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, 2008oTRANSITION 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. 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 Comments6Item  2.Properties7Item  3.Legal Proceedings9Item  4.Submission of Matters to a Vote of Security Holders9Part IIItem  5.Market for Partnership's Limited Partnership Units and Related Security Holder Matters10Item  6.Selected Financial Data10Item  7.Management's Discussion and Analysis of Financial Condition and Results of Operations11Item 7(A).Quantitative and Qualitative Disclosures About Market Risk16Item  8.Financial Statements and Supplementary Data17Item  9.Changes in and Disagreements with Independent Auditors on Accounting and Financial Disclosure36Item 9(A).Controls and Procedures36Item 9(B).Other Information36Part IIIItem 10.Directors and Executive Officers of the Registrant37Item 11.Executive Compensation41Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters42Item 13.Certain Relationships and Related Transactions42Item 14.Principal Accounting Fees and Services43Part IVItem 15.Exhibits and Financial Statement Schedules43SIGNATURES44  -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, 2008, 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, 2008, we have had multiple sales transactions, through which we have disposed of approximately 3,527 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 remaining 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.  In light of the continued turbulent economic conditions and its impact on development in general, we believe it is in the best interest of the Partnership to table plans for a possible tax increment financing district for this parcel.  Parcel 3/27 have been zoned and planned for commercial and residential use.  The commercial portions have been sold and two third-party builders had entered into contracts for the residential portions of these parcels.  Parcel 18 has been zoned and planned for residential use.  The townhome portion was sold in a single transaction to a third-party purchaser.  The residential lots and duplex lots were under separate contract on a take-out basis with a single third-party builder.  The builder has fulfilled its obligations for the duplex lots pursuant to the terms of the contract.  Due to the severe slow down in new home starts and the abundance of competing inventory within these communities, the builders who have contracts for the remaining residential lots of Parcels 3/27 and 18 have not been able to fulfill their take-out obligation for the balance of the residential lots.  The builders for Parcel 3/27 and Parcel 18 are in default and escrowed funds of approximately $200,000 will be remitted to us during the first quarter of 2009 if they do not cure such default within a specified period of time.  We are closely monitoring the real estate market trends, especially within the areas where our remaining parcels are located.  Currently, the depressed real estate market, coupled with the turbulent financial markets, continue to adversely impact sales activity, especially sales of vacant land and residential lots.  We realize it could take some time for these current trends to improve which could result in an even longer holding period.  However, we believe we have taken the steps necessary to reduce costs and maintain sufficient reserves of cash and cash equivalents to cover all our costs for an extended period of time. We have been able to renew farm leases with our long time tenants which cover the costs of  -3-  insurance and real estate taxes.  Our remaining land is debt free and is located in areas that are still in the path of future development which should prove to be beneficial to us.  During the year ended December 31, 2008, we received net sales proceeds of $264,826 from the sales of Parcel 18, and $824,879 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.  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 2008.  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  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 customer relations department, 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 or that they can be accomplished in a timely fashion.  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.   -4-  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.  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 Treasury Regulation Section 1.7704-1(j), we reached the maximum threshold of partnership units that may be transferred/assigned directly between parties during 2008.  We have established a relationship with a "qualified matching service" as defined under Treasury Regulation Section 1.7704-1(g).  In accordance with this Treasury Regulation and the IRS private letter ruling obtained by the "qualified matching service," we understand that additional partnership units may be transferred or assigned through the "qualified matching service" up to a separate maximum threshold each taxable year (in addition to the maximum threshold that may be transferred or assigned directly between parties under our partnership agreement and Treasury Regulation Section 1.7704-1(j)).  However, there can be no assurance that the IRS private letter ruling will apply in this particular instance, or that any particular transfer will not violate the transfer restrictions contained in the partnership agreement or the provisions of Treasury Regulation Section 1.7704-1(g).  The private letter ruling was issued to the "qualified matching service," not to us or for our benefit.  In addition, there can be no assurance that the IRS will not revise its regulations in the future to reduce this maximum threshold.  Furthermore, there can be no assurance that you will be able to find a buyer for your partnership units through the "qualified matching service," or that you will be able to obtain a price for your partnership units consistent with their fair market value or any other valuation you may desire.  We have no influence in the prices set in such a service. You are strongly encouraged to consult your personal legal, financial and tax advisors in connection with any participation in any matching program or service.  Conflicts of Interest.   We may be subject to various conflicts of interest arising out of our relationship with our general partner 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.   -5-   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  Not applicable  -6-  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, Illinois120.817051.802011/06/9083.52503/11/93(3.3900sold 05/17/05)(31.0000sold 07/14/05)(74.7000sold various 2006)(36.85sold various 2007)(6.6000sold various 2008)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)  -7-   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, Illinois139.169719.460011/07/91(9.2500sold various 2004)(33.3197sold various 2005)(62.0200sold various 2006)(12.8800sold various 2007)(2.2400sold various 2008)Parcel 19, Kane County, Illinois436.2360-12/13/91(436.2360sold 05/16/01)Parcel 20, Kane & Kendall Counties, Illinois400.1290371.991001/31/92(21.1380sold 06/30/99)(7.0000conveyed 07/21/08)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)  -8-   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, 2008, 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 2008.  -9-  Part II  Item 5. Market for the our Limited Partnership Units and Related Security Holder Matters  As of February 12, 2009, there were 4,246 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, 2008 and 2007, we paid the following distributions:  Distributions to:20082007General partners$-2,500,000Limited partners-5,000,000Total$-7,500,000  Item 6.  Selected Financial Data  Not applicable  -10-  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 Accounting for the Impairment or Disposal of Long-Lived Assets, we review impairment indicators and if necessary, conduct an impairment analysis to ensure that the carrying value of each investment property does not exceed its estimated fair value.  If an investment property is considered impaired, we would be required to record an impairment loss equal to the excess of carrying value over the estimated fair value.  In determining the value of an investment property and whether the property is impaired, management considers several indicators which require difficult, complex and/or subjective judgments, such as projected sales prices, capital expenditures and assessment of current economic conditions.  The aforementioned indicators 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 indicators, 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, 2008, we recorded an impairment loss of $890,234 in regards to Parcel 3/27 and Parcel 18.  Subsequent costs incurred above the estimated fair value for Parcels 3/27 and 18 and for any other parcels that may be deemed to be impaired will be expensed and included in land operating expenses.  