AEI Income & Growth Fund 26 LLC – ‘10KSB’ for 12/31/06

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Annual Report by a Small Business   —   Form 10-KSB
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Document/Exhibit                   Description                      Pages   Size 

 1: 10KSB       Annual Report by a Small Business                     36±   158K 
 2: EX-31.1     Certification -- Sarbanes-Oxley Act - Sect. 302        2±     9K 
 3: EX-31.2     Certification -- Sarbanes-Oxley Act - Sect. 302        2±     9K 
 4: EX-32       Certification -- Sarbanes-Oxley Act - Sect. 906        1      6K 

10KSB   —   Annual Report by a Small Business
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10KSB
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION                
Washington, D.C. 20549                

FORM 10-KSB               

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

For the Fiscal Year Ended:  December 31, 2006               

Commission file number:  000-51823                

AEI INCOME & GROWTH FUND 26 LLC               
(Name of small business issuer in its charter)                

State of Delaware                41-2173048                     
(State or other jurisdiction of      (I.R.S. Employer                     
incorporation or organization)     Identification No.)                    

30 East 7th Street, Suite 1300, St. Paul, Minnesota 55101           
(Address of principal executive offices)                

(651) 227-7333              
(Issuer's telephone number)               

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

Securities registered under Section 12(g) of the Exchange Act:                  

Limited Liability Company Units           
(Title of class)                

Check  whether  the issuer (1) filed all reports required  to  be               
filed by Section 13 or 15(d) of the Exchange Act 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  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]                                             

Indicate by check mark whether the registrant is a shell  company               
(as defined in Rule 12b-2 of the Exchange Act).   Yes      No [X]               

The  Issuer's revenues for the year ended December 31, 2006  were               
$220,724.                                                                       

As  of February 28, 2007, there were 1,042,949.4 Units of limited               
membership interest 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 $10,429,494.                                    

DOCUMENTS INCORPORATED BY REFERENCE               
The registrant has not incorporated any documents by reference                
into this report.               

Transitional Small Business Disclosure Format:    Yes      No [X]               
Use Company NOT Partnership, LLC Unit and LLC administration                
expenses                

PART I                

ITEM 1.   DESCRIPTION OF BUSINESS.                                              

AEI  Income  & Growth Fund 26 LLC (the "Company"  or  the       
"Registrant") is a limited liability company which was  organized               
pursuant to the laws of the State of Delaware on March 14,  2005.               
The  registrant  is  comprised of AEI Fund Management  XXI,  Inc.               
(AFM),  as  the Managing Member, Robert P. Johnson, the President               
and  sole  director of AFM, as the Special Managing  Member,  and               
purchasers of LLC Units as Limited Members.  The Company  offered               
for  sale up to $100,000,000 of limited membership interests (the               
"Units")  (10,000,000  Units  at $10  per  Unit)  pursuant  to  a               
registration statement effective October 20, 2005.   The  Company               
commenced  operations on April 3, 2006 when minimum subscriptions               
of 150,000 LLC Units ($1,500,000) were accepted.  At December 31,               
2006,  882,126.8 Units ($8,821,268) were subscribed and  accepted               
by the Company.  The Managing Members have contributed capital of               
$1,000.                                                                         

The  Company was organized to acquire existing and  newly       
constructed  commercial properties, to lease such  properties  to               
tenants  under  net  leases,  to  hold  such  properties  and  to               
eventually  sell such properties.  As of December 31,  2006,  the               
Company   had   purchased  four  properties,  including   partial               
interests in three properties at a total cost of $7,545,000.  The               
properties  are commercial, single tenant buildings leased  under               
triple  net leases.  The Company is continuing to review  various               
properties for acquisition until available subscription  proceeds               
are fully committed.                                                            

The Company's properties were purchased with subscription       
proceeds without any indebtedness.  The Company will not  finance               
properties  in  the future to obtain proceeds  for  new  property               
acquisitions.  If it is required to do so, the Company may  incur               
short-term   indebtedness  to  finance   day-to-day   cash   flow               
requirements (including cash flow necessary to repurchase Units).               
The Company may borrow to finance the refurbishing of a property.               

The  Company will hold its properties until the  Managing       
Members  determine  that  the sale or other  disposition  of  the               
properties  is  advantageous in view of the Company's  investment               
objectives.  In deciding whether to sell properties, the Managing               
Members will consider factors such as potential appreciation, net               
cash  flow  and income tax considerations.  In addition,  certain               
tenants  may  be granted options to purchase properties  after  a               
specified  portion  of the lease term has elapsed.   The  Company               
expects to sell some or all of its properties prior to its  final               
liquidation  and  to  reinvest the proceeds from  such  sales  in               
additional  properties.  The Company reserves the right,  at  the               
discretion of the Managing Members, to either distribute proceeds               
from  the  sale of properties to the Members or to reinvest  such               
proceeds  in  additional  properties,  provided  that  sufficient               
proceeds  are distributed to the Limited Members to  pay  federal               
and state income taxes related to any taxable gain recognized  as               
a  result  of the sale.  It is anticipated that the Company  will               
commence liquidation through the sale of its remaining properties               
ten  to  twelve years after completion of the acquisition  phase,               
depending  upon  the then current real estate and money  markets,               
the  economic  climate  and the income tax  consequences  to  the               
Members.                                                                        

ITEM 1.   DESCRIPTION OF BUSINESS.  (Continued)                                 

Leases                                                                          

Although there are variations in the specific terms of the        
leases,  the following is a summary of the general terms  of  the               
Company's  leases.  The properties are leased to various  tenants               
under  triple  net  leases,  which are  classified  as  operating               
leases.  Under a triple net lease, the tenant is responsible  for               
all  real  estate  taxes,  insurance,  maintenance,  repairs  and               
operating expenses for the property.  The primary lease terms are               
for  13  to 20 years.  The leases provide for base annual  rental               
payments,  payable  in  monthly installments,  and  contain  rent               
clauses  which entitle the Company to receive additional rent  in               
future years based on stated rent increases.                                    

The  leases provide the tenants with three to four  five-       
year renewal options subject to the same terms and conditions  as               
the  primary  term.  Certain tenants may be  granted  options  to               
purchase the property at a formula price, which would exceed  the               
original  cost.  The actual sale price of a property to a  tenant               
may or may not exceed original cost depending on market and other               
conditions.                                                                     

Property Activity                                                               

During the second quarter of 2006, the Company purchased a        
40%  interest in a Sports Authority (formerly Gart Sports)  store               
in  Wichita,  Kansas for $2,230,753.  The property was  purchased               
from  AEI Fund Management XVII, Inc. (AFMX), an affiliate of  the               
Managing  Members.  In order to facilitate the  purchase  of  the               
Company's  first  property, AFMX purchased the property  from  an               
unrelated  third  party on December 22, 2005.   The  property  is               
leased  to  TSA  Stores,  Inc. under a  Lease  Agreement  with  a               
remaining  primary term of 11 years and initial  annual  rent  of               
$186,059.   The remaining interest in this property was purchased               
by AEI Income & Growth Fund 25 LLC, an affiliate of the Company.                

On June 1, 2006, the Company purchased a 55% interest  in       
an  Advance  Auto Parts store in Middletown, Ohio for $1,022,289.               
The  property is leased to Advance Stores Company, Inc.  under  a               
Lease  Agreement with a remaining primary term of 13.2 years  and               
initial  annual rent of $71,679.  The remaining interest  in  the               
property  was purchased by AEI Income & Growth Fund  24  LLC,  an               
affiliate of the Company.                                                       

On  September  21,  2006,  the Company  purchased  a  37%       
interest in an Applebee's restaurant in Indianapolis, Indiana for               
$1,130,049 from the tenant.  During the fourth quarter  of  2006,               
the Company purchased the remaining 63% interest in this property               
for  $1,924,138  from  AFMX.  The property  is  leased  to  Apple               
Indiana II LLC under a Lease Agreement with a primary term of  20               
years and initial annual rent of $220,262.                                      

On December 29, 2006, the Company purchased a 40% interest        
in  an  Applebee's  restaurant  in  Crawfordsville,  Indiana  for               
$1,237,771 from AFMX.  The property is leased to Apple Indiana II               
LLC  under a Lease Agreement with a primary term of 20 years  and               
initial  annual rent of $89,289.  The remaining interest  in  the               
property  is  owned  by  AEI Income & Growth  Fund  XXII  Limited               
Partnership, an affiliate of the Company.                                       

ITEM 1.   DESCRIPTION OF BUSINESS.  (Continued)                                 

In  order  to  facilitate the Company's purchase  of  the       
Applebee's property interests, AFMX purchased the properties from               
Apple Indiana II LLC, an unrelated third party, on September  21,               
2006.   For the property interests purchased from AFMX, the price               
paid by the Company was equal to the price paid by AFMX plus  the               
expenses incurred by it to transfer ownership of the property  to               
the  Company,  which were minimal.  There was  no  other  benefit               
arising out of the transactions to the Managing Members or  their               
affiliates  apart  from compensation otherwise permitted  by  the               
Operating Agreement.                                                            

Major Tenants                                                                   

During 2006, three tenants each contributed more than ten       
percent of the Company's total rental revenue.  The major tenants               
in  aggregate contributed 100% of total rental revenue  in  2006.               
Because  the  Company  has  not  completed  its  acquisition   of               
properties,  it is not possible to determine which  tenants  will               
contribute more than ten percent of the Company's rental  revenue               
in  2007  and  future years.  In the event that  certain  tenants               
contribute  more  than ten percent of rental  revenue  in  future               
years, any failure of these major tenants could materially affect               
the Company's net income and cash distributions.                                

