Victory Tax Exempt Realty Income Fund Limited Partnership
                United States Securities and Exchange Commission
                             Washington, D.C. 20549
                     
                                   FORM 10-Q
                              
(Mark One)
   X        Quarterly Report Pursuant to Section 13 or 15(d) of the
            Securities Exchange Act of 1934

               For the Quarterly Period Ended September 30, 1996
                              
            or

           Transition Report Pursuant to Section 13 or 15(d) of the
           Securities Exchange Act of 1934

                For the Transition period from ______  to ______
                              
                              
                        Commission File Number: 0-18333
                              
                              
           VICTORY TAX EXEMPT REALTY INCOME FUND LIMITED PARTNERSHIP
              Exact Name of Registrant as Specified in its Charter
      
      
          Delaware                                      13-3516912
 State or Other Jurisdiction of
 Incorporation or Organization             I.R.S. Employer Identification No.


 3 World Financial Center, 29th Floor,
 New York, NY    Attn: Andre Anderson                        10285
 Address of Principal Executive Offices                    Zip Code

                                 (212) 526-3237
               Registrant's Telephone Number, Including Area Code
                              
                              
                              
                              
                              
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes    X    No ____
                              
                              
Balance Sheets
                                          At September 30,     At December 31,
                                                     1996                1995
Assets
Investment in mortgage revenue bond,
 working capital loan, and capital
 improvements loan                           $ 13,033,957        $ 13,222,356
Cash and cash equivalents                         478,551             679,620
Mortgage acquisition fees, net of accumulated
amortization of $317,909 and $285,809 in 1996
and 1995, respectively                            110,091             142,191
                                             ------------        ------------
     Total Assets                            $ 13,622,599        $ 14,044,167
                                             ============        ============
Liabilities and Partners' Capital
Liabilities:
  Accounts payable and accrued expenses      $     19,645        $     26,187
  Due to affiliates                                17,847               6,500
  Distributions payable                           272,423             272,423
                                             ------------        ------------
      Total Liabilities                           309,915             305,110
                                             ------------        ------------
Partners' Capital (Deficit):
  General Partner                                 (62,877)            (58,613)
  BAC Holders (2,140,000 BACS outstanding)     13,375,561          13,797,670
                                             ------------        ------------
     Total Partners' Capital                   13,312,684          13,739,057
                                             ------------        ------------
   Total Liabilities and Partners' Capital   $ 13,622,599        $ 14,044,167
                                             ============        ============





Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1996
                                         General            BAC
                                         Partner        Holders         Total
Balance at December 31, 1995           $ (58,613)  $ 13,797,670  $ 13,739,057
Net income                                 3,820        378,193       382,013
Cash distributions                        (8,084)      (800,302)     (808,386)
                                       ---------   ------------  ------------
Balance at September 30, 1996          $ (62,877)  $ 13,375,561  $ 13,312,684
                                       =========   ============  ============






Statements of Operations
                                        Three months ended    Nine months ended
                                            September 30,       September 30,
                                           1996      1995      1996       1995
Revenue Share of earnings (loss) from
investment in mortgage revenue bond   $ 162,844 $ 130,426 $ 464,526 $ (118,230)
Interest                                  4,321     6,855    14,520     21,049
                                      --------- --------- --------- ----------
     Total Revenue                      167,165   137,281   479,046    (97,181)
                                      --------- --------- --------- ----------
Expenses
General and administrative               24,347    14,928    64,933     41,691
Amortization of mortgage costs           10,700    10,700    32,100     32,100
                                      --------- --------- --------- ----------
     Total Expenses                      35,047    25,628    97,033     73,791
                                      --------- --------- --------- ----------
     Net income (loss)                $ 132,118 $ 111,653 $ 382,013 $ (170,972)
                                      ========= ========= ========= ==========
Net Income (Loss) Allocated:
To the General Partner                $   1,321 $   1,117 $   3,820 $   (1,710)
To the BAC Holders                      130,797   110,536   378,193   (169,262)
                                      --------- --------- --------- ----------
                                      $ 132,118 $ 111,653 $ 382,013 $ (170,972)
                                      ========= ========= ========= ==========
Per BAC unit
(2,140,000 outstanding)                    $.06     $ .05     $ .18     $ (.08)
                                      --------- --------- --------- ----------



