UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549  FORM 10-K  XANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM     TO  COMMISSION FILE NUMBER: 0-19220  Inland Land Appreciation Fund II, L.P. (Exact name of registrant as specified in its charter)  Delaware36-3664407(State of Incorporation)(I.R.S. Employer Identification No.)  2901 Butterfield Road, Oak Brook, IL  60523 (Address of principal executive offices)(Zip Code)  630-218-8000 (Registrants telephone number, including area code) ___________________________________________  Securities registered pursuant to Section 12(b) of the Act: Title of each class:Name of each exchange on which registered:NoneNone  Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Units (Title of each class)  Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  o      No X Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act. Yes  o      No  X Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. Yes X   No  o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form 10-K.  [ X ]  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,  a non-accelerated filer, or a smaller reporting company  (See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company"  in Rule 12b-2 of the Exchange Act).  (Check one): Large accelerated filer  o         Accelerated filer  o          Non-accelerated filer o           Smaller reporting company X  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No  X  The registrant's common equity is not publicly traded and therefore has no market value.   -1-  INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
TABLE OF CONTENTS  Part IPageItem  1.Business3Item  1(A).Risk factors4Item  1(B).Unresolved Staff Comments5Item  2.Properties6Item  3.Legal Proceedings8Item  4.Submission of Matters to a Vote of Security Holders8Part IIItem  5.Market for Partnership's Limited Partnership Units and Related Security Holder Matters9Item  6.Selected Financial Data9Item  7.Management's Discussion and Analysis of Financial Condition and Results of Operations10Item  8.Financial Statements and Supplementary Data16Item  9.Changes in and Disagreements with Independent Auditors on Accounting and Financial Disclosure34Item 9(A).Controls and Procedures34Item 9(B).Other Information34Part IIIItem 10.Directors and Executive Officers of the Registrant35Item 11.Executive Compensation39Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters40Item 13.Certain Relationships and Related Transactions40Item 14.Principal Accounting Fees and Services41Part IVItem 15.Exhibits and Financial Statement Schedules41SIGNATURES42  -2-  PART I  Item 1. Business  Inland Land Appreciation Fund II, L.P.  was formed on June 28, 1989, to invest in undeveloped land on an all-cash basis and realize appreciation of such land upon resale. On October 25, 1989, we commenced an offering of 30,000 (subject to an increase to 60,000) limited partnership units or units at $1,000 per unit, pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933. On October 24, 1991, we terminated our offering of units, after we sold 50,476.17 units, at $1,000 per unit, resulting in $50,476,170 in gross offering proceeds, not including our general partner's capital contribution of $500. All of the holders of our units were admitted to our partnership. Inland Real Estate Investment Corporation is our general partner. Our limited partners share in their portion of benefits of ownership of our real property investments according to the number of units held. As of December 31, 2007, we have repurchased a total of 408.65 units for $383,822 from various limited partners through the unit repurchase program. Under this program, limited partners could, under certain circumstances, have their units repurchased for an amount equal to their original capital as reduced by distributions from net sale proceeds.  We purchased on an all-cash basis, 27 parcels of undeveloped land and two buildings and are engaged in the rezoning and resale of the parcels. On September 16, 2002, we completed a tax-deferred exchange of Parcels 9 and 12 for 50 acres in Kendall County (Parcel 28). All of the investments were made in the Chicago metropolitan area. The anticipated holding period of the land was approximately two to seven years from the completion of the land portfolio acquisitions. As a result of the lengthy rezoning and entitlement processes and the no growth mentality of the municipalities where the land is located, our holding period has exceeded our original estimates. As of December 31, 2007, we have had multiple sales transactions, through which we have disposed of approximately 3,511 acres of the approximately 4,530 acres originally owned. We continue to market the remaining acres for sale.  We are engaged in the business of real estate investment which management considers being a single operating segment. A presentation of information about operating segments would not be material to an understanding of our business taken as a whole.  We plan to enhance the value of our land through pre-development activities such as rezoning, annexation and land planning. We have already been successful in, or are in the process of, pre-development activity on several of our land investments.  Parcel 20 has been granted rezoning which will permit additional land to be used for development, and discussions continue with the Village of Montgomery about a tax increment financing district to fund development of the property.  Zoning and planning of Parcels 3/27 and 18 is complete and three contracts for sale of improved single family lots are proceeding. We have completed our final planning on Parcel 4.  During the year ended December 31, 2007, we received net sales proceeds of $5,477,275 from the sale of Parcel 6, $1,414,147 from the sales of Parcel 18, and $4,503,703 from the sales of Parcel 3/27.  Parcel 3/27 consists of two contiguous parcels which are being jointly developed as two residential subdivisions.  Each subdivision lies within the boundaries of both parcels.  We anticipate future additional sales of over 80 acres of Parcels 3/27 and 18 during 2008 through 2009.  However there can be no assurance that any sales will be completed or that a distribution will be made to the limited partners based upon such sales. Undistributed net sales proceeds will be used to fund our operations, including property upgrades. We will evaluate our cash needs throughout the year to determine any future distributions.  We had no employees during 2007.  Our general partner and its affiliates provide services to us. Our general partner and its affiliates are reimbursed for salaries and expenses of employees of the general partner and its affiliates relating to the administration of the partnership. An affiliate of the general partner performs marketing and advertising services for us and is reimbursed for direct costs. An affiliate of the general partner performs property upgrades, rezoning, annexation and other activities to prepare our parcels for sale and is reimbursed for salaries and direct costs.  Access to Our Information   -3-  We electronically file our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports with the Securities and Exchange Commission (SEC). The public may read and copy any of the reports that are filed with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at (800)-SEC-0330. The SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically.  We make available, free of charge, by responding to requests addressed to our director of investor relations, the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports. These reports are available as soon as reasonably practical after such material is electronically filed or furnished to the SEC. Limited partners wishing to communicate with our general partner can do so by writing to the attention of the general partner care of our partnership at 2901 Butterfield Road, Oak Brook, IL 60523.  Item 1(A). Risk Factors  Pre-Development Stage Land  The net proceeds of the offering were invested in pre-development stage land.  An investment in such land involves a number of potential risks, which include the following:  Dependence on Governmental Zoning and Fiscal Policies.  We will conduct rezoning and pre-development activities with respect to our land investments.  Rezoning may only be effected by appropriate city, county and/or other local authorities.  There can be no assurance that our efforts to cause these authorities to change the zoning classification(s) which apply to a given parcel of land owned by the partnership will be successful. Sometimes citizens oppose our efforts. Moreover, these authorities may require us to spend funds to facilitate future development of the land as a condition of rezoning.  There can be no assurance that we will have sufficient funds to accomplish the required changes.  Restricted or Limited Access to Utilities and Roadways.  The value of our land will be affected by ease of access to utilities and transportation.  If public utility providers are not located in sufficient proximity to a parcel owned by the partnership, the cost of arranging for such utility access may be prohibitive to the partnership or a potential purchaser of the parcel, thereby reducing the value of the parcel. Delays and/or postponements in the construction of roads in areas by our parcels likely would adversely affect the value of our parcels.  Environmental Risks. Federal and state environmental laws can impose substantial liability on owners of real estate without regard to fault, even when other parties are or were responsible for the environmental impairment.  Environmental liabilities could cause us to incur significant expenses, including (but not limited to) the obligation to remedy or clean up hazardous substances (such as pesticides commonly used on farmland) or other pollutants, regardless of fault.  Such liabilities could require us to dispose of a property at a loss, which could be substantial.  In addition, the value of our land is affected by the drainage pattern of such land and the surrounding area, the susceptibility of such land to flooding and the possibility that such land might be classified as "wetlands" by a government agency, thereby inhibiting or precluding development of the parcel.  Nature of Farm Leases and Limited Current Income.  With the exception of limited amounts of cash which may be generated from leasing the land as farmland or for other revenue-producing activities, pre-development land does not generate current income.  Nevertheless, we incur ongoing expenses in connection with the ownership of such land (for example, real estate taxes).  At the same time, our farm rental revenue is subject to a farm tenant's ability to pay the contracted rent, which depends on fluctuations in commodity prices, bad weather, competition from other producers, changes in government farm policy (including price supports), pests and crop diseases.  Lack of Geographic Diversification.  All of our land investments are located in the Chicago metropolitan area.  The success of the partnership will, therefore, depend to a great extent upon the rate and amount of economic growth in the Chicago metropolitan area.   -4-  Partnership-Related Risks  Risk of Installment Sale.  We may sell some land parcels on an installment basis (which means that the sale price will be received in installments during the term of the agreement).  In the event we find it necessary or desirable to provide such financing upon the resale of our parcels, a liquidation of the partnership may be delayed beyond the time of disposition of the parcels until any such loans are repaid or otherwise liquidated.  In the event of a default on an installment sale, we may be forced to reacquire a property.  No Market for Units.  Our units are subject to certain restrictions on transferability.  As a result of these restrictions, no public trading market is likely to develop for these securities, nor is one intended to develop.  Purchasers of units may not, therefore, be able to liquidate their investment, and units may not be readily acceptable as collateral for a loan.  