Competition                                                                     

The  Company  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 Company.  At the time the Company  elects  to               
dispose  of its properties, it will be in competition with  other               
persons and entities to find buyers for its properties.                         

Employees                                                                       

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

ITEM 2.   DESCRIPTION OF PROPERTIES.                                            

Investment Objectives                                                           

The  Company's  investment  objectives  are  to  acquire      
existing or newly-developed commercial properties that offer  the               
potential  for  (i) regular cash distributions of  lease  income;               
(ii)  growth  in lease income through rent escalation provisions;               
(iii) preservation of capital through all-cash transactions; (iv)               
capital  growth through appreciation in the value of  properties;               
and  (v)  stable  property  performance through  long-term  lease               
contracts.  The Company 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  Managing Members attempt to diversify the type and  location               
of the properties.                                                              

ITEM 2.   DESCRIPTION OF PROPERTIES.  (Continued)                               

Description of Properties                                                       

The  Company's properties are commercial,  single  tenant       
buildings.  The properties were acquired on a debt-free basis and               
are  leased to various tenants under triple net leases, which are               
classified  as operating leases.  The only exceptions  are  under               
the  Leases  for  the  Sports Authority and  Advance  Auto  Parts               
stores,  the Company is responsible for repairs to the structural               
components  of the building, except for the roof,  which  is  the               
tenant's  responsibility.  The Company  holds  an  undivided  fee               
simple interest in the properties.                                              

The  Company'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  Company               
decides to sell the property.  At this time, the Company 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 Company would be  competing               
with  other  real estate owners, who have property vacancies,  to               
attract  a  new  tenant  to  lease the property.   The  Company'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 Company acquired and owned as of December 31, 2006.                         

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

Sports Authority Store                                                          
Wichita, KS4/3/06 to                                                          
(40.0%)              6/30/06   $2,230,753 TSA Stores, Inc. $186,059 $ 8.90    

Advance Auto Parts Store                                                        
Middletown, OH                             Advance Stores                     
(55.0%)              6/1/06    $1,022,289  Company, Inc.   $ 71,679 $18.94    

Applebee's Restaurant 9/21/06 to            Apple Indiana                       
Indianapolis, IN      12/1/06  $3,054,187     II LLC       $220,262 $42.12    

Applebee's Restaurant                                                           
Crawfordsville, IN                         Apple Indiana                      
(40%)                12/29/06  $1,237,771     II LLC       $ 89,289 $42.44    

The  properties  listed above with  a  partial  ownership       
percentage  are  owned  with  affiliates  of  the  Company.   The               
remaining interest in the Sports Authority store is owned by  AEI               
Income  &  Growth  Fund 25 LLC.  The remaining  interest  in  the               
Advance Auto Parts store is owned by AEI Income & Growth Fund  24               
LLC.   The  remaining  interest in the Applebee's  restaurant  in               
Crawfordsville, Indiana is owned by AEI Income & Growth Fund XXII               
Limited Partnership.                                                            

ITEM 2.   DESCRIPTION OF PROPERTIES.  (Continued)                               

The  Company accounts for properties owned as tenants-in-       
common  with  affiliated  Partnerships  and/or  unrelated   third               
parties  using  the  proportionate  consolidation  method.   Each               
tenant-in-common  owns  a  separate, undivided  interest  in  the               
properties.   Any  tenant-in-common that holds more  than  a  50%               
interest  does  not control decisions over the  other  tenant-in-               
common  interests.   The financial statements reflect  only  this               
Company's percentage share of the properties' land, building  and               
equipment, liabilities, revenues and expenses.                                  

At  the  time the properties were acquired, the remaining       
primary  lease terms varied from 13 to 20 years, except  for  the               
Sports Authority store, which had a remaining primary term of  11               
years.   The leases provide the tenants with three to four  five-               
year renewal options subject to the same terms and conditions  as               
the primary term.                                                               

Pursuant to the lease agreements, the tenants are required        
to provide proof of adequate insurance coverage on the properties               
they  occupy.   The Managing Members believe the  properties  are               
adequately covered by insurance and consider the properties to be               
well-maintained and sufficient for the Company's operations.                    

For tax purposes, the Company'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  39  years.               
The  remaining depreciable components of a property are  personal               
property  and land improvements which are depreciated,  using  an               
accelerated method, over 5 and 15 years, respectively.  Since the               
Company  has  tax-exempt Members, the Company 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 will be the same as the basis for book               
depreciation purposes.                                                          

At  December 31, 2006, all properties listed  above  were       
100% occupied.                                                                  

ITEM 3.   LEGAL PROCEEDINGS.                                                    

None.                                                             

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

None.                                                             

PART II               

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

(a)  As  of December 31, 2006, there were 263 holders  of       
record of the registrant's LLC Units.  There is no other class of               
security  outstanding or authorized.  The registrant's Units  are               
not  a  traded security in any market.  During the period covered               
by  this  report, the Company did not sell any equity  securities               
that are not registered under the Securities Act of 1933.                       

Cash  distributions of $5,342 were made to  the  Managing       
Members  and $172,728 were made to the Limited Members  in  2006.               
The  distributions were made on a quarterly basis  and  represent               
Net  Cash  Flow, as defined.  These distributions should  not  be               
compared with dividends paid on capital stock by corporations.                  

(b) The registration statement for the offering (No. 333-       
125266) was declared effective on October 20, 2005.  The offering               
commenced  on  October 20, 2005 and is ongoing.  AEI  Securities,               
Inc.   (ASI)  is  the  dealer  manager  of  the  offering.    The               
registration  statement  covers  10,000,000  Units   of   limited               
liability  company interest at an aggregate price of up  to  $100               
million.   Through  December  31,  2006,  the  Company  had  sold               
882,126.8 Units for gross offering proceeds of $8,821,268.                      

From gross offering proceeds, the Company paid $860,461 in        
selling commissions to ASI, an affiliate of the Managing Members.               
Of  this  amount, $572,653 was re-allowed by ASI to participating               
broker/dealers  not  affiliated with the Managing  Members.   The               
gross  offering  proceeds  were further reduced  by  underwriting               
discounts of $5,492 and other organization and syndication  costs               
of  $441,063  of which $220,077 was paid to AEI Fund  Management,               
Inc., an affiliate of the Managing Members, for costs incurred in               
connection with managing the Company's offering and organization.               
From   inception   to  December  31,  2006,  the   Company   paid               
commissions,   organization   and  syndication   costs   totaling               
$1,307,017.                                                                     

From  the  net  offering proceeds, the  Company  expended       
$7,545,000 to acquire real estate of which $7,424,287 represented               
cash  paid  to  unaffiliated sellers of real estate and  $120,713               
represented cash paid to reimburse AEI Fund Management, Inc.  for               
costs  and direct expenses incurred by it in acquiring properties               
on behalf of the Company.                                                       

(c)  Beginning in March 2009, pursuant to Section 7.7  of       
the  Operating Agreement, each Limited Member has  the  right  to               
present Units to the Company for purchase by submitting notice to               
the  Managing  Member during January or July of each  year.   The               
purchase  price  of the Units is equal to 80% of  the  net  asset               
value  of  the Units, as of the first business day of January  or               
July  of  each  year,  as determined by the  Managing  Member  in               
accordance with the provisions of the Operating Agreement.  Units               
tendered  to the Company during January and July are redeemed  on               
April 1st and October 1st, respectively, of each year subject  to               
the following limitations.  The Company will not be obligated  to               
purchase  in any year more than 2% of the total number  of  Units               
outstanding  on  January 1 of such year.  In no event  shall  the               
Company be obligated to purchase Units if, in the sole discretion               
of the Managing Member, such purchase would impair the capital or               
operation  of  the Company.  During the period  covered  by  this               
report, the Company did not purchase any Units.                                 

