
                                                    ===========    ===========


 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 YEARS ENDED DECEMBER 31

                                                         1996          1995
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Income                                        $   496,478   $   967,752

  Adjustments To Reconcile Net Income
  To Net Cash Provided By Operating Activities:
     Depreciation                                       289,724       317,059
     Real Estate Impairment                             216,300             0
     Gain on Sale of Real Estate                       (284,690)     (572,654)
     Decrease in Receivables                             37,377        47,996
     Increase (Decrease) in Payable to
     AEI Fund Management, Inc.                          (51,562)       41,674
     Decrease in Contract Payable                             0      (236,202)
     Decrease in Deferred Income                        (22,212)      (22,212)
                                                     -----------   -----------
       Total Adjustments                                184,937      (424,339)
                                                     -----------   -----------
        Net Cash Provided By Operating Activities       681,415       543,413
                                                     -----------   -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Investments in Real Estate                         (2,043,337)      (14,813)
  Proceeds from Sale of Real Estate                   1,051,744     1,455,148
                                                     -----------   -----------
       Net Cash Provided By (Used For)
           Investing Activities                        (991,593)    1,440,335
                                                     -----------   -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Increase in Distributions Payable                         475        60,430
  Distributions to Partners                            (848,485)     (972,554)
  Redemption Payments                                   (70,344)      (80,580)
                                                     -----------   -----------
        Net Cash Used For Financing Activities         (918,354)     (992,704)
                                                     -----------   -----------
NET INCREASE (DECREASE) IN CASH
   AND CASH EQUIVALENTS                              (1,228,532)      991,044

CASH AND CASH EQUIVALENTS, beginning of period        1,873,834       882,790
                                                     -----------   -----------
CASH AND CASH EQUIVALENTS, end of period            $   645,302   $ 1,873,834
                                                     ===========   ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Interest Paid During the Year                     $         0   $    17,157
                                                     ===========   ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:

   Note Receivable Acquired in Sale of Property     $         0   $    37,500
                                                     ===========   ===========

 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 YEARS ENDED DECEMBER 31


                                                                     Limited
                                                                   Partnership
                                General      Limited                   Units
                                Partners     Partners     Total    Outstanding


BALANCE, December 31, 1994  $  (32,717)  $ 9,680,797  $ 9,648,080    14,225.70

  Distributions                 (9,725)     (962,829)    (972,554)

  Redemption Payments             (806)      (79,774)     (80,580)     (118.00)

  Net Income                     9,678       958,074      967,752
                             ----------   -----------  -----------  -----------
BALANCE, December 31, 1995     (33,570)    9,596,268    9,562,698    14,107.70

  Distributions                 (8,485)     (840,000)    (848,485)

  Redemption Payments             (704)      (69,640)     (70,344)     (113.00)

  Net Income                     4,965       491,513      496,478
                             ----------   -----------  -----------  -----------
BALANCE, December 31, 1996  $  (37,794)  $ 9,178,141  $ 9,140,347    13,994.70
                             ==========   ===========  ===========  ===========




 The accompanying notes to financial statements are an integral
                     part of this statement.
</PAGE>

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHlP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 1996 and 1995
                                
(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   of  the  Partnership.   Robert  P.  Johnson,   the
     President  and  sole  shareholder  of  AFM,  serves  as  the
     Individual General Partner of the Partnership.  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  Partnership's  offering
     terminated on November 6, 1987 when the maximum subscription
     limit of 15,000 Limited Partnership Units ($15,000,000)  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 the  operation
     of the Partnership, any Net Cash Flow, as defined, which the
     General Partners determine to distribute will be distributed
     90% to the Limited Partners and 10% to the General Partners;
     provided,  however, that such distributions to  the  General
     Partners will be subordinated to the Limited Partners  first
     receiving an annual, noncumulative distribution of Net  Cash
     Flow equal to 10% of their Adjusted Capital Contribution, as
     defined,  and, provided further, that in no event  will  the
     General Partners receive less than 1% of such Net Cash  Flow
     per  annum. Distributions to Limited Partners will  be  made
     pro rata by Units.
     
     Any  Net  Proceeds  of Sale, as defined, from  the  sale  or
     financing of the Partnership's properties which the  General
     Partners determine to distribute will, after provisions  for
     debts  and  reserves, be paid in the following manner:   (i)
     first,  99%  to the Limited Partners and 1% to  the  General
     Partners until the Limited Partners receive an amount  equal
     to:  (a)  their Adjusted Capital Contribution  plus  (b)  an
     amount  equal  to 6% of their Adjusted Capital  Contribution
     per  annum, cumulative but not compounded, to the extent not
     previously distributed from Net Cash Flow; (ii) next, 99% to
     the  Limited  Partners and 1% to the General Partners  until
     the Limited Partners receive an amount equal to 14% of their
     Adjusted Capital Contribution per annum, cumulative but  not
     compounded, to the extent not previously distributed;  (iii)
     next, to the General Partners until cumulative distributions
     to the General Partners under Items (ii) and (iii) equal 15%
     of cumulative distributions to all Partners under Items (ii)
     and (iii).  Any remaining balance will be distributed 85% to
     the  Limited  Partners  and  15% to  the  General  Partners.
     Distributions to the Limited Partners will be made pro  rata
     by Units.