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.   -11-  Valuation of Mortgage Loan 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 that 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 the mortgage loan 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, 2008, the partnership has evaluated the mortgage loan receivable and determined that an allowance for doubtful accounts of $3,923,062 is 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.  Assets Held for Sale-  In determining whether to classify an asset as held for sale, we consider whether: (i) management has committed to a plan to sell the asset; (ii) the asset is available for immediate sale, in its present condition; (iii) we have initiated a program to locate a buyer; (iv) we believe that the sale of the asset is probable; (v) we are actively marketing the asset for sale at a price that is reasonable in relation to its current value; and (vi) actions required for us to complete the plan indicate that it is unlikely that any significant changes will be made to the plan.  If all of the above criteria are met, we classify the asset as held for sale. The assets and liabilities associated with those assets that are held for sale are classified separately on the balance sheets for the most recent reporting period.  Additionally, the operations for the periods presented are classified on the statements of operations as discontinued operations for all periods presented.  From time to time, we may determine that a held for sale property no longer meets the criteria to continue to be classified as held for sale.  If this occurs, we record the property at the lower of the carrying amount before the property was classified as held for sale or the fair value at the decision date not to sell.  As of December 31, 2008, we have not classified any properties as held for sale.  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, 2008, we have had multiple sales and exchange transactions through which we have disposed of the buildings and approximately 3,527 acres of the approximately 4,530 acres originally owned. As of December 31, 2008, 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, 2008, we have used $46,264,493 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  -12-  December 31, 2008, 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, 2008, we had cash and cash equivalents of $4,137,034 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.  During the year ended December 31, 2008, we received net sales proceeds of $264,826 from the sales of Parcel 18, and $824,879 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.  Undistributed net sales proceeds will be used to fund our operations, including property upgrades. We will evaluate our cash needs throughout the upcoming year to determine any future distributions.  We plan to enhance the value of our remaining 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.  In light of the continued turbulent economic conditions and its impact on development in general, we believe it is in the best interest of the Partnership to table plans for a possible tax increment financing district for this parcel.  Parcel 3/27 has been zoned and planned for commercial and residential use.  The commercial portions have been sold and two third-party builders had entered into contracts for the residential portions of these parcels.  Parcel 18 has been zoned and planned for residential use.  The townhome portion was sold in a single transaction to a third party purchaser.  The residential lots and duplex lots were under separate contract on a take-out basis with a single third-party builder.  The builder has fulfilled its obligations for the duplex lots pursuant to the terms of the contract.  Due to the severe slow down in new home starts and the abundance of competing inventory within these communities, the builders who have contracts for the remaining residential lots of Parcels 3/27 and 18 have not been able to fulfill their take-out obligation for the balance of the residential lots.  The builders for Parcel 3/27 and Parcel 18 are in default and escrowed funds of approximately $200,000 will be remitted to us during the first quarter of 2009 if they do not cure such default within a specified period of time.  We are closely monitoring the real estate market trends, especially within the areas where our remaining parcels are located.  Currently, the depressed real estate market, coupled with the turbulent financial markets, continue to adversely impact sales activity, especially sales of vacant land and residential lots.  We realize it could take some time for these current trends to improve which could result in an even longer holding period.  However, we believe we have taken the steps necessary to reduce costs and maintain sufficient reserves of cash and cash equivalents to cover all our costs for an extended period of time. We have been able to renew farm leases with our long time tenants which cover the costs of insurance and real estate taxes.  Our remaining land is debt free and is located in areas that are still in the path of future development which should prove to be beneficial to us.  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 $102,588 and $80,984 are included in professional services to affiliates and general and administrative expenses to affiliates for the years ended December 31, 2008 and 2007, respectively, of which $16,942 and $26,066 was unpaid as of December 31, 2008 and 2007, respectively.  An affiliate of our general partner performed marketing and advertising services for us and was reimbursed for direct costs.   Such costs of $17,891 and $33,600 have been incurred and are included in marketing expenses to affiliates for the years ended December 31, 2008 and 2007, respectively, of which $600 and $5,306 was unpaid at December 31, 2008 and 2007, respectively.  An affiliate of our general partner performed property upgrades, rezoning, annexation and other activities to prepare our investment properties for sale and was reimbursed for salaries and direct costs. For the years ended December 31, 2008 and 2007, we incurred $140,957 and $184,934, respectively, of such costs. The affiliate did not recognize a profit on any  -13-  project. Such costs are included in investment properties, of which $6,575 and $31,444 was unpaid as of December 31, 2008 and 2007, respectively.  Results of Operations  Income from the sale of investment properties of $1,089,705 and cost of investment properties sold of $1,028,000 recorded for the year ended December 31, 2008 is the result of the sale of approximately seven acres of Parcel 3/27 and two acres of Parcel 18.  On July 21, 2008, seven acres of vacant land of Parcel 20 was conveyed to the Oswego Public Library District as required by the Annexation Agreement affecting this Parcel.  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 approximately 57 acres of Parcel 6, the sale of approximately 13 acres of Parcel 18 and the sale of approximately 37 acres of Parcel 3/27.  The decrease in sales activity for the year ended December 31, 2008 is the result of the soft real estate market, the slow down in the sales of vacant land and the turbulent financial markets.  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 the first quarter of 2008, the homebuilder who is the borrower under the mortgage note notified us that they were experiencing a slow down in sales contracts for new homes.  As a result, we agreed to temporarily suspend the 6% interest due on the mortgage receivable and applied payments received during this time toward principal.  During the third quarter of 2008, based on the available information, we determined that the full collectibility of the mortgage receivable was doubtful.  As a result, we elected to reserve $3,923,062 of principal relating to the mortgage receivable, and in addition, $2,296,818 of the deferred gain relating to the mortgage receivable was also reserved and recorded against bad debt expense resulting in bad debt expense of $1,626,244 for the year ended December 31, 2008.  During the first quarter of 2008, we received principal payments totaling $1,189,548 and recognized deferred gain of $696,439.  As of December 31, 2008, the balance of the mortgage loan receivable was $4,997,750. The remaining deferred gain will be recognized as principal payments are received.  As of December 31, 2008, we owned seven parcels of land consisting of approximately 1,003 acres.  Of the approximately 1,003 acres owned, 707 acres are tillable, leased to local farmers and generate sufficient cash flow to cover property taxes and insurance.  Rental income was $81,282 and $74,632 for the years ended December 31, 2008 and 2007, respectively. The rental income for 2008 increased due to favorable lease rate change for Parcel 20. For 2009 all farm leases have been renewed.  