INLAND LAND APPRECIATION FUND LP
None   -5-
We acquired fee ownership of the following real property investments:    Gross Acres Remaining Purchase/Sales  Parcel & Location Purchased/Sold Acres Date  Parcel 1, Kendall County, Illinois 84.7360      -     01/19/89    (3.5200       sold 12/24/96)    (.3520       sold 11/25/97)    (80.8640       sold 12/29/97)       Parcel 2, McHenry County, Illinois 223.4121      -     01/19/89    (183.3759       sold 12/27/90)   (40.0362       sold 05/11/00)       Parcel 3, Kendall County, Illinois 20.0000      -     02/09/89    (20.0000       sold 05/08/90)       Parcel 4, Kendall County, Illinois 69.2760      -     04/18/89   (.4860       sold 02/28/91)   (27.5750       sold 08/25/95)   (4.4000       sold various 2001)   (2.1417       sold various 2002)   (23.1033       sold various 2003)   (6.7800       sold various 2004)   (4.7900       sold various 2005)       Parcel 5, Kendall County, Illinois       372.2230      -     05/03/89    (Option       sold 04/06/90)   (372.2230       sold 06/20/03)       Parcel 6, Kendall County, Illinois 78.3900      44.44 06/21/89   (3.9500       sold 11/01/00)   (30.0000       Sold 07/12/05)       Parcel 7, Kendall County, Illinois 77.0490      77.0490 06/21/89       Parcel 8, Kendall County, Illinois 5.0000      -     06/21/89    (5.0000       sold 10/06/89)       Parcel 9, McHenry County, Illinois 51.0300      51.0300 08/07/89       Parcel 10, McHenry County, Illinois 123.9400      -     08/07/89    (123.9400       sold 12/06/89)       Parcel 11, McHenry County, Illinois 30.5920      30.5920 08/07/89       Parcel 12, Kendall County, Illinois 90.2710      -     10/31/89    (.7090       sold 04/26/91)   (89.5620       sold 03/10/04)    As part of the purchase agreement for parcel 5, we were required to buy an option to purchase an additional 243 acres immediately to the west of this parcel. The 1990 sale transaction relates to the sale of this option.   -6-            Gross Acres Remaining Purchase/Sales  Parcel & Location Purchased/Sold Acres Date            Parcel 13, McHenry County, Illinois 92.7800      -     11/07/89    (2.0810       sold 09/18/97)   (90.6990       sold 02/15/01)       Parcel 14, McHenry County, Illinois 76.2020      76.2020 11/07/89       Parcel 15, Lake County, Illinois 84.5564      -     01/03/90    (10.5300       sold various 1996)    (5.4680       sold various 1997)    (68.5584       sold various 1998)       Parcel 16, Kane/Kendall Counties, 72.4187      -     01/29/90    Illinois (30.9000       sold 07/10/98)    (10.3910       sold 12/15/99)   (3.1000       sold 12/12/00)   (28.0277       sold 05/19/03)       Parcel 17, McHenry County, Illinois 99.9240      72.4140 01/29/90    (27.5100       sold 01/29/99)       Parcel 18, McHenry County, Illinois 71.4870      69.9670 01/29/90    (1.0000       sold various 1990)    (.5200       sold 03/11/93)       Parcel 19, McHenry County, Illinois 63.6915      63.6915 02/23/90       Parcel 20, Kane County, Illinois 224.1480      -     02/28/90    (.2790       sold 10/17/91)   (223.8690       sold 02/20/04)       Parcel 21, Kendall County, Illinois 172.4950      -     03/08/90    (172.4950       sold various 1998)       Parcel 22, McHenry County, Illinois 254.5250      254.5250 04/11/90       Parcel 23, Kendall County, Illinois 140.0210      -     05/08/90    (4.4100       sold various 1993)    (35.8800       sold various 1994)    (3.4400       sold various 1995)    (96.2910       sold 08/26/99)       Parcel 24, Kendall County, Illinois 298.4830      211.5770 05/23/90    (12.4570       sold 05/25/90)    (4.6290       sold 04/01/96)   (69.82       sold 11/26/02)       Parcel 25, Kane County, Illinois 225.0000      225.0000 06/01/90      -7-  Our general partner anticipates that the land we acquired will produce sufficient income to pay property taxes, insurance and other miscellaneous expenses. Income will be derived through leases to farmers or from other activities compatible with undeveloped land. Although the general partner believes that leasing our land will generate sufficient revenues to pay these expenses, there can be no assurance that this will in fact occur. Our general partner has agreed to make a supplemental capital contribution to us if and to the extent that real estate taxes and insurance payable with respect to our land during a given year exceed the revenue earned by us from leasing our land during such year. Any supplemental capital contribution will be repaid only after limited partners have received, over the life of our partnership, a return of their original capital plus the 15% cumulative return. A majority of the parcels purchased by us c onsist of land which generates revenue from farming or other leasing activities. It is not expected that we will generate cash distributions to limited partners from farm leases or other leasing activities. Through December 31, 2005, our land has generated sufficient revenues from leasing to cover real estate taxes and insurance expense.
We are not subject to any material pending legal proceedings.
Consistent with our partnership agreement, there were no matters submitted to a vote of our security holders during 2005.  PART II
As of March 15, 2006, there were 2,944 holders of our units. There is no public market for units nor is it anticipated that any public market for units will develop.  For the years ended December 31, 2005 and 2004, we paid the following distributions:        Distributions to:  2005 2004       General partners $ 291,379 2,635,030  Limited partners  2,000,000 10,964,450       Total $ 2,291,379 13,599,480                -8-
INLAND LAND APPRECIATION FUND, L.P. (a limited partnership)  For the years ended December 31, 2005, 2004, 2003, 2002 and 2001  (not covered by the Report of Independent Registered Public Accounting Firm)       2005 2004 2003 2002 2001          Total assets $ 15,602,183 15,372,720 21,527,191  27,611,879  26,413,426          Total income $ 3,799,317 17,079,723 13,116,054  1,916,049  1,289,468          Net income $ 2,571,593 10,150,323 6,436,652  314,651  652,753          Net income (loss) allocated to the one general partner unit $ 291,712 2,632,985 1,265,292  (8,513) 2,807          Net income allocated per limited partnership unit  $ 77.04 254.02 174.75  10.92  21.96          Distributions per limited partnership unit from sales  $ 67.58 370.51 239.93  51.76  -             Weighted average limited partnership units  29,593 29,593 29,593  29,593  29,593    The above selected financial data should be read in conjunction with the financial statements and related notes appearing elsewhere in this annual report.  The net income per unit and distributions per unit data is based upon the weighted average number of units outstanding.  All distributions from sales represent a return of original capital until such time as the limited partners have received distributions totaling their original capital.  As of March 2004, the limited partners had received distributions in excess of their original capital.             -9-
Not Applicable.   -15-
INLAND LAND APPRECIATION FUND, L.P. (a limited partnership)   Index     Page     Report of Independent Registered Public Accounting Firm 17     Report of Independent Registered Public Accounting Firm 18     Financial Statements:        Balance Sheets, December 31, 2005 and 2004 19       Statements of Operations, for the years ended December 31, 2005, 2004 and 2003 21       Statements of Partners' Capital, for the years ended December 31, 2005, 2004 and 2003 22       Statements of Cash Flows, for the years ended December 31, 2005, 2004 and 2003 23       Notes to Financial Statements 25      Schedules not filed:  All schedules have been omitted as the required information is inapplicable or the information is presented in the financial statements or related notes.             -16-  Report of Independent Registered Public Accounting Firm   To the Partners of  Inland Land Appreciation Fund, L.P.  We have audited the accompanying balance sheets of Inland Land Appreciation Fund, L.P. (a limited partnership) (“the Partnership”) as of December 31, 2005 and 2004, and the related statements of operations, partners’ capital, and cash flows for the years then ended.  The financial statements are the responsibility of the Partnership’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.    We conducted our audits in accordance with 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.  The Partnership is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and si gnificant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.  In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Inland Land Appreciation Fund, L.P. as of December 31, 2005 and 2004, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.   Grant Thornton LLP  Chicago, Illinois March 23, 2006       -17-        REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   To the Partners of  Inland Land Appreciation Fund, L.P.   