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHlP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 1996 and 1995
                                
(1)  Organization - (Continued)

     For  tax  purposes,  profits  from  operations,  other  than
     profits  attributable  to  the  sale,  exchange,  financing,
     refinancing   or  other  disposition  of  the  Partnership's
     property,  will  be  allocated first in the  same  ratio  in
     which,  and  to the extent, Net Cash Flow is distributed  to
     the Partners for such year.  Any additional profits will  be
     allocated 90% to the Limited Partners and 10% to the General
     Partners.  In  the event no Net Cash Flow is distributed  to
     the  Limited  Partners,  90% of  each  item  of  Partnership
     income,  gain  or credit for each respective year  shall  be
     allocated to the Limited Partners, and 10% of each such item
     shall be allocated to the General Partners.  Net losses from
     operations will be allocated 98% to the Limited Partners and
     2% to the General Partners.
     
     For  tax purposes, profits arising from the sale, financing,
     or  other disposition of the Partnership's property will  be
     allocated  in  accordance with the Partnership Agreement  as
     follows:  (i) first, to those partners with deficit balances
     in  their capital accounts in an amount equal to the sum  of
     such  deficit  balances; (ii) second,  99%  to  the  Limited
     Partners  and 1% to the General Partners until the aggregate
     balance in the Limited Partners' capital accounts equals the
     sum  of the Limited Partners' Adjusted Capital Contributions
     plus  an  amount  equal  to 14% of  their  Adjusted  Capital
     Contributions  per annum, cumulative but not compounded,  to
     the  extent  not previously allocated; (iii) third,  to  the
     General Partners until cumulative allocations to the General
     Partners equal 15% of cumulative allocations.  Any remaining
     balance  will  be allocated 85% to the Limited Partners  and
     15%  to the General Partners.  Losses will be allocated  98%
     to the Limited Partners and 2% to the General Partners.
     
     The  General Partners are not required to currently  fund  a
     deficit   capital   balance.   Upon   liquidation   of   the
     Partnership or withdrawal by a General Partner, the  General
     Partners will contribute to the Partnership an amount  equal
     to  the  lesser  of  the deficit balances in  their  capital
     accounts  or  1%  of  total Limited  Partners'  and  General
     Partners' capital contributions.
         
(2)  Summary of Significant Accounting Policies -

     Financial Statement Presentation
       
       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  and  expenses.
       Actual results could differ from those estimates.
       


          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHlP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 1996 and 1995
                                
(2)  Summary of Significant Accounting Policies - (Continued)

       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

       At  times  throughout  the year,  the  Partnership's  cash
       deposited  in  financial  institutions  may  exceed   FDIC
       insurance limits.
     
     Statement of Cash Flows
     
       For  purposes  of  reporting cash  flows,  cash  and  cash
       equivalents  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.
     
     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.  Accordingly, 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  long-term
       triple  net  leases classified as operating  leases.   The
       Partnership  recognizes  rental  revenue  on  the  accrual
       basis  according  to  the terms of the individual  leases.
       For  leases  which contain cost of living  increases,  the
       increases  are  recognized in the year in which  they  are
       effective.
       
       Real  estate is recorded at the lower of cost or estimated
       net  realizable value.  The Financial Accounting Standards
       Board  issued  Statement  No.  121,  "Accounting  for  the
       Impairment of Long-Lived Assets and for Long-Lived  Assets
       to   be   Disposed   Of"  which  is  effective   for   the
       Partnership's fiscal year ended December 31,  1996.   This
       standard  requires the Partnership to compare the carrying
       amount  of  its  properties to the estimated  future  cash
       flows  expected  to  result  from  the  property  and  its
       eventual  disposition.  If the sum of the expected  future
       cash  flows  is  less  than the  carrying  amount  of  the
       property,  the  Statement  requires  the  Partnership   to
       recognize  an impairment loss by the amount by  which  the
       carrying amount of the property exceeds the fair value  of
       the  property.  Adoption of this Statement resulted  in  a
       $216,300  real estate impairment loss on the Partnership's
       1996 financial statements.
                                
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHlP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 1996 and 1995

(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.

(3)  Related Party Transactions -

     In  1987,  the Partnership acquired an 83.6514% interest  in
     the  Children's  World Daycare Center  located  in  Sterling
     Heights, Michigan.  The remaining interest is owned  by  AEI
     Real  Estate Fund 85-B Limited Partnership, an affiliate  of
     the Partnership.
     