Statements of Cash Flows
For the nine months ended September 30,                     1996          1995

Cash Flows From Operating Activities:
Net income (loss)                                     $  382,013    $ (170,972)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
  Share of earnings (loss) from investment in
   mortgage revenue bond                                (464,526)      118,230
  Interest received on mortgage revenue bond             652,925       749,895
  Amortization                                            32,100        32,100
  Increase (decrease) in cash arising from changes
  in operating assets and liabilities:
     Accounts payable and accrued expenses                (6,542)       (6,729)
     Due to affiliates                                    11,347           270
                                                       ---------     ---------
Net cash provided by operating activities                607,317       722,794
                                                       ---------     ---------
Cash Flows From Financing Activities:
  Cash distributions                                    (808,386)     (808,386)
                                                       ---------     ---------
Net cash used for financing activities                  (808,386)     (808,386)
                                                       ---------     ---------
Net decrease in cash and cash equivalents               (201,069)      (85,592)
Cash and cash equivalents, beginning of period           679,620       802,222
                                                       ---------     ---------
Cash and cash equivalents, end of period               $ 478,551     $ 716,630
                                                       =========     =========


Notes to the Financial Statements

The unaudited financial statements should be read in conjunction with the
Partnership's annual 1995 audited financial statements within Form 10-K.

The unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of September 30, 1996 and the results of operations for the three
and nine months ended September 30, 1996 and 1995 and cash flows for the nine
months ended September 30, 1996 and 1995 and the statement of partner's capital
(deficit) for the nine months ended September 30, 1996. Results of operations
for the period are not necessarily indicative of the results to be expected for
the full year.

The following significant events have occurred subsequent to fiscal year 1995,
or the following material contingencies exist and require disclosure in this
interim report per Regulation S- X, Rule 10-01, Paragraph (a) (5).

Forbearance Agreement

On May 8, 1996, as a result of negotiations with the ConCam Owner, the
Partnership executed a Letter Agreement (the "Agreement") to generally allow a
continuance of the terms of the Forbearance Agreement which originally became
effective January 31, 1994 (the "Forbearance Agreement").  The Agreement
provided that in lieu of the minimum pay rate, the ConCam Owner pay as debt
service all available cash flow.  The Agreement will be in effect through
December 31, 1996, the expiration of the Forbearance Agreement, but can be
terminated by either party upon 30 days written notice.

The General Partner is evaluating the situation to determine a future strategy
for the Partnership.  Among the alternatives being considered is a formal
restructuring of the interest payment terms under the Bond.  The Internal
Revenue Service recently released final regulations (the "Regulations")
concerning modifications to terms of debt instruments, which generally apply to
debt modifications that occur on or after September 24, 1996.  The Regulations
provide that the agreement of a debt holder to defer interest due (i.e., a
"forbearance), is a reissuance of the debt for tax purposes, unless the
forbearance is for a period not exceeding two years plus an additional period
of time during which the parties conduct good faith negotiations to restructure
the debt.  As a result of the Regulations and the fact that the Bonds are
already the subject of the Forbearance Agreement, the Partnership is unable to
extend the expiration of the existing Forbearance Agreement. Such an extension
could constitute a reissuance of the Bonds, resulting in the issuance of a new
debt obligation and a redemption of the existing debt. As so reissued, the
Bonds may no longer constitute debt, and the tax-exempt feature of the Bond
would be preserved only in the event that the new debt obligation is determined
to be debt and not equity for federal income tax purposes.  Given the risk
associated with an extension of the Forbearance Agreement, a formal
restructuring may be required in order to attempt to preserve the tax-exempt
status of the Bond.  Consequently, the Partnership and the ConCam Owner are
currently discussing the parameters of a possible restructuring.


Part I, Item 2.  Management's Discussion and Analysis of Financial Condition
                 and Results of Operations

Liquidity and Capital Resources

The Partnership's operating income is derived from its investment in a mortgage
revenue bond (the "Bond") in the original principal amount of $15,515,000
secured by a first deed of trust on Camelot Lakes Apartments (the "Property").