Transfer Limit.In accordance with Article XVI Section 16.1 of the Inland Land Appreciation Fund II, L.P. Partnership Agreement and IRS Regulation Section 1.7704-1(j), we reached the maximum threshold of partnership units that can be transferred/assigned during 2007.  Conflicts of Interest.   We may be subject to various conflicts of interest arising out of our relationship with our general partners and its affiliates.   If the general partner or its affiliates breach their fiduciary obligations to us, or do not resolve these conflicts of interest to our benefit, we could suffer consequences which we might not otherwise be subject to if such conflicts of interest did not exist.  Federal Income Tax Aspects  Potential Receipt of UBTI. The incurrence of debt in connection with our pre-development and/or sales activities could cause the gain on the sale of parcels to constitute unrelated business taxable income ("UBTI") and affect limited partners that are tax-exempt entities.  Item 1(B). Unresolved Staff Comments None  -5-  Item 2. Properties  We acquired fee ownership of the following real property investments:  Gross AcresRemainingPurchase/SalesParcel & LocationPurchased/SoldAcresDateParcel 1, McHenry County, Illinois372.7590-04/25/90(372.7590sold 02/23/04)Parcel 2, Kendall County, Illinois41.1180-07/06/90(3.473sold 08/29/03)(37.645sold 02/17/05)Parcel 3/27, Kendall County, Illinois120.817058.40211/06/9083.52503/11/93(3.3900sold 05/17/05)(31.0000sold 07/14/05)(74.7000sold various 2006)(36.85sold various 2007)Parcel 4, Kendall County, Illinois299.0250299.025006/28/91Parcel 5, Kane County, Illinois189.0468-02/28/91(189.0468sold 05/16/01)Parcel 6, Lake County, Illinois57.3345-04/16/91(.2580sold 10/01/94)(57.0765sold 03/22/07)Parcel 7, McHenry County, Illinois56.7094-04/22/91(12.6506sold various  1997)(15.7041sold various 1998)(19.6296sold various 1999)(8.7251sold various 2000)Parcel 8, Kane County, Illinois325.3940181.524006/14/91(.8700sold 04/03/96)(63.0000sold 01/23/01)(80.0000sold 05/11/04)Parcel 9, Will County, Illinois9.8670-08/13/91(9.8670*09/16/02)Parcel 10, Will County, Illinois150.6600-08/20/91(150.6600sold 01/10/05)Parcel 11, Will County, Illinois138.4470-08/20/91(138.4470sold 05/03/93)Parcel 12, Will County, Illinois44.7320-08/20/91(44.7320*09/16/02)Parcel 13, Will County, Illinois6.3420-09/23/91(6.3420sold 05/03/93)  -6-   Gross AcresRemainingPurchase/SalesParcel & LocationPurchased/SoldAcresDateParcel 14, Kendall County, Illinois44.4030-09/03/91(15.3920sold 04/16/01)(14.2110sold various 2002)(13.6000sold 04/11/03)(1.2000sold 02/19/04)Parcel 15, Kendall County, Illinois100.3640-09/04/91(5.0000sold 09/01/93)(11.0000sold 12/01/94)(84.3640sold 08/14/98)Parcel 16, McHenry County, Illinois168.9050-09/13/91(168.9050sold 08/03/01)Parcel 17, Kendall County, Illinois3.4620-10/30/91(2.1130sold 03/06/01)(1.3490sold 08/23/02)Parcel 18, McHenry County, Illinois139.169721.700011/07/91(9.2500sold various 2004)(33.3197sold various 2005)(62.0200sold various 2006)(12.8800sold various 2007)Parcel 19, Kane County, Illinois436.2360-12/13/91(436.2360sold 05/16/01)Parcel 20, Kane & Kendall Counties, Illinois400.1290378.991001/31/92(21.1380sold 06/30/99)Parcel 21, Kendall County, Illinois15.0130-05/26/92(1.0000sold 03/16/99)(14.0130sold 09/06/06)Parcel 22, Kendall County, Illinois391.959028.996010/30/92(10.0000sold 01/06/94)(5.5380sold 01/05/96)(2.4000sold 07/27/99)(73.3950sold various 2001)(136.0000sold 08/14/02)(34.1400sold 05/27/03)(101.4900sold various 2004)Parcel 23, Kendall County, Illinois133.4750-10/30/92(.2676sold 03/16/93)(11.5250donated 07/16/93)(44.0700sold various 1995)(8.2500sold various 1996)(2.6100sold various 1997)(10.6624sold various 1998)(5.8752sold various 1999)  -7-   Gross AcresRemainingPurchase/SalesParcel & LocationPurchased/SoldAcresDate(49.0120sold various 2000)(.2028sold various 2001)(1.0000sold various 2002)Parcel 24, Kendall County, Illinois4.3140-01/21/93(4.3140sold 04/16/01)Parcel 25, Kendall County, Illinois656.6870-01/28/93(656.6870sold 10/31/95)Parcel 26, Kane County, Illinois89.5110-03/10/93(2.1080sold 12/03/99)(34.2550sold various 2000)(7.8000sold various 2001)(29.1200sold various 2002)(11.3100sold various 2003)(4.9180sold 01/28/04)Parcel 28, Kendall County, Illinois50.000050.0000*09/16/02  *  On September 16, 2002, we completed a tax-deferred exchange of Parcels 9 and 12 for 50 acres in Kendall County (Parcel 28).  Our general partner anticipates that the land we acquired will produce sufficient income to pay property taxes and  insurance. 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 consist 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, 2007, our land has generated sufficient revenues from leasing to cover real estate taxes and insurance expense.  Item 3. Legal Proceedings  We are not subject to any material pending legal proceedings.  Item 4. Submission of Matters to a Vote of Security Holders  There were no matters submitted to a vote of our security holders during 2007.  -8-  Part II  Item 5. Market for the our Limited Partnership Units and Related Security Holder Matters  As of February 5, 2008, there were 4,306 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, 2007 and 2006, we paid the following distributions:  Distributions to:20072006General partners$2,500,0002,425,000Limited partners5,000,00014,565,000Total$7,500,00016,990,000  Item 6.  Selected Financial Data  Not applicable  -9-  Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations  Certain statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this annual report on Form 10-K constitute "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. These forward looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward looking statements. These factors include, among other things, the ability to obtain annexation and zoning approvals required to develop our properties; the approval of local governing bodies to develop our properties; successful lobbying of local "no growth" or limited development homeowner groups; adverse changes in real estate, financing and general economic or local conditions; eminent domain proceedings; changes in the environmental conditions or changes in the environmental positions of governmental bodies; and potential conflicts of interest between us and our affiliates, including our general partner.  Critical Accounting Policies On December 12, 2001, the Securities and Exchange Commission issued Financial Reporting Release or FRR No. 60 "Cautionary Advice Regarding Disclosure About Critical Accounting Policies."  A critical accounting policy is one that would materially affect our operations or financial condition, and requires management to make estimates or judgements in certain circumstances. We believe that our most critical accounting policies relate to how we value our investment properties and mortgage loans receivable and revenue recognition.  These judgements often result from the need to make estimates about the effect of matters that are inherently uncertain.  The purpose of the FRR is to provide investors with an understanding of how management forms these policies.  Critical accounting policies discussed in this section are not to be confused with accounting principles and methods disclosed in accordance with accounting principles generally accepted in the United States of America or GAAP.  GAAP requires information in financial statements about accounting principles, methods used and disclosures pertaining to significant estimates.  The following disclosure discusses judgements known to management pertaining to trends, events or uncertainties known which were taken into consideration upon the application of those policies and the likelihood that materially different amounts would be reported upon taking into consideration different conditions and assumptions.  Valuation of Investment Properties - On a quarterly basis, in accordance with Statement of Financial Accounting Standards No. 144, we conduct an impairment analysis to ensure that the carrying value of each property does not exceed its estimated fair value.  If this were to occur, we would be required to record an impairment loss equal to the excess of carrying value over fair value. In determining the value of an investment property and whether the property is impaired, management considers several factors such as projected capital expenditures and sales prices. The aforementioned factors are considered by management in determining the value of any particular property.  The value of any particular property is sensitive to the actual results of any of these uncertain factors, either individually or taken as a whole.  Should the actual results differ from management's judgement, the valuation could be negatively or positively affected. The valuation and possible subsequent impairment of investment properties is a significant estimate that can and does change based on management's continuous process of analyzing each property. For the year ended December 31, 2007, we had recorded no such impairment.  Cost Allocation - We use the area method of cost allocation, which approximates the relative sales method of cost 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.   -10-  Valuation of Mortgage Loans Receivable - On a quarterly basis, we conduct an analysis to ensure that the carrying value of each mortgage loan receivable is recoverable from the borrower. If we determine all or a portion of the receivable is not collectible, we would be required to record an allowance for doubtful accounts equal to the amount estimated to be uncollectible.  In determining the value of mortgage loans receivable, management considers projected sales proceeds available and expenses related to the property associated with the mortgage. Should the actual results differ from management's judgement, the valuation could be negatively or positively affected.  The valuation and possible subsequent allowance for doubtful accounts is a significant estimate that can and does change based on management's continuous process of analyzing each mortgage loan receivable. As of December 31, 2007, the partnership has evaluated the mortgage loans receivables and determined that an allowance for doubtful accounts is not needed.  Revenue Recognition - We recognize income from the sale of land parcels in accordance with Statement of Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate.   Liquidity and Capital Resources  On October 25, 1989, we commenced an offering of 30,000 (subject to increase to 60,000) limited partnership units or units pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933. On October 24, 1991, we terminated our offering of units, with total sales of 50,476.17 units, at $1,000 per unit, resulting in $50,476,170 in gross offering proceeds, not including the general partner's capital contribution of $500. All of the holders of these units were admitted to the partnership. Our limited partners share in their portion of benefits of ownership of our real property investments according to the number of units held.  We used $41,314,301 of gross offering proceeds to purchase, on an all-cash basis, 27 parcels of undeveloped land and two buildings. These investments include the payment of the purchase price, acquisition fees and acquisition costs of such properties.  Three of the parcels were purchased during 1990, sixteen during 1991, four during 1992, and four during 1993. On September 16, 2002, we completed a tax-deferred exchange of Parcels 9 and 12 for 50 acres in Kendall County (Parcel 28). As of December 31, 2007, we have had multiple sales and exchange transactions through which we have disposed of the buildings and approximately 3,511 acres of the approximately 4,530 acres originally owned. As of December 31, 2007, cumulative distributions have totaled $90,330,834 to the limited partners (which exceeds the original capital) and $13,313,195 to the general partner.  Of the $90,330,834 distributed to the limited partners, $89,609,834 was net sales proceeds and $721,000 was from operations. As of December 31, 2007, we have used $44,585,448 of working capital for rezoning and other activities. Such amounts have been capitalized and are included in investment properties.  