     In  1987  and  1988,  the Partnership  acquired  a  55.0958%
     interest in the restaurant in Waco, Texas, a 40% interest in
     the St. Louis Fuddruckers restaurant and a 50% interest in a
     Super  8 Motel.  The remaining interests in these properties
     are owned by AEI Real Estate Fund XV Limited Partnership, an
     affiliate of the Partnership.
     
     In  1988,  the  Partnership purchased a 50%  interest  in  a
     Cheddar's  restaurant and a 58.12% interest in the  Columbia
     Applebee's  restaurant.  The remaining  interests  in  these
     properties  are owned by AEI Real Estate Fund  XVII  Limited
     Partnership, an affiliate of the Partnership.
     
     In  February and March, 1988, the Partnership sold,  at  its
     original  cost  of $2,101,052, a majority interest  in  four
     properties to AEI Real Estate Fund XVII Limited Partnership,
     an affiliate of the Partnership.  The Partnership sold a 65%
     interest  in  the Mesquite J.T. McCord's restaurant,  a  50%
     interest  in  the  Jiffy Lube in Garland, Texas  and  a  75%
     interest  in both of the Jiffy Lubes in Dallas, Texas.   The
     sale  of  these interests allowed the Partnership to acquire
     all  of  its  commitments without financing and  provided  a
     greater diversification of its property portfolio.
     
     In  1990, the Partnership acquired a 30.8078% interest in  a
     Sizzler restaurant.  The remaining interest in this property
     is  owned  by  AEI Real Estate Funds XVII and XVIII  Limited
     Partnerships, affiliates of the Partnership.
     
     In  May, 1993, the Partnership acquired a 73% interest in an
     Applebee's restaurant in Slidell, Louisiana.  The  remaining
     interest  in this property is owned by AEI Real Estate  Fund
     XVIII Limited Partnership.
     
                                
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHlP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 1996 and 1995
                                
(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.
     
     AFM   and  AEI  received  the  following  compensation   and
     reimbursements for costs and expenses from the Partnership:
     
                                            Total Incurred by the Partnership
                                             for the Years Ended December 3l
    
                                                         1996          1995
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.                                          $   202,324   $   223,782
                                                      ===========   ===========

b.AEI and AFM are reimbursed for all direct
  expenses they have paid on the Partnership's
  behalf to third parties.  These expenses
  included printing costs, legal and filing fees,
  direct administrative costs, outside audit and
  accounting costs, taxes, insurance and
  other property costs.                             $   130,473    $   138,202
                                                     ===========    ===========

c.AEI is reimbursed for all property acquisition
  costs incurred by it in acquiring properties on
  behalf of the Partnership.  The amounts are net
  of financing and commitment fees and expense
  reimbursements received by the Partnership from
  the lessees in the amount of $48,543 and
  $6,250 for 1996 and 1995, respectively.           $     1,395    $    14,813
                                                     ===========    ===========

     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, 1996 and 1995
                                
(4)  Investments in Real Estate -
     
     The  Partnership  leases its properties to  various  tenants
     through   non-cancelable  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  except
     for  the Houston daycare center, the JEMCARE properties  (10
     years),  the Credit Union (11 years), the Arby's (15 years),
     and  the  Waco  property discussed below.   Several  of  the
     Leases have renewal options which may extend the Lease  term
     an  additional  9  to  15 years.  The  Leases  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.  Certain lessees have  been
     granted options to purchase the property.  Depending on  the
     lease, the purchase price is either determined by a formula,
     or  is  the greater of the fair market value of the property
     or the amount determined by a formula.  In all cases, if the
     option  were  to  be exercised by the lessee,  the  purchase
     price  would  be  greater  than the  original  cost  of  the
     property.
     
     The  Partnership's  properties are all  commercial,  single-
     tenant  buildings.   The  restaurant  in  Waco,  Texas   was
     constructed  in  1980 and enlarged in 1982  and  1983.   The
     Irving  and  Mesquite  J.T.  McCord's  restaurants  and  the
     Houston daycare center were constructed in 1984.  The  Omaha
     Fuddruckers restaurant was constructed in 1985 and remodeled
     in  1987.   The Sizzler restaurant was constructed in  1989.
     The   Applebee's  restaurant  in  Slidell,  Louisiana,   was
     constructed in 1993.  The Applebee's restaurant in Victoria,
     Texas  was  constructed in 1996.  All other properties  were
     constructed  in  1986, 1987 or 1988.   All  properties  were
     acquired  in 1987 or 1988, except for the Sizzler restaurant
     which  was  acquired  in  1990, and the  Slidell  Applebee's
     restaurant  in 1993, and the Victoria Applebee's  restaurant
     in   1996.    There  have  been  no  costs  capitalized   as
     improvements subsequent to the acquisitions.