We have audited the accompanying statements of operations, partners' capital, and cash flows of Inland Land Appreciation Fund, L.P. (a limited partnership) ("the Partnership") for the year ended December 31, 2003. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our 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, such financial statements present fairly, in all material respects, the results of operations and cash flows of Inland Land Appreciation Fund, L.P. for the year ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.   Deloitte & Touche LLP   March 26, 2004 Chicago, Illinois     -18-   INLAND LAND APPRECIATION FUND, L.P. (a limited partnership)  Balance Sheets  December 31, 2005 and 2004   Assets      2005 2004  Current assets:       Cash and cash equivalents (Note 1) $ 1,426,760  601,956     Accounts and accrued interest receivable (net of allowance for doubtful     accounts of $423,794 at December 31, 2005 and 2004) (Note 6)  9,224  1,401     Mortgage loans receivable (net of allowance for doubtful accounts of     $1,233,175 at December 31, 2005 and 2004) (Note 6)  -  -     Other current assets  8,966  19,410        Total current assets  1,444,950  622,767        Other assets  5,729  5,729   Investments in land and improvements, at cost (including acquisition fees paid   to Affiliates of $486,732 and $495,417 at December 31, 2005 and 2004,   respectively) (Notes 3 and 4)  14,151,504  14,744,224        Total assets $ 15,602,183  15,372,720                               See accompanying notes to financial statements.   -19-  INLAND LAND APPRECIATION FUND, L.P. (a limited partnership)  Balance Sheets (continued)  December 31, 2005 and 2004  Liabilities and Partners' Capital      2005 2004       Current liabilities:       Accounts payable $ 27,183  87,486     Accrued real estate taxes  34,621  43,458     Due to Affiliates (Notes 3 and 7)  45,487  21,438     Unearned income  23,170  28,830        Total current liabilities  130,461  181,212        Partners' capital:       General Partner:         Capital contribution  500  500       Cumulative net income  4,360,159  4,068,447       Cumulative cash distributions  (4,345,451) (4,054,072)          15,208  14,875     Limited Partners:         Units of $1,000. Authorized 30,001 Units, 29,593 outstanding at       December 31, 2005 and 2004, (net of offering costs of $3,768,113, of       which $1,069,764 was paid to Affiliates)  25,873,403  25,873,403       Cumulative net income  24,753,017  22,473,136       Cumulative cash distributions  (35,169,906) (33,169,906)          15,456,514  15,176,633        Total Partners' capital  15,471,722  15,191,508        Total liabilities and Partners' capital $ 15,602,183  15,372,720                    See accompanying notes to financial statements.   -20-  INLAND LAND APPRECIATION FUND, L.P. (a limited partnership)  Statements of Operations  For the years ended December 31, 2005, 2004 and 2003      2005 2004 2003        Income:        Sale of investments in land and improvements (Note 4) $ 3,577,683  16,847,378  12,827,798     Rental income (Note 5)  160,380  166,438  225,179     Interest income  52,546  58,782  53,772     Other income  8,708  7,125  9,305           3,799,317  17,079,723  13,116,054         Expenses:        Cost of land sold  1,039,366  6,492,519  4,289,425     Professional services to Affiliates  24,216  27,543  31,832     Professional services to non-affiliates  44,415  55,829  39,588     General and administrative expenses to Affiliates  21,100  20,496  23,799     General and administrative expenses to non-affiliates  29,925  33,559  17,704     Tax expense  8,417  139,258  8,201     Marketing expenses to Affiliates  29,982  19,280  16,120     Marketing expenses to non-affiliates  19,782  54,982  83,826     Land operating expenses to non-affiliates  70,521  65,826  72,980     Amortization of deferred loan fees  -  20,108  35,508     Bad debt (recovery) expense  (60,000) -  2,060,419           1,227,724  6,929,400  6,679,402         Net income $ 2,571,593  10,150,323  6,436,652         Net income (loss) allocated to (Note 2):        General Partner $ 291,712  2,632,985  1,265,292     Limited Partners  2,279,881  7,517,338  5,171,360         Net income $ 2,571,593  10,150,323  6,436,652         Net income allocated to the one General Partner Unit $ 291,712  2,632,985  1,265,292         Net income per Unit allocated to Limited Partners per   weighted average Limited Partnership Units (29,593   for the years ended December 31, 2005, 2004 and   2003) $ 77.04  254.02  174.75             See accompanying notes to financial statements.   -21-  INLAND LAND APPRECIATION FUND, L.P. (a limited partnership)  Statements of Partners' Capital  For the years ended December 31, 2005, 2004 and 2003      General Limited     Partner Partners Total        Balance at January 1, 2003 $ 16,927  20,552,518  20,569,445         Net income (Note 2)  1,265,292  5,171,360  6,436,652   Distributions to Partners ($239.93 per weighted average   Limited Partnership Units of 29,593) (Note 2)  (1,265,299) (7,100,133) (8,365,432)        Balance at December 31, 2003  16,920  18,623,745  18,640,665         Net income (Note 2)  2,632,985  7,517,338  10,150,323   Distributions to Partners ($370.51 per weighted average Limited Partnership Units of 29,593) (Note 2)  (2,635,030) (10,964,450) (13,599,480)        Balance at December 31, 2004  14,875  15,176,633  15,191,508         Net income (Note 2)  291,712  2,279,881  2,571,593   Distributions to Partners ($67.58 per weighted average   Limited Partnership Units of 29,593) (Note 2)  (291,379) (2,000,000) (2,291,379)        Balance at December 31, 2005 $ 15,208  15,456,514  15,471,722                               See accompanying notes to financial statements.   -22-  INLAND LAND APPRECIATION FUND, L.P. (a limited partnership)  Statements of Cash Flows  For the years ended December 31, 2005, 2004 and 2003       2005 2004 2003        Cash flows from operating activities:        Net income $ 2,571,593  10,150,323  6,436,652     Adjustments to reconcile net income to net cash used in     operating activities:          Gain on sale of investments in land and improvements  (2,538,317) (10,354,859) (8,538,373)      Bad debt (recovery) expense  (60,000) -  2,060,419       Amortization of deferred loan fees  -  20,108  35,508       Changes in assets and liabilities:            Accounts and accrued interest receivable  (7,823) (1,009) -         Other assets  10,444  (1,483) (6,816)        Accounts payable  (60,303) 84,031  (68,030)        Accrued real estate taxes  (8,837) (12,260) (27,248)        Due to Affiliates  24,049  (329,953) (3,960)        Unearned income  (5,660) 9,550  (650,000)        Net cash used in operating activities  (74,854) (435,552) (761,848)        Cash flows from investing activities:        Principal payments collected on mortgage loans receivable  60,000  -  -     Additions to investments in land and improvements  (446,646) (719,464) (921,343)    Proceeds from disposition of investments in land and     improvements  3,577,683  16,847,378  12,827,798         Net cash flow provided by investing activities  3,191,037  16,127,914  11,906,455         Cash flows from financing activities:        Principal payments on notes payable to Affiliates  -  (2,456,682) (3,164,302)    Cash distributions  (2,291,379) (13,599,480) (8,365,432)        Net cash flow used in financing activities  (2,291,379) (16,056,162) (11,529,734)                  See accompanying notes to financial statements.   -23-  INLAND LAND APPRECIATION FUND, L.P. (a limited partnership)  Statements of Cash Flows (continued)  For the years ended December 31, 2005, 2004 and 2003       2005 2004 2003        Net increase (decrease) in cash and cash equivalents $ 824,804  (363,800) (385,127)  Cash and cash equivalents at beginning of year  601,956  965,756  1,350,883         Cash and cash equivalents at end of year $ 1,426,760  601,956  965,756         Cash paid for interest $ -  387,189  232,681      Supplemental schedule of non-cash investing and financing activities:     2005 2004 2003        Reduction in investments in land and improvements $ 1,039,366  6,492,519  4,289,425   Gain on sale of investments in land and improvements  2,538,317  10,354,859  8,538,373   Proceeds from disposition of investments in land and   improvements $ 3,577,683  16,847,378  12,827,798                                See accompanying notes to financial statements.   -24-  INLAND LAND APPRECIATION FUND, L.P. (a limited partnership)  Notes to Financial Statements  For the years ended December 31, 2005, 2004 and 2003  (1) Organization and Basis of Accounting  The Registrant, Inland Land Appreciation Fund, L.P. (the "Partnership"), was formed in October 1987, pursuant to the Delaware Revised Uniform Limited Partnership Act, to invest in undeveloped land on an all-cash basis and realize appreciation of such land upon resale. On October 12, 1988, the Partnership commenced an Offering of 10,000 (subject to increase to 30,000) Limited Partnership Units ("Units") pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933. Inland Real Estate Investment Corporation is the General Partner. The Offering terminated on October 6, 1989, with total sales of 30,000 Units, at $1,000 per Unit, not including the General Partner or the Initial Limited Partner. All of the holders of these Units were admitted to this Partnership. The Limited Partners of the Partnership share in their portion of benefits of ownership of the Partnership's real property investments according  to the number of Units held. As of December 31, 2005, the Partnership has repurchased a total of 407.75 Units for $359,484 from various Limited Partners through the Unit Repurchase Program. Under this program Limited Partners may under certain circumstances have their Units repurchased for an amount equal to their Invested Capital.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain reclassifications were made to the 2004 financial statements to conform with the 2005 presentation.  Offering costs have been offset against the Limited Partners' capital accounts.  The Partnership considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents which are carried at cost, which approximates market.  The Partnership recognizes income from the sale of land parcels in accordance with Statement of Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate".  Except as described in footnote (b) to Note 4 of these notes, the Partnership uses the area method of allocation, which approximates the relative sales method of allocation, whereby a per acre price is used as the standard allocation method for land purchases and sales. The total cost of the parcel is divided by the total number of acres to arrive at a per acre price.  A presentation of information about operating segments as required in SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information" would not be material to an understanding of the Partnership's business taken as a whole as the Partnership is engaged in the business of real estate investment which management considers to be a single operating segment.   -25-  INLAND LAND APPRECIATION FUND, L.P. (a limited partnership)  Notes to Financial Statements (continued)  The Partnership is required to pay a withholding tax to the Internal Revenue Service with respect to a Partner's allocable share of the Partnership's taxable net income, if the Partner is a foreign person. The Partnership will first pay the withholding tax from the distributions to any foreign partner, and to the extent that the tax exceeds the amount of distributions withheld, or if there have been no distributions to withhold, the excess will be accounted for as a distribution to the foreign partner. Withholding tax payments are made every April, June, September and December.  No provision for Federal income taxes has been made as the liability for such taxes is that of the Partners rather than the Partnership.  The Partnership's records are maintained on the accrual basis of accounting in accordance GAAP. The Federal income tax return has been prepared from such records after making appropriate adjustments, if any, to reflect the Partnership's accounts as adjusted for Federal income tax reporting purposes. Such adjustments are not recorded in the records of the Partnership. The net effect of these items is summarized as follows:     2005 2004     Tax  Tax    GAAP Basis GAAP Basis    Basis (unaudited) Basis (unaudited)         Total assets $ 15,602,183 19,364,568 15,372,720 19,129,018         Partners' capital:         General Partner  15,208 (4,538) 14,875 (4,829)    Limited Partners  15,456,514 19,196,475 15,176,633 18,920,773         Net income (loss) allocated:         General Partner  291,712 291,670 2,632,985 2,632,983    Limited Partners  2,279,881 2,244,652 7,517,338 6,112,380         Net income per Limited Partnership Unit  77.04 75.85 254.02 206.55    The net income per Unit is based upon the weighted average number of Units of 29,593 during 2005 and 2004.  New Accounting Pronouncements  In December 2004, the FASB issued SFAS No. 153: Exchange of Nonmonetary Assets, an amendment of APB Opinion No. 29. The amendments made by SFAS No. 153 are based on the principle that exchanges of nonmonetary assets should be measured on the fair value of assets exchanged. It eliminates the exceptions for nonmonetary exchanges of similar productive assets and replaces it with a broader exception for exchanges of nonmonetary assets that do not have commercial substance. The statement is effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005. The Partnership does not believe that the adoption of SFAS No. 153 will have a material impact on its financial statements.    -26-  INLAND LAND APPRECIATION FUND, L.P. (a limited partnership)  Notes to Financial Statements (continued)  Emerging Issues Task Force ("EITF") Issue No. 04-5: Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity when the Limited Partners Have Certain Rights, was ratified by the FASB in June 2005. At issue is what rights held by the limited partner(s) preclude consolidation in circumstances in which the sole general partner would consolidate the limited partnership in accordance with U.S. generally accepted accounting principles. The assessment of limited partners' rights and their impact on the presumption of control of the limited partnership by the sole general partner should be made when an investor becomes the sole general partner and should be reassessed if (a) there is a change to the terms or in the exercisability of the rights of the limited partners, (b) the sole general partner increases or decreases its ownership of limited partnership interests,  or (c) there is an increase or decrease in the number of outstanding limited partnership interests. This consensus applies to limited partnerships or similar entities, such as limited liability companies that have governing provisions that are the functional equivalent of a limited partnership. This Issue is effective no later than for fiscal years beginning after December 15, 2005 and as of June 29, 2005 for new or modified arrangements. The Partnership does not expect that this EITF Issue will have a material effect on its financial statements.  In June 2005, the FASB issued EITF Issue No. 04-10: Determining Whether to Aggregate Operating Segments that do not meet the Quantitative Thresholds.  The EITF provides clarification regarding SFAS No. 131: Disclosure about Segments of an Enterprise and Related Information.  The consensus states that operating segments that do not meet the quantitative thresholds can be aggregated only if aggregation is consistent with the objective and basic principles provided in SFAS No. 131, the segments have similar economic characteristics, and the segments share a majority of the aggregation criteria listed in SFAS No. 131.  This should be applied for fiscal years ending after September 15, 2005.  The corresponding information for earlier periods, including interim periods, should be restated unless it is impractical to do so.  Early application of the consensus is permitted.  The adoption of this consensu s did not have a significant impact on the Partnership's segment disclosure.  In March 2005, the FASB issued FIN No. 47: Accounting for Conditional Asset Retirement Obligations.  This interpretation clarifies that the term conditional asset retirement obligation as used in SFAS No. 143: Accounting for Asset Retirement Obligation, refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity.  Thus, the timing and (or) method of settlement may be conditional on a future event.  This interpretation also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation.  This interpretation is effective no later than the end of fiscal years ending after December 15, 2005.  The adoption of this interpretation did not have a significant impact on the Partnership’s finan cial statements.   -27-  INLAND LAND APPRECIATION FUND, L.P. (a limited partnership)  Notes to Financial Statements (continued)   (2) Partnership Agreement  The Partnership Agreement defines the allocation of profits and losses, and available cash.  If and to the extent that real estate taxes and insurance payable with respect to the Partnership's land during a given year exceed revenues of the Partnership, the General Partner will make a Supplemental Capital Contribution of such amount to the Partnership to ensure that it has sufficient funds to make such payments.  Profits and losses from operations (other than capital transactions) will be allocated 99% to the Limited Partners and 1% to the General Partner.  