Operating difficulties at the Property resulted in Camelot Lakes Associates, an
unaffiliated limited partnership ("Camelot Lakes" or the "Original Borrower"),
defaulting on the November 1993 through January 1994 Bond payments.  On
February 1, 1994, the General Partner reached a restructuring agreement with
the Original Borrower, whereby the ownership of the Property was transferred to
ConCam Associates (the "ConCam Owner" or the "New Borrower"), and property
management was transferred to the ConAm Management Corporation ("ConAm"), a
major property management company.  In addition to ownership, the ConCam Owner,
an affiliate of ConAm, assumed the obligations under the Bond and loan
documents on a nonrecourse basis.  Pursuant to the restructuring, the
Partnership entered into a Forbearance Agreement (the "Forbearance Agreement")
with the ConCam Owner, which modified the terms of the Bond and amended the
second mortgage.  The Forbearance Agreement will expire on December 31, 1996
and is subject to renewal at the Partnership's sole option. Pursuant to the
Forbearance Agreement, the minimum interest payment on the Bond increased to
7.0% on February 1, 1996 from the previous rate of 6.5%.  Given the
difficulties confronting multifamily property owners in Fresno, California, the
ConCam Owner indicated that it was unlikely that the Property's operations
could support debt service payments at the increased rate in 1996.  Although
the ConCam Owner paid debt service at the 7.0% minimum pay rate (partially from
its cash reserves) on February 1, 1996, it made its March 1 and April 1, 1996
payments at an annualized rate lower than the minimum pay rate. In view of
these circumstances, the General Partner engaged in discussions with the ConCam
Owner to negotiate an agreement to continue operations under the Forbearance
Agreement.  On May 8, 1996, as a result of negotiations with the ConCam Owner,
the Partnership executed a Letter Agreement (the "Agreement") to generally
allow a continuance of the terms of the Forbearance Agreement provided that in
lieu of the minimum pay rate, the ConCam Owner pay as debt service all
available cash flow.  The Agreement will be in effect through December 31,
1996, the expiration of the Forbearance Agreement, but can be terminated by
either party upon 30 days written notice.

In view of the circumstances discussed above, the General Partner is evaluating
the situation to determine a future strategy for the Partnership.  Among the
alternatives being considered is a formal restructuring of the interest payment
terms under the Bond.  The Internal Revenue Service recently released final
regulations (the "Regulations") concerning modifications to terms of debt
instruments, which generally apply to debt modifications that occur on or after
September 24, 1996.  The Regulations provide that the agreement of a debt
holder to defer interest due (i.e., a "forbearance), is a reissuance of the
debt for tax purposes, unless the forbearance is for a period not exceeding two
years plus an additional period of time during which the parties conduct good
faith negotiations to restructure the debt. As a result of the Regulations and
the fact that the Bonds are already the subject of the Forbearance Agreement,
the Partnership is unable to extend the expiration of the existing Forbearance
Agreement. Such an extension could constitute a reissuance of the Bonds,
resulting in the issuance of a new debt obligation and a redemption of the
existing debt.  As so reissued, the Bonds may no longer constitute debt, and
the tax-exempt feature of the Bond would be preserved only in the event that
the new debt obligation is determined to be debt and not equity for federal
income tax purposes.  Given the risk associated with an extension of the
Forbearance Agreement, a formal restructuring may be required in order to
attempt to preserve the tax-exempt status of the Bond. Consequently, the
Partnership and the ConCam Owner are currently discussing the parameters of a
possible restructuring.

At September 30, 1996, the Partnership had cash and cash equivalents, which are
invested in tax-exempt money market accounts, of $478,551, compared with
$679,620 at December 31, 1995.  The decrease is due to net cash used to fund
cash distributions exceeding net cash provided by operating activities.

Due to the Property's operating difficulties, the General Partner reduced the
cash distribution paid to the partners from an annual return of 7.5% to 5.0%,
effective with the second quarter of 1993.  Total cash distributions declared
year-to- date for 1996 were $808,386, which included $800,302, or $.374 per
Beneficial Assignee Certificate, declared payable to the Limited Partners. As
of September 30, 1996, total cash distributions paid to the Limited Partners
since inception have been funded 77% from operating cash flow and 23% from the
Partnership's cash reserves. The sources of the Partnership's future cash flows
are expected to be from payments of interest on the Bond, and interest earned
on cash and cash equivalents.  The ConCam Owner's ability to service the new
pay rate of 7.0% has been impeded due to the adverse market conditions in
Fresno, California. Given these circumstances and the persistent market
pressures confronting the Property, future distributions to limited partners
are dependent on the level of debt service payments to be made by ConCam in the
future and the outcome of the Partnership's discussions with the ConCam Owner.