                                
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                   DECEMBER 31, 1996 and 1995
                                
(4)  Investments in Real Estate - (Continued)
     
     The cost of the properties not held for sale and the related
     accumulated depreciation at December 31, 1996 are as
     follows:

                                      Buildings and               Accumulated
Property                      Land      Equipment       Total     Depreciation

Daycare Center
 Houston, TX               $  147,753  $  335,375   $   483,128    $  134,832
Credit Union, Wyoming, MI     166,434     459,805       626,239       186,681
Arby's, Grand Rapids, MI      195,229     457,651       652,880       185,806
Fuddruckers, Omaha, NE        307,913     843,630     1,151,543       415,274
Children's World,
 Sterling Heights, MI         138,133     591,353       729,486       200,928
Jiffy Lube, Dallas, TX         65,918      88,973       154,891        33,923
JEMCARE, Arlington, TX        148,214     302,261       450,475       110,775
Zapata's, Waco, TX            226,315     447,970       674,285       170,117
J.T. McCord's, Irving, TX     441,252     706,081     1,147,333       268,134
J.T. McCord's, Mesquite, TX   230,337     289,772       520,109       110,032
JEMCARE, Arlington, TX        323,671     279,970       603,641       100,734
Fuddruckers, St. Louis, MO    396,943     364,110       761,053       143,532
Applebee's, Slidell, LA       278,879     467,586       746,465        57,149
Applebee's, Victoria, TX      379,644     955,911     1,335,555        30,151
                            ----------  ----------   -----------    ----------
                           $3,446,635  $6,590,448   $10,037,083    $2,148,068
                            ==========  ==========   ===========    ==========
     
     In  May, 1990, Flagship, Inc. (Flagship), the lessee of  the
     J.T.  McCord's  properties, filed for reorganization,  after
     occupying  the properties for approximately five years.   In
     March,   1993,   the  Partnership,  along  with   affiliated
     Partnerships which also own J.T. McCord's properties,  filed
     its  own plan of reorganization (the "Plan") with the Court.
     That  Plan  provided for an assignee of the Partnerships  (a
     replacement  tenant) to purchase the assets of Flagship  and
     operate  the restaurants with financial assistance from  the
     Partnerships.   This  Plan  was  expected   to   allow   the
     Partnerships  to  avoid  closing  these  properties,   allow
     operations  to  continue uninterrupted,  and  avoid  further
     costly litigation with Flagship and its creditors.  The Plan
     was  confirmed by the Court and the creditors April 16, 1993
     and became effective July 20, 1993.
     
                                
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                   DECEMBER 31, 1996 and 1995
                                
(4)  Investments in Real Estate - (Continued)
     
     To  entice  the  assignee, WIM, Inc. (WIM)  to  operate  the
     restaurants  and  enter  into  the  Lease  Agreements,   the
     Partnership  provided funds to renovate the restaurants  and
     paid  for  operating expenses.  The Partnership's  share  of
     renovation  and  operating expenses during this  period  was
     $755,773  which was expensed in the fourth quarter of  1994.
     However,   WIM  was  not  able  to  operate  the  properties
     profitably  and  was  unable  to  make  rental  payments  as
     provided  in  the Lease Agreements.  To reduce expenses  and
     minimize  the losses produced by these properties, the  Waco
     restaurant was closed and listed for sale or lease  and  the
     Partnership  amended  the  agreements  for  the  Irving  and
     Mesquite locations to provide for WIM to make annual  rental
     payments  of  the  greater  of  $60,000  or  5.5%  of  sales
     beginning   October  1,  1994.   In  December,   1995,   the
     Partnership took possession of the properties after WIM  was
     unable  to  perform  under the terms  of  the  Leases.   The
     properties  are currently listed for sale or  lease.   While
     the  properties are being re-leased or sold, the Partnership
     is  responsible  for the real estate taxes and  other  costs
     required to maintain the properties.
     
     As  part  of  the  Plan, the Partnerships, which  own  these
     properties,  were responsible for an annual payment  to  the
     Creditors Trust of approximately $110,000 for the next  five
     years.   The  Partnership's share of the annual payment  was
     $69,702.   In  1994,  the Partnership expensed  $302,652  to
     record  this liability and administrative costs  related  to
     the bankruptcy.
     
     In  1995, the Partnership negotiated a settlement, with  the
     trustee,  for a lump sum payment of the minimum  amount  due
     over  the  remaining  term of the Plan for  release  of  the
     Partnership and WIM from any other financial obligations and
     reporting  requirements to the trustee.  The  settlement  of
     $215,442 was completed in the fourth quarter of 1995.
     
     In June 1995, the Partnership re-leased the Waco property to
     Tex-Mex  Cocina  of Waco, L.C.  The Lease  Agreement  has  a
     primary  term  of  eighteen months  with  an  annual  rental
     payment  of  $29,752.  The Partnership  could  also  receive
     additional  rent if gross receipts from the property  exceed
     certain  specified  amounts.   The  Lease  contains  renewal
     options  which  may extend the lease term an  additional  10
     years.  The property is now operated as a Zapata's Cantina &
     Cafe.
     