The net gain from a sale of Partnership properties is first allocated among the Partners in proportion to the negative balances, if any, in their respective capital accounts.  Thereafter, except as provided below, net gain is allocated to the General Partner in an amount equal to the proceeds distributed to the General Partner from such sale and the balance of any net gain is allocated to the Limited Partners.  If the amount of net gain realized from a sale is less than the amount of cash distributed to the General Partner from such sale, the Partnership will allocate income or gain to the General Partner in an amount equal to the excess of the cash distributed to the General Partner with respect to such sale as quickly as permitted by law.   Any net loss from a sale wil l be allocated to the Limited Partners.  Distributions of Net Sale Proceeds will be allocated between the General Partner and the Limited Partners based upon both an aggregate overall return to the Limited Partners and a separate return with respect to each parcel of land purchased by the Partnership.  As a general rule, Net Sale Proceeds will be distributed 90% to the Limited Partners and 10% to the General Partner until the Limited Partners have received from Net Sale Proceeds (i) a return of their Original Capital plus (ii) a noncompounded Cumulative Preferred Return of 15% of their Invested Capital.  However, with respect to each parcel of land, the General Partner's 10% share will be subordinated until the Limited Partners receive a return of the Original Capital attributed to such parcel ("Parcel Capital") plus a 6% per annum noncompounded Cumulative Preferred Return thereon.  After the amounts described in items (i) and (ii) above and any previously subordinated distributions to the General Partner have been paid, and the amount of any Supplemental Capital Contributions have been repaid to the General Partner, subsequent distributions shall be paid 75% to the Limited Partners and 25% to the General Partner without considering Parcel Capital. If, after all Net Sale Proceeds have been distributed, the General Partner has received more than 25% of all Net Sale Proceeds (exclusive of distributions made to the Limited Partners to return their Original Capital), the General Partner shall contribute to the Partnership for distribution to the Limited Partners an amount equal to such excess.  Any distributions from Net Sale Proceeds at a time when Invested Capital is greater than zero shall be deemed applied first as a reduction of such Invested Capital before application to payment of any deficiency in the 15% Cumulative Preferred Return.     -28-  INLAND LAND APPRECIATION FUND, L.P. (a limited partnership)  Notes to Financial Statements (continued)   (3) Transactions with Affiliates  The General Partner and its Affiliates are entitled to reimbursement for salaries and expenses of employees of the General Partner and its Affiliates relating to the administration of the Partnership. Such costs are included in professional services and general and administrative expenses to Affiliates, of which $7,423 and $5,422 were unpaid as of December 31, 2005 and 2004, respectively.  An Affiliate of the General Partner performed marketing and advertising services for the Partnership and was reimbursed (as set forth under terms of the Partnership Agreement) for direct costs. Such costs of $29,982, $19,280 and $16,120 have been incurred and are included in marketing expenses to Affiliates for the years ended December 31, 2005, 2004 and 2003, respectively, all of which was paid as of December 31, 2005, 2004 and 2003.  An Affiliate of the General Partner performed property upgrades, rezoning, annexation and other activities to prepare the Partnership's land investments for sale and was reimbursed (as set forth under terms of the Partnership Agreement) for salaries and direct costs. For the years ended December 31, 2005 and 2004, the Partnership incurred $156,306 and $98,576, respectively, of such costs. The Affiliate did not recognize a profit on any project. Such costs are included in investments in land and improvements, of which $38,064 and $16,016 were unpaid as of December 31, 2005 and 2004, respectively.            -29-  INLAND LAND APPRECIATION FUND, L.P. (a limited partnership)  Notes to Financial Statements (continued)  (4) Investments in Land and Improvements        Initial Costs       Illinois Gross Acres Purchased Purchase/Sales  Original Acquisition Total Costs  Capitalized Subsequent to Costs of Property Total Remaining Costs of Parcels at Current Year Gain on Sale  Parcel County (Sold) Date  Costs Costs Costs Acquisition Sold 12/31/05 Recognized               1 Kendall 84.7360 01/19/89 $ 423,680 61,625 485,305 5,462,589 5,947,894 -      -           (3.5200) 12/24/96              (.3520) 11/25/97              (80.8640) 12/29/97                       2 McHenry 223.4121 01/19/89  650,000 95,014 745,014 26,816 771,830 -      -           (183.3759) 12/27/90            (40.0362) 05/11/00                       3 Kendall 20.0000 02/09/89  189,000 13,305 202,305 -     202,305 -      -           (20.0000) 05/08/90                       4 Kendall 69.2760 04/18/89  508,196 38,126 546,322 1,223,376 1,769,698 -      255,307      (.4860) 02/28/91              (27.5750) 08/25/95            (4.4000) Var 2001            (2.1470) Var 2002            (23.1033) Var 2003            (6.7800) Var 2004            (4.79) Var 2005                       5 Kendall (a) 372.2230  05/03/89  2,532,227 135,943 2,668,170 456,398 3,124,568 -      -          (Option) 04/06/90            (372.2230) 06/20/03                       6 Kendall (b) 78.3900 06/21/89  416,783 31,691 448,474 1,389,858 674,518 1,163,814 2,283,010    (3.9500) 11/01/00            (30.0000) 07/12/05                        7 Kendall (b) 77.0490 06/21/89  84,754 8,163 92,917 1,348,100 -      1,441,017 -                     8 Kendall (b) 5.0000 06/21/89  60,000 5,113 65,113 -      65,113 -      -          (5.0000) 10/06/89                           -30-  INLAND LAND APPRECIATION FUND, L.P. (a limited partnership)  Notes to Financial Statements (continued)  (4) Investments in Land and Improvements (continued)        Initial Costs       Illinois Gross Acres Purchased Purchase/Sales  Original Acquisition Total Costs Capitalized Subsequent to Costs of Property Total Remaining Costs of Parcels at Current Year Gain on Sale  Parcel County (Sold) Date  Costs Costs Costs Acquisition Sold 12/31/05 Recognized               9 McHenry (b) 51.0300 08/07/89 $ 586,845 22,482 609,327 54,536 -      663,863 -                    10 McHenry (b) 123.9400 08/07/89  91,939 7,224 99,163 600 99,763 -      -          (123.9400) 12/06/89                                    11 McHenry (b) 30.5920  08/07/89  321,216 22,641 343,857 59,786 -      403,643 -                     12 Kendall 90.2710 10/31/89  907,389 41,908 949,297 246,964 1,196,261 -      -          (.7090) 04/26/91            (89.562) 03/10/04                       13 McHenry 92.7800 11/07/89  251,306 19,188 270,494 18,745 289,239 -      -           (2.0810) 09/18/97            (90.6990) 02/15/01                       14 McHenry 76.2020 11/07/89   419,111 23,402 442,513 167,618 -      610,131 -                    15 Lake 84.5564 01/03/90   1,056,955 85,283 1,142,238 1,661,344 2,803,582 -      -           (10.5300) Var 1996              (5.4680) Var 1997              (68.5584) Var 1998                       16 Kane/ 72.4187 01/29/90   1,273,537 55,333 1,328,870 706,718 2,035,588 -      -          Kendall (30.9000) 07/10/98              (10.3910) 12/15/99            (3.1000) 12/12/00            (28.0277) 05/19/03                       17 McHenry 99.9240 01/29/90   739,635 61,038 800,673 965,088 320,961 1,444,800 -           (27.5100) 01/29/99              -31-  INLAND LAND APPRECIATION FUND, L.P. (a limited partnership)  Notes to Financial Statements (continued)  (4) Investments in Land and Improvements (continued)        Initial Costs       Illinois Gross Acres Purchased Purchase/Sales  Original Acquisition Total Costs Capitalized Subsequent to Costs of Property Total Remaining Costs of Parcels at Current Year Gain on Sale  Parcel County (Sold) Date  Costs Costs Costs Acquisition Sold 12/31/05 Recognized  18 McHenry 71.4870 01/29/90 $ 496,116 26,259 522,375 241,002 11,109 752,268 -           (1.0000) Var 1990              (.5200) 03/11/93                       19 McHenry 63.6915 02/23/90   490,158 29,158 519,316 193,292 -      712,608 -                    20 Kane 224.1480 02/28/90   2,749,800 183,092 2,932,892 1,938,930 4,871,822 -      -          (.2790) 10/17/91            (223.869) 02/20/04                       21 Kendall 172.4950 03/08/90  1,327,459 75,822 1,403,281 954,415 2,357,696 -      -           (172.4950) Var 1998                       22 McHenry 254.5250 04/11/90   2,608,881 136,559 2,745,440 279,293 -      3,024,733 -                    23 Kendall 140.0210 05/08/90  1,480,000 116,240 1,596,240 909,395 2,505,635 -      -           (4.4100) Var 1993              (35.8800) Var 1994              (3.4400) Var 1995              (96.2910) 08/26/99                       24 Kendall 298.4830 05/23/90   1,359,774 98,921 1,458,695 81,779 436,638 1,103,836 -           (12.4570) 05/25/90              (4.6290) 04/01/96            (69.82) 11/26/02                       25 Kane 225.0000 06/01/90   2,600,000 168,778 2,768,778 62,013 -      2,830,791 -                      Totals     $ 23,624,761 1,562,308 25,187,069 18,448,655 29,484,220 14,151,504 2,538,317                    -32-  INLAND LAND APPRECIATION FUND, L.P. (a limited partnership)  Notes to Financial Statements (continued)   (4) Investments in Land and Improvements (continued)  (a) Included in the purchase agreement of Parcel 5 was a condition that required the Partnership to buy an option to purchase an additional 243 acres immediately to the west of this parcel.  