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

Other Information                                                               

In order for NASD members and their associated persons to       
participate in the offering and sale of Units of the Company, the               
Company  is required, pursuant to NASD Rule 2810, to disclose  in               
each  annual  report distributed to Limited Members  a  per  Unit               
estimated  value,  the method by which it was developed  and  the               
date  of  the  data  used  to develop the  estimated  value.   At               
December  31, 2006, the Company's Units were valued at $10.   The               
basis for this valuation is the Company is currently engaged in a               
public offering at a price of $10 per Unit.  However, please note               
that  there is no public trading market for the Units nor is  one               
ever  expected  to  develop and there can be  no  assurance  that               
Limited  Members could receive $10 per unit if such a market  did               
exist  and  they sold their Units or that they will  be  able  to               
receive  such amount for their Units in the future.  In addition,               
the  Company  has  not  performed an evaluation  of  the  Company               
properties and, therefore, this valuation is not based  upon  the               
value of the Company properties, nor does it represent the amount               
Limited Members would receive if the Company properties were sold               
and  the  proceeds  distributed  to  the  Limited  Members  in  a               
liquidation  of  the Company, which amount would most  likely  be               
less  than $10 per Unit as a result of the fact that, at the time               
the  Company  is purchasing its properties, the amount  of  funds               
available for investment in properties is approximately 15%  less               
than the offering proceeds due to the payment of organization and               
offering expenses, including selling commissions, as described in               
more detail in the Company's Prospectus.                                        

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS.                                 

The Management's Discussion and Analysis contains various       
"forward  looking  statements"  within  the  meaning  of  federal               
securities  laws  which  represent management's  expectations  or               
beliefs  concerning future events, including statements regarding               
anticipated  application of cash, expected  returns  from  rental               
income,  growth  in  revenue, the sufficiency  of  cash  to  meet               
operating  expenses, rates of distribution,  and  other  matters.               
These,  and other forward looking statements made by the Company,               
must be evaluated in the context of a number of factors that  may               
affect   the   Company's  financial  condition  and  results   of               
operations, including the following:                                            

Market and economic conditions which affect the value                   
of the properties the Company owns and the cash from                    
rental income such properties generate;                                 

the federal income tax consequences of rental income,                   
deductions, gain on sales and other items and the                       
affects of these consequences for Members;                              

resolution by the Managing Members of conflicts with                    
which they may be confronted;                                           

the success of the Managing Members of locating                         
properties with favorable risk return characteristics;                  

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

the effect of tenant defaults; and                                      

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

The Application of Critical Accounting Policies                                 

The  preparation  of  the Company's financial  statements       
requires  management to make estimates and assumptions  that  may               
affect the reported amounts of assets, liabilities, revenues  and               
expenses,  and  related  disclosure  of  contingent  assets   and               
liabilities. Management evaluates these estimates on  an  ongoing               
basis,  including  those related to the carrying  value  of  real               
estate  and  the  allocation  by AEI  Fund  Management,  Inc.  of               
expenses to the Company as opposed to other funds they manage.                  

The Company purchases properties and records them in  the       
financial statements at the lower of cost or estimated realizable               
value.   The  Company  initially records the properties  at  cost               
(including  capitalized acquisition expenses).   The  Company  is               
required   to  periodically  evaluate  the  carrying   value   of               
properties  to  determine  whether  their  realizable  value  has               
declined.   For  properties the Company will  hold  and  operate,               
management   determines  whether  impairment  has   occurred   by               
comparing the property's probability-weighted cash flows  to  its               
current carrying value.  For properties held for sale, management               
determines  whether  impairment has  occurred  by  comparing  the               
property's estimated fair value less cost to sell to its  current               
carrying  value.   If  the carrying value  is  greater  than  the               
realizable  value, an impairment loss is recorded to  reduce  the               
carrying value of the property to its realizable value.  A change               
in  these assumptions or analysis could cause material changes in               
the carrying value of the properties.                                           

AEI  Fund Management, Inc. allocates expenses to each  of       
the  funds  they manage primarily on the basis of the  number  of               
hours  devoted  by their employees to each fund's affairs.   They               
also  allocate  expenses at the end of each month  that  are  not               
directly related to a fund's operations based upon the number  of               
investors  in the fund and the fund's capitalization relative  to               
other  funds they manage.  The Company reimburses these  expenses               
subject  to  detailed  limitations  contained  in  the  Operating               
Agreement.                                                                      

Management  of the Company has discussed the  development       
and   selection  of  the  above  accounting  estimates  and   the               
management  discussion  and analysis disclosures  regarding  them               
with the managing member of the Company.                                        

Results of Operations                                                           

The  Company was organized on March 14, 2005.  From  this       
date  until the initial subscription proceeds of $1,932,316  were               
released  from escrow on April 3, 2006, the Company had  received               
only  $1,000  of  capital  from the  Managing  Members,  had  not               
conducted any business operations other than those related to the               
offering and sale of Units and had not admitted any investors  as               
Limited Members.                                                                

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

For  the  year  ended  December  31,  2006,  the  Company       
recognized rental income of $218,953, representing rent from four               
properties acquired during the period.  At December 31, 2006, the               
scheduled annual rent for the four properties was $567,289.                     

The Company purchased a 40% interest in a Sports Authority        
store  in  Wichita,  Kansas  from an affiliate  of  the  Managing               
Members.   During  the  period the  property  was  owned  by  the               
affiliate,  the  property generated net income  of  $6,199.   The               
Company  purchased a 63% interest in an Applebee's restaurant  in               
Indianapolis,  Indiana  and  a  40%  interest  in  an  Applebee's               
restaurant  in Crawfordsville, Indiana from an affiliate  of  the               
Managing Members.  During the period the properties were owned by               
the  affiliate, the properties generated a net loss of $1,616 and               
$2,812, respectively.  Pursuant to the Operating Agreement, these               
amounts  were paid to or charged to the Company and are shown  as               
Miscellaneous Income on the Income Statement.                                   

For the year ended December 31, 2006, the Company incurred        
LLC  administration expenses from affiliated parties of  $40,207.               
These  administration expenses include costs associated with  the               
management of the properties, processing distributions, reporting               
requirements  and correspondence to the Limited Members.   During               
the  same  period,  the Company incurred LLC  administration  and               
property  management expenses from unrelated parties  of  $5,744.               
These  expenses  represent direct payments to third  parties  for               
legal and filing fees, direct administrative costs, outside audit               
costs, taxes, insurance and other property costs.                               

For  the  year  ended  December  31,  2006,  the  Company       
recognized  interest income of $10,263 mainly  from  subscription               
proceeds temporarily invested in a money market account.                        

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

Liquidity and Capital Resources                                                 

The  Company's primary sources of cash are proceeds  from       
the  sale  of Units, interest income, rental income and  proceeds               
from  the  sale  of  property.  Its  primary  uses  of  cash  are               
investment  in real properties, payment of expenses  involved  in               
the sale of Units, the management of properties, the organization               
and   administration  of  the  Company,  and   the   payment   of               
distributions.                                                                  

The  Company  generated $271,540 of cash from  operations       
during  the year ended December 31, 2006, representing net income               
of  $102,013, a non-cash expense of $83,023 for depreciation  and               
an $86,504 increase in the payable to the Company's managers.                   

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

The  major  components of the Company's  cash  flow  from       
investing activities are investments in real estate and  proceeds               
from the sale of real estate.  During the year ended December 31,               
2006,   the  Company  expended  $7,545,000  to  invest  in   real               
properties  (inclusive  of  acquisition  expenses).   During  the               
second quarter of 2006, the Company purchased a 40% interest in a               
Sports  Authority (formerly Gart Sports) store in Wichita, Kansas               
for  $2,230,753.   On June 1, 2006, the Company purchased  a  55%               
interest  in an Advance Auto Parts store in Middletown, Ohio  for               
$1,022,289.  On September 21, 2006, the Company purchased  a  37%               
interest in an Applebee's restaurant in Indianapolis, Indiana for               
$1,130,049.   During  the fourth quarter  of  2006,  the  Company               
purchased  the  remaining  63%  interest  in  this  property  for               
$1,924,138.   On December 29, 2006, the Company purchased  a  40%               
interest  in an Applebee's restaurant in Crawfordsville,  Indiana               
for $1,237,771.                                                                 

The Sports Authority store, the Applebee's restaurant  in       
Crawfordsville,  Indiana and the 63% interest in  the  Applebee's               
restaurant in Indianapolis, Indiana were purchased from AEI  Fund               
Management  XVII,  Inc.  (AFMX), an  affiliate  of  the  Managing               
Members.  In order to facilitate the Company's purchase of  these               
property  interests,  AFMX  purchased  the  properties  from   an               
unrelated  third parties.  For property interests purchased  from               
AFMX,  the price paid by the Company was equal to the price  paid               
by  AFMX plus the expenses incurred to transfer ownership of  the               
property to the Company, which were minimal.  There was no  other               
benefit  arising out of the transactions to the Managing  Members               
or  their  affiliates apart from compensation otherwise permitted               
by the Operating Agreement.                                                     

During the offering of Units, the Company's primary source        
of  cash  flow will be from the sale of LLC Units.   The  Company               
commenced  the  offering of LLC Units to  the  public  through  a               
registration statement that became effective October 20, 2005 and               
will  continue until October 19, 2007, unless all 10,000,000  LLC               
Units are sold before then.  The registration statement indicated               
that  the  Company would not be capitalized, and all subscription               
funds  would  be held in escrow, until the Company  had  received               
subscriptions  for  150,000  Units  ($1,500,000).   The   Company               
obtained subscriptions for the 150,000 Units required for release               
of  escrow  proceeds and on April 3, 2006, the  Company  accepted               
subscriptions  for  193,231.6 Units  for  aggregate  proceeds  of               
$1,932,316.   Through  December 31, 2006, the  Company  raised  a               
total  of  $8,821,268  from the sale of  882,126.8  Units.   From               
subscription   proceeds,  the  Company  paid   organization   and               
syndication  costs (which constitute a reduction of  capital)  of               
$1,307,017.                                                                     

After  completion of the acquisition phase, the Company's       
primary  use of cash flow is distribution and redemption payments               
to   Members.    The  Company  declares  its  regular   quarterly               
distributions  before  the  end of  each  quarter  and  pays  the               
distribution in the first ten days after the end of each quarter.               
For  the  year  ended  December 31, 2006,  the  Company  declared               
distributions of $178,070, which were distributed 97% to  Limited               
Members and 3% to the Managing Members.                                         

Beginning  in  April 2009, the Company may acquire  Units       
from  Limited  Members  who  have tendered  their  Units  to  the               
Company.  Such Units may be acquired at a discount.  The  Company               
will not be obligated to purchase in any year more than 2% of the               
total number of Units outstanding on January 1 of such year.   In               
no  event shall the Company be obligated to purchase Units if, in               
the  sole discretion of the Managing Member, such purchase  would               
impair the capital or operation of the Company.                                 