     In  July, 1996, the Partnership entered into an agreement to
     sell  the  J.T. McCord's in Mesquite, Texas to an  unrelated
     third   party.   In  September,  1996,  the  Agreement   was
     terminated  by the purchaser.  The property was  listed  for
     sale  or  lease until March, 1997 when it was  re-leased  to
     Texas  Sports  City  Cafe, Ltd. under  a  triple  net  lease
     agreement  with  a  primary term of 12 years  which  may  be
     renewed  for  up to two consecutive five-year periods.   The
     Partnership's share of the annual base rent is  $17,500  for
     the  first lease year and $31,500 for the second lease year,
     with  rent increases in each subsequent lease year of either
     three  percent of the prior year's rent or three percent  of
     gross  receipts  in years two and three and six  percent  of
     gross  receipts  thereafter, to the extent they  exceed  the
     base rent.
     
                                
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                   DECEMBER 31, 1996 and 1995

(4)  Investments in Real Estate - (Continued)

     In  March, 1995, the lessee of the Applebee's restaurant  in
     Columbia,  South Carolina, exercised an option in the  Lease
     Agreement  to purchase the property.  On July 28, 1995,  the
     sale closed with the Partnership receiving net sale proceeds
     of  $990,453  which resulted in a net gain of $437,915.   At
     the   time   of  sale,  the  cost  and  related  accumulated
     depreciation  of  the  property was $723,823  and  $171,285,
     respectively.
     
     On  October 25, 1995, the Partnership sold two of the  Jiffy
     Lube  Auto  Care  Centers  to the lessee.   The  Partnership
     recognized net sale proceeds of $322,443, which resulted  in
     a  net gain of $80,500 for the Jiffy Lube in Garland, Texas.
     At  the  time  of  sale,  the cost and  related  accumulated
     depreciation  of  the  property was  $301,884  and  $59,941,
     respectively.  The Partnership recognized net sale  proceeds
     of $161,218, which resulted in a net gain of $35,705 for one
     of  the Jiffy Lube's in Dallas, Texas.  At the time of sale,
     the   cost  and  related  accumulated  depreciation  of  the
     property was $154,781 and $29,268.
     
     In  July  1995,  the  lessee of the Super  8  Motel  in  Hot
     Springs,   Arkansas,  exercised  an  option  in  the   Lease
     Agreement to purchase the property.  On March 29, 1996,  the
     sale closed with the Partnership receiving net sale proceeds
     of  $663,386 which resulted in a net gain of $215,017.   The
     Partnership recognized $18,534 of this gain in 1995  due  to
     nonrefundable deposits received from the purchaser.  At  the
     time  of sale, the cost and related accumulated depreciation
     of the property was $583,653 and $135,284, respectively.
     
     In  January, 1996, the Cheddar's restaurant in Indianapolis,
     Indiana was destroyed by a fire.  The Partnership reached an
     agreement with the tenant and insurance company which  calls
     for termination of the Lease, demolition of the building and
     payment to the Partnership of $407,282 for the building  and
     equipment and $49,688 for lost rent.  The property will  not
     be  rebuilt  and the Partnership listed the land  for  sale.
     The  Partnership  recognized  net  disposition  proceeds  of
     $406,892  which resulted in a net gain of $88,207.   At  the
     time  of  disposition,  the  cost  and  related  accumulated
     depreciation  was $496,967 and $178,282, respectively.   The
     Partnership's cost of the land is $253,747.
     
     During  1996 and 1995, the Partnership distributed  $699,791
     and  $730,214, respectively, of the net sale proceeds to the
     Limited  and  General  Partners as  part  of  their  regular
     quarterly  distributions and to pay for  the  redemption  of
     Partnership Units.  The distributions represented  a  return
     of  capital  of  $49.17 and $50.98 per  Limited  Partnership
     Unit,  respectively.   The majority  of  the  remaining  net
     proceeds will be reinvested in additional properties.
     
     In November, 1995, the Partnership entered into an Agreement
     to  purchase  an  Applebee's restaurant in Victoria,  Texas.
     The  property was acquired on March 22, 1996 for $1,335,555.
     The property is leased to Renaissant Development Corporation
     under a Lease Agreement with a primary term of 20 years  and
     annual rental payments of approximately $151,000.
     
                                
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                   DECEMBER 31, 1996 and 1995
                                
(4)  Investments in Real Estate - (Continued)
     
     In  August, 1996, the Partnership entered into an  agreement
     to purchase a Caribou Coffee store in Atlanta, Georgia.  The
     purchase  price  will  be  approximately  $1,231,000.    The
     property  will  be  leased to Caribou Coffee  Company,  Inc.
     under a Lease Agreement with a primary term of 18 years  and
     annual  rental payments of approximately $141,500.   Through
     December 31, 1996, the Partnership had advanced $701,662 for
     the  construction of the property and was charging  interest
     on  the  Note  at  the  rate of 7.0%.  The  Partnership  has
     incurred net costs of $20,933 related to the acquisition  of
     the  property.  The costs have been capitalized and will  be
     allocated to land, building and equipment.
     