Our capital needs and resources will vary depending upon a number of factors, including the extent to which we conduct rezoning and other activities relating to utility access, the installation of roads, subdivision and/or annexation of land to a municipality, changes in real estate taxes affecting our land, and the amount of revenue received from leasing. As of December 31, 2007, we own, in whole or in part, seven parcels, the majority of which are leased to local tenants and are generating sufficient cash flow from leases to cover property taxes and insurance. We continue to market the remaining acres for sale.  At December 31, 2007, we had cash and cash equivalents of $4,653,805 which is available to be used for our costs and liabilities, cash distributions to partners and other activities with respect to some or all of our land parcels.   -11-  In 2007, we received net sales proceeds of approximately $11,395,125 from the sales of Parcels 6,18, and 3/27.  In May 2007, we paid distributions totaling $7,500,000, which included $5,000,000 paid to the limited partners and $2,500,000 paid to the general partner.  In addition to these sales which occurred in 2007, we anticipate additional sales of over 80 acres of Parcels 3/27 and 18 during 2008 and 2009. However there can be no assurance that any sales will be completed.  Undistributed net sales proceeds will be used to cover our operations, including property upgrades. We will evaluate our cash needs throughout the year to determine future distributions.  We plan to enhance the value of our land through pre-development activities such as rezoning, annexation and land planning. We have already been successful in, or are in the process of, pre-development activity on several of our land investments.  Parcel 20 has been granted rezoning which will permit additional land to be used for development, and discussions continue with the Village of Montgomery about a tax increment financing district to fund development of the property.  Zoning and planning of Parcels 3/27 and 18 is complete and three contracts for sale of improved single family lots are proceeding. We have completed our final planning on Parcel 4.  Transactions with Related Parties  Our general partner and its affiliates are entitled to reimbursement for salaries and expenses of employees of the general partner and its affiliates relating to our administration. Such costs of $80,984 and $91,219 are included in professional services to affiliates and general and administrative expenses to affiliates for the years ended December 31, 2007 and 2006, respectively, of which $26,066 and $12,352 was unpaid as of December 31, 2007 and 2006, respectively.  An affiliate of our general partner performed marketing and advertising services for us and was reimbursed for direct costs.   Such costs of $33,600 and $44,070 have been incurred and paid and are included in marketing expenses to affiliates for the years ended December 31, 2007 and 2006, respectively, of which $5,306 and $10,137 was unpaid at December 31, 2007 and 2006.  An affiliate of our 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 years ended December 31, 2007 and 2006, we incurred $184,934 and $229,186, respectively, of such costs. The affiliate did not recognize a profit on any project. Such costs are included in investment properties, of which $31,444 and $61,641 was unpaid as of December 31, 2007 and 2006, respectively.  Results of Operations  Income from the sale of investment properties of $11,395,125 and cost of investment properties sold of $5,285,063 recorded for the year ended December 31, 2007 is the result of the sale of 57.0765 acres of Parcel 6, the sale of 12.88 acres of Parcel 18 and the sale of 36.85 acres of Parcel 3/27.  Income from the sale of investment properties of $20,131,591 and cost of investment properties sold of $8,446,175 recorded for the year ended December 31, 2006 is the result of the sale of 74.7 acres of Parcel 3/27, the sale of 62.02 acres of Parcel 18, the sale of the remaining 14.013 acres of Parcel 21.  The sales activity for the years ended December 31, 2007 and 2006, respectively, are the result of favorable zoning and a change in our marketing approach to target homebuilders, commercial users and land developers.   -12-   During 2001, we sold 189 acres of Parcel 5 and 436 acres of Parcel 19 for $17,500,000 and recorded deferred gain of $10,203,634.  We received a deferred down payment note in the amount of $1,500,000, due December 31, 2001.  The note had an interest rate of 6%, however the note provided for the interest to be waived if the principal was paid in full by December 1, 2001.  We received payment of the deferred down payment note on December 1, 2001 and recognized $875,923 of deferred gain.  We also received an installment note in the amount of $16,000,000 at the time of closing.  The installment note matures July 1, 2011 and has an interest rate of 6%. During 2007, we received principal payments totaling $50,368 and recognized deferred gain of $29,489.  As of December 31, 2007, the balance of the mortgage loan receivable was $10,110,360. The remaining deferred gain will be recognized as payments are received.  As of December 31, 2007, we owned seven parcels of land consisting of approximately 1,019 acres.  Of the approximately 1,019 acres owned, 707 acres are tillable, leased to local farmers and generate sufficient cash flow to cover property taxes and insurance.  Rental income was $74,632 and $76,813 for the years ended December 31, 2007 and 2006, respectively. Rental income continues to decrease due to a decrease in the tillable acres as a result of sales.  Other operating income was $250,000 and $42,225 for the years ended December 31, 2007 and 2006, respectively.  Other income for 2007 is due to $250,000 in fees from the cancellation of a purchase agreement from Parcel 28.  Other income for 2006 is due primarily to extension fees on purchase agreements and non-refundable deposits for purchase agreements..  Professional services to non-affiliates were $48,609 and $56,896 for the years ended December 31, 2007 and 2006, respectively. Professional services to non-affiliates decreased in 2007 due to a decrease in legal services and accounting costs.  General and administrative expenses to affiliates were $11,386 and $22,490 for the years ended December 31, 2007 and 2006, respectively.  The decrease in 2007 is due to a decrease in data processing expense and investor services.  State replacement tax expense was $83,380 and $107,995 for the years ended December 31, 2007 and 2006, respectively.  State replacement tax expense includes Illinois replacement taxes paid and accrued for at the partnership level.  State replacement tax expense fluctuates in accordance with land sales.  Marketing expenses to affiliates were $33,600 and $44,070 for the years ended December 31, 2007 and 2006, respectively.  Marketing expenses to affiliates are costs incurred for preparing and marketing parcels for sale.  Marketing expenses to non-affiliates were $30,959 and $40,141 for the years ended December 31, 2007 and 2006, respectively.  Marketing expenses decreased as we continue to take advantage of established marketing plans from prior years.  Land operating expenses to non-affiliates were $233,832 and $138,537 for the years ended December 31, 2007 and 2006, respectively. These costs primarily include real estate tax expense, ground maintenance and insurance expense on the parcels owned.  The increase in 2007 is due primarily to an increase in grounds maintenance expenses for snow removal and landscape maintenance costs for Parcel 18 and Parcel 3/27.  During 2006, the Partnership recorded a recovery of bad debt expense for the receipt of $422,395 in principal and interest for the remaining portion of a mortgage and the related accrued interest which was previously written off.  Interest income was $917,888 and $946,826 for the years ended December 31, 2007 and 2006, respectively.  Interest income is primarily a result of cash available to invest on a short term basis during the year as a result of sales proceeds received.     Our Partnership Agreement  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.  -13-   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 sales 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 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 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 ("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 us for distribution to the limited partners an amount equal to such excess.  Any distributions from net sales proceeds at a time when invested capital is greater than zero shall be deemed applied first to reduction of such invested capital before application to payment of any deficiency in the 15% cumulative preferred return.   Subsequent Events  On January 10, 2008, we received a payment of $336,357 on the mortgage receivable for Parcels 5 and 19 comprised of $183,308 of principal and $153,049 of interest.  On January 30, 2008, we sold 4 lots of Parcel 3/27 for approximately $278,000 and recorded a gain of approximately $24,000.  On January 31, 2008, we sold 3 lots of Parcel 3/27 for approximately $208,000 and recorded a gain of approximately $18,000.  On February 1, 2008, we received a payment of $1,003,990 principal payment on the mortgage receivable for Parcels 5 and 19.  On February 14, 2008, we sold 1 lot of Parcel 3/27 for approximately $68,000 and recorded a gain of approximately $4,000.  Subsequent to year end, the homebuilder who is the holder of the mortgage receivable, has notified us that they are currently experiencing a slow down in sale contracts for new homes.  The mortgage receivable is currently not in default.  Principal and interest payments are current.  Based on the currently available information, we do not feel it is necessary to set up an allowance for the mortgage receivable.     -14-  Other  In accordance with Article XVI Section 16.1 of the Inland Land Appreciation Fund II, L.P. Partnership Agreement and IRS Regulation Section 1.7704-1(j), we reached the maximum threshold of partnership units that can be transferred/assigned during 2007.   Off-Balance Sheet Arrangements, Contractual Obligations, Liabilities and Contracts and Commitments  None    -15-   Item 8.  Financial Statements and Supplementary Data    INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Index   PageReport of Independent Registered Public Accounting Firm17Financial Statements:Balance Sheets, December 31, 2007 and 200618Statements of Operations, for the years ended December 31, 2007 and 200620Statements of Partners' Capital, for the years ended December 31, 2007 and 200621Statements of Cash Flows, for the years ended December 31, 2007 and 200622Notes to Financial Statements23    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 II, L.P.  We have audited the accompanying balance sheets of Inland Land Appreciation Fund II, L.P. (a limited partnership) (the Partnership) as of December 31, 2007 and 2006, 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 significant 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 II, L.P. as of December 31, 2007 and 2006, 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.   /s/ Grant Thornton LLP  Chicago, Illinois March 19, 2008     -17-  INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Balance Sheets
December 31, 2007 and 2006    Assets   20072006Current assets:Cash and cash equivalents (Note 1)$4,653,8054,698,542Accounts and accrued interest receivable (Note 6)161,815315,965Other current assets250,000279,836Total current assets5,065,6205,294,343Mortgage loan receivable (Note 6)10,110,36010,160,728Investment properties (including acquisition fees paid to   affiliates of $374,487 and $469,365 at December 31, 2007 and   2006, respectively) (Note 4):Land and improvements19,033,19619,655,113Total assets$34,209,17635,110,184   See accompanying notes to financial statements.  -18-  INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Balance Sheets
(continued)