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

The  Operating Agreement requires that all proceeds  from       
the  sale  of Units, subject to a reasonable reserve for  ongoing               
operations, be invested or committed to investment in  properties               
by  the  later  of two years after the date of the Prospectus  or               
twelve  months after the offering terminates.  As of the date  of               
this filing, the Company had no formal contractual commitments to               
expend capital.                                                                 

Until capital is invested in properties, the Company will       
remain   extremely   liquid.   After   completion   of   property               
acquisitions, the Company will attempt to maintain a cash reserve               
of  only  approximately  .5% of subscription  proceeds.   Because               
properties  are  purchased for cash and leased  under  triple-net               
leases,   this   is   considered   adequate   to   satisfy   most               
contingencies.                                                                  

ITEM 7.   FINANCIAL STATEMENTS.                                                 

See accompanying index to financial statements.                   

AEI INCOME & GROWTH FUND 26 LLC               

INDEX TO FINANCIAL STATEMENTS               

Report of Independent Registered Public Accounting Firm                         

Balance Sheet as of December 31, 2006 and 2005                                  

Statements for the Year Ended December 31, 2006 and for the                     
Period from Inception (March 14, 2005) to December 31, 2005:                

Income                                                                

Cash Flows                                                            

Changes in Members' Equity                                            

Notes to Financial Statements                                                   

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM               

To the Members:                                                                 
AEI Income & Growth Fund 26 LLC                                                 
St. Paul, Minnesota                                                             

We have audited the accompanying balance sheet of AEI Income          
& Growth Fund 26 LLC (a Delaware limited liability company) as of               
December 31, 2006 and 2005 and the related statements of  income,               
cash  flows  and  changes in members' equity for the  year  ended               
December  31, 2006 and for the period from inception  (March  14,               
2005)  to December 31, 2005.  These financial statements are  the               
responsibility  of the Company's management.  Our  responsibility               
is  to express an opinion on these financial statements based  on               
our audit.                                                                      

We conducted our audit in accordance with the standards  of         
the  Public  Company Accounting Oversight Board (United  States).               
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  audit               
provides 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  Income & Growth Fund 26 LLC as of December 31, 2006  and               
2005,  and  the results of its operations and its cash flows  for               
the  year  ended  December  31, 2006  and  for  the  period  from               
inception  (March 14, 2005) to December 31, 2005,  in  conformity               
with U.S. generally accepted accounting principles.                             

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

Minneapolis, Minnesota                                                          
March 23, 2007                                                                  

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AEI INCOME & GROWTH FUND 26 LLC               
BALANCE SHEET               
DECEMBER 31               

ASSETS                

                                            2006          2005
CURRENT ASSETS:                                                                 
Cash and Cash Equivalents                      $   151,644   $     1,004    

INVESTMENTS IN REAL ESTATE:                                                     
Land                                             2,036,625             0    
Buildings and Equipment                          5,508,375             0    
Accumulated Depreciation                           (83,023)            0    
                                             -----------   -----------
Net Investments in Real Estate               7,461,977             0
                                             -----------   -----------
    Total Assets                           $ 7,613,621   $     1,004
                                             ===========   ===========

LIABILITIES AND MEMBERS' EQUITY 

CURRENT LIABILITIES:                                                            
Payable to AEI Fund Management, Inc.           $    86,504   $         0    
Distributions Payable                               87,919             0    
                                             -----------   -----------
Total Current Liabilities                      174,423             0
                                             -----------   -----------
MEMBERS' EQUITY (DEFICIT):                                                      
Managing Members' Equity                            (1,278)        1,004    
Limited Members' Equity, $10 per Unit;                                      
10,000,000 Units authorized;                                              
882,127  Units issued and outstanding in 2006   7,440,476             0   
                                             -----------   -----------
Total Members' Equity                        7,439,198         1,004
                                             -----------   -----------
  Total Liabilities and Members' Equity    $ 7,613,621   $     1,004
                                             ===========   ===========

The accompanying Notes to Financial Statements are an integral                
part of this statement.               
</PAGE>                                                                         

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AEI INCOME & GROWTH FUND 26 LLC               
STATEMENT OF INCOME               
FOR THE YEAR ENDED DECEMBER 31, 2006 AND FOR THE                
PERIOD FROM INCEPTION (MARCH 14, 2005) TO DECEMBER 31, 2005               

                                                2006          2005

INCOME                                                                          
Rental Income                                  $   218,953   $         0    
Miscellaneous Income                                 1,771             0    
                                             -----------   -----------
Total Income                                   220,724             0
                                             -----------   -----------

EXPENSES:                                                                       
LLC Administration - Affiliates                     40,207             0    
LLC Administration and Property                                             
Management - Unrelated Parties                    5,744             0 
Depreciation                                        83,023             0    
                                             -----------   -----------
Total Expenses                                 128,974             0
                                             -----------   -----------

OPERATING INCOME                                      91,750             0      

OTHER INCOME:                                                                   
Interest Income                                     10,263             4    
                                             -----------   -----------
NET INCOME                                       $   102,013   $         4      
                                             ===========   ===========

NET INCOME ALLOCATED:                                                           
Managing Members                               $     3,060   $         4    
Limited Members                                     98,953             0    
                                             -----------   -----------
                                           $   102,013   $         4
                                             ===========   ===========

NET INCOME PER LLC UNIT                          $       .21   $         0      
                                             ===========   ===========

Weighted Average Units Outstanding                   460,607             0      
                                             ===========   ===========

The accompanying Notes to Financial Statements are an integral                
part of this statement.               
</PAGE>                                                                         

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AEI INCOME & GROWTH FUND 26 LLC               
STATEMENT OF CASH FLOWS               
FOR THE YEAR ENDED DECEMBER 31, 2006 AND FOR THE                
PERIOD FROM INCEPTION (MARCH 14, 2005) TO DECEMBER 31, 2005               

                                          2006            2005

CASH FLOWS FROM OPERATING ACTIVITIES:                                           
Net  Income                                 $   102,013    $         4  

Adjustments To Reconcile Net Income                                       
To Net Cash Provided By Operating Activities:                             
Depreciation                                    83,023              0 
Increase in Payable to                                                
  AEI Fund Management, Inc.                    86,504              0
                                            -----------    -----------
  Total Adjustments                           169,527              0
                                            -----------    -----------
Net Cash Provided By                                            
      Operating Activities                    271,540              4
                                            -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:                                           
Investments in Real Estate                   (7,545,000)             0  
                                            -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:                                           
Capital Contributions from Managing Members           0          1,000  
Capital  Contributions from Limited Members   8,821,268              0  
Organization and Syndication Costs           (1,307,017)             0  
Increase in Distributions Payable                87,919              0  
Distributions to Members                       (178,070)             0  
                                            -----------    -----------
Net Cash Provided By                                            
      Financing Activities                  7,424,100          1,000
                                            -----------    -----------
NET INCREASE IN CASH                                                            
AND CASH EQUIVALENTS                             150,640          1,004   

CASH AND CASH EQUIVALENTS, beginning of period        1,004              0      
                                            -----------    -----------
CASH AND CASH EQUIVALENTS, end of period        $   151,644    $     1,004      
                                            ===========    ===========

The accompanying Notes to Financial Statements are an integral                
part of this statement.               
</PAGE>                                                                         

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AEI INCOME & GROWTH FUND 26 LLC               
STATEMENT OF CHANGES IN MEMBERS' EQUITY               
FOR THE YEAR ENDED DECEMBER 31, 2006 AND FOR THE                
PERIOD FROM INCEPTION (MARCH 14, 2005) TO DECEMBER 31, 2005               

                                                             Limited
                                                              Member
                        Managing    Limited                  Units
                           Members     Members     Total     Outstanding

BALANCE, March 14, 2005      $      0   $        0  $        0           0      

Capital Contributions         1,000            0       1,000           0    

Net Income                        4            0           4                
                         --------   ----------  ----------  ----------
BALANCE, December 31, 2005      1,004            0       1,004           0      