     The  Partnership  owned  a 30.8078% interest  in  a  Sizzler
     restaurant  at the King's Island Theme Park near Cincinnati,
     Ohio.    In  January,  1994,  the  Partnership  closed   the
     restaurant and listed it for sale or lease.  On January  23,
     1997,  the Partnership sold its interest in the property  to
     an  unrelated  third  party.  The Partnership  received  net
     sales proceeds of approximately $149,000, which resulted  in
     a  net  loss of approximately $216,300, which was recognized
     as a real estate impairment in 1996.  Prior to the sale, the
     Partnership  was responsible for the real estate  taxes  and
     other costs required to maintain the property.  No rent  was
     received in 1996 or 1995 from the property.  At December 31,
     1996,  the property was classified on the balance  sheet  as
     Real Estate Held for Sale.

     The  minimum future rentals on the non-cancelable Leases for
     years subsequent to December 31, 1996 are as follows:
     
                       1997          $   838,309
                       1998              837,547
                       1999              854,072
                       2000              820,901
                       2001              731,870
                       Thereafter      7,154,462
                                      -----------
                                     $11,237,161
                                      ===========

     The Partnership recognized contingent rents in 1996 and 1995
     of $27,187 and $19,971, respectively.
     
                                
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                   DECEMBER 31, 1996 and 1995

(5)  Deferred Income -

     In  June,  1994, Fuddruckers, Inc., the restaurant concept's
     franchisor,  acquired  the  operations  of  the  Fuddruckers
     restaurants in St. Louis, Missouri and Omaha, Nebraska,  and
     assumed the lease obligations from the original lessee.   As
     part of the agreement, the Partnership amended the Leases to
     reduce  the  base  rent  from the  current  annual  rent  of
     $109,033  to $92,164 for the St. Louis property and $167,699
     to  $145,081 for the Omaha property.  The Partnership  could
     receive  additional  rent in the  future  if  10%  of  gross
     receipts  from  the  properties exceed the  base  rent.   In
     consideration  for the lease assumption and  amendment,  the
     Partnership  received a lump sum payment from  the  original
     lessee of $299,723.  The lump sum payment will be recognized
     as income over the remainder of the Lease terms which expire
     January  31, 2008 and November 30, 2007, using the  straight
     line  method.   As  of  December  31,  1996  and  1995,  the
     Partnership    has   recognized   $55,530    and    $33,318,
     respectively, of this payment as income.

(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:
     
                                                       1996           1995
      Tenants                       Industry

     Fuddruckers, Inc.              Restaurant      $  259,457     $  259,457
     Renaissant Development Corp.   Restaurant         117,395            N/A
     Southland Restaurant
      Development Company, L.L.C.   Restaurant         106,009        102,424
     JEMCARE, Inc.                  Child Care         103,177            N/A
     Children's World
      Learning Centers, Inc.        Child Care         102,809            N/A
                                                     ----------     ----------

     Aggregate rent revenue of major tenants        $  688,847     $  361,881
                                                     ==========     ==========

     Aggregate rent revenue of major tenants as
     a percentage of total rent revenue                    71%           36%
                                                     ==========     ==========

                                
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                   DECEMBER 31, 1996 and 1995

(7) Partners' Capital -

     Cash  distributions of $9,189 and $10,531 were made  to  the
     General Partners and $840,000 and $962,829 were made to  the
     Limited  Partners  in  1996  and  1995,  respectively.   The
     Limited Partners' distributions represent $59.66 and  $67.82
     per  Limited Partnership Unit outstanding using  14,079  and
     14,196   weighted   average  Units   in   1996   and   1995,
     respectively.  The distributions represent $29.93 and $67.49
     per  Unit  of  Net Income and $29.73 and $.33  per  Unit  of
     return   of   contributed  capital   in   1996   and   1995,
     respectively.
     
     As  part  of  the  Limited  Partner distributions  discussed
     above, the Partnership distributed $692,793 and $643,138  of
     proceeds from property sales in 1996 and 1995, respectively.
     The  distributions  reduced the Limited  Partners'  Adjusted
     Capital Contributions.

     Distributions  of  Net  Cash Flow to  the  General  Partners
     during  1996  and  1995  were subordinated  to  the  Limited
     Partners  as  required in the Partnership Agreement.   As  a
     result,  99%  of distributions and income were allocated  to
     the Limited Partners and 1% to the General Partners.