Results of Operations

The Partnership accounts for its investment in the Bond using the equity method
of accounting.  Accordingly, the Partnership reports as income its share of the
Property's results of operations.

For the three months ended September 30, 1996, the Partnership generated net
income of $132,118, compared with net income of $111,653 for the three months
ended September 30, 1995.  The increase primarily is due to an increase in the
Partnership's share of earnings from its investment in the Bond, which was
partially offset by an increase in general and administrative expenses and a
decrease in interest.  For the nine months ended September 30, 1996, the
Partnership generated net income of $382,013, compared with a net loss of
$170,972 for the nine months ended September 30, 1995.  The change from net
loss to net income primarily is due to an increase in the Partnership's share
of earnings from its investment in the Bond, which was partially offset by an
increase in general and administrative expenses and a decrease in interest
income.

The Partnership's share of earnings from investment in the Bond is based on the
Property's earnings before debt service, which increased for the nine months
ended September 30, 1996 relative to the same period in 1995.  The
Partnership's equity interest in the Property's earnings for the three months
ended September 30, 1996 was $162,844, compared with $130,426 for the three
months ended September 30, 1995.  The Partnership's equity interest in the
Property's earnings for the nine months ended September 30, 1996 was $464,526,
compared with $(118,230) for the nine months ended September 30, 1995.  The
Partnership's equity interest in the Property's earnings increased for the
nine-month period in 1996 primarily due to higher expenses incurred at the
Property in the first quarter of 1995.  Total income at the Property was
$1,561,760 for the nine months ended September 30, 1996, largely
unchanged from $1,557,277 for the nine months ended September 30, 1995.  The
increase primarily is due to an increase in rental income as a result of
increased occupancy at the Property, which was partially offset by a decrease
in other income, consisting of laundry revenues.  Total expenses at the
Property, excluding debt service, were $788,642 for the nine months
ended September 30, 1996, compared to $1,357,138 for the nine months ended
September 30, 1995.  The decrease primarily is due to higher repairs and
maintenance expense in the first quarter of 1995.

For the three and nine months ended September 30, 1996, interest was $4,321 and
$14,520, respectively, compared to $6,855 and $21,049, respectively, for the
three and nine months ended September 30, 1995.  The decreases primarily are
due to lower cash balances maintained by the Partnership during 1996.

Total expenses for the three and nine months ended September 30, 1996 were
$35,047 and $97,033, respectively, compared to $25,628 and $73,791,
respectively, for the three and nine months ended September 30, 1995.  The
increases are attributable to higher general and administrative expenses in
1996, primarily as a result of increased legal expenses associated with the
modification of the Forbearance Agreement and potential debt remodification,
and an increase in Partnership administrative expenses, which were partially
offset by a decrease in miscellaneous expenses.

Interest received on the mortgage revenue bond was $652,925 for the nine months
ended September 30, 1996, compared with $749,895 for the nine months ended
September 30, 1995.  The decrease is largely due to the ConCam Owner providing
for debt service at a lower rate due to the current operating and market
constraints mentioned above.

As of September 30, 1996, occupancy at the Property was 88%, compared with 87%
as of September 30, 1995.



Part II        Other Information

Items 1-5      Not applicable.

Item 6         Exhibits and reports on Form 8-K.

               (a)  Exhibits -

                    (27) Financial Data Schedule

               (b)  Reports on Form 8-K - No reports on Form 8-K were filed
                    during the quarter ended September 30, 1996.



                                   SIGNATURES


Pursuant to the requirements 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.



                         VICTORY TAX EXEMPT REALTY INCOME FUND
                         LIMITED PARTNERSHIP

                         BY:  CA Victory Inc.
                              General Partner
                              
                              
                              
Date:  November 14, 1996

                         BY:  /s/ Paul L. Abbott
                              Director, President and
                              Chief Executive Officer
                                       
                                       
                                       
                                       
Date:  November 14, 1996

                        BY:   /s/Doreen D. Odell
                              Vice President and Chief
                              Financial Officer