Capital Contributions             0    8,821,268   8,821,268   882,126.8    

Organization and                                                            
Syndication Costs               0   (1,307,017) (1,307,017)             

Distributions                (5,342)    (172,728)   (178,070)               

Net Income                    3,060       98,953     102,013                
                         --------   ----------  ----------  ----------
BALANCE, December 31, 2006   $ (1,278)  $7,440,476  $7,439,198   882,126.8      
                         ========   ==========  ==========  ==========

The accompanying Notes to Financial Statements are an integral                
part of this statement.               
</PAGE>                                                                         

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AEI INCOME & GROWTH FUND 26 LLC               
NOTES TO FINANCIAL STATEMENTS               
DECEMBER 31, 2006               

(1)  Organization -                                                             

AEI  Income  & Growth Fund 26 LLC (the Company),  a  Limited          
Liability  Company, was formed on March 14, 2005 to  acquire          
and  lease commercial properties to operating tenants.   The          
Company's operations are managed by AEI Fund Management XXI,          
Inc.  (AFM),  the Managing Member.  Robert P.  Johnson,  the          
President  and sole director of AFM, serves as  the  Special          
Managing  Member.  AFM is a wholly owned subsidiary  of  AEI          
Capital  Corporation of which Mr. Johnson  is  the  majority          
shareholder.  AEI Fund Management, Inc. (AEI), an  affiliate          
of  AFM, performs the administrative and operating functions          
for the Company.                                                      

The  terms of the offering call for a subscription price  of          
$10 per LLC Unit, payable on acceptance of the offer.  Under          
the  terms of the Operating Agreement, 10,000,000 LLC  Units          
are  available for subscription which, if fully  subscribed,          
will  result  in  contributed Limited  Members'  capital  of          
$100,000,000.  The Company commenced operations on April  3,          
2006   when  minimum  subscriptions  of  150,000  LLC  Units          
($1,500,000) were accepted.  At December 31, 2006, 882,126.8          
Units  ($8,821,268)  were subscribed  and  accepted  by  the          
Company.   The Managing Members have contributed capital  of          
$1,000.  The Company shall continue until December 31, 2055,          
unless  dissolved, terminated and liquidated prior  to  that          
date.                                                                 

During operations, any Net Cash Flow, as defined, which  the          
Managing Members determine to distribute will be distributed          
97%  to  the Limited Members and 3% to the Managing Members.          
Distributions to Limited Members will be made  pro  rata  by          
Units.                                                                

Any  Net  Proceeds  of Sale, as defined, from  the  sale  or          
financing of properties which the Managing Members determine          
to distribute will, after provisions for debts and reserves,          
be  paid  in  the following manner: (i) first,  99%  to  the          
Limited  Members  and 1% to the Managing Members  until  the          
Limited  Members  receive  an amount  equal  to:  (a)  their          
Adjusted  Capital Contribution plus (b) an amount  equal  to          
6.5%  of  their  Adjusted  Capital Contribution  per  annum,          
cumulative  but not compounded, to the extent not previously          
distributed  from Net Cash Flow; (ii) any remaining  balance          
will  be distributed 90% to the Limited Members and  10%  to          
the  Managing Members.  Distributions to the Limited Members          
will be made pro rata by Units.                                       

For  tax  purposes,  profits  from  operations,  other  than          
profits  attributable  to  the  sale,  exchange,  financing,          
refinancing  or  other  disposition  of  property,  will  be          
allocated 97% to the Limited Members and 3% to the  Managing          
Members.   Net losses from operations will be allocated  99%          
to the Limited Members and 1% to the Managing Members.                

AEI INCOME & GROWTH FUND 26 LLC               
NOTES TO FINANCIAL STATEMENTS               
DECEMBER 31, 2006               

(1)  Organization - (Continued)                                                 

For  tax purposes, profits arising from the sale, financing,          
or  other  disposition  of property  will  be  allocated  in          
accordance  with  the Operating Agreement  as  follows:  (i)          
first,  to  those  Members with deficit  balances  in  their          
capital  accounts  in an amount equal to  the  sum  of  such          
deficit  balances; (ii) second, 99% to the  Limited  Members          
and  1%  to the Managing Members until the aggregate balance          
in  the Limited Members' capital accounts equals the sum  of          
the Limited Members' Adjusted Capital Contributions plus  an          
amount equal to 6.5% of their Adjusted Capital Contributions          
per  annum, cumulative but not compounded, to the extent not          
previously  allocated;  (iii)  third,  the  balance  of  any          
remaining  gain  will then be allocated 90% to  the  Limited          
Members  and  10% to the Managing Members.  Losses  will  be          
allocated 99% to the Limited Members and 1% to the  Managing          
Members.                                                              

The  Managing Members are not required to currently  fund  a          
deficit capital balance.  Upon liquidation of the Company or          
withdrawal  by a Managing Member, the Managing Members  will          
contribute to the Company an amount equal to the  lesser  of          
the  deficit balances in their capital accounts or 1.01%  of          
the  total capital contributions of the Limited Members over          
the amount previously contributed by the Managing Members.            

(2)  Summary of Significant Accounting Policies -                               

Financial Statement Presentation                                      

The  accounts of the Company 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.                 

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

Cash Concentrations of Credit Risk                                    

The   Company's  cash  is  deposited  primarily   in   two        
financial  institutions and at times during  the  year  it        
may exceed FDIC insurance limits.                                 

AEI INCOME & GROWTH FUND 26 LLC               
NOTES TO FINANCIAL STATEMENTS               
DECEMBER 31, 2006               

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

Statement of Cash Flows                                               

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

Receivables                                                           

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

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

Income Taxes                                                          

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

The  tax  return  and the amount of distributable  Company        
income  or loss are subject to examination by federal  and        
state  taxing authorities.  If such an examination results        
in  changes to distributable Company income or  loss,  the        
taxable   income   of  the  members  would   be   adjusted        
accordingly.                                                      

Real Estate                                                           

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

AEI INCOME & GROWTH FUND 26 LLC               
NOTES TO FINANCIAL STATEMENTS               
DECEMBER 31, 2006               

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

Real  estate is recorded at the lower of cost or estimated        
net  realizable value.  The Company compares the  carrying        
amount  of  its  properties to the estimated  probability-        
weighted  future  cash flows expected to result  from  the        
property and its eventual disposition.  If the sum of  the        
expected  future  cash  flows is less  than  the  carrying        
amount   of  the  property,  the  Company  recognizes   an        
impairment  loss  by  the amount  by  which  the  carrying        
amount  of  the  property exceeds the fair  value  of  the        
property.                                                         

The  Company 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   Company   are        
depreciated  using the straight-line method for  financial        
reporting purposes based on estimated useful lives  of  25        
years and 5 years, respectively.                                  

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

The  Company  accounts for properties owned as tenants-in-        
common  with  affiliated Companies and/or unrelated  third        
parties  using  the  proportionate  consolidation  method.        
Each  tenant-in-common owns a separate, undivided interest        
in  the properties.  Any tenant-in-common that holds  more        
than  a  50% interest does not control decisions over  the        
other    tenant-in-common   interests.    The    financial        
statements  reflect only this Company's  percentage  share        
of   the   properties'  land,  building   and   equipment,        
liabilities, revenues and expenses.                               

The  Company's  properties  are subject  to  environmental        
laws  and  regulations  adopted  by  various  governmental        
entities  in the jurisdiction in which the properties  are        
located.    These  laws  could  require  the  Company   to        
investigate  and remediate the effects of the  release  or        
disposal  of  hazardous materials at  these  locations  if        
found.  For each property, an environmental assessment  is        
completed  prior to acquisition.  In addition,  the  lease        
agreements  typically  strictly prohibit  the  production,        
handling, or storage of hazardous materials (except  where        
incidental  to  the  tenant's  business  such  as  use  of        
cleaning  supplies)  in violation  of  applicable  law  to        
restrict  environmental and other  damage.   Environmental        
liabilities  are  recorded  when  it  is  determined   the        
liability  is  probable and the costs  can  reasonably  be        
estimated.   There were no environmental issues  noted  or        
liabilities recorded at December 31, 2006 and 2005.               

AEI INCOME & GROWTH FUND 26 LLC               
NOTES TO FINANCIAL STATEMENTS               
DECEMBER 31, 2006               

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

Recently Issued Accounting Pronouncements                             

Management  has  reviewed recently  issued,  but  not  yet        
effective,  accounting pronouncements and does not  expect        
the  implementation  of  these pronouncements  to  have  a        
significant effect on the Company's financial statements.         

