FORM 10-Q 			 SECURITIES AND EXCHANGE COMMISSION 			 Washington, D.C. 20549 	 (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 0-2670 			 60 EAST 42ND ST. ASSOCIATES 	 (Exact name of registrant as specified in its charter) 	 A New York Partnership 13-6077181 	 (State or other jurisdiction of (I.R.S. Employer 	 incorporation or organization) Identification No.) 		 60 East 42nd Street, New York, New York 10165 		 (Address of principal executive offices) 				 (Zip Code) 				 (212) 687-8700 		(Registrant's telephone number, including area code) 					 N/A 	 (Former name, former address and former fiscal year, if changed 	 since last report) 	 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 [ ]. 	 An Exhibit Index is located on Page 12 of this Report. 	 Number of pages (including exhibits) in this filing: 12 									 2. 			 PART I. FINANCIAL INFORMATION 			 60 East 42nd St. Associates 		 Condensed Statements of Cash Flows 				 (Unaudited) Item 1. Financial Statements 				 For the Three Months For the Nine Months 				 Ended September 30, Ended September 30, 				 1996 1995 1996 1995 Income: Basic rent from a related party (Note B) $ 271,961 $ 271,961 $ 815,881 $ 815,881 Additional rent from a related party (Note B) 263,450 263,450 790,350 790,350 Further additional rent income from a related party (Note B) 2,051,475 1,565,928 2,051,475 1,565,928 				 ---------- ---------- ---------- ---------- Total rent income 2,586,886 2,101,339 3,657,706 3,172,159 				 ---------- ---------- ---------- ---------- Expenses: Interest on mortgage (Note B) 265,961 265,961 797,881 797,881 Supervisory services, to a related party (Note C) 212,993 164,438 228,683 180,128 Amortization of mortgage refinancing costs 6,194 6,194 18,582 18,582 				 ---------- ---------- ---------- ---------- Total expenses 485,148 436,593 1,045,146 996,591 				 ---------- ---------- ---------- ---------- Net income $2,101,738 $1,664,746 $2,612,560 $2,175,568 				 ========== ========== ========== ========== Earnings per $10,000 participa- tion unit, based on 700 parti- cipation units outstanding during the year $3,002.48 $2,378.21 $3,732.23 $3,107.95 				 ========= ========= ========= ========= Distributions per $10,000 parti- cipation consisted of the following: Income $3,002.48 $2,378.21 $3,723.23 $3,107.95 Decrease in capital deficit (2,628.76) (2,004.49) (2,611.07) (1,986.79) 				 --------- --------- --------- ---------- Total distributions $ 373.72 $ 373.72 $1,121.16 $1,121.16 				 ========= ========= ========= ========= At September 30, 1996 and 1995, there were $7,000,000 of participations outstanding. 									 3. 			 60 East 42nd St. Associates 		 Condensed Statements of Cash Flows 				 (Unaudited) 					 September 30, 1996 December 31, 1995 Assets Current assets: Cash $ 87,879 $ 87,879 Further additional rent due from a related party (Note B) 1,901,475 -0- 					 ----------- ----------- Total current assets 1,989,354 87,879 Real estate Land 7,240,000 7,240,000 Buildings and Building Improvements 18,534,135 18,534,135 Less, allowance for depreciation 18,534,135 18,534,135 					 ----------- ----------- 						 -0- -0- Mortgage refinancing costs 249,522 249,522 Less, allowance for amortization 49,263 30,681 					 ------------ --------- 						 200,259 218,841 					 ----------- ----------- Total assets $ 9,429,613 $ 7,546,720 					 =========== =========== Liabilities and Capital Current liabilities Accrued expense, to a related party (Note C) $ 55,148 $ -0- 					 ----------- ----------- Total current liabilities 55,148 -0- Long-term debt 12,020,814 12,020,814 Capital Capital deficit, January 1, (4,474,094) (4,449,318) Add, Net income: January 1, 1996 through September 30, 1996 2,612,560 January 1, 1995 through December 31, 1995 2,430,979 					 ----------- ----------- 						(1,861,534) (2,018,339) 					 ----------- ----------- Less, Distributions: Monthly distributions, January 1, 1996 through September 30, 1996 784,815 January 1, 1995 through December 31, 1995 1,046,420 Distribution on November 30, 1995 of Additional Rent for the lease year ended September 30, 1995 1,409,335 					 ----------- ----------- Total distributions 784,815 2,455,755 					 ----------- ----------- Capital (deficit) September 30, 1996 (2,646,349) December 31, 1995 (4,474,094) 					 ----------- ----------- Total liabilities and capital: 	September 30, 1996 $ 9,429,613 	December 31, 1995 $ 7,546,720 					 =========== =========== 							 									 4. 			 