Other operating income was $0 and $250,000 for the years ended December 31, 2008 and 2007, respectively.  Other income for 2007 is due to $250,000 in fees from the cancellation of a purchase agreement from Parcel 28.  Professional services to affiliates were $93,393 and $69,598 for the years ended December 31, 2008 and 2007, respectively.  Professional services to affiliates increased due to an increase in legal fees and accounting services.  Professional services to non-affiliates were $67,001 and $48,609 for the years ended December 31, 2008 and 2007, respectively. Professional services to non-affiliates increased in 2008 due to an increase in accounting fees.  General and administrative expenses to non-affiliates were $9,811 and $120,624 for the years ended December 31, 2008 and 2007, respectively.  The decrease in 2008 is due primarily to a decrease in Illinois replacement tax for 2008 as there is a taxable loss for 2008, as well as a benefit from the finalization of the 2007 Illinois replacement tax return.  Marketing expenses to affiliates were $17,891 and $33,600 for the years ended December 31, 2008 and 2007, respectively.  Marketing expenses to non-affiliates were $16,457 and $30,959 for the years ended December 31, 2008 and 2007, respectively.  Marketing expenses to affiliates and non-affiliates are costs incurred for preparing and marketing parcels for sale.  Marketing expenses decreased as we continue to take advantage of established marketing plans from prior years as well as the slow down in sales of vacant land and the softer real estate market.   -14-  Land operating expenses to non-affiliates were $722,604 and $233,832 for the years ended December 31, 2008 and 2007, respectively. These costs primarily include real estate tax expense, ground maintenance, the Partnerships proportionate share of the homeowners association fees, and insurance expense on the parcels owned.  The increase in 2008 is due primarily to an increase in grounds maintenance expenses for Parcels 3/27 and 18 and the Partnerships proportionate share of the homeowners association fees.  There was also an increase in snow removal fees for Parcel 3/27 due the unusually high amount of snowfall in 2008, as well as drainage repairs and maintenance for Parcel 18.  Interest income was $112,206 and $917,888 for the years ended December 31, 2008 and 2007, 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 as well as interest earned on the mortgage receivable.  Due to the suspension of interest payments on the mortgage receivable during the first quarter of 2008, there is $2,145 of mortgage interest included for 2008 as compared to $615,072 for 2007.  In addition, interest income for 2008 is lower due to lower interest rates.  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.  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  During the first quarter of 2009, we received a total of $208,463 in earnest money deposits held in escrow as a result of the default on the three separate contracts with the builders for Parcels 3/27 and 18.  Pursuant to the terms of the contracts, the builders were given the required notice of default and an opportunity to cure such default within a specified period of  -15-  time. The cure period expired January 11, 2009 and the earnest money deposits held in escrow are deemed earned by us as income during the first quarter of 2009.   Other items  The Illinois Department of Revenue has finalized regulations in regards to new Illinois income tax withholding requirements for nonresident partners.  The new withholding requirements are effective for the taxable years ending on or after December 31, 2008.  Payment of the required withholding amount will be made to the Illinois Department of Revenue prior to April 15, 2009.  You are encouraged to consult with your tax advisor in connection with the Illinois withholding requirements for nonresident partners.  In accordance with Article XVI Section 16.1 of the Inland Land Appreciation Fund II, L.P. Partnership Agreement and Treasury Regulation Section 1.7704-1(j), we reached the maximum threshold of partnership units that may be transferred/assigned directly between parties during 2008.  We have established a relationship, however, with a qualified matching service as defined under Treasury Regulation Section 1.7704-1(g).  In accordance with this Treasury Regulation and the IRS private letter ruling obtained by the qualified matching service, we understand that additional partnership units may be transferred/assigned through the qualified matching service up to a separate maximum threshold each taxable year (in addition to the maximum threshold that may be transferred/assigned directly between parties discussed above). However, there can be no assurance that the IRS private letter ruling will apply in this particular instance, or that any particular transfer will not violate the transfer restrictions contained in our partnership agreement or the provisions of Treasury Regulation Section 1.7704-1(g). If you have any interest in participating in a transfer/assignment of partnership units through this qualified matching service, please contact American Partnership Board directly at 800-736-9797. You are strongly encouraged to consult your personal legal, financial and tax advisors in connection with any such transfer/assignment.   Off-Balance Sheet Arrangements, Contractual Obligations, Liabilities and Contracts and Commitments  None   Item 7(A). Quantitative and Qualitative Disclosures About Market Risk  Not Applicable  -16-   Item 8.  Financial Statements and Supplementary Data    INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Index   PageReport of Independent Registered Public Accounting Firm18Financial Statements:Balance Sheets, December 31, 2008 and 200719Statements of Operations, for the years ended December 31, 2008 and 200721Statements of Partners' Capital, for the years ended December 31, 2008 and 200722Statements of Cash Flows, for the years ended December 31, 2008 and 200723Notes to Financial Statements24    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.                    -17-  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, 2008 and 2007, 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, 2008 and 2007, 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 6, 2009     -18-  INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  Balance Sheets  December 31, 2008 and 2007    Assets   20082007Current assets:Cash and cash equivalents (Note 1)$4,137,0344,653,805Accounts and accrued interest receivable (Note 6)-161,815Other current assets3,342250,000Total current assets4,140,3765,065,620Mortgage loan receivable (net of allowance for doubtful
accounts of $3,923,062 and $0 at December 31, 2008 and 2007,
respectively) (Note 6)4,997,75010,110,360Investment properties (including acquisition fees paid to
affiliates of $369,560 and $374,487 at December 31, 2008 and
2007, respectively) (Note 4):Land and improvements18,794,00719,033,196Total assets$27,932,13334,209,176                         See accompanying notes to financial statements.  -19-  INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  Balance Sheets (continued)  December 31, 2008 and 2007    Liabilities and Partners' Capital   20082007Current liabilities:Accounts payable$460,0341,226,430Accrued real estate taxes48,87341,441Due to affiliates (Note 3)24,11762,816Total current liabilities533,0241,330,687Deferred gain on sale of investment properties (Note 6)2,914,5975,907,854Total liabilities3,447,6217,238,541Partners' capital:General Partner:Capital contribution500500Cumulative net income13,697,37913,729,822Cumulative cash distributions(13,313,195)(13,313,195)384,684417,127Limited Partners:Units of $1,000. Authorized 60,000 Units, 50,068 Units outstanding       at December 31, 2008 and 2007, (net of offering costs of       $7,532,439, of which $2,535,445 was paid to affiliates)42,559,90942,559,909Cumulative net income71,870,75374,324,433Cumulative cash distributions(90,330,834)(90,330,834)24,099,82826,553,508Total Partners' capital24,484,51226,970,635Total liabilities and Partners' capital$27,932,13334,209,176          See accompanying notes to financial statements.  -20-  INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  Statements of Operations  For the years ended December 31, 2008 and 2007   20082007Revenues:Sale of investment properties (Notes 1 and 3)$1,089,70511,395,125Recognition of deferred gain on sale of investment properties (Note 6)696,43929,489Rental income (Note 5)81,28274,632Other operating income-250,000Total revenues1,867,42611,749,246Expenses:Cost of investment properties sold1,028,0005,285,063Professional services to affiliates93,39369,598Professional services to non-affiliates67,00148,609General and administrative expenses to affiliates9,19511,386General and administrative expenses to non-affiliates9,811120,624Marketing expenses to affiliates17,89133,600Marketing expenses to non-affiliates16,45730,959Land operating expenses to non-affiliates722,604233,832Bad debt expense1,626,244-Impairment loss on land890,234-Total expenses4,480,8305,833,671Operating income (loss)(2,613,404)5,915,575Interest income112,206917,888Other income15,07515,900Other expense-(5,659)Net income (loss)$(2,486,123)6,843,704Net income (loss) allocated to (Note 2):General Partner$(32,443)2,507,042Limited Partners(2,453,680)4,336,662Net income (loss)$(2,486,123)6,843,704Net income (loss) allocated to the one General Partner Unit$(32,443)2,507,042Net income (loss) per Unit allocated to Limited Partners per weighted   average Limited Partnership Units (50,068 for the years ended December   31, 2008 and 2007)$(49.01)86.62   See accompanying notes to financial statements.  -21-  INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Statements of Partners' Capital