(3)  Related Party Transactions -                                               

The  Company  owns a 55% interest in an Advance  Auto  Parts          
store.  The remaining interest in this property is owned  by          
AEI  Income  &  Growth  Fund 24 LLC,  an  affiliate  of  the          
Company.                                                              

During  the second quarter of 2006, the Company purchased  a          
40%  interest  in  a Sports Authority store for  $2,230,753.          
The  property  was purchased from AEI Fund Management  XVII,          
Inc. (AFMX), an affiliate of the Managing Members.  In order          
to  facilitate the purchase of the Company's first property,          
AFMX purchased the property from an unrelated third party on          
December  22, 2005.  The remaining interest in this property          
is owned by AEI Income & Growth Fund 25 LLC, an affiliate of          
the Company.                                                          

During the fourth quarter of 2006, the Company purchased the          
remaining  63% of the Applebee's restaurant in Indianapolis,          
Indiana  that  it  did not already own for  $1,924,138.   On          
December  29, 2006, the Company purchased a 40% interest  in          
an  Applebee's  restaurant  in Crawfordsville,  Indiana  for          
$1,237,771.   In order to facilitate the Company's  purchase          
of  these  property interests, AFMX purchased the properties          
from  Apple  Indiana II LLC, an unrelated  third  party,  on          
September 21, 2006.  The remaining interest in the  property          
in  Crawfordsville is owned by AEI Income & Growth Fund XXII          
Limited Partnership, an affiliate of the Company.                     

For  the  property interests purchased from AFMX, the  price          
paid by the Company was equal to the price paid by AFMX plus          
the  expenses  incurred by it to transfer ownership  of  the          
property to the Company, which were minimal.  There  was  no          
other  benefit  arising  out  of  the  transactions  to  the          
Managing Members or their affiliates apart from compensation          
otherwise permitted by the Operating Agreement.                       

AEI INCOME & GROWTH FUND 26 LLC               
NOTES TO FINANCIAL STATEMENTS               
DECEMBER 31, 2006               

(3)  Related Party Transactions - (Continued)                                   

AEI,  AFM  and  AEI  Securities,  Inc.  (ASI)  received  the          
following  compensation  and reimbursements  for  costs  and          
expenses from the Company:                                            

                               Total Incurred by the Company
                                for the Year Ended December 31

                                                2006        2005
a.AEI and AFM are reimbursed for all costs incurred in                          
connection with managing the Company's operations,                          
maintaining the Company's books and communicating                           
the results of operations to the Limited Members.   $  40,207  $       0    
                                                 ========   ========
b.AEI and AFM are reimbursed for all direct expenses they                       
have paid on the Company's behalf to third parties                          
relating to LLC administration and property                                 
management.  These expenses included printing costs,                        
legal and filing fees, direct administrative costs,                         
outside audit costs, taxes, insurance and other                             
property costs.                                     $   5,744  $       0    
                                                 ========   ========

c.AEI is reimbursed for all costs and direct expenses                           
incurred by it in acquiring properties on behalf of                         
the Company.                                        $ 120,713  $       0    
                                                 ========   ========

d.ASI was the underwriter of the Company's offering.  AEI                       
Capital Corporation is the sole stockholder of ASI, which is                
a member of the National Association of Securities Dealers,                 
Inc.  ASI received, as underwriting commissions,10% for                     
sale of certain subscription Units (a majority of this                      
amount was re-allowed to other participating                                
broker/dealers). These costs are treated as a reduction                     
of members' capital.                                $ 865,953  $       0    
                                                 ========   ========
e.AEI is reimbursed for all costs incurred in                                   
connection with managing the Company's offering                             
and organization.                                   $ 220,077  $       0    
                                                 ========   ========

f.AEI is reimbursed for all direct expenses it has paid on the                  
Company's behalf to third parties relating to the offering                  
and organization of the Company.  These expenses included                   
printing costs, legal and filing fees, direct                               
administrative costs, underwriting costs and due                            
diligence fees.                                     $ 220,987  $       0    
                                                 ========   ========

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

AEI INCOME & GROWTH FUND 26 LLC               
NOTES TO FINANCIAL STATEMENTS               
DECEMBER 31, 2006               

(4)  Investments in Real Estate -                                               

The  Company leases its properties to various tenants  under          
triple net leases, which are classified as operating leases.          
Under a triple net lease, the tenant is responsible for  all          
real  estate  taxes,  insurance,  maintenance,  repairs  and          
operating expenses of the property.  The only exceptions are          
under  the Leases for the Sports Authority and Advance  Auto          
Parts stores, the Company is responsible for repairs to  the          
structural components of the building, except for the  roof,          
which  is  the  tenant's responsibility.  At  the  time  the          
properties were acquired, the remaining primary lease  terms          
varied  from 13 to 20 years, except for the Sports Authority          
store, which had a remaining primary term of 11 years.   The          
leases  provide  the tenants with three  to  four  five-year          
renewal options subject to the same terms and conditions  as          
the  primary  term.  The leases contain rent  clauses  which          
entitle  the  Company to receive additional rent  in  future          
years based on stated rent increases.                                 

The   Company's  properties  are  commercial,  single-tenant          
buildings.  The  Sports Authority store was  constructed  in          
1996,  renovated in 2001 and acquired in 2006.  The  Advance          
Auto  Parts  store was constructed in 2004 and  acquired  in          
2006.   The  Applebee's restaurant in Indianapolis,  Indiana          
was   constructed  in  1997  and  acquired  in  2006.    The          
Applebee's   restaurant  in  Crawfordsville,   Indiana   was          
constructed in 1996 and acquired in 2006.  There  have  been          
no  costs  capitalized  as improvements  subsequent  to  the          
acquisitions.                                                         

The   cost   of   the  properties  and  related  accumulated          
depreciation at December 31, 2006 are as follows:                     

                                 Buildings and           Accumulated
Property                   Land     Equipment     Total   Depreciation

Sports Authority,                                                               
Wichita, KS                $  697,617  $1,533,136  $2,230,753  $   42,992     
Advance Auto Parts,                                                             
Middletown, OH                112,315     909,974   1,022,289      21,233     
Applebee's, Indianapolis, IN   889,340   2,164,847   3,054,187      18,798      
Applebee's, Crawfordsville, IN 337,353     900,418   1,237,771           0      
                        ----------  ----------  ----------  ----------
                      $2,036,625  $5,508,375  $7,545,000  $   83,023
                        ==========  ==========  ==========  ==========

During  the second quarter of 2006, the Company purchased  a          
40%  interest  in a Sports Authority (formerly Gart  Sports)          
store  in  Wichita, Kansas for $2,230,753.  The property  is          
leased  to TSA Stores, Inc. under a Lease Agreement  with  a          
remaining  primary term of 11 years and initial annual  rent          
of $186,059.                                                          

AEI INCOME & GROWTH FUND 26 LLC               
NOTES TO FINANCIAL STATEMENTS               
DECEMBER 31, 2006               

(4)  Investments in Real Estate - (Continued)                                   

On  June 1, 2006, the Company purchased a 55% interest in an          
Advance Auto Parts store in Middletown, Ohio for $1,022,289.          
The property is leased to Advance Stores Company, Inc. under          
a  Lease  Agreement with a remaining primary  term  of  13.2          
years and initial annual rent of $71,679.                             

On  September 21, 2006, the Company purchased a 37% interest          
in  an  Applebee's restaurant in Indianapolis,  Indiana  for          
$1,130,049.  During the fourth quarter of 2006, the  Company          
purchased  the remaining 63% interest in this  property  for          
$1,924,138.  The property is leased to Apple Indiana II  LLC          
under a Lease Agreement with a primary term of 20 years  and          
initial annual rent of $220,262.                                      

On  December 29, 2006, the Company purchased a 40%  interest          
in  an Applebee's restaurant in Crawfordsville, Indiana  for          
$1,237,771.  The property is leased to Apple Indiana II  LLC          
under a Lease Agreement with a primary term of 20 years  and          
initial annual rent of $89,289.                                       

For  properties owned as of December 31, 2006,  the  minimum          
future rent payments required by the leases are as follows:           

2007           $  582,794         
2008              585,895         
2009              585,895         
2010              585,895         
2011              591,699         
Thereafter      7,031,427         
        ----------
      $9,963,605
        ==========

There were no contingent rents recognized in 2006.                    

AEI INCOME & GROWTH FUND 26 LLC               
NOTES TO FINANCIAL STATEMENTS               
DECEMBER 31, 2006               

(5)  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  Company's  total          
rent revenue for the year ended December 31:                          

Tenants               Industry          2006            

TSA Stores, Inc.              Retail         $ 129,757                
Apple American Group          Restaurant        47,190                
Advance Stores Company, Inc.  Retail            42,006                
                               ---------
Aggregate rent revenue of major tenants      $ 218,953                
                               =========
Aggregate rent revenue of major tenants as                            
a percentage of total rent revenue                 100%               
                               =========

(6)  Miscellaneous Income -                                                     

The  Company purchased a 40% interest in a Sports  Authority          
store  in  Wichita, Kansas from an affiliate of the Managing          
Members.   During the period the property was owned  by  the          
affiliate, the property generated net income of $6,199.  The          
Company purchased a 63% interest in an Applebee's restaurant          
in Indianapolis, Indiana and a 40% interest in an Applebee's          
restaurant  in Crawfordsville, Indiana from an affiliate  of          
the Managing Members.  During the period the properties were          
owned by the affiliate, the properties generated a net  loss          
of   $1,616  and  $2,812,  respectively.   Pursuant  to  the          
Operating  Agreement, these amounts were paid to or  charged          
to  the Company and are shown as Miscellaneous Income on the          
Income Statement.                                                     

(7)  Members' Capital -                                                         

Cash  distributions  of $5,342 were  made  to  the  Managing          
Members  and  $172,728 were made to the Limited Members  for          
the  year  ended  December 31, 2006.  The  Limited  Members'          
distributions represent $0.38 per LLC Unit outstanding using          
460,607  weighted average Units in 2006.  The  distributions          
represent $0.21 per Unit of Net Income and $0.17 per Unit of          
return of contributed capital in 2006.                                