60 East 42nd St. Associates 		 Condensed Statements of Cash Flows 				 (Unaudited) 					 January 1, 1996 January 1, 1995 						 through through 					 September 30, 1996 September 30, 1995 Cash flows from operating activities: Net income $2,612,560 $2,175,568 Adjustments to reconcile net income to cash provided by operating activities: Amortization of mortgage refinancing costs 18,582 18,582 Change in accrued interest payable -0- (88,653) Change in accrued expenses 55,148 31,593 Change in additional rent due (1,901,475) (1,440,928) 						 ---------- ---------- Net cash provided by operating activities 784,815 696,162 						 ---------- ---------- Cash flows from financing activities: Cash distributions (784,815) (784,815) 						 ---------- ---------- Net cash used in financing activities (784,815) (784,815) 						 ---------- ---------- Net increase (decrease) in cash -0- (88,653) Cash, beginning of quarter 87,879 176,532 						 ---------- ---------- Cash, end of quarter $ 87,879 $ 87,879 						 ========== ========== 					 January 1, 1996 January 1, 1995 						 through through 					 September 30, 1996 September 30, 1995 Cash paid for: Interest $ 797,881 $ 886,534 						 ========== ========== 	 60 East 42nd St. Associates 5. 	 September 30, 1996 	 Notes to Condensed Financial Statements (Unaudited) 	 Note A - Basis of Presentation 		 The accompanying unaudited condensed financial 	 statements have been prepared in accordance with the instructions 	 to Form 10-Q and therefore do not include all information and 	 footnotes necessary for a fair presentation of financial position, 	 results of operations and statement of cash flows in conformity 	 with generally accepted accounting principles. The accompanying 	 unaudited condensed financial statements include all adjustments 	 (consisting only of normal recurring accruals) which are, in the 	 opinion of the partners in Registrant, necessary for a fair 	 statement of the results for such interim periods. The partners 	 in Registrant believe that the accompanying unaudited condensed 	 financial statements and the notes thereto fairly disclose the 	 financial condition and results of Registrant's operations for the 	 periods indicated and are adequate to make the information 	 presented therein not misleading. 	 Note B - Interim Period Reporting 		 The results for the interim periods are not necessarily 	 indicative of the results to be expected for a full year. 		 Registrant is a New York partnership which was organized 	 on September 25, 1958 and which owns fee title to the Lincoln 	 Building and the land thereunder, located at 60 East 42nd Street, 	 New York, New York 10165 (the "Property"). Registrant's partners 	 are Donald A. Bettex, Ralph W. Felsten, Stanley Katzman, Peter L. 	 Malkin, John L. Loehr, Thomas N. Keltner, Jr. and Richard A. 	 Shapiro (collectively the "Partners"), each of whom also acts as 	 an agent for holders of participations in their respective part- 	 nership interests in Registrant (the "Participants"). 		 Registrant leases the Property to Lincoln Building 	 Associates ("Lessee") under a long-term net operating lease (the 	 "Lease"), the current term of which expires on September 30, 2008. 	 (There is one additional 25-year term which, if exercised, will 	 extend the Lease until September 30, 2033.) Lessee is a 	 partnership whose partners consist of, among others, Mr. Malkin. 	 The Partners, with the exception of Donald A. Bettex, who has 	 recently retired, are also members of the law firm of Wien, Malkin 	 & Bettex, 60 East 42nd Street, New York, New York, counsel to 	 Registrant and Lessee ("Counsel"). See Note C of this Item 1 	 ("Note C"). 		 The Lease, as modified, provides that Lessee is required 	 to pay Registrant: 	 60 East 42nd St. Associates 6. 	 September 30, 1996 		 (i) an annual basic rent of $1,087,842 (the "Basic 	 Rent"), which is equal to the sum of $1,063,842, the constant 	 annual charges on the first mortgage calculated in accordance with 	 the terms of the Lease, plus $24,000 for supervisory services 	 payable to Counsel. 		 (ii) (A) additional rent (the "Additional Rent") equal 	 to the lesser of (x) Lessee's net operating income for the 	 preceding lease year or (y) $1,053,800 and (B) further additional 	 rent ("Further Additional Rent") equal to 50% of any remaining 	 balance of Lessee's net operating income for such lease year. 	 (Lessee has no obligation to make any payment of Additional Rent 	 or Further Additional Rent until after Lessee has recouped any 	 cumulative operating loss accruing from and after September 30, 	 1977.) 		 (iii) $1,053,800 as an advance against Additional Rent, 	 an amount which will permit basic distributions to Participants at 	 the annual rate of approximately 14.95% on their remaining cash 	 investment in Registrant; provided, however, if such advances 	 exceed Lessee's net operating income for any Lease year, advances 	 otherwise required during the subsequent lease year shall be 	 reduced by an amount equal to such excess until Lessee shall have 	 recovered, through retention of net operating income, the full 	 amount of such excess. 		 Further Additional Rent income is recognized when earned 	 from the Lessee, at the close of the lease year ending September 	 30. Such income is not determinable until the Lessee, pursuant to 	 the Lease, renders to Registrant a certified report on the 	 operation of the Property. Further Additional Rent for the lease 	 year ended September 30, 1996 was $2,051,475. After payment of 	 $205,148 to Counsel as an additional payment for supervisory 	 services, the balance of $1,846,327 will be distributed to the 	 Participants on November 30, 1996. 		 A new first mortgage loan on the Property in the 	 original principal amount of $12,020,814 was closed on October 6, 	 1994 (the "Mortgage"). Annual Mortgage charges are $1,063,842, 	 payable in equal monthly installments of $88,654, representing 	 interest only at the rate of 8.85% per annum. The Mortgage will 	 mature on October 31, 2004 and is prepayable in whole after 	 October 6, 1995 with a penalty providing interest protection to 	 the mortgagee. The Mortgage is prepayable in whole without 	 penalty during the 90-day period prior to its maturity date. 		 The refinancing costs were capitalized by Registrant and 	 are being expensed ratably during the period of the mortgage 	 extension from October 6, 1994 to October 31, 2004. 	 60 East 42nd St. Associates 7. 	 September 30, 1996 		 If the Mortgage is modified, upon the first refinancing 	 which would result in an increase in the amount of the outstanding 	 principal balance of the mortgage, the Basic Rent shall be equal 	 to the annual supervisory fee to Counsel of $24,000 plus an amount 	 equal to the product of the new debt service percentage rate under 	 the refinanced mortgage multiplied by the principal balance of the 	 mortgage immediately prior to such refinancing. If there are 	 subsequent refinancings which result in an increase in the amount 	 of the outstanding principal balance of the mortgage, the 	 principal balance referred to above shall be reduced by the amount 	 of the mortgage amortization payable from Basic Rent subsequent to 	 the first refinancing. 	 Note C - Supervisory Services 		 Registrant pays Counsel for supervisory services and 	 disbursements $24,000 per annum (the "Basic Payment"), plus an 	 additional payment of 10% of all distributions to Participants in 	 Registrant in any year in excess of the amount representing a 	 return at the rate of 14% per annum on their remaining cash 	 investment (the "Additional Payment"). At September 30, 1996, 	 such remaining cash investment was $7,000,000, representing the 	 original cash investment of Participants in Registrant. 		 No remuneration was paid during the three and nine month 	 periods ended September 30, 1996 by Registrant to any of the 	 Partners as such. Pursuant to the fee arrangements described 	 herein, Registrant paid Counsel $6,000 and $18,000, respectively, 	 of the Basic Payment and $151,845 and $155,535 respectively, on 	 account of the Additional Payment, for supervisory services for 	 the three and nine month periods ended September 30, 1996. The 	 supervisory services provided to Registrant by Counsel include 	 legal and administrative services and financial services. The 	 legal and administrative services include acting as general 	 counsel to Registrant, maintaining all of its partnership and 	 Participant records, performing physical inspections of the 	 Building, reviewing insurance coverage and conducting annual 	 partnership meetings. Financial services include monthly receipt 	 of rent from the Lessee, payment of monthly and additional 	 distributions to the Participants, payment of all other 	 disbursements, confirmation of the payment of real estate taxes, 	 and active review of financial statements submitted to Registrant 	 by the Lessee and financial statements audited by and tax 	 information prepared by Registrants' independent certified public 	 accountant, and distribution of such materials to the 	 Participants. Counsel also prepares quarterly, annual and other 	 periodic filings with the Securities and Exchange Commission and 	 applicable state authorities. 		 