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, 1997
                              
         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,
                                                      1997               1996
Assets
Investment in mortgage revenue bond,
working capital loan, and capital
improvements loan                             $ 12,880,412       $ 12,983,476
Cash and cash equivalents                          368,311            410,449
Mortgage acquisition fees, net of accumulated
 amortization of $360,709 and $328,609 in
 1997 and 1996, respectively                        67,291             99,391

     Total Assets                             $ 13,316,014       $ 13,493,316

Liabilities and Partners' Capital
Liabilities:
  Accounts payable and accrued expenses       $     41,725       $     48,523
  Due to affiliates                                 11,000                  0
  Distributions payable                                  0            162,105

     Total Liabilities                              52,725            210,628

Partners' Capital (Deficit):
  General Partner                                  (63,354)           (63,160)
  BAC Holders (2,140,000 BACS outstanding)      13,326,643         13,345,848

     Total Partners' Capital                    13,263,289         13,282,688

     Total Liabilities and Partners' Capital  $ 13,316,014       $ 13,493,316


Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1997
                                       General             BAC
                                       Partner         Holders          Total
Balance at December 31, 1996         $ (63,160)   $ 13,345,848   $ 13,282,688
Net income                               2,213         219,127        221,340
Cash distributions                      (2,407)       (238,332)      (240,739)

Balance at September 30, 1997        $ (63,354)   $ 13,326,643   $ 13,263,289



Statements of Operations
                                     Three months ended      Nine months ended
                                        September 30,           September 30,
                                      1997        1996        1997        1996
Revenue
Share of earnings from investment
  in mortgage revenue bond       $ 129,333   $ 162,844   $ 366,697   $ 464,526
Other Interest                       3,335       4,321      10,565      14,520

    Total Revenue                  132,668     167,165     377,262     479,046

Expenses
General and administrative          38,585      24,347     123,822      64,933
Amortization of mortgage costs      10,700      10,700      32,100      32,100

    Total Expenses                  49,285      35,047     155,922      97,033

    Net Income                   $  83,383   $ 132,118   $ 221,340   $ 382,013

Net Income Allocated:
To the General Partner           $     833   $   1,321   $   2,213   $   3,820
To the BAC Holders                  82,550     130,797     219,127     378,193

                                 $  83,383   $ 132,118   $ 221,340   $ 382,013
Per BAC unit
(2,140,000 outstanding)               $.04        $.06        $.10        $.18



Statements of Cash Flows
For the nine months ended September 30,                     1997          1996

Cash Flows From Operating Activities:
Net income                                             $ 221,340     $ 382,013
Adjustments to reconcile net income to net cash
provided by operating activities:
  Share of earnings from investment in mortgage
   revenue bond                                         (366,697)     (464,526)
  Interest received on mortgage revenue bond             469,761       652,925
  Amortization                                            32,100        32,100
  Increase in cash arising from changes in
  operating assets and liabilities:
      Accounts payable and accrued expenses               (6,798)        4,805
      Due to affiliates                                   11,000             0

Net cash provided by operating activities                360,706       607,317

Cash Flows From Financing Activities:
  Cash distributions                                    (402,844)     (808,386)

Net cash used for financing activities                  (402,844)     (808,386)

Net decrease in cash and cash equivalents                (42,138)     (201,069)
Cash and cash equivalents, beginning of period           410,449       679,620

Cash and cash equivalents, end of period              $  368,311    $  478,551



Notes to the Financial Statements

The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1996 audited financial statements within Form 10-K.

The unaudited interim financial statements include all  normal and reoccurring
adjustments which are, in the opinion of management, necessary to present a
fair statement of financial position as of September 30, 1997 and the results
of operations for the three and nine months ended September 30, 1997 and 1996,
and cash flows for the nine months ended September 30, 1997 and 1996, and the
statement of partner's capital (deficit) for the nine months ended
September 30, 1997.  Results of operations for the period are not necessarily
indicative of the results to be expected for the full year.

Certain prior year amounts have been reclassified in order to conform to the
current year's presentation.

The following significant events have occurred subsequent to fiscal year 1996,
or the following material contingencies exist and require disclosure in this
interim report per Regulation S- X, Rule 10-01, Paragraph (a) (5).