For the years ended December 31, 2008 and 2007    GeneralLimitedPartnerPartnersTotalBalance at January 1, 2007$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 at December 31, 2007$417,12726,553,50826,970,635Net loss (Note 2)(32,443)(2,453,680)(2,486,123)Balance at December 31, 2008$384,68424,099,82824,484,512                                See accompanying notes to financial statements.  -22-  INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Statements of Cash Flows
For the years ended December 31, 2008 and 2007  20082007Cash flows from operating activities:Net income (loss)$(2,486,123)6,843,704Adjustments to reconcile net income (loss) to net cash provided by     (used in) operating activities:Gain on sale of investment properties(61,705)(6,110,062)Recognition of deferred gain on sale of investment properties(696,439)(29,489)Bad debt expense1,626,244-Impairment loss on land890,234-Changes in assets and liabilities:Accounts and accrued interest receivable161,815154,150Other current assets246,65829,836Accounts payable(766,396)(186,360)Accrued real estate taxes7,432(7,549)Due to affiliates(38,699)(21,314)Net cash flow provided by (used in) operating activities(1,116,979)672,916Cash flows from investing activities:Principal payments collected on mortgage loan receivable1,189,54850,368Additions to investment properties(1,679,045)(4,663,146)Proceeds from sale of investment properties1,089,70511,395,125Net cash flow provided by investing activities600,2086,782,347Cash flows from financing activities:Distributions-(7,500,000)Net cash flow used in financing activities-(7,500,000)Net decrease in cash and cash equivalents(516,771)(44,737)Cash and cash equivalents at beginning of year4,653,8054,698,542Cash and cash equivalents at end of year$4,137,0344,653,805              See accompanying notes to financial statements.  -23-  INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
For the years ended December 31, 2008 and 2007  (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 (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, 2008, 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 2007 financial statements to conform with the 2008 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.As of December 31, 2008, the Partnerships cash and cash equivalents are fully covered by the U.S. governments Temporary Liquidity Guarantee Program which provides unlimited deposit insurance coverage through December 31, 2009.  The Partnership recognizes income from the sale of land parcels in accordance with Statement of Financial Accounting Standards (SFAS) 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.  A presentation of information about operating segments as required in SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information" would not be material to an understanding of the Partnership's business taken as a whole as the Partnership is engaged in the business of real estate investment which management considers to be a single operating segment.  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.   -24-  INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)  In accordance with Statement of Financial Accounting Standards No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets, on a quarterly basis, the Partnership reviews impairment indicators and if necessary, conducts an impairment analysis to ensure that the carrying value of each investment property does not exceed its estimated fair value.  If an investment property is considered impaired, the Partnership would be required to record an impairment loss equal to the excess of carrying value over the estimated fair value.  In determining the value of an investment property and whether the property is impaired, management considers several factors which require difficult, complex and/or subjective judgments, such as projected sales prices, capital expenditures and assessment of current economic conditions.  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.  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.  The Illinois Department of Revenue has finalized regulations in regards to new Illinois income tax withholding requirements for nonresident partners.  The new withholding requirements are effective for the taxable years ending on or after December 31, 2008.  Payment of the required withholding amount is due to the Illinois Department of Revenue prior to April 15, 2009.  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:   -25-  INLAND LAND APPRECIATION FUND II, L.P. (a limited partnership)  Notes to Financial Statements (continued)  20082007GAAPTax BasisGAAPTax BasisBasis(unaudited)Basis(unaudited)Total assets$27,932,13335,464,57334,209,17641,491,615Partners' capital:General Partner384,684238,060417,127236,494Limited Partners24,099,82831,777,28126,553,50834,232,571Net income (loss):General Partner(32,443)(6,539)2,507,0422,507,042Limited Partners(2,453,680)91,6554,336,6624,783,535Net income (loss) per Limited Partnership Unit(49.01)1.8386.6295.54  The net income (loss) per Unit is based upon the weighted average number of Units of 50,068 during 2008 and 2007. New Accounting Pronouncements  In September 2006, FASB issued SFAS No. 157: Fair Value Measurements (FAS 157), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.  FAS No. 157 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information.  FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007.  The adoption of SFAS No. 157 in 2008 did not have an impact on our financial statements.  In February 2007, FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (FAS 159).  FAS 159 provides the option to report certain financial assets and liabilities at fair value, with the intent to mitigate volatility in financial reporting that can occur when related assets and liabilities are recorded on different basis.  This statement is effective for fiscal years beginning after November 15, 2007.  The adoption of SFAS No. 159 in 2008 did not have an impact on our financial statements.  In May 2008, FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" (FAS 162). FAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements that are presented in conformity with generally accepted accounting principles. FAS 162 becomes effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles."The Partnership does not expect SFAS No. 162 to have a material impact on the financial statements.     -26-  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.   -27-  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 $102,588 and $80,984 are included in professional services to affiliates and general and administrative expenses to affiliates for the years ended December 31, 2008 and 2007, respectively, of which $16,942 and $26,066 was unpaid as of December 31, 2008 and 2007, respectively.  An affiliate of the General Partner performed marketing and advertising services for the Partnership and was reimbursed (as set forth under terms of the Partnership Agreement) for direct costs. Such costs of $17,891 and $33,600 have been incurred and are included in marketing expenses to affiliates for the years ended December 31, 2008 and 2007, respectively, of which $600 and $5,306 was unpaid as of December 31, 2008 and 2007, respectively.  An affiliate of the General Partner performed property upgrades, rezoning, annexation and other activities to prepare the Partnership's investment properties 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, 2008 and 2007, the Partnership incurred $140,957 and $184,934, respectively, of such costs.  The affiliate did not recognize a profit on any project. Such costs are included in investment properties, of which $6,575 and $31,444 was unpaid as of December 31, 2008 and 2007, respectively.    -28-