Reference is made to Note B of Item 1 ("Note B") for a 	 description of the terms of the Lease between Registrant and 	 Lessee. As of September 30, 1996, Mr. Malkin owned a partnership 	 interest in Lessee. In addition, Isabel W. Malkin, the wife of 	 Peter L. Malkin, owned a partnership interest in Lessee. Mr. 	 60 East 42nd St. Associates 8. 	 September 30, 1996 	 Malkin disclaims any beneficial ownership of such interest. The 	 respective interests, if any, of the Partners in Registrant and 	 Lessee arise solely from ownership of their respective 	 participations in Registrant and, in the case of Mr. Malkin, his 	 individual ownership of a partnership interest in Lessee. The 	 Partners receive no extra or special benefit not shared on a pro 	 rata basis with all other Participants in Registrant or partners 	 in Lessee. However, the Partners, other than Mr. Bettex, by 	 reason of their respective interests in Counsel, are entitled to 	 receive their pro rata share of any legal fees or other 	 remuneration paid to Counsel for legal and supervisory services 	 rendered to Registrant and Lessee. 		 As of September 30, 1996, the Partners owned of record 	 and beneficially an aggregate $53,333 of participations in 	 Registrant, representing less than 1% of the currently outstanding 	 participations therein. 		 In addition, as of September 30, 1996, certain of the 	 Partners in Registrant (or their respective spouses) held 	 additional Participations in Registrant as follows: 		 Richard A. Shapiro owned of record as custodian, but not 		 beneficially, a $5,000 Participation. Mr. Shapiro 		 disclaims any beneficial ownership of such 		 Participation. 		 Peter L. Malkin owned of record, as trustee or 		 co-trustee, an aggregate of $55,714 of Participations. 		 Mr. Malkin disclaims any beneficial ownership of such 		 Participations. 		 Isabel Malkin, individually and beneficially, owned 		 $35,000 of Participations. Mr. Malkin disclaims any 		 beneficial ownership of such Participations. 	 Item 2. Management's Discussion and Analysis of 		 Financial Condition and Results of Operations. 		 As stated in Note B, Registrant was organized solely for 	 the purpose of acquiring the Property subject to the Lease. 	 Registrant is required to pay from Basic Rent the annual mortgage 	 charges due under the Mortgage and the Basic Payment to Counsel 	 for supervisory services. Additional Rent and Further Additional 	 Rent are distributed to the Participants after the Additional 	 Payment to Counsel. See Note C. Under the Lease, Lessee has 	 assumed responsibility for the condition, operation, repair, 	 maintenance and management of the Property. Registrant is not 	 required to maintain substantial reserves or otherwise maintain 	 liquid assets to defray any operating expenses of the Property. 	 60 East 42nd St. Associates 9. 	 September 30, 1996 		 Registrant does not pay dividends. During the three and 	 nine month periods ended September 30, 1996, Registrant made 	 regular monthly distributions of $124.57 for each $10,000 	 participation ($1,494.84 per annum for each $10,000 	 participation). There are no restrictions on Registrant's present 	 or future ability to make distributions; however, the amount of 	 such distributions depends solely on the ability of Lessee to make 	 payments of Basic Rent, Additional Rent and Further Additional 	 Rent to Registrant in accordance with the terms of the Lease. 	 Registrant expects to make distributions so long as it receives 	 the payments provided for under the Lease. 		 On November 30, 1996, Registrant will make an additional 	 distribution of $2,637.61 for each $10,000 participation. Such 	 distribution represents Further Additional Rent paid by the 	 Lessee, in accordance with the terms of the Lease, net of the 	 additional payment for supervisory services to Counsel. 		 