Beginning in April 2009, the Company may acquire Units  from          
Limited  Members  who  have  tendered  their  Units  to  the          
Company.   Such  Units may be acquired at a  discount.   The          
Company  will not be obligated to purchase in any year  more          
than  2% of the total number of Units outstanding on January          
1  of such year.  In no event shall the Company be obligated          
to purchase Units if, in the sole discretion of the Managing          
Member,  such purchase would impair the capital or operation          
of the Company.                                                       

AEI INCOME & GROWTH FUND 26 LLC               
NOTES TO FINANCIAL STATEMENTS               
DECEMBER 31, 2006               

(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:                  

                                               2006       2005

Net Income for Financial Reporting Purposes    $  102,013   $     4   

Depreciation for Tax Purposes Under                                   
Depreciation for Financial Reporting Purposes     32,711         0  
                                              ----------   -------
   Taxable Income to Members                $  134,724   $     4
                                              ==========   =======

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

                                                    2006        2005

 Members' Equity for Financial Reporting Purposes  $7,439,198  $   1,004

Depreciation for Tax Purposes Under                                   
  Depreciation for Financial Reporting Purposes        32,711          0

Organization and Syndication Costs Treated as                         
Reduction of Capital for Financial Reporting                        
  Purposes                                          1,301,525          0
                                                     ----------  ---------
       Members' Equity for Tax Reporting Purposes  $8,773,434  $   1,004
                                                     ==========  =========

(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:                                                          

               2006                 2005
            Carrying     Fair    Carrying       Fair
              Amount     Value     Amount        Value

Money Market Funds   $151,644  $151,644   $  1,004     $  1,004       
                --------  --------   --------     --------
Total Cash and                                                      
Cash Equivalents  $151,644  $151,644   $  1,004     $  1,004    
                ========  ========   ========     ========

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

None.                                                             

ITEM 8A.  CONTROLS AND PROCEDURES.                                              

(a) Evaluation of disclosure controls and procedures              

Under  the  supervision  and with  the  participation  of       
management, including its President and Chief Financial  Officer,               
the Managing Member of the Company evaluated the effectiveness of               
the   design  and  operation  of  its  disclosure  controls   and               
procedures (as defined in Rule 13a-14(c) under the Exchange Act).               
Based  upon  that  evaluation, the President and Chief  Financial               
Officer of the Managing Member concluded that, as of the  end  of               
the  period  covered by this report, the disclosure controls  and               
procedures of the Company are adequately designed to ensure  that               
information required to be disclosed by us in the reports we file               
or   submit  under  the  Exchange  Act  is  recorded,  processed,               
summarized  and  reported, within the time periods  specified  in               
applicable   rules  and  forms  and  that  such  information   is               
accumulated   and  communicated  to  management,  including   the               
President and Chief Financial Officer of the Managing Member,  in               
a   manner   that  allows  timely  decisions  regarding  required               
disclosure.                                                                     

(b)  Changes in internal controls                                 

There  were no significant changes made in the  Company's       
internal controls during the most recent period covered  by  this               
report that have materially affected, or are reasonably likely to               
materially affect, the Company's internal control over  financial               
reporting.                                                                      

ITEM 8B.  OTHER INFORMATION.                                                    

None.                                                             

PART III                

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

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

Robert  P.  Johnson, age 62, is Chief Executive  Officer,       
President  and  sole director and has held these positions  since               
the  formation  of AFM in August 1994, and has  been  elected  to               
continue  in these positions until December 2007.  From  1970  to               
the  present, he has been employed exclusively in the  investment               
industry,  specializing in limited partnership  investments.   In               
that capacity, he has been involved in the development, analysis,               
marketing   and  management  of  public  and  private  investment               
programs investing in net lease properties as well as public  and               
private  investment  programs investing  in  energy  development.               
Since 1971, Mr. Johnson has been the president, a director and  a               
registered principal of AEI Securities, Inc., which is registered               
with  the SEC as a securities broker-dealer, is a member  of  the               
National Association of Securities Dealers, Inc. (NASD) and is  a               
member  of the Security Investors Protection Corporation  (SIPC).               
Mr.  Johnson  has  been president, a director and  the  principal               
shareholder   of  AEI  Fund  Management,  Inc.,  a  real   estate               
management  company founded by him, since 1978.  Mr.  Johnson  is               
currently  a general partner or principal of the general  partner               
in ten limited partnerships and a managing member in four LLCs.                 

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

Patrick  W.  Keene,  age 47, is Chief Financial  Officer,       
Treasurer  and  Secretary  and has  held  these  positions  since               
January  22,  2003  and  has been elected to  continue  in  these               
positions  until December 2007.  Mr. Keene has been  employed  by               
AEI  Fund  Management, Inc. and affiliated entities  since  1986.               
Prior  to being elected to the positions above, he was Controller               
of  the various entities.  From 1982 to 1986, Mr. Keene was  with               
KPMG  Peat  Marwick  Certified Public Accountants,  first  as  an               
auditor and later as a tax manager.  Mr. Keene is responsible for               
all accounting functions of AFM and the registrant.                             

Since Mr. Johnson serves as the Special Managing Member of        
the  Company,  as well as the sole director of AFM,  all  of  the               
duties  that might be assigned to an audit committee are assigned               
to  Mr. Johnson.  Mr. Johnson is not an audit committee financial               
expert, as defined.  As an officer and majority owner, through  a               
parent  company, of AFM, and as the Special Managing Member,  Mr.               
Johnson is not a "disinterested director" and may be subject to a               
number of conflicts of interests in his capacity as sole director               
of AFM.                                                                         

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

Section 16(a) Beneficial Ownership Reporting Compliance                         

Under federal securities laws, the directors and officers       
of  the Managing Member of the Company, and any beneficial  owner               
of  more than 10% of a class of equity securities of the Company,               
are  required  to report their ownership of the Company's  equity               
securities  and  any changes in such ownership to the  Securities               
and  Exchange Commission (the "Commission").  Specific due  dates               
for  these  reports have been established by the Commission,  and               
the  Company is required to disclose in this Annual Report on 10-               
KSB any delinquent filing of such reports and any failure to file               
such  reports  during the fiscal year ended  December  31,  2006.               
Based upon information provided by officers and directors of  the               
Managing Member, all officers, directors and 10% owners filed all               
reports on a timely basis in the 2006 fiscal year.                              

ITEM 10.  EXECUTIVE COMPENSATION.                                               

The Managing Member 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 will  be               
actual  time  spent  performing such services  plus  an  overhead               
burden.   These  services include organizing the  registrant  and               
arranging  for the offer and sale of Units, reviewing  properties               
for acquisition and rendering administrative, property management               
and  property  sales  services.  The amount and  nature  of  such               
payments are detailed in Item 12 of this annual report on Form 10-              
KSB.                                                                            

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

The following table sets forth information pertaining  to       
the ownership of the Units by each person known by the Company to               
beneficially  own  5%  or  more of the Units,  by  each  Managing               
Member, and by each officer or director of the Managing Member as               
of February 28, 2007:                                                           

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

AEI Fund Management XXI, Inc.            0            0%                  
Robert P. Johnson                        0            0%                  
Patrick W. Keene                         0            0%                  

Address for all:                                                          
1300 Wells Fargo Place                                                    
30 East 7th Street, St. Paul, Minnesota 55101                             

The  Managing Members know of no holders of more than 5%  of  the               
outstanding Units.                                                              

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND                   
DIRECTOR INDEPENDENCE.                                            

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 Managing Member of the registrant               
are  governed  by,  and  are conducted in  conformity  with,  the               
limitations  set  forth  in  the  Operating  Agreement   of   the               
registrant.   Reference  is  made to  Note  3  of  the  Financial               
Statements,   as  presented,  and  is  incorporated   herein   by               
reference,  for  details of related party  transactions  for  the               
years ended December 31, 2006 and 2005.                                         

Neither  the registrant, nor the Managing Member  of  the       
registrant,  has a board of directors consisting of  any  members               
who are "independent."  The sole director of the Managing Member,               
Robert  P.  Johnson, is also the Special Managing Member  of  the               
registrant,  and is the Chief Executive Officer,  and  indirectly               
the  principal owner, of the Managing Member.  Accordingly, there               
is  no  disinterested  board,  or other  functioning  body,  that               
reviews  related party transactions, or the transactions  between               
the  registrant and the Managing Members, except as performed  in               
connection with the audit of its financial statements.                          