     The  Partnership may acquire Units from Limited Partners who
     have tendered their Units to the Partnership. Such Units may
     be acquired at a discount.  The Partnership is not obligated
     to  purchase in any year more than 5% of the number of Units
     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  1996, thirteen Limited Partners redeemed a total  of
     113  Partnership  Units for $69,640 in accordance  with  the
     Partnership Agreement.  The Partnership acquired these Units
     using  Net  Cash  Flow  from operations.   In  1995,  twelve
     Limited  Partners redeemed a total of 118 Partnership  Units
     for $79,774.  The redemptions increase the remaining Limited
     Partners' ownership interest in the Partnership.
     
     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
     $925.38 per original $1,000 invested.

                                
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                   DECEMBER 31, 1996 and 1995

(8)  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:
     
                                                        1996           1995
     
     Net Income for Financial
      Reporting Purposes                            $  496,478     $  967,752
     
     Depreciation for Tax Purposes
      Under Depreciation for Financial
      Reporting Purposes                                56,498         56,416
     
     Income Accrued for Tax Purposes
      Under Income for Financial
      Reporting Purposes                               (24,256)        (4,324)
     
     Property Expenses for Tax Purposes
      Over Expenses for Financial
      Reporting Purposes                                     0       (234,439)
     
     Gain on Sale of Real Estate for Tax
      Purposes Over (Under) Gain for Financial
      Reporting Purposes                               185,210        (25,031)
                                                     ----------     ----------
           Taxable Income to Partners               $  713,930     $  760,374
                                                     ==========     ==========
                                

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                   DECEMBER 31, 1996 and 1995

(8)  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:
     
                                                       1996          1995
     
     Partners' Capital for
      Financial Reporting Purposes                $  9,140,347   $  9,562,698
     
     Adjusted Tax Basis of Investments
      in Real Estate Over Net Investments
      in Real Estate for Financial
      Reporting Purposes                               736,694        494,986
     
     Capitalized Start-Up Costs
      Under Section 195                                185,558        185,558
     
     Amortization of Start-Up and
      Organization Costs                              (190,952)      (190,952)
     
     Income Accrued for Tax Purposes Over
      Income for Financial
      Reporting Purposes                               319,055        343,311
     
     Organization and Syndication Costs
      Treated as Reduction of Capital
      for Financial Reporting Purposes               1,987,080      1,987,080
                                                    -----------    -----------
           Partners' Capital for
              Tax Reporting Purposes               $12,177,782    $12,382,681
                                                    ===========    ===========
                                

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                   DECEMBER 31, 1996 and 1995

(9)  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:
     
                                     1996                     1995
                            Carrying      Fair       Carrying       Fair
                            Amount        Value      Amount         Value
     
     Cash                 $      416    $      416  $     1,665   $     1,665
     Money Market Funds      644,886       644,886    1,872,169     1,872,169
                           ----------    ---------   -----------   -----------
       Total Cash and
         Cash Equivalents $  645,302    $  645,302  $ 1,873,834   $ 1,873,834
                           ==========    =========   ===========   ===========
     

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

        None.


                            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
of  the  registrant are Robert P. Johnson and AFM.   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 director and  officers
of AFM are as follows:

        Robert  P.  Johnson, age 52, is Chief Executive  Officer,
President  and  Director and has held these positions  since  the
formation  of  AFM in September, 1986, and has  been  elected  to
continue in these positions until March, 1998.  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
Incorporated,  which  is  registered  with  the  Securities   and
Exchange Commission 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 fifteen other limited partnerships.

        Mark  E.  Larson,  age 44, is Executive  Vice  President,
Treasurer  and  Chief Financial Officer and has been  elected  to
continue  in these positions until March, 1998.  Mr.  Larson  has
been  Treasurer and Executive Vice President since December, 1987
and  Chief  Financial Officer since January, 1990.   In  January,
1993,  Mr.  Larson was elected to serve as Secretary of  AFM  and
will  continue to serve until March, 1998.  Mr. Larson  has  been
employed  by  AEI  Fund Management, Inc. and affiliated  entities
since  1985.   From  1979  to 1985, Mr. Larson  was  with  Apache
Corporation as manager of Program Accounting responsible for  the
accounting  and reports for approximately 45 public partnerships.
Mr.   Larson   is  responsible  for  supervising  the  accounting
functions of AFM and the registrant.

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 and management services.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT.

        AFM, the Managing General Partner of the registrant,  and
Robert  P.  Johnson, its Individual General Partner,  contributed
$1,000 in total for their interest in the registrant.  See Item 1
for  a discussion of their share of the registrant's profits  and
losses.   Neither the General Partners nor their affiliates  have
purchased Limited Partnership 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.

        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, 1996.

Person or Entity                                        Amount Incurred From
  Receiving                   Form and Method      Inception (February 6, 1987)
 Compensation                 of Compensation           To December 31, 1996

AEI Incorporated    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    Reimbursement at Cost for other                    
and Affiliates      Organization and Offering Costs.          $  487,080
                    

General Partners    Reimbursement at Cost for all             $  223,414
and Affiliates      Acquisition Expenses

General  Partners   1% of Net Cash Flow in any fiscal year    $   89,379
                    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    Reimbursement at Cost for all             $2,063,404
and 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.