December 31, 2007 and 2006 Liabilities and Partners' Capital   20072006Current liabilities:Accounts payable$1,226,4301,412,790Accrued real estate taxes41,44148,990Due to affiliates (Note 3)62,81684,130Total current liabilities1,330,6871,545,910Deferred gain on sale of investment properties (Note 6)5,907,8545,937,343Total liabilities7,238,5417,483,253Partners' capital:General Partner:Capital contribution500500Cumulative net income13,729,82211,222,780Cumulative cash distributions(13,313,195)(10,813,195)417,127410,085Limited Partners:Units of $1,000. Authorized 60,000 Units, 50,068 Units outstanding     at December 31, 2007 and 2006, (net of offering costs of $7,532,439,     of which $2,535,445 was paid to affiliates)42,559,90942,559,909Cumulative net income74,324,43369,987,771Cumulative cash distributions(90,330,834)(85,330,834)26,553,50827,216,846Total Partners' capital26,970,63527,626,931Total liabilities and Partners' capital$34,209,17635,110,184   See accompanying notes to financial statements.  -19-  INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Statements of Operations
For the years ended December 31, 2007 and 2006   20072006Revenues:Sale of investment properties (Notes 1 and 3)$11,395,12520,131,591Recognition of deferred gain on sale of investment properties
  (Note 6)29,489904,127Rental income (Note 5)74,63276,813Other operating income250,00045,225Total revenues11,749,24621,157,756Expenses:Cost of investment properties sold5,285,0638,446,175Professional services to affiliates69,59868,729Professional services to non-affiliates48,60956,896General and administrative expenses to affiliates11,38622,490General and administrative expenses to non-affiliates37,24438,701State replacement tax expense83,380107,995Marketing expenses to affiliates33,60044,070Marketing expenses to non-affiliates30,95940,141Land operating expenses to non-affiliates233,832138,537Recovery of bad debt expense-(422,395)Total expenses5,833,6718,541,339Operating income5,915,57512,616,417Interest income917,888946,826Other income15,90013,450Other expense(5,659)(9,831)Net income$6,843,70413,566,862Net income allocated to (Note 2):General Partner$2,507,0422,434,773Limited Partners4,336,66211,132,089Net income$6,843,70413,566,862Net income allocated to the one General Partner Unit$2,507,0422,434,773Net income per Unit allocated to Limited Partners per weighted   average Limited Partnership Units (50,068 for the years ended   December 31, 2007 and 2006)$86.62222.34   See accompanying notes to financial statements.  -20-  INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Statements of Partners' Capital
For the years ended December 31, 2007 and 2006    GeneralLimitedPartnerPartnersTotalBalance January 1, 2006400,31230,649,75731,050,069Distributions to Partners ($290.90 per weighted average   Limited Partnership Units of 50,068) (Note 2)(2,425,000)(14,565,000)(16,990,000)Net income (Note 2)2,434,77311,132,08913,566,862Balance December 31, 2006$410,08527,216,84627,626,931Distributions to Partners ($99.86 per weighted average   Limited Partnership Units of 50,068) (Note 2)(2,500,000)(5,000,000)(7,500,000)Net income (Note 2)2,507,0424,336,6626,843,704Balance December 31, 2007$417,12726,553,50826,970,635                 See accompanying notes to financial statements.  -21-  INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Statements of Cash Flows
For the years ended December 31, 2007 and 2006  20072006Cash flows from operating activities:Net income$6,843,70413,566,862Adjustments to reconcile net income to net cash provided by (used     in) operating activities:Gain on sale of investment properties(6,110,062)(11,685,416)Recognition of deferred gain on sale of investment properties(29,489)(904,127)Recovery of bad debt expense-(422,395)Changes in assets and liabilities:Accounts and accrued interest receivable154,150(47,068)Other current assets29,836(1,654)Accounts payable(186,360)(965,175)Accrued real estate taxes(7,549)19,864Due to affiliates(21,314)12,903Net cash provided by (used in) operating activities672,916(426,206)Cash flows from investing activities:Principal payments collected on mortgage loan receivable50,3681,966,682Additions to investment properties(4,663,146)(6,112,652)Proceeds from sale of investment properties11,395,12520,131,591Net cash provided by investing activities6,782,34715,985,621Cash flows from financing activities:Distributions(7,500,000)(16,990,000)Net cash used in financing activities(7,500,000)(16,990,000)Net decrease in cash and cash equivalents(44,737)(1,430,585)Cash and cash equivalents at beginning of year4,698,5426,129,127Cash and cash equivalents at end of year$4,653,8054,698,542              See accompanying notes to financial statements.  -22-  INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
For the years ended December 31, 2007, 2006 and 2005   (1) Organization and Basis of Accounting  The Registrant, Inland Land Appreciation Fund II, L.P. (the "Partnership"), is a limited partnership formed on June 28, 1989, 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 25, 1989, the Partnership commenced an Offering of 30,000 (subject to increase to 60,000) Limited Partnership Units pursuant to a Registration under the Securities Act of 1933.  The Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement") provides for Inland Real Estate Investment Corporation to be the General Partner. On October 24, 1991, the Partnership terminated its Offering of Units, with total sales of 50,476.17 Units, at $1,000 per Unit, resulting in $50,476,170 in gross offering proceeds, not including the General Partner's capital contribution of $500. All of the holders of these Units have been admitted to the Partnership. As of December 31, 2007, the Partnership had repurchased a total of 408.65 Units for $383,822 from various Limited Partners through the Unit Repurchase Program. Under this program, Limited Partners could, 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 2006 financial statements to conform with the 2007 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 and 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".  The Partnership's escrow agent holds earnest money deposits for the purchase of parcels.  Generally, these funds are not the Partnership's until the closing has occurred or the buyer under the sale agreement has committed a default which would entitle the Partnership to the earnest money.  For vacant land parcels and parcels with insignificant buildings and improvements, 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. For parcels with significant buildings and improvements (Parcel 24, described in Note 4), the Partnership records the buildings and improvements at a cost based upon the appraised value at the date of acquisition. Buildings and improvements are depreciated using the straight-line method of depreciation over a useful life of thirty years.  Repair and maintenance expenses are charged to operations as incurred.    -23-  INLAND LAND APPRECIATION FUND II, 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 records are maintained on the accrual basis of accounting in accordance with 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:  20072006GAAPTax BasisGAAPTax BasisBasis(unaudited)Basis(unaudited)Total assets$34,209,17641,491,61535,110,18442,272,624Partners' capital:General Partner417,127236,494410,085229,451Limited Partners26,553,50834,232,57127,216,84634,895,909Net income:General Partner2,507,0422,507,0422,434,7732,435,035Limited Partners4,336,6624,783,53511,132,08911,047,958Net income per Limited Partnership Unit86.6295.54222.34220.66  The net income per Unit is based upon the weighted average number of Units of 50,068 during 2007 and 2006.  New Accounting Pronouncements  In April 2006, the FASB issued FASB Staff Position ("FSP") 46R-6: Determining the Variability to Be Considered in Applying FASB Interpretation No. 46(R).  This FSP addresses certain implementation issues related to FIN 46(R). Specifically, FSP FIN 46R-6 addresses how a reporting enterprise would determine the variability to be considered in applying FIN 46(R).  The variability that is considered in applying FIN 46(R) affects the determination of (a) whether an entity is a variable interest entity (VIE), (b) which interests are "variable interests" in the entity, and (c) which party, if any, is the primary beneficiary of the VIE.  That variability affects any calculation of expected losses and expected residual returns, if such a calculation is necessary.  The Partnership is required to apply the guidance in this FSP prospectively to all entities (including newly created entities) with which it first becomes involved and to all entities previously required to be analyzed under FIN 46(R) when a "reconsideration event" has occurred, beginning July 1, 2006.  The Partnership will evaluate the impact of this FSP at the time any such "reconsideration event" occurs, and for any new entities with which the Partnership becomes involved in future periods.  -24-  INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)   In June 2006, the FASB ratified the EITF's consensus on Issue No. 06-3: How Taxes Collected from Customers and Remitted to Governmental Authorities should be Presented in the Income Statement (That is, Gross versus Net Presentation).Specifically, EITF No. 06-3 addresses any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, sales, use, value added, and some excise taxes.  An accounting policy decision determines if the presentation should be on a gross or a net basis in the income statement.  The consensus in this issue is to be applied to financial reports for interim and annual reporting periods beginning after December 15, 2006.  The Partnership primarily accounts for the sales taxes and other taxes subject to the consensus in EITF No. 06-3 on the gross basis in its statement of operations.  Also in June 2006, the FASB issued Interpretation No. 48: Uncertainty in Income Taxes  an Interpretation of FASB Statement No. 109. This Interpretation defines a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognizing, classification, interest and penalties, accounting in interim periods, disclosure and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006. The Partnership determined that the adoption of Interpretation No. 48 did not have a material effect on our financial statements.  In September 2006, the SEC's staff issued SAB No. 108: Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.  This Bulletin provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment.  The guidance in this Bulletin must be applied to financial reports covering the first fiscal year ending after November 15, 2006.  The Partnership has applied this guidance in its assessment of the materiality of prior year misstatements on its current year financials and determined that the adoption of SAB 108 did not have a material impact on its financial statements.    -25-  INLAND LAND APPRECIATION FUND II, 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 sales 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 will 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 Sales Proceeds at a time when Invested Capital is greater than zero shall be deemed applied first to reduction of such Invested Capital before application to payment of any deficiency in the 15% Cumulative Preferred Return.   -26-  INLAND LAND APPRECIATION FUND II, 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 of $80,984 and $91,219 are included in professional services to affiliates and general and administrative expenses to affiliates for the years ended December 31, 2007 and 2006, respectively, of which $26,066 and $12,352 was unpaid as of December 31, 2007 and 2006, respectively.  An Affiliate of the General Partner performed marketing and advertising services for the Partnership and was reimbursed (as set forth under term of the Partnership Agreement) for direct costs. Such costs of $33,600 and $44,070 have been incurred and paid and are included in marketing expenses to affiliates for the years ended December 31, 2007 and 2006, respectively, of which $5,306 and $10,137 was unpaid as of December 31, 2007 and 2006.  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, 2007 and 2006, the Partnership incurred $184,934 and $229,186, respectively, of such costs.  The Affiliate did not recognize a profit on any project. Such costs are included in investment properties, of which $31,444 and $61,641 was unpaid as of December 31, 2007 and 2006, respectively.    -27-


INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued) (4) Investment Properties  Gross AcresPurchase/Initial CostsCosts CapitalizedCosts ofTotal Remaining Costs ofCurrent Year GainParcelIllinoisPurchasedSalesOriginalAcquisitionTotalSubsequent toPropertyParcels aton Sale#County(Sold)DateCostsCostsCostsAcquisitionSold12/31/07Recognized1McHenry372.75904/25/90$2,114,295114,0702,228,365630,7032,859,068--(372.759)02/23/042Kendall41.11807/06/90549,63943,889593,52875,199668,727--(3.473)08/29/03(37.645)02/17/053/27Kendall120.81711/06/902,591,268156,7092,747,9779,462,7208,034,5224,176,1751,473,30383.52503/11/93(3.390)05/17/05(31.000)07/14/05(74.700)Var 2006(36.850)Var 20074Kendall299.02506/28/911,442,05977,8041,519,863509,118-2,028,981-5Kane189.046802/28/911,954,62994,5692,049,198349,8452,399,043--(189.0468)05/16/016Lake57.334504/16/91904,33771,199975,53655,6281,031,164-4,450,568(.258)10/01/94(57.0765)03/22/077McHenry56.709404/22/91680,51344,444724,9573,210,4513,935,408--(12.6506)Var 1997(15.7041)Var 1998(19.6296)Var 1999(8.7251)Var 20008Kane325.39406/14/913,496,700262,2753,758,97568,2651,909,0341,918,206-(.870)04/03/96(63.000)01/23/01(80.000)05/11/04