The 1990 sale transaction relates to the sale of this option.  (b) The Partnership purchased from two third parties, two sets of three contiguous parcels of land (Parcels 6, 7 and 8; and Parcels 9, 10 and 11). The General Partner believes that the total value of this land will be maximized if it is treated and marketed to buyers as six separate parcels and closed the transactions as six separate purchases to facilitate this. Parcels 6, 7 and 8 will be treated as one parcel and Parcels 9, 10 and 11 will be treated as one parcel for purposes of computing Parcel Capital (as defined) and distributions to the Partners.  (c) Reconciliation of investments in land and improvements owned:     2005 2004       Balance at January 1, $ 14,744,224 20,517,279   Additions during year  446,646 719,464   Sales during year  1,039,366 (6,492,519)       Balance at December 31, $ 14,151,504 14,744,224     (d) The aggregate cost of investments in land and improvements owned at December 31, 2005 for Federal income tax purposes was approximately $14,200,000 (unaudited).   (5) Rental Income  The Partnership has determined that all leases relating to the farm parcels are operating leases.  Accordingly, rental income is reported when earned.  As of December 31, 2005 the Partnership had farm leases of generally one year in duration, for approximately 899 acres of the approximately 1,176 acres owned.             -33-  INLAND LAND APPRECIATION FUND, L.P. (a limited partnership)  Notes to Financial Statements (continued)  (6) Mortgage Loans Receivable  Mortgage loans receivable are the result of sales of Parcels, in whole or in part.  The Partnership has recorded a deferred gain on these sales.  The deferred gain will be recognized over the life of the related mortgage loan receivable as principal payments are received.  As of December 31, 2005, the mortgage loans receivable and the related deferred gain are fully reserved.  For the year ended December 31, 2005, the Partnership received a payment of $60,000 on a mortgage loan receivable previously reserved and recorded as recovery of loan losses and bad debt expense.      Principal Balance Principal Balance Accrued Interest Receivable Deferred Gain  Parcel Maturity Interest Rate 12/31/05 12/31/04 12/31/05 12/31/05  1 03/31/06 9.00% $  1,233,175 1,233,175 423,794 60,752          Less allowance for doubtful accounts 1,233,175 1,233,175 423,794 60,752             $       -            -           -           -        The General Partner determined that the maximum value of Parcels 1, 15, 21 and 23 could be realized if the parcels were developed and sold as individual lots. However, if we had followed that plan, there is a possibility that the limited partners may have been subject to unrelated business taxable income. Therefore, the Partnership sold the parcels to a third party developer whereby 100% of the sales price was represented by notes receivable from the buyer. The transactions were deemed installment sales. After the sales, the developer, through a limited liability company (“LLC”), secured third party financing to cover the deferred down payment owed to the Partnership as well as provide proceeds to begin the development of the project. The sales were structured so that the down payment received at the time of the sale was sufficient to provide a distribution to the Limited Partners that equated to the parcel capital allocated to t he parcel plus approximately a 6% return per annum on the parcel capital through the date of the distribution.  The velocity of the developer's individual lot sales was slower than originally projected and consequently the developer's carrying costs were higher. The developer obtained a loan from an affiliate of the General Partner. These funds were used for operating costs and to continue the development of the project. As a result of the slower lot sales, the net sale proceeds available to the Partnership were lower than anticipated. As of December 31, 2002, we had recorded an allowance for doubtful accounts of $767,248 relating to a portion of the accrued interest receivable on mortgage loans resulting from the sale of these parcels. In early August 2003, we reviewed recent forecasts on these parcels, and determined that the collectibility of these receivables was doubtful. As a result, we elected to reserve an additional $2,302,787 of principal and accrued interest relating to the mortgages receivable in 2003. The deferred gain of $242,368 relating to the mortgage loans receivable was also reserved and recorded ag ainst bad debt expense as of December 31, 2003.  We continued to monitor these transactions throughout 2004 and, based on our review of the developments’ financial situation during the fourth quarter of 2004, we did not anticipate receiving any additional proceeds on Parcels 15, 21 and 23. As of December 31, 2004, the Partnership wrote off the mortgage loans receivable and related accrued interest receivable and deferred gain relating to Parcels 15, 21 and 23. As of December 31, 2005, the mortgage loan receivable relating to Parcel 1 is fully reserved, however based on our review of the developments’ financial situation relating to this Parcel and potential sales of the commercial pieces of this Parcel, we have not written off this receivable at this time.    -34-  INLAND LAND APPRECIATION FUND, L.P. (a limited partnership)  Notes to Financial Statements (continued)   The General Partner guaranteed the third party development loans owed by the LLCs. In reviewing the development’s financial situation, the General Partner determined that it would be in its best interest to have an affiliate acquire the interest in the LLCs. The General Partner and its affiliates concluded that they could better control the continuing costs to complete the development and would therefore have the best opportunity to limit their exposure under the guarantee agreements and possibly recover a portion of the amount owed to the Partnership. An affiliate of the General Partner acquired the interests in the LLCs and paid off the debt under its guarantee of the LLC loans. The affiliate of the General Partner will complete the development and the sale of the projects.   (7) Notes Payable to Affiliate  On December 6, 2000, the Partnership obtained a loan from the General Partner in the amount of $1,500,000 collateralized by Parcels 17, 18 and 22. During 2002, the General Partner advanced an additional $15,000. The note accrued interest at prime plus .5% and had a maturity date of November 30, 2004.  For the year ended December 31, 2004, interest of $49,046 was capitalized. During 2004, all principal and accrued interest on this loan was repaid.  On September 17, 2002, the Partnership obtained a loan from the General Partner in the amount of $1,600,000, collateralized by Parcels 4, 6 and 7.  The note accrued interest at a rate of prime plus .5% and had a maturity date of September 17, 2005. For the year ended December 31, 2004, interest of $22,609 was capitalized. During 2004, all principal and accrued interest on this loan was repaid.    -35-
Not applicable    -36-   PART III