Effective as of January 1, 1997, the Partnership began reimbursing certain
expenses incurred by the General Partner and its affiliates in servicing the
partnership to the extent permitted by the partnership agreement.  In prior
years, affiliates of the General Partner had voluntarily absorbed these
expenses.



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 (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 the ConCam
Owner, and property management was transferred to ConAm, a major property
management company and an affiliate of the ConCam Owner. In addition to
ownership, the ConCam Owner 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 pursuant to which the Partnership, for a limited period,
agreed to forbear from exercising certain remedies against the ConCam Owner
and the Property provided certain conditions were met. 

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%.  In
February 1996, the ConCam Owner indicated that the Property's operations could
not support debt service payments at the increased rate in 1996.  On May 8,
1996, as a result of negotiations with the ConCam Owner, the Partnership
executed a standstill 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 generated by the Property.  The Agreement was in effect through
December 31, 1996, the expiration of the Forbearance Agreement. At such time,
the parties were engaged in good faith negotiations and therefore, the
Partnership further extended the Agreement with ConCam through December 31,
1997 to enable the General Partner to explore various alternatives and seek a
suitable resolution.  Until such time, ConCam will continue to make "cashflow"
debt service payments in accordance with the Agreement. Payments made during
the first quarter and second quarters of 1997 approximated a 5.3% pay rate and
a 3.5% pay rate, respectively.  Payments made during the third quarter of 1997
approximated a 2.85% pay rate.

The General Partner's objective is to maximize the recovery of the
Partnership's investment.  Options evaluated by the General Partner have
included, among other things, a discounted pay-off of the Bond, which would
involve a sale of the Property prior to the scheduled maturity date of the Bond
on April 28, 1999, or a formal restructuring of the payment terms
under the Bond, which would likely involve a write-down of the principal
balance of the Bond based on the current market value of the Property.  A
writedown or discounted pay-off of the principal balance of the Bond would not
be based on the carrying value reflected on the Partnership's balance sheets
(the Partnership accounts for its investment in the Bond using the equity
method of accounting), but rather, on the contractual obligations under the
Bond, the working capital loan and the capital improvements loan. Collectively,
these obligations, inclusive of deferred and accrued interest, totaled
approximately $20,000,000 as of September 30, 1997.  A detailed description of
the Bond, the working capital loan and the capital improvements loan is
contained in the Partnership's 1996 Annual Report on Form 10-K.

Given that the Bond is collateralized by the Property, the principal repaid on
the Bond is dependent on the value of the Property.  Therefore, in determining
the viability of the possible alternatives, the General Partner has considered
such factors as the potential for further change in the southeast Fresno rental
market and in the performance of the Property.

Based on its evaluation of conditions in the Fresno market, the General Partner
has concluded there is little indication that job growth, or, consequently,
demand for rental units, will improve substantially in the foreseeable future.
Given these factors, and taking into consideration the significant costs that
would be associated with a potential restructuring of the Bond, the General
Partner and ConCam have agreed to pursue a sale of the Property in order to
accelerate repayment of the Bond at a discount.  To assist with sales efforts,
ConCam and the Partnership have retained Marcus & Millichap Real Estate
Investment Brokerage Company ("Marcus & Millichap"), a nationally-recognized
real estate firm.  Marcus & Millichap is in the process of preparing marketing
brochures, and it is expected that the active marketing of the Property will
commence in the fourth quarter.  In anticipation of initiating the marketing
process, ConCam has been concentrating its efforts on stabilizing Property
operations and positioning the Property in the Fresno market.  To this end, the
Partnership authorized ConCam to utilize a portion of operating cash flow to
make certain Property improvements deemed necessary to ensure that the Property
is well-positioned for sale.  ConCam will continue to make "cash-flow" debt
service payments to the Partnership until the Property is sold.  However, as a
result of this increase in capital expenses at the Property level, the level of
debt service payments made by ConCam to the Partnership further decreased
during the third quarter, and additional decreases are expected in future
payments.

At September 30, 1997, the Partnership had cash and cash equivalents, which are
invested in tax-exempt money market accounts, of $368,311, compared with
$410,449 at December 31, 1996.  The decrease is due to a decrease in net cash
flow from operations due to ConCam making lower minimum interest payments to
the Partnership.