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)DateCostsCostsCostsAcquisitionSold12/31/08Recognized1McHenry372.759004/25/90$2,114,295114,0702,228,365630,7032,859,068--(372.7590)02/23/042Kendall41.118007/06/90549,63943,889593,52875,199668,727--(3.4730)08/29/03(37.6450)02/17/053/27Kendall120.817011/06/902,591,268156,7092,747,9779,880,8509,328,8273,300,00044,87983.525003/11/93(3.3900)05/17/05(31.0000)07/14/05(74.7000)Var 2006(36.8500)Var 2007(6.6000)Var 20084Kendall299.025006/28/911,442,05977,8041,519,863530,302-2,050,165-5Kane189.046802/28/911,954,62994,5692,049,198349,8452,399,043--(189.0468)05/16/016Lake57.334504/16/91904,33771,199975,53655,6281,031,164--(.2580)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 20008Kane325.394006/14/913,496,700262,2753,758,97574,7491,909,0341,924,690-(.8700)04/03/96(63.0000)01/23/01(80.0000)05/11/04


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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)DateCostsCostsCostsAcquisitionSold12/31/08Recognized9 (c)Will9.867008/13/91$-------(9.8670)09/16/0210Will150.660008/20/911,866,71689,3331,956,04923,8971,979,946--(150.6600)01/10/0511Will138.447008/20/91289,91420,376310,2902,700312,990--(138.4470)05/03/9312 (c)Will44.732008/20/91-------(44.7320)09/16/0213Will6.342009/23/91139,524172139,696-139,696--(6.3420)05/03/9314Kendall44.403009/03/91888,06068,210956,2701,259,5832,215,853--(15.3920)04/16/01(14.2110)Var 2002(13.6000)04/11/03(1.2000)02/19/0415Kendall100.364009/04/911,050,00052,6941,102,694117,8291,220,523--(5.0000)09/01/93(11.0000)12/01/94(84.3640)08/14/9816McHenry168.905009/13/911,402,05869,7311,471,78997,7661,569,555--(168.9050)08/03/0117Kendall3.462010/30/91435,00022,326457,326113,135570,461--(2.1130)03/06/01(1.3490)08/23/02