Our general partner, Inland Real Estate Investment Corporation (IREIC), was organized in 1984 for the purpose of acting as general partner of limited partnerships formed to acquire, own and operate real properties. Our general partner is a wholly owned subsidiary of The Inland Group, Inc. The general partner has responsibility for all aspects of our operations.   During 2004, the board of directors of our general partner formalized the audit committee. The Audit Committee is not independent from our general partner and consists of Catherine L. Lynch, committee chair and financial expert, Brenda G. Gujral, Roberta S. Matlin and Gary Pechter. The audit committee is responsible for engaging our independent registered public accounting firm, reviewing the plans and results of the audit engagement with our independent registered public accounting firm and consulting with the independent registered public accounting firm regarding the adequacy of our internal accounting controls.  During 2004, our general partner adopted a Code of Ethics that applies to all of its employees.  Officers and Directors  The officers, directors, and key employees of IREIC and its affiliates that are likely to provide services to us are as follows. Ages are listed as of January 1, 2006.     Functional Title     Daniel L. Goodwin Director  Robert H. Baum Director, General Counsel of IREIC  Robert D. Parks Chairman   Brenda G. Gujral  Director, President and principal executive officer of the Partnership  Catherine L. Lynch  Treasurer  Roberta S. Matlin  Director, Senior Vice President-Investments  Guadalupe Griffin Vice President-Asset Management  Kelly Tucek Vice President-Partnership Accounting and principal financial officer of the Partnership   Gary E. Pechter Senior Vice President, The Inland Group,  Counsel to the Partnership       -37-  DANIEL L. GOODWIN (age 62) has been with Inland since 1968 and is a founding and controlling stockholder of, and the chairman of the board and chief executive officer of, The Inland Group. Mr. Goodwin also serves as a director or officer of entities wholly owned or controlled by The Inland Group. In addition, Mr. Goodwin is the chairman of the board of Inland Real Estate Corporation, chairman of the board and chief executive officer of Inland Mortgage Investment Corporation and chairman of the board and chief executive officer of Inland Bancorp Holding Company, a bank holding company. Mr. Goodwin also serves on the management committee of Inland Real Estate Corporation.  Mr. Goodwin is a member of the National Association of Realtors, the Illinois Association of Realtors and the Northern Illinois Commercial Association of Realtors.  He is also the author of a nationally recognized real estate reference book for the management of residential properties.  Mr. Goodwin serves on the Board of the Illinois State Affordable Housing Trust Fund. He has served as an advisor for the Office of Housing Coordination Services of the State of Illinois, and as a member of the Seniors Housing Committee of the National Multi-Housing Council. He has served as Chairman of the DuPage County Affordable Housing Task Force and presently serves as chairman of New Directions Affordable Housing Corporation.   Mr. Goodwin obtained his bachelor's and master's degrees from Illinois state universities. Following graduation, he taught for five years in the Chicago public schools system. More recently, Mr. Goodwin has served as a member of the board of governors of Illinois State Colleges and Universities.  He is vice chairman of the board of trustees of Benedictine University, vice chairman of the board of trustees of Springfield College and chairman of the board of Northeastern Illinois University.   ROBERT H. BAUM (age 62) has been with Inland since 1968 and is one of the founding stockholders. Mr. Baum is vice chairman and executive vice president and general counsel of The Inland Group. In his capacity as general counsel, Mr. Baum is responsible for the supervision of the legal activities of The Inland Group and its affiliates. This responsibility includes the supervision of The Inland Law Department and serving as liaison with outside counsel. Mr. Baum has served as a member of the North American Securities Administrators Association Real Estate Advisory Committee and as a member of the Securities Advisory Committee to the Secretary of State of Illinois. He is a member of the American Corporation Counsel Association and has also been a guest lecturer for the Illinois State Bar Association. Mr. Baum has been admitted to practice before the Supreme Court of the United States, as well as the bars of several federal courts of appea ls and federal district courts and the State of Illinois. He is also a licensed real estate broker. He has served as a director of American National Bank of DuPage and currently serves as a director of Inland Bancorp Holding Company and of Westbank. Mr. Baum also is a member of the Governing Council of Wellness House, a charitable organization that exists to improve the quality of life for people whose lives have been affected by cancer and its treatment by providing psychosocial and educational support for cancer patients, their families and friends.   ROBERT D. PARKS  (age 62) has been with Inland since 1968 and is one of the founding stockholders. He also is chairman of Inland Real Estate Investment Corporation, director of Inland Securities Corporation and a director of Inland Investment Advisors, Inc.  Mr. Parks is president, chief executive officer, and a director of Inland Real Estate Corporation and serves on its management committee.  He is also chairman and an affiliated director of Inland Western Retail Real Estate Trust, Inc. He is chairman and an affiliated director of Inland American Real Estate Trust, Inc. Mr. Parks is responsible for the ongoing administration of existing investment programs, corporate budgeting and administration for Inland Real Estate Investment Corporation. He oversees and coordinates the marketing of all investments and investor relations.  Prior to joining Inland, Mr. Parks was a school teacher in Chicago's public schools. He received his B.A. Degree from Northeastern Illinois University and his M.A. Degree from the University of Chicago. He is a registered Direct Participation Program Limited Principal with the National Association of Securities Dealers, Inc. He is also a member of the Real Estate Investment Association, the Financial Planning Association, the Foundation for Financial Planning, as well as a member of the National Association of Real Estate Investment Trusts.     -38-  BRENDA G. GUJRAL (age 63) is president, chief operating officer and a director of Inland Real Estate Investment Corporation (IREIC). She is also president, chief operating officer and a director of Inland Securities Corporation (ISC), a member firm of the National Association of Securities Dealers (NASD). Mrs. Gujral is also a director of Inland Investment Advisors, Inc., an investment advisor. She is also Chief Executive Officer and an affiliated director of Inland Western Retail Real Estate Trust, Inc., chairman of the board of Inland Real Estate Exchange Corporation and President and chief operating officer and an affiliated director of Inland American Retail Real Estate Trust, Inc.  Mrs. Gujral has overall responsibility for the operations of IREIC, including the distribution of checks to over 70,000 investors, review of periodic communications to those investors, the filing of quarterly and annual reports for Inland’s publicly registered investment programs with the Securities and Exchange Commission, compliance with other SEC and NASD securities regulations both for IREIC and ISC, review of asset management activities, and marketing and communications with the independent broker/dealer firms selling Inland’s current and prior programs.  Mrs. Gujral works with internal and outside legal counsel in structuring and registering the prospectuses for IREIC’s investment programs and in connection with the preparation of its offering documents and registering the related securities with the Securities and Exchange Commission and state securities commissions.  Mrs. Gujral has been with the Inland organization for more than 20 years, becoming an officer in 1982. Prior to joining Inland, she worked for the Land Use Planning Commission establishing an office in Portland, Oregon, to implement land use legislation for that state.  She is a graduate of California State University.  She holds Series 7, 22, 39 and 63 licenses withthe NASD.  Mrs. Gujral is a member of the National Association of Real Estate Investment Trusts (NAREIT) and the National Association for Female Executives.   CATHERINE L. LYNCH (age 47) joined Inland in 1989 and is the treasurer of Inland Real Estate Investment Corporation. Ms. Lynch is responsible for managing the corporate accounting department. Prior to joining Inland, Ms. Lynch worked in the field of public accounting for KPMG LLP since 1980. She received her B.S. Degree in Accounting from Illinois State University. Ms. Lynch is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants and the Illinois CPA Society. She is registered with the National Association of Securities Dealers as a Financial Operations Principal.   ROBERTA S. MATLIN (age 61) joined Inland Real Estate Investment Corporation (IREIC) in 1984 as director of investor administration and currently serves as senior vice president of IREIC, directing the day-to-day internal operations.  Ms. Matlin is a director of IREIC and president of Inland Investment Advisors, Inc., and Intervest Southern Real Estate Corporation, and a director and vice president of Inland Securities Corporation. She is the president of Inland American Advisory Services, Inc. Since 2003, she has been vice president of administration of Inland Western Retail Real Estate Trust, Inc., and since 2004, vice president of administration of Inland American Real Estate Trust, Inc.  