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, 1996

General Partners    15% of distribution of Net Proceeds       $   20,703
                    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.

        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, (ii) the cumulative property management
fees  allowed  but  not  paid, (iii) any real  estate  commission
allowed under the Guidelines, and (iv) 10% of Net Cash Flow  less
the  Net Cash Flow actually distributed.  The reimbursements  not
allowed  under  the  Guidelines include  a  controlling  person's
salary  and  fringe  benefits,  rent  and  depreciation.   As  of
December  31, 1996, the cumulative reimbursements to the  General
Partners and their affiliates did not exceed these amounts.


                             PART IV

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

            A.   Exhibits -
                                  Description

              10.1   Sale and Leaseback Financing
                     Commitment  dated  August 18,  1995  between
                     AEI  Fund  Management, Inc.  and  Renaissant
                     Development  Corporation  relating  to   the
                     property  at 6409 N. Navarro Road, Victoria,
                     Texas  (incorporated by reference to Exhibit
                     10.1  of  Form 8-K filed with the Commission
                     on April 4, 1996).

              10.2   Amendment  to  Sale   and
                     Leaseback    Financing   Commitment    dated
                     November  21,  1995 between the Partnership,
                     AEI  Fund  Management, Inc.  and  Renaissant
                     Development  Corporation  relating  to   the
                     property  at 6409 N. Navarro Road, Victoria,
                     Texas  (incorporated by reference to Exhibit
                     10.2  of  Form 8-K filed with the Commission
                     on April 4, 1996).


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A.
(Continued)

             A.   Exhibits - (Continued)

                                 Description

              10.3   Net  Lease Agreement  dated
                     March 22, 1996, between the Partnership  and
                     Renaissant Development Corporation  relating
                     to  the  property at 6409 N.  Navarro  Road,
                     Victoria,  Texas (incorporated by  reference
                     to  Exhibit 10.3 of Form 8-K filed with  the
                     Commission on April 4, 1996).

              10.4   Purchase  Agreement  dated
                     July  25, 1995 between the Partnership,  AEI
                     Real Estate Fund XV Limited Partnership  and
                     Motel  Developers,  Inc.  relating  to   the
                     property   at   4726  Central  Avenue,   Hot
                     Springs,    Arkansas    (incorporated     by
                     reference to Exhibit 10.1 of Form 8-K  filed
                     with the Commission on April 2, 1996).

              10.5   Purchase  Agreement  dated
                     July 10, 1996, between the Partnership,  AEI
                     Real  Estate  Fund XVII Limited Partnership,
                     and   BW,  Incorporated  relating   to   the
                     property  at  3808 Town Crossing  Boulevard,
                     Mesquite,  Texas (incorporated by  reference
                     to  Exhibit  10.1 of Form 10-QSB filed  with
                     the Commission on August 7, 1996).

              10.6   Assignment of  Construction
                     Loan   Commitment  and  Sale  and  Leaseback
                     Financing Commitment dated August  8,  1996,
                     concerning  those  documents  with   Caribou
                     Coffee  store and AEI Fund Management,  Inc.
                     to  the  Partnership, relating to  the  sale
                     and  leaseback of a Caribou Coffee store  at
                     Johnson   Ferry  Road  in  Atlanta,  Georgia
                     (incorporated by reference to  Exhibit  10.1
                     of  Form 10-QSB filed with the Commission on
                     November 13, 1996).

              10.7   Net Lease Agreement dated March 15, 1997
                     between the Partnership, AEI Real Estate
                     Fund XVI Limited Partnership, and Texas
                     Sports City Cafe, Ltd. relating to the
                     property at 3808 Towne Crossing Boulevard,
                     Mesquite, Texas.

              10.8   Guarantee of Lease dated March 15, 1997 
                     between the Partnership, AEI Real Estate
                     Fund XVI Limited Partnership, and Texas
                     Sports City Cafe, Ltd. relating to the
                     property at 3808 Towne Crossing Boulevard,
                     Mesquite, Texas.

                27   Financial Data Schedule
                     for year ended December 31, 1996.

             B.   Reports on Form 8-K and Form 8-K/A - None.


                           SIGNATURES

       Pursuant to the requirements of Section 13 or 15(d) of the
Securities  Exchange Act of 1934, the registrant has duly  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 24, 1997              By: /s/ Robert P. Johnson
                                    Robert P. Johnson, President and Director
                                   (Principal Executive Officer)



        Pursuant  to the requirements of the Securities  Exchange
Act  of  1934, 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 24, 1997
    Robert P. Johnson  and Sole Director of Managing General
                       Partner

/s/ Mark E. Larson     Executive Vice President, Treasurer      March 24, 1997
    Mark E. Larson     and Chief Financial Officer
                       (Principal Accounting Officer)