-28-


INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued) (4) Investment Properties (continued)  Gross AcresPurchase/Initial CostsCosts CapitalizedCosts ofTotal Remaining Costs ofCurrent Year GainParcelIllinoisPurchasedSalesOriginalAcquisitionTotalSubsequent toPropertyParcels aton Sale#County(Sold)DateCostsCostsCostsAcquisitionSold12/31/07Recognized9 (c)Will9.86708/13/91$-------(9.867)09/16/0210Will150.6608/20/911,866,71689,3331,956,04923,8971,979,946--(150.66)01/10/0511Will138.44708/20/91289,91420,376310,2902,700312,990--(138.447)05/03/9312 (c)Will44.73208/20/91-------(44.732)09/16/0213Will6.34209/23/91139,524172139,696-139,696--(6.342)05/03/9314Kendall44.40309/03/91888,06068,210956,2701,259,5832,215,853--(15.392)04/16/01(14.2110)Var 2002(13.6000)04/11/03(1.2000)02/19/0415Kendall100.36409/04/911,050,00052,6941,102,694117,8291,220,523--(5.000)09/01/93(11.000)12/01/94(84.364)08/14/9816McHenry168.90509/13/911,402,05869,7311,471,78997,7661,569,555--(168.905)08/03/0117Kendall3.46210/30/91435,00022,326457,326113,135570,461--(2.113)03/06/01(1.349)08/23/02