The  limitations  included  in  the  Operating  Agreement       
require  that  the  cumulative  reimbursements  to  the  Managing               
Members and their affiliates for certain expenses will not exceed               
an  amount  equal to the sum of (i) 20% of capital contributions,               
(ii)  1% of gross revenues, plus an initial leasing fee of 3%  of               
gross  revenues for the first five years of the original term  of               
each lease, (iii) 3% of Net Proceeds of Sale, and (iv) 10% of Net               
Cash  Flow  less  the Net Cash Flow actually distributed  to  the               
Managing Members. The cumulative reimbursements subject  to  this               
limitation  are reimbursements for (i) organization and  offering               
expenses,  including  commissions and an Organization  Fee,  (ii)               
acquisition expenses paid with proceeds from the initial offering               
of  Units,  (iii)  services  provided  in  the  sales  effort  of               
properties, and (iv) expenses of controlling persons and overhead               
expenses  directly  attributable  to  the  forgoing  services  or               
attributable  to  administrative services.  As  of  December  31,               
2006, these cumulative reimbursements to the Managing Members and               
their affiliates did not exceed the limitation amount.                          

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND                   
DIRECTOR INDEPENDENCE.  (Continued)                             

The following table sets forth the forms of compensation,       
distributions  and cost reimbursements paid by the registrant  to               
the  Managing Members or their Affiliates in connection with  the               
operation  of  the Fund and its properties for  the  period  from               
inception through December 31, 2006.                                            

Person or Entity                                     Amount Incurred From       
Receiving                Form and Method         Inception (March 14, 2005)   
Compensation              of Compensation            To December 31, 2006       

AEI Securities, Inc. Selling Commissions equal to 10%        $865,953           
of proceeds most of which were        
reallowed to Participating Dealers.   

Managing Members     Reimbursement at Cost for other         $441,064           
and Affiliates       Organization and Offering Costs.                           

Managing Members     Reimbursement at Cost for all           $120,713           
and Affiliates       Acquisition Expenses.                                      

Managing Members     Reimbursement at Cost for all           $ 40,207           
and Affiliates       Administrative Expenses attributable                       
to the Fund, including all expenses   
related to management of the Fund's   
properties  and  all  other  transfer 
agency, reporting, Member relations   
and other administrative functions.   

Managing Members     Reimbursement at Cost for all expenses  $      0           
and Affiliates       related to the disposition of the                          
Fund's properties.                    

Managing Members     3% of Net Cash Flow in any fiscal year. $  5,342           

Managing Members     1% of distributions of Net Proceeds of  $      0           
Sale until Limited Members have       
received an amount equal to (a) their 
Adjusted Capital Contributions,  plus 
(b) an amount equal to 6.5% of their  
Adjusted Capital Contributions per    
annum, cumulative but not             
  compounded, to the extent not previously
distributed. 10% of distributions of  
Net Proceeds of Sale thereafter.      

PART IV               

ITEM 13.  EXHIBITS                                                              

3.1   Certificate of Limited Liability Company (incorporated          
by   reference   to   Exhibit  3.1   of   the   registrant's          
Registration  Statement on Form SB-2 filed on May  26,  2005          
[File No. 333-125266]).                                               

3.2  Operating Agreement to the Prospectus (incorporated  by          
reference  to  Exhibit  A  of the registrant's  Registration          
Statement  on Form SB-2 filed on October 14, 2005 [File  No.          
333-125266]).                                                         

10.1  Form  of  Impoundment  Agreement  with  Fidelity  Bank          
(incorporated   by   reference  to   Exhibit   10   of   the          
registrant's  Registration Statement on Form SB-2  filed  on          
September 29, 2005 [File No. 333-125266]).                            

10.2  Assignment and Assumption of Lease and Guaranty  dated          
April  3,  2006 between the Company and AEI Fund  Management          
XVII,  Inc.  relating  to the Property  at  6959  East  21st          
Street,  Wichita,  Kansas  (incorporated  by  reference   to          
Exhibit 10.1 of Form 8-K filed April 5, 2006).                        

10.3   Assignment  and  Assumption  of  Purchase  and   Sale          
Agreement  dated  May  24,  2006 between  the  Company,  AEI          
Income  &  Growth Fund 24 LLC and AEI Fund Management,  Inc.          
relating  to the Property at 65 North University  Boulevard,          
Middletown, Ohio (incorporated by reference to Exhibit  10.1          
of Form 8-K filed June 7, 2006).                                      

10.4  Assignment and Assumption of Lease dated May 31,  2006          
between  the Company, AEI Income & Growth Fund  24  LLC  and          
Blue  Bell  Partners, LLC relating to  the  Property  at  65          
North  University Boulevard, Middletown, Ohio  (incorporated          
by  reference  to  Exhibit 10.2 of Form 8-K  filed  June  7,          
2006).                                                                

10.5   Assignment  and  Assumption  of  Purchase  and   Sale          
Agreement dated September 11, 2006 between the Company,  AEI          
Fund  Management  XVII, Inc. and AEI Fund  Management,  Inc.          
relating  to  the  Property at 7345  E.  Washington  Street,          
Indianapolis, Indiana (incorporated by reference to  Exhibit          
10.1 of Form 8-K filed September 26, 2006).                           

10.6  Net  Lease Agreement dated September 21, 2006  between          
the  Company,  AEI  Fund Management  XVII,  Inc.  and  Apple          
Indiana  II  LLC  relating  to  the  Property  at  7345   E.          
Washington  Street, Indianapolis, Indiana  (incorporated  by          
reference  to  Exhibit 10.2 of Form 8-K filed September  26,          
2006).                                                                

10.7  Assignment and Assumption of Lease dated December  29,          
2006  between  the  Company, AEI Income & Growth  Fund  XXII          
Limited  Partnership  and  AEI Fund  Management  XVII,  Inc.          
relating  to  the Property at 1516 South Washington  Street,          
Crawfordsville,  Indiana  (incorporated  by   reference   to          
Exhibit 10.1 of Form 8-K filed January 8, 2007).                      

31.1  Certification of Chief Executive Officer  of  Managing          
Member pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a))  and          
Section 302 of the Sarbanes-Oxley Act of 2002.                        

31.2  Certification of Chief Financial Officer  of  Managing          
Member pursuant to Rule 15d-14(a)(17 CFR 240.15d-14(a))  and          
Section 302 of the Sarbanes-Oxley Act of 2002.                        

32    Certification  of Chief Executive  Officer  and  Chief          
Financial  Officer  of Managing Member pursuant  to  Section          
906 of the Sarbanes-Oxley Act of 2002.                                

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.                                

The  following  is a summary of the fees  billed  to  the       
Company   by  Boulay,  Heutmaker,  Zibell  &  Co.  P.L.L.P.   for               
professional  services rendered for the years ended December  31,               
2006 and 2005:                                                                  

Fee Category                            2006       2005               

Audit Fees                           $  12,001   $  7,939             
Audit-Related Fees                           0          0             
Tax Fees                                     0          0             
All Other Fees                               0          0             
                          ---------   --------
Total Fees                           $  12,001   $  7,939             
                          =========   ========

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

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

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

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

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

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

SIGNATURES                

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

 AEI INCOME & GROWTH FUND 26
Limited Liability Company 
       By: AEI Fund Management XXI, Inc.
Its Managing Member 

March 23, 2007             By: /s/ Robert P Johnson                             
                               Robert P. Johnson, President and Director
                   (Principal Executive Officer)

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

Name                          Title                    Date     

/s/Robert P Johnson   President (Principal Executive Officer) March 23, 2007    
Robert P. Johnson  and Sole Director of Managing Member                   

/s/Patrick W Keene    Chief Financial Officer and Treasurer   March 23, 2007    
Patrick W. Keene   (Principal Accounting Officer)                         

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10KSB’ Filing		Date		First		Last			Other Filings
		10/19/07		1
Filed on:		3/27/07
		3/23/07		1		6
		2/28/07		1		6
		1/8/07		6					8-K
For Period End:		12/31/06		1		6			10KSB/A
		12/29/06		1		6			8-K
		9/26/06		6					8-K
		9/21/06		1		6			8-K
		9/11/06		6
		6/7/06		6					8-K
		6/1/06		1		6			8-K
		5/31/06		6
		5/24/06		6
		4/5/06		6					8-K,  POS AM
		4/3/06		1		6			8-K
		12/31/05		1		6			10KSB
		12/22/05		1		6
		10/20/05		1
		10/14/05		6					SB-2/A
		9/29/05		6					SB-2/A
		5/26/05		6					SB-2
		3/14/05		1		6
		1/22/03		6
									List all Filings

3 Subsequent Filings that Reference this Filing

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 2/01/08  SEC                               UPLOAD¶     9/23/17    1:20K  AEI Income & Growth Fund 26 LLC
 2/01/08  SEC                               UPLOAD¶     9/23/17    1:25K  AEI Income & Growth Fund 26 LLC
10/26/07  SEC                               UPLOAD¶     9/23/17    1:43K  AEI Income & Growth Fund 26 LLC