She was vice president of administration of Inland Real Corporation from 1995 until 2000 and of Inland Retail Real Estate Trust, Inc from 1998 until 2004. From June 2001 until April 2004, she was a trustee and executive vice president of I nland Mutual Fund Trust. Prior to joining Inland, she worked for the Chicago Region of the Social Security Administration of the Untied States Department of Health and Human Services.  Ms. Matlin is a graduate of the University of Illinois. She holds Series 7, 22, 24, 39, 63 and 65 licenses with the National Association of Securities Dealers.   GUADALUPE GRIFFIN (age 41) joined Inland in 1994. Ms. Griffin serves as vice president of Inland Real Estate Investment Corporation and assistant vice president of Inland Midwest Investment Corporation. Ms. Griffin is responsible for the asset management and day-to-day operations of the public and private partnerships which include the development of operating and disposition strategies for the partnerships and investor communications. Prior to joining Inland, Ms. Griffin was employed by the University of Illinois at Chicago Center for Urban Educational    -39-  Research and Development as Assistant to the Director of the Nation of Tomorrow Program; a privately funded multi-million dollar program, which provided educational and empowerment services to youths and their families in four inner-city schools. Ms. Griffin holds an Illinois Real Estate Sales License.   KELLY TUCEK (age 43) joined Inland in 1989 and is a vice president of Inland Real Estate Investment Corporation and beginning in 2006, vice president, controller of Inland Western Retail Real Estate Advisory Services, Inc.  As of August 1996, Ms. Tucek is responsible for the investment accounting department which includes all public partnership accounting functions along with quarterly and annual SEC filings. Prior to joining Inland, Ms. Tucek was on the audit staff of Coopers and Lybrand since 1984. She received her B.A. Degree in Accounting and Computer Science from North Central College.   GARY E. PECHTER (age 54) joined Inland in 1985 and is a Senior Vice President and Assistant General Counsel of The Inland Real Estate Group, Inc., and a member of the Audit Committee for all public partnerships sponsored by IREIC. In his capacity as their counsel, Mr. Pechter has been admitted to practice law in the State of Illinois and the federal district court.  He is also a licensed real estate broker. Mr. Pechter received his undergraduate degree from the University of Illinois and his law degree from John Marshall Law School.   Section 16(a) Beneficial Ownership Reporting Compliance  Section 16(a) of the Exchange Act requires directors, executive officers and beneficial owners of more than ten percent of our partnership units to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission and to provide us with copies of such reports. Based solely on a review of the copies provided to us and written representations from such reporting persons, we believe that all applicable Section 16(a) filing requirements have been met for such reporting persons.
Our general partner is entitled to receive a share of cash distributions of net sales proceeds based upon both an aggregate overall return to the limited partners and a separate return with respect to each parcel of land purchased by us.  Our partnership agreement defines the allocation of profits and losses, and available cash.  If and to the extent that real estate taxes and insurance payable with respect to our land during a given year exceed our revenues, our general partner will make a supplemental capital contribution of such amount to us to ensure that we have sufficient funds to make such payments.    -40-  Profits and losses from operations (other than capital transactions) will be allocated 99% to the limited partners and 1% to the general partner.  The net gain from a sale of our properties is first allocated among the partners in proportion to the negative balances, if any, in their respective capital accounts.  Thereafter, except as provided below, net gain is allocated to the general partner in an amount equal to the proceeds distributed to the general partner from such sale and the balance of any net gain is allocated to the limited partners.  If the amount of net gain realized from a sale is less than the amount of cash distributed to the general partner from such sale, we will allocate income or gain to the general partner in an amount equal to the excess of the cash distributed to the general partner with respect to such sale as quickly as permitted by law.   Any net loss from a sale will be allo cated to the limited partners.  Distributions of net sale proceeds will be allocated between the general partner and the limited partners based upon both an aggregate overall return to the limited partners and a separate return with respect to each parcel of land purchased by us.  As a general rule, net sale proceeds will be distributed 90% to the limited partners and 10% to the general partner until the limited partners have received from net sale proceeds (i) a return of their original capital plus (ii) a noncompounded cumulative preferred return of 15% of their invested capital.  However, with respect to each parcel of land, the general partner's 10% share will be subordinated until the limited partners receive a return of the original capital attributed to such parcel or parcel capital, plus a 6% per annum noncompounded cumulative preferred return thereon.  After the amounts described in items (i) and (ii) above and any previously subordinated distributions to the general partner have been paid, and the amount of any supplemental capital contributions have been repaid to the general partner, subsequent distributions shall be paid 75% to the limited partners and 25% to the general partner without considering parcel capital. If, after all net sale proceeds have been distributed, the general partner has received more than 25% of all net sale proceeds (exclusive of distributions made to the limited partners to return their original capital), the general partner shall contribute to the partnership for distribution to the limited partners an amount equal to such excess.  Any distributions from net sale proceeds at a time when invested capital is greater than zero shall be deemed applied first as a reduction of such invested capital before application to payment of any deficiency in the 15% cumulative preferred return.  We are permitted to engage in various transactions involving affiliates of our general partner, as described below.   Our general partner was entitled to receive an asset management fee equal to one-quarter of 1% of our original cost of undeveloped land annually, limited to a cumulative total over the life of our partnership of 2% of the land's original cost to us. As of June 30, 1998, we had met this limit and no additional asset management fees have been paid.  Our general partner and its affiliates may be reimbursed for their expenses or out-of-pocket costs relating to our administration. For the year ended December 31, 2005, such costs included in general and administrative services to affiliates and professional services to affiliates were $45,316, of which $7,423 was unpaid as of December 31, 2005.  An affiliate of the general partner performed marketing and advertising services for us and was reimbursed for direct costs.  For the year ended December 31, 2005, we incurred $29,982 of such costs, all of which was paid as of December 31, 2005.  An affiliate of the general partner performed property upgrades, rezoning, annexation and other activities to prepare our land investments for sale and was reimbursed for salaries and direct costs. For the year ended December 31, 2005, we incurred $156,306 of such costs which are included in investments in land and improvements, of which $38,063 was unpaid.    -41-
(a) No person or group is known by us to own beneficially more than 5% of the outstanding units of our partnership  (b) The officers and directors of our general partner own as a group the following units of our partnership:    Amount and Nature    of Beneficial Percent  Title of Class Ownership of Class      Limited partnership units 317 Units directly 1%        No officer or director of our general partner possesses a right to acquire beneficial ownership of units of our partnership.  All of the outstanding shares of our general partner are owned by an affiliate or its officers and directors as set forth above in Item 10.  (c) There exists no arrangement, known to us, the operation of which may at a subsequent date result in a change in our control.