-29-


INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued) (4) Investment Properties (continued)  Gross AcresPurchase/Initial CostsCosts CapitalizedCosts ofTotal Remaining Costs ofCurrent Year GainParcelIllinoisPurchasedSalesOriginalAcquisitionTotalSubsequent toPropertyParcels aton Sale#County(Sold)DateCostsCostsCostsAcquisitionSold12/31/07Recognized18McHenry139.169711/07/91$1,160,30158,1901,218,4919,385,2128,656,5541,947,149186,191(9.2500)Var 2004(33.3197)Var 2005(62.0200)Var 2006(12.8800)Var 200719Kane436.23612/13/914,362,360321,2504,683,610187,2114,870,821--(436.236)05/16/0120Kane &Kendall400.12901/31/921,692,623101,3181,793,9417,163,9411,250,4697,707,413-(21.138)06/30/9921Kendall15.01305/26/92250,00023,844273,84443,063316,907--(1.000)03/16/99(14.013)09/06/0622Kendall391.95910/30/923,870,000283,1864,153,1861,768,7855,556,530365,441-(10.000)01/06/94(5.538)01/05/96(2.400)07/27/99(73.395)Var 2001(136.000)08/14/02(34.1400)05/27/03(101.4900)01/09/0423Kendall133.207410/30/923,231,942251,3733,483,3154,665,9988,149,313--(11.525)07/16/93(44.070)Var 1995(8.250)Var 1996(2.610)Var 1997(10.6624)Var 1998(5.8752)Var 1999(49.0120)Var 2000(.2028)Var 2001(1.0000)Var 2002


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INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued) (4) Investment Properties (continued)  Gross AcresPurchase/Initial CostsCosts CapitalizedCosts ofTotal Remaining Costs ofCurrent Year GainParcelIllinoisPurchasedSalesOriginalAcquisitionTotalSubsequent toPropertyParcels aton Sale#County(Sold)DateCostsCostsCostsAcquisitionSold12/31/07Recognized23A(a)Kendall.267610/30/92$170,07212,641182,713-182,713--(.2676)03/16/9324Kendall3.90801/21/93645,00056,316701,31630,436731,752--(3.908)04/16/0124A(b)Kendall.40601/21/93155,00013,533168,533-168,533--(.406)04/16/0125Kendall656.68701/28/931,625,00082,5361,707,53622,6731,730,209--(656.687)10/31/9526 (d)Kane89.51103/10/931,181,55589,3121,270,8675,135,8956,406,762--(2.108)Var 1999(34.255)Var 2000(7.800)Var 2001(29.1200)Var 2002(11.3100)Var 2003(4.9180)01/28/0428 (c)Kendall50.000009/16/02661,46022,976684,436205,395-889,831-$38,810,0252,504,27641,314,30144,585,44866,866,55319,033,1966,110,062


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INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)  (4) Investment Properties (continued)  (a) Included in the purchase of Parcel 23 was a newly constructed 2,500 square foot house. The house was sold in March 1993.  (b) Included in the purchase of Parcel 24 was a 2,400 square foot office building. The building was sold in 2001.  (c) On September 16, 2002, the Partnership completed a tax-deferred exchange of Parcels 9 and 12 for 50 acres in Kendall County (Parcel 28).  (d) Reconciliation of investment properties owned:  20072006Balance at January 1,$19,655,11321,988,636Additions during year4,663,1466,112,652Sales during year(5,285,063)(8,446,175)Balance at December 31,$19,033,19619,655,113  (e) The aggregate cost of investment properties owned at December 31, 2007 for Federal income tax purposes was approximately $19,000,000 (unaudited).  (f) On a quarterly basis, in accordance with Statement of Financial Accounting Standards No. 144, the Partnership conducts an impairment analysis to ensure that the carrying value of each property does not exceed its estimated fair value.  If this were to occur, the Partnership would be required to record an impairment loss equal to the excess of carrying value over fair value. In determining the value of an investment property and whether the property is impaired, management considers several factors such as projected capital expenditures and sales prices. The aforementioned factors are considered by management in determining the value of any particular property.  The value of any particular property is sensitive to the actual results of any of these uncertain factors, either individually or taken as a whole.  Should the actual results differ from management's judgment, the valuation could be negatively or positively affected. The valuation and possible subsequent impairment of investment properties is a significant estimate that can and does change based on management's continuous process of analyzing each property. For the year ended December 31, 2007, the Partnership had recorded no such impairment.  (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, 2007, the Partnership had leases of generally one year in duration, for approximately 707 acres of the approximately 1,019 acres owned.


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INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)  (6) Mortgage Loan Receivable  Mortgage loan receivable is 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. The fair market value of the mortgage loan receivable was approximately $11,200,000 and $11,100,000, at December 31, 2007 and 2006, respectively.  AccruedPrincipalPrincipalInterestDeferredBalanceBalanceReceivableGainParcelMaturityInterest Rate12/31/0712/31/0612/31/0712/31/075 & 1907/01/116.00%$10,110,36010,160,728153,0485,907,854$10,110,36010,160,728153,0485,907,854  On May 16, 2001, the Partnership sold 189 acres of Parcel 5 and 436 acres of Parcel 19 for $17,500,000 and recorded deferred gain of $10,203,634.  The Partnership received a deferred down payment note in the amount of $1,500,000, due December 31, 2001.  The note had an interest rate of 6%, however the note provided for the interest to be waived if the principal was paid in full by December 1, 2001.  The Partnership received payment of the deferred down payment note on December 1, 2001 and recognized $875,923 of deferred gain.  The Partnership also received an installment note in the amount of $16,000,000 at the time of closing.  The installment note matures July 1, 2011 and has an interest rate of 6%.  The remaining deferred gain will be recognized as payments are received.  (7) Subsequent Events  On January 10, 2008, the Partnership received a payment of $336,357 on the mortgage receivable for Parcels 5 and 19 comprised of $183,308 of principal and $153,049 of interest.  On January 30, 2008, the Partnership sold 4 lots of Parcel 3/27 for approximately $278,000 and recorded a gain of approximately $24,000.  On January 31, 2008, the Partnership sold 3 lots of Parcel 3/27 for approximately $208,000 and recorded a gain of approximately $18,000.  On February 1, 2008, the Partnership received a payment of $1,003,990 principal payment on the mortgage receivable for Parcels 5 and 19.  On February 14, 2008, the Partnership sold 1 lot of Parcel 3/27 for approximately $68,000 and recorded a gain of approximately $4,000.  Subsequent to year end, the homebuilder who is the holder of the mortgage receivable, has notified the Partnership that they are currently experiencing a slow down in sale contracts for new homes.  The mortgage receivable is currently not in default.  Principal and interest payments are current.  Based on the currently available information, the Partnership does not feel it is necessary to set up an allowance for the mortgage receivable.


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Item 9.  Changes in and Disagreements with Independent Auditors on Accounting and Financial Disclosure  There were no disagreements on accounting or financial disclosure matters during 2007.   Item 9(A).  Controls and Procedures  Evaluation of Disclosure Controls and Procedures  We have established disclosure controls and procedures to ensure that material information relating to us is made known to the members of senior management and the Audit Committee.  Based on management's evaluation as of December 31, 2007, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.  Management's Report on Internal Control Over Financial Reporting  Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f).  Under the supervision and with the participation of our management, including our principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on our evaluation under the framework in Internal Control - Integrated Framework,our management concluded that our internal control over financial reporting was effective as of December 31, 2007.  This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.  Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only  management's report in this annual report.  There were no changes to our internal controls over financial reporting during the fiscal quarter ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.   Item 9 (B).  Other Information  Not applicable.