Registrant's results of operations are affected 	 primarily by the amount of rent payable to it under the Lease. 	 The following summarizes, with respect to the current period and 	 the corresponding period of the previous year, the material 	 factors affecting Registrant's results of operations for such 	 periods: 	 Total income increased for the three and nine month 	 periods ended September 30, 1996, as compared with the 	 three and nine month periods ended September 30, 1995. 	 Such increase resulted from an increase in income from 	 Further Additional Rent for the lease year ending 	 September 30, 1996 as compared to the lease year 	 ending September 30, 1995. See Note B. Total 	 expenses increased for the three and nine month 	 periods ended September 30, 1996, as compared with the 	 three and nine month periods ended September 30, 1995. 	 Such increase resulted from an increase in the 	 additional payments for supervisory services with 	 respect to the increase in Further Additional Rent. 	 See Note B. 			 Liquidity and Capital Resources 		 There has been no significant change in Registrant's 	 liquidity for the three and nine month periods ended September 30, 	 1996, as compared with the three and nine month periods ended 	 September 30, 1995. 		 No amortization payments are due under the Mortgage to 	 fully satisfy the outstanding principal balance at maturity, and 	 furthermore, the Registrant does not maintain any reserve to cover 	 the payment of such Mortgage indebtedness at maturity. Therefore, 	 60 East 42nd St. Associates 10. 	 September 30, 1996 	 repayment of the Mortgage will depend on Registrant's ability to 	 arrange a refinancing. Assuming that the Building continues to 	 generate an annual net profit in future years comparable to that 	 in past years, and assuming further that current real estate 	 trends continue in the geographic area in which the Property is 	 located, Registrant anticipates that the value of the Property 	 would be in excess of the amount of the Mortgage balance at 	 maturity. Registrant foresees no need to make material 	 commitments for capital expenditures while the Lease is in effect. 				 Inflation 		 Registrant has been advised that there has been no 	 material change in the impact of inflation on its operations since 	 the filing of its report on Form 10-K for the year ended December 	 31, 1995, which report and all exhibits thereto are incorporated 	 herein by reference and made a part hereof. 	 PART II. OTHER INFORMATION 	 Item 1. Legal Proceedings. 		 There are no pending material legal proceedings to which 	 Registrant is a party. 	 Item 6. Exhibits and Reports on Form 8-K. 		 (a) The exhibits hereto are incorporated by reference. 		 (b) Registrant has not filed any report on Form 8-K 	 during the quarter for which this report is being filed. 	 60 East 42nd St. Associates 11. 	 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. 		 The individual signing this report on behalf of 	 Registrant is Attorney-in-Fact for Registrant and each of the 	 Partners in Registrant, pursuant to a Power of Attorney, dated 	 August 6, 1996 (the "Power"). 	 60 EAST 42ND ST. ASSOCIATES 	 (Registrant) 	 By: /s/ Stanley Katzman 	 Stanley Katzman, Attorney-in-Fact* 	 Date: November 13, 1996 		 Pursuant to the requirements of the Securities Exchange 	 Act of 1934, this report has been signed by the undersigned as 	 Attorney-in-Fact for each of the Partners in Registrant, pursuant 	 to the Power, on behalf of Registrant and as a Partner in 	 Registrant on the date indicated. 	 By: /s/ Stanley Katzman 	 Stanley Katzman, Attorney-in-Fact* 	 Date: November 13, 1996 	 ______________________ 	 * Mr. Katzman supervises accounting functions for 		Registrant. 	 60 East 42nd St. Associates 12. 	 September 30, 1996 				 EXHIBIT INDEX 	 Number Document Page* 	 25 Power of Attorney dated 			 August 6, 1996 between 			 Donald A. Bettex, Ralph W. 			 Felsten, John L. Loehr, 			 Stanley Katzman, Peter L. 			 Malkin, Richard A. Shapiro 			 and Thomas N. Keltner, Jr. 			 as Partners of Registrant 			 and Stanley Katzman and 			 Richard A. Shapiro. 	 ______________________ 	 *Page references are based on a sequential numbering system.