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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)DateCostsCostsCostsAcquisitionSold12/31/08Recognized18McHenry139.169711/07/91$1,160,30158,1901,218,4919,456,9929,280,4831,395,00016,826(9.2500)Var 2004(33.3197)Var 2005(62.0200)Var 2006(12.8800)Var 2007(2.2400)Var 200819Kane436.236012/13/914,362,360321,2504,683,610187,2114,870,821--(436.2360)05/16/0120Kane &Kendall400.129001/31/921,692,623101,3181,793,9418,292,5531,250,4698,836,025-(21.1380)06/30/99(7.0000)07/21/0821Kendall15.013005/26/92250,00023,844273,84443,063316,907--(1.0000)03/16/99(14.0130)09/06/0622Kendall391.959010/30/923,870,000283,1864,153,1861,768,8315,556,530365,487-(10.0000)01/06/94(5.5380)01/05/96(2.4000)07/27/99(73.3950)Var 2001(136.0000)08/14/02(34.1400)05/27/03(101.4900)01/09/04


-31-


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)DateCostsCostsCostsAcquisitionSold12/31/08Recognized23Kendall133.207410/30/92$3,231,942251,3733,483,3154,665,9988,149,313--(11.5250)07/16/93(44.0700)Var 1995(8.2500)Var 1996(2.6100)Var 1997(10.6624)Var 1998(5.8752)Var 1999(49.0120)Var 2000(.2028)Var 2001(1.0000)Var 200223A(a)Kendall.267610/30/92170,07212,641182,713-182,713--(.2676)03/16/9324Kendall3.908001/21/93645,00056,316701,31630,436731,752--(3.9080)04/16/0124A(b)Kendall.406001/21/93155,00013,533168,533-168,533--(.4060)04/16/0125Kendall656.687001/28/931,625,00082,5361,707,53622,6731,730,209--(656.6870)10/31/9526 (d)Kane89.511003/10/931,181,55589,3121,270,8675,135,8956,406,762--(2.1080)Var 1999(34.2550)Var 2000(7.8000)Var 2001(29.1200)Var 2002(11.3100)Var 2003(4.9180)01/28/0428 (c)Kendall50.000009/16/02661,46022,976684,436238,204-922,640-$38,810,0252,504,27641,314,30146,264,49368,784,78718,794,00761,705