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PART III   Item 10.  Directors and Executive Officers of the Registrant  Our general partner, Inland Real Estate Investment Corporation, was organized in 1984 for the purpose of acting as general partner of limited partnerships formed to acquire, own and operate real properties. The 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 our audit committee. The Audit Committee is not independent of our general partner and consists of Catherine L. Lynch, committee chair and audit committee 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.  We will provide the code of ethics free of charge upon request to our customer relations group.   Officers and Directors  The officers, directors, and key employees of IREIC and its affiliates that are likely to provide services to the Partnership are as follows.  Ages are listed as of January 1, 2007.  Functional TitleDaniel L. GoodwinDirectorRobert H. BaumDirector, General Counsel of IREICRobert D. ParksChairmanBrenda G. GujralDirector, President and principal executive officer of the PartnershipCatherine L. LynchTreasurerRoberta S. MatlinDirector, Senior Vice President-InvestmentsGuadalupe GriffinVice President-Asset ManagementDonna UrbainPrincipal Financial OfficerCathleen M. HrtanekAssistant Counsel, The Inland Real Estate Group, Inc., Counsel to the Partnership


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DANIEL L. GOODWIN (age 64) 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 64) 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 appeals 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 64) 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


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Association, the Foundation for Financial Planning, as well as a member of the National Association of Real Estate Investment Trusts.   BRENDA G. GUJRAL (age 65) 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 of the Financial Industry Regulatory Authority (FINRA).  Mrs. Gujral is also a director of Inland Investment Advisors, Inc., an investment advisor.  She is an affiliated director of Inland Western Retail Real Estate Trust, Inc., chairperson of the board of Inland Real Estate Exchange Corporation and President and an affiliated director of Inland American Retail Real Estate Trust, Inc.  Ms. Gujral has overall responsibility for the operations of IREIC, including investor relations, regulatory compliance and filings, review of asset management activities and broker-dealer marketing and communication.  Ms. Gujral works with the internal and outside legal counsel in structuring IREICs investment programs and in connection with preparing offering documents and registering the related securities with the SEC and state securities commissions.  Ms. Gujral has been with the Inland organization more than twenty-five years, becoming an officer in 1982.  Prior to joining the Inland organization, she worked for the Land Use Planning Commission, establishing an office in Portland, Oregon, to implement land use legislation for that state.  Ms. Gujral is a graduate of California State University.  She holds Series, 7, 22, 39 and 63 certifications from the Financial Industry Regulatory Authority, and is a licensed real estate salesperson and a member of the National Association of Real Estate Investment Trusts.   CATHERINE L. LYNCH (age 49) 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 63) 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 and director 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 Estate 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 Inland 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 43) 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


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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 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.   DONNA URBAIN (age 45) joined Inland in 2002 and is the Principal Financial Officer with respect to the public partnerships.  Ms. Urbain 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 Urbain worked in the field of public accounting for KPMG LLP.  Ms. Urbain is a Certified Public Accountant.  She received her B.B.A. in Accounting from the University of Notre Dame.   CATHLEEN M. HRTANEK (age 31) joined Inland in 2005 and is an Assistant Counsel of The Inland Real Estate Group, Inc.  She is also a member of the Audit Committee for all public partnerships sponsored by IREIC.  In her capacity as their Assistant Counsel, Ms. Hrtanek has been admitted to practice law in the State of Illinois.  Additionally, she is a licensed real estate broker.  Ms. Hrtanek received her undergraduate degree from the University of Notre Dame and her law degree from Loyola University of Chicago School of Law.   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.


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Item 11. Executive Compensation  We do not have any employees, and none of our executive officers receives any compensation from us.  Our general partner is entitled to receive a share of cash distributions of net sale 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.  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 sales 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 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 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 ("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 us for distribution to the limited partners an amount equal to such excess.  Any distributions from net sales proceeds at a time when invested capital is greater than zero shall be deemed applied first to 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, as described below.  Our general partner and its affiliates may be reimbursed for its expenses or out-of-pocket costs relating to our administration. For the year ended December 31, 2007, such costs, included in general and administrative expenses to affiliates and professional services to affiliates, were $80,984, of which $26,066 was unpaid as of December 31, 2007.


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An affiliate of our general partner performed marketing and advertising services for us and was reimbursed  (as set forth under terms of the partnership agreement) for direct costs. For the year ended December 31, 2007, such costs were $33,600, of which $5,306 was unpaid at December 31, 2007.  An affiliate of our general partner performed property upgrades, rezoning, annexation and other activities to prepare our land investments for sale and was reimbursed (as set forth under terms of the partnership agreement) for salaries and direct costs. The affiliate did not recognize a profit on any project. For the year ended December 31, 2007, we incurred $184,934 of such costs, of which $31,444 was unpaid as of December 31, 2007, and which are included in investment properties.   Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters.  We do not maintain any equity compensation plans.  (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 Natureof BeneficialPercentTitle of ClassOwnershipof ClassLimited partnership units234 Units directlyLess than 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 us, the operation of which may, at a subsequent date, result in a change in our control.   Item 13. Certain Relationships and Related Transactions  We do not currently have written, formal policies and procedures for the review, approval or ratification of transactions with related persons, as defined by Item 404 of the SEC Regulation S-K.  Our policies, however, contain provisions setting forth an ability to engage in certain transactions.  Our audit committee reviews all of these transactions as well as any related party transactions.  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.


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Item 14:  Principal Accounting Fees and Services  Fees.  Aggregate fees for professional services rendered by Grant Thornton were as follows:  Years ended December 31,20072006Audit fees for professional services rendered for the audit of our annual financial statements and quarterly reviews of our   financial statements.$43,33034,244Tax fees for professional services rendered for tax return   preparation and review of our K-1s.8,4006,760Total fees$51,73041,004  Our audit committee has reviewed and approved all of the fees charged by Grant Thornton and actively monitors the relationship between audit and non-audit services provided by Grant Thornton.  The audit committee concluded that all services rendered by Grant Thornton during the years ended December 31, 2007 and 2006, respectively were consistent with maintaining Grant Thornton's independence.  In addition, the audit committee must pre-approve all services provided by the company's independent registered public accounting firm and the fees charged for these services including an annual review of audit fees, audit related fees, tax fees and other fees with specific dollar value limits for each category of service.  PART IV  Item 15. Exhibits and Financial Statement Schedules  (a) The financial statements listed in the index at page 14 of this annual report are filed as part of this annual report.  (b) Exhibits. The following exhibits are incorporated herein by reference:  3 Certificate of Limited Partnership and Amended and Restated Agreement of Limited Partnership, included as Exhibits A and B of the Prospectus dated October 25, 1989, as amended, are 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.   No annual report or proxy material for the year 2007 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.


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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 II, L.P.Inland Real Estate Investment CorporationGeneral Partner/s/Brenda G. GujralBy:Brenda G. GujralPresident and DirectorDate:March 19, 2008  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 CorporationGeneral Partner/s/Brenda G. GujralBy:Brenda G. GujralPresident and DirectorDate:March 19, 2008/s/Guadalupe GriffinBy:Guadalupe GriffinVice PresidentDate:March 19, 2008/s/Donna UrbainBy:Donna UrbainPrincipal Financial OfficerDate:March 19, 2008/s/Robert D. ParksBy:Robert D. ParksChairmanDate:March 19, 2008/s/Daniel L. GoodwinBy:Daniel L. GoodwinDirectorDate:March 19, 2008


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