There were no significant transactions or business relationships with the general partner, affiliates or their management other than those described in Items 10 and 11 above.  Reference is made to Note 3 of the Notes to Financial Statements (Item 8 of this Annual Report) for information regarding related party transactions.
Fees.  Aggregate fees paid for professional services rendered by our independent registered public accounting firm were as follows:     Years ended December 31,    2005 2004       Audit fees for professional services rendered for the audit of our annual financial statements and quarterly reviews of our financial statements. $ 31,787 35,900  Tax fees for professional services rendered for tax return preparation and review of our K-1s.  6,200 15,190       Total fees  $ 37,987 51,090       -42-  PART IV
(a) The financial statements listed in the index at page 16 of this annual report are filed as part of this annual report.  (b) Exhibits. The following exhibits are incorporated herein by reference:  3  Restated Certificate of Limited Partnership and amended and restated Agreement of Limited Partnership, included as Exhibits A and B of the Prospectus dated October 12, 1988 as supplemented, are incorporated herein by reference thereto.  4  Form of Certificate of Ownership representing interests in the registrant filed as Exhibits 4(a) and 4(b) to Registration Statement on Form S-11, File No.  33-18607, is incorporated herein by reference thereto.      31.1 Rule 13a-14(a)/15d-14(a) Certification by principal executive officer     31.2 Rule 13a-14(a)/15d-14(a) Certification by principal financial officer     32.1 Section 1350 Certification by principal executive officer     32.2 Section 1350 Certification by principal financial officer       (c) Financial Statement Schedules.        All schedules have been omitted as the required information is inapplicable or the information is presented in the financial statements or related notes.  (d)  Reports on Form 8-K.  None.    No annual report or proxy material for the year 2005 has been sent to our limited partners.   An annual report will be sent to the limited partners subsequent to this filing and we will furnish copies of such report to the Commission when it is sent to the limited partners.      -43-  SIGNATURES  Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.     INLAND LAND APPRECIATION FUND, L.P.    Inland Real Estate Investment Corporation    General Partner     /s/ Brenda G. Gujral     By: Brenda G. Gujral    President and Director  Date: March 23, 2005    Pursuant to the  requirements  of  the  Securities  Exchange  Act of 1934, this report has  been  signed  below  by  the  following  persons  on  behalf of the Registrant and in the capacities and on the dates indicated:   By: Inland Real Estate Investment Corporation    General Partner     /s/ Brenda G. Gujral     By: Brenda G. Gujral    President and Director  Date: March 23, 2005     /s/ Guadalupe Griffin     By: Guadalupe Griffin    Vice President  Date: March 23, 2005     /s/ Kelly Tucek     By: Kelly Tucek    Vice President  Date: March 23, 2005     /s/ Robert D. Parks     By: Robert D. Parks    Chairman  Date: March 23, 2005     /s/ Daniel L. Goodwin     By: Daniel L. Goodwin    Director  Date: March 23, 2005          -44-       EX-31 2 land1311.htm     SECTION 302 CERTIFICATION     EXHIBIT 31.1 CERTIFICATION  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  I, Brenda G. Gujral, President, certify that: (1) I have reviewed this annual report on Form 10-K of Inland Land Appreciation Fund, L.P.; (2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; (3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. (4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) and we have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrants fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and  (5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.   By:  Inland Real Estate Investment Corporation       General Partner         /S/ Brenda G. Gujral                                                   Name:  Brenda G. Gujral  Title:  President of the General Partner and principal executive officer of Inland Land Appreciation Fund, L.P.     Date:  March 23, 2006           EX-31 3 land1312.htm     SECTION 302 CERTIFICATION     EXHIBIT 31.2 CERTIFICATION  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  I, Kelly Tucek, Vice President, certify that: (1) I have reviewed this annual report on Form 10-K of Inland Land Appreciation Fund, L.P.; (2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; (3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. (4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) and we have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrants fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and  (5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.   By: Inland Real Estate Investment Corporation       General Partner      /S/ Kelly Tucek                                                 Name: Kelly Tucek  Title: Vice President of the General Partner and   principal financial officer of Inland Land Appreciation Fund, L.P.  Date: March 23, 2006           EX-32 4 land1321.htm     Exhibit [___]     Exhibit 32.1  Certification  Pursuant to Section 1350 of Title 18 of the United States Code, the undersigned hereby certifies that:  (1) I have reviewed the Annual Report on Form 10-K of Inland Land Appreciation Fund, L.P. (the "Report") to which this statement is an Exhibit;  (2) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and  (3) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Inland Land Appreciation Fund, L.P.   By:  Inland Real Estate Investment Corporation       General Partner         /S/ Brenda G. Gujral                                        Name:  Brenda G. Gujral  Title:  President of the General Partner and principal executive officer of Inland Land Appreciation Fund, L.P.     Date:  March 23, 2006           EX-32 5 land1322.htm     Exhibit 99       Exhibit 32.2  Certification  Pursuant to Section 1350 of Title 18 of the United States Code, the undersigned hereby certifies that:  (1) I have reviewed the Annual Report on Form 10-K of Inland Land Appreciation Fund, L.P.  (the "Report") to which this statement is an Exhibit;  (2) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and  (3) The information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of Inland Land Appreciation Fund, L.P.    By: Inland Real Estate Investment Corporation       General Partner      /S/ Kelly Tucek                                           Name: Kelly Tucek  Title: Vice President of the General Partner and   principal financial officer of Inland Land Appreciation Fund, L.P.  Date: March 23, 2006                -----END PRIVACY-ENHANCED MESSAGE-----