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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) On a quarterly basis, in accordance with Statement of Financial Accounting Standards No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets, the Partnership reviews impairment indicators and if necessary, conducts an impairment analysis to ensure that the carrying value of each investment 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 the carrying value over the estimated fair value.  In determining the value of an investment property and whether the property is impaired, management considers several indicators which require difficult, complex and/or subjective judgments, such as projected sales prices, capital expenditures and assessment of current economic conditions. The aforementioned indicators 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 indicators, 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, 2008, the Partnership recorded a $514,305 impairment loss on land relating to Parcel 3/27 and a $375,929 impairment loss on land relating to Parcel 18.  Due to the declining economy, the reduction in new construction home starts, the decrease in new home and lot prices, and the homebuilder defaults in the fourth quarter of 2008 on the existing sales contracts, the remaining cost of Parcel 3/27 and Parcel 18 exceeded the estimated sales proceeds on the remaining lots and accordingly, the Partnership recorded the impairment loss to reduce the remaining cost of Parcel 3/27 and Parcel 18 to the projected sales proceeds.  As of December 31, 2008, the total accumulated gain on sale recorded, net of the current impairment loss, for Parcel 3/27 was approximately $11,817,942 and for Parcel 18, the total accumulated gain recorded, net of the current impairment loss, was approximately $2,569,127.  (e) Reconciliation of investment properties owned:  20082007Balance at January 1,$19,033,19619,655,113Additions during year1,679,0454,663,146Impairment loss on land(890,234)-Sales during year(1,028,000)(5,285,063)Balance at December 31,$18,794,00719,033,196


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INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)  (f) The aggregate cost of investment properties owned at December 31, 2008 for Federal income tax purposes was approximately $18,800,000(unaudited).  (5) Rental Income  The Partnership has determined that all leases relating to the farm parcels are operating leases. Accordingly, rental income is reported when earned.  As of December 31, 2008, the Partnership had leases of generally one year in duration, for approximately 707 acres of the approximately 1,003 acres owned.  (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 less the allowance for doubtful accounts was approximately $5,700,000 and $11,200,000, at December 31, 2008 and 2007, respectively.  AccruedPrincipalPrincipalInterestDeferredBalanceBalanceReceivableGainParcelMaturityInterest Rate12/31/0812/31/0712/31/0812/31/085 & 1907/01/116.00%$8,920,81210,110,360-5,211,415Less allowance for doubtful accounts3,923,062--2,296,818$4,997,75010,110,360-2,914,597  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.  During the first quarter of 2008, the Partnership received payments of $1,189,548 in principal and $155,194 in interest, bringing the total amount of principal paid since loan inception to $8,579,189 and interest paid since loan inception to $5,449,637.  In addition, during the quarter ended March 31, 2008, the homebuilder who is the borrower under the mortgage note notified the Partnership that they are currently experiencing a slow down in sales contracts for new homes.  The Partnership agreed to temporarily suspend the 6% interest due on the mortgage receivable and will apply payments received during this time toward principal.  During the third quarter, based on the available information, the Partnership determined that the full collectibility of the mortgage receivable was doubtful.  As a result, management elected to reserve $3,923,062 of principal relating to the mortgage receivable and in addition, $2,296,818 of the deferred gain relating to the mortgage receivable was also reserved and recorded against bad debt expense resulting in bad debt expense of $1,189,548 for the year ended December 31, 2008.  We will continue to monitor the activity associated with the mortgage receivable and reassess the future need for any additional allowance for doubtful accounts.


-34-


INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)  (7) Subsequent Events  During the first quarter of 2009, the Partnership received a total of $208,463 in earnest money deposits held in escrow as a result of the default on the three separate contracts with the builders for Parcels 3/27 and 18. Pursuant to the terms of the contracts, the builders were given the required notice of default and an opportunity to cure such default within a specified period of time. The cure period expired January 11, 2009 and the earnest money deposits held in escrow are deemed earned by the Partnership as income during the first quarter of 2009.


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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 2008.   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, 2008, 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, 2008.  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, 2008 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 (IREIC), 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 Cathleen Hrtanek. 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 written request to our customer relations group in care of the general partner of our partnership at 2901 Butterfield Road, Oak Brook, IL 60523.    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, 2009.  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 Officer with respect to Inland Land Appreciation Fund II, L.P.Cathleen M. HrtanekAssistant Counsel, The Inland Real Estate Group, Inc., Counsel to the Partnership


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DANIEL L. GOODWIN (age 65) 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 65) 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 65) has been with Inland since 1968 and is one of the founding stockholders. He also is chairman of Inland Real Estate Investment Corporation, director of Inland Securities Corporation and a director of Inland Investment Advisors, Inc.  Mr. Parks is president, chief executive officer, and a director of Inland Real Estate Corporation and serves on its management committee.  He is also chairman and an affiliated director of Inland Western Retail Real Estate Trust, Inc. He is chairman and an affiliated director of Inland American Real Estate Trust, Inc. Mr. Parks is responsible for the ongoing administration of existing investment programs, corporate budgeting and administration for Inland Real Estate Investment Corporation. He oversees and coordinates the marketing of all investments and investor relations.  Prior to joining Inland, Mr. Parks was a school teacher in Chicago's public schools. He received his B.A. Degree from Northeastern Illinois University and his M.A. Degree from the University of Chicago. He is a registered Direct Participation Program Limited Principal with the National Association of Securities Dealers, Inc. He is also a member of the Real Estate Investment Association, the Financial Planning Association, the Foundation for Financial Planning, as well as a member of the National Association of Real Estate Investment Trusts.