Accounts payable and accrued expenses decreased to $41,725 at September 30,
1997, compared to $48,523 at December 31, 1996. The change is primarily due to
differences in the timing of payments.  Due to affiliates increased to $11,000
at September 30, 1997, compared to $0 at December 31, 1996, primarily due to
administrative reimbursement accruals due through the 1997 period.  Such
expenses were not reimbursable in prior periods.

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.  Beginning with the fourth quarter
of 1996, cash distributions were reduced to an annual return of 3.0%. The level
of debt service paid by ConCam declined further during the second quarter of
1997, and consequently, the 1997 second quarter distribution was reduced to an
annual return of 1.5%.  In view of the decline in cash flow available to fund
distributions, cash distributions have been suspended beginning with the 1997
third quarter distribution, which would have been paid in November.  In light
of the decision to begin marketing the Property, it is currently anticipated
that quarterly distributions will not be reinstated, and future distributions
to the Limited Partners likely will be in the form of liquidating
distributions.  Total cash distributions declared year-to-date for 1997 were
$240,739, which included $238,332, or $.111 per Beneficial Assignee
Certificate, declared payable to the Limited Partners.  As of September 30,
1997, 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.

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 and nine months ended September 30, 1997, the Partnership
generated net income of $83,383 and $221,340, respectively, compared with net
income of $132,118 and $382,013, respectively, for the three and nine months
ended September 30, 1996.  The decreases primarily are due to decreases in the
Partnership's share of earnings from its investment in the Bond, increases in
general and administrative expenses and slight decreases in other interest.

The Partnership's share of earnings from investment in the Bond is based on the
Property's earnings before debt service, which decreased for the nine months
ended September 30, 1997 relative to the same period in 1996.  The
Partnership's equity interest in the Property's earnings for the three and nine
months ended September 30, 1997 was $129,333 and $366,697, respectively,
compared to $162,844 and $464,526, respectively, for the three and nine months
ended September 30, 1996.  The Partnership's equity interest in the Property's
earnings decreased for the 1997 periods, primarily due to lower rental income
and higher expenses incurred at the Property.  Total income at Camelot Lakes
Apartments was $1,482,529 for the nine months ended September 30, 1997,
compared to $1,561,760 for the nine months ended September 30, 1996.  The
decrease primarily is due to a decrease in rental income as a result of
decreased average occupancy at the Property.  Total expenses at Camelot Lakes
Apartments, net of debt service, were $829,629 for the nine months ended
September 30, 1997, compared to $772,895 for the nine months ended
September 30, 1996.  The increase primarily is due to higher administrative and
management fees, higher property taxes, and higher security, advertising and
promotion, utilities and repairs and maintenance expenses, which were partially
offset by a decrease in other Property expenses.

For the three and nine months ended September 30, 1997, other interest was
$3,335 and $10,565, respectively, compared to $4,321 and $14,520, respectively,
for the three and nine months ended September 30, 1996.  The decreases
primarily are due to lower cash balances maintained by the Partnership during
1997.

Total Partnership expenses for the three and nine months ended September30,
1997 were $49,285 and $155,922, respectively, compared to $35,047 and
$97,033, respectively, for the three and nine months ended September 30, 1996.
The increases are attributable to higher general and administrative expenses
for the 1997 periods.  General and administrative expenses for the three and
nine months ended September 30, 1997 were $38,585 and $123,822, respectively,
compared to $24,347 and $64,933 for the same periods in 1996.  During the 1997
periods, certain expenses incurred by the General Partner, its affiliates, and
an unaffiliated third party service provider in servicing the Partnership,
which were voluntarily absorbed by affiliates of the General Partner in prior
periods, were reimbursable to the General Partner and its affiliates.

Interest received on the mortgage revenue bond was $469,761 for the nine months
ended September 30, 1997, compared with $652,925 for the nine months ended
September 30, 1996.  The decrease is largely due to the ConCam Owner providing
for debt service at a lower rate averaging 3.7% for the nine-month period in
1997, due to the current operating and market constraints mentioned above.

Average occupancy at the Property for the nine months ended September 30, 1997
was 84.3%, compared with 87.1% for the nine months ended September 30, 1996.
As of September 30, 1997, the Property was 88.9% occupied, compared with 87.6%
as of September 30, 1996.



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, 1997.
                               


                                   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, 1997

                         BY:  /s/ Doreen D. Odell
                       Name:  Doreen D. Odell
                      Title:  Director, President and
                              Chief Financial Officer