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BRENDA G. GUJRAL, (age 65) chief executive officer, president and director of Inland Real Estate Investment Corporation (IREIC).  She was the president and a director of IREIC from July 1987 through September 1992 at which time she took a leave to work in a family business.  On her return to IREIC in January 1997 she was again named president and a director, and January 2008 the chief executive officer.  She has been the president, chief operating officer and a director of Inland Securities Corporation since January 1997.  Additionally, Ms. Gujral has served as a director of Inland Investment Advisors, Inc., an investment advisor, since January 2001 and has been a director of Inland Western Retail Real Estate Trust, Inc. since its inception in March 2003 and served as its chief executive officer from June 2005 until November 2007. Ms. Gujral also has served as president and director of Inland American Real Estate Trust, Inc. since its inception in October 2004 and has been the chairman of the board of Inland Real Estate Exchange Corporation since May 2001.  Ms. Gujral was a director of Inland Retail Real Estate Trust, Inc. from its inception in September 1998 until it was acquired in February 2007.   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 for 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 FINRA, and is a licensed real estate salesperson and a member of the National Association of Real Estate Investment Trusts.   CATHERINE L. LYNCH (age 50) joined the Inland organization in 1989.  Ms. Lynch has served as the treasurer and secretary of Inland Real Estate Investment Corporation since January 1995, and as treasurer and secretary of Inland Securities Corp. since June 1995.  Ms. Lynch worked for KPMG Peat Marwick LLP from 1980 to 1989.  Ms. Lynch received her bachelor degree in accounting from Illinois State University, Normal, Illinois. Ms. Lynch is a certified public accountant and a member of the American Institute of Certified Public Accountants and the Illinois CPA Society. Ms. Lynch also is registered with FINRA as a financial operations principal.   ROBERTA S. MATLIN (age 64) joined Inland Real Estate Investment Corporation (IREIC) in 1984 as director of investor administration and currently serves as a director and senior vice president of IREIC, in the latter capacity directing its day-to-day internal operations.  Ms. Matlin also has been a director of Inland Real Estate Exchange Corporation since May 2001, a director of Inland Institutional Capital Partners Corporation since May 2006 and a director of Pan American Bank since 2007.  She also has served as a director and president of Inland Investment Advisors, Inc. since June 1995 and Intervest Southern Real Estate Corporation since July 1995, and a director and vice president of Inland Securities Corporation since July 1995.  She has served as vice president  administration of Inland American Real Estate Trust, Inc. since its inception in October 2004.  Ms Matlin served as vice president of administration of Inland Western Retail Real Estate Trust, Inc. from 2003 until 2007, vice president of administration of Inland Retail Real Estate Trust, Inc from 1998 until 2004, vice president of administration of Inland Real Estate Corporation from 1995 until 2000 and trustee and executive vice president of Inland Mutual Fund Trust from 2001 until 2004. Prior to joining Inland, Ms Matlin worked for the Chicago Region of the Social Security Administration of the United States Department of Health and Human Services.  Ms. Matlin is a graduate of the University of Illinois in Champaign. She holds Series 7, 22, 24, 39, 63 and 65 licenses from FINRA.   GUADALUPE GRIFFIN (age 44) joined Inland in 1994. Ms. Griffin serves as vice president of Inland Real Estate Investment Corporation and assistant vice president of Inland Midwest Investment


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Corporation. Ms. Griffin is responsible for the asset management and day-to-day operations of the public and private partnerships which include the development of operating and disposition strategies for the partnerships and investor communications. Prior to joining Inland, Ms. Griffin was employed by the University of Illinois at Chicago Center for Urban Educational 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 46) joined Inland in 2002 and is the Principal Financial Officer with respect to Inland Land Appreciation Fund II, L.P.  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 32) 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, 2008, such costs, included in general and administrative expenses to affiliates and professional services to affiliates, were $102,588, of which $16,942 was unpaid as of December 31, 2008.


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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, 2008, such costs were $17,891, of which $600 was unpaid at December 31, 2008.  An affiliate of our general partner performed property upgrades, rezoning, annexation and other activities to prepare our investment properties 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, 2008, we incurred $140,957 of such costs, of which $6,575 was unpaid as of December 31, 2008, 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 our principal accountant, Grant Thornton, were as follows:  Years ended December 31,20082007Audit fees for professional services rendered for the audit of our
annual financial statements and quarterly reviews of our
financial statements.$49,20043,330Tax fees for professional services rendered for tax return   preparation and review of our K-1s.-8,400Total fees$49,20051,730  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, 2008 and 2007, 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, 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 17 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 Registration Statement on form S-11, filed with the SEC on 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 2008 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 6, 2009  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 6, 2009/s/Guadalupe GriffinBy:Guadalupe GriffinVice PresidentDate:March 6, 2009/s/Donna UrbainBy:Donna UrbainPrincipal Financial Officer with respect to Inland Land Appreciation Fund II, L.P.Date:March 6, 2009/s/Robert D. ParksBy:Robert D. ParksChairmanDate:March 6, 2009/s/Daniel L. GoodwinBy:Daniel L. GoodwinDirectorDate:March 6, 2009


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