UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K  XANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 2006oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM     TO  COMMISSION FILE NUMBER: 0-18431  Inland Land Appreciation Fund, L.P. (Exact name of registrant as specified in its charter)  Delaware36-3545798(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, or a non-accelerated filer (See definition of "accelerated filer" in Rule 12b-2 of the Exchange Act). Large accelerated filer  o         Accelerated filer  o          Non-accelerated filer 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   -1-   INLAND LAND APPRECIATION FUND, L.P. (a limited partnership)  TABLE OF CONTENTS  Part IPageItem  1.Business3Item  1(a).Risk Factors4Item  1(b).Unresolved Staff Comments5Item  2.Properties6Item  3.Legal Proceedings8Item  4.Submission of Matters to a Vote of Security Holders8Part IIItem  5.Market for Partnership's Limited Partnership Units and Related Security Holder Matters8Item  6.Selected Financial Data9Item  7.Management's Discussion and Analysis of Financial Condition and Results of Operations10Item  7(a)Quantitative and Qualitative Disclosures About Market Risk15Item  8.Financial Statements and Supplementary Data16Item  9.Changes in and Disagreements with Independent Auditors on Accounting and Financial Disclosure34Item 9(a).Controls and Procedures34Part IIIItem 10.Directors and Executive Officers of the Registrant35Item 11.Executive Compensation38Item 12.Security Ownership of Certain Beneficial Owners and Management40Item 13.Certain Relationships and Related Transactions40Item 14.Principal Accountant Fees and Services40Part IVItem 15.Exhibits, Financial Statement Schedules, and Reports on Form 8-K41SIGNATURES42  -2-  PART I Item 1. Business  Inland Land Appreciation Fund, L.P. was formed in October 1987 to invest in undeveloped land on an all-cash basis and realize appreciation of such land upon resale. On October 12, 1988, we commenced an offering of 10,000  (subject to an increase to 30,000) 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. The offering terminated on October 6, 1989, after we sold 30,000 units, at  $1,000 per unit, resulting in gross offering proceeds of $30,000,000, which does not include proceeds from our general partner or our initial limited partner. All of the holders of our units were admitted to our partnership. Inland Real Estate Investment Corporation is our general partner. We used $25,187,069 of gross offering proceeds to purchase on an all-cash basis twenty-five parcels of undeveloped land and an option to purchase undeveloped land. 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, 2006, we have repurchased a total of 407.75 Units for $359,484 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, twenty-five parcels of undeveloped land and are engaged in the rezoning and resale of the parcels. 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, 2006, we have had multiple sales transactions, through which we have disposed of approximately 1,959 acres of the approximately 3,102 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. Parcels 6 and 7 have completed and sold two phases of improvements for an industrial park and sites are being marketed. We have also completed the planning process and received favorable zoning on the residential portion of these parcels. Marketing efforts have been successful to date and a contract is in place for the sale of the residential portion of these parcels. The first of three closings occurred during July 2005. The second of three closings occurred during July 2006.  Provided the buyer performs, the final closing is anticipated to occur during July 2007.  Zoning discussions and land planning are in progress on Parcels 14, 17, 18, 19 and 22.  On July 27, 2006, we sold approximately 33 acres of Parcel 6 for $3,046,294.  In September 2006, we paid distributions totaling $2,200,000, which includes $2,000,000 paid to the limited partners and $200,000 paid to the general partner.  In addition to this sale which occurred in 2006, we anticipate additional sales of the residential portion of Parcels 6 and 7 during July 2007.  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 future distributions.  We had no employees during 2006.  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.   -3-   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 director of investor relations, the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports. These reports are available as soon as reasonably practical after such material is electronically filed or furnished to the SEC. Limited Partners wishing to communicate with our general partner can do so by writing to the attention of the general partner care of our partnership at 2901 Butterfield Road, Oak Brook, IL 60523.   Item 1(a). Risk Factors  Pre-Development Stage Land  The net proceeds of the offering were invested in pre-development stage land.  An investment in such land involves a number of potential risks, which include the following:  Dependence on Governmental Zoning and Fiscal Policies.  We will conduct rezoning and pre-development activities with respect to our land investments.  Rezoning may only be effected by appropriate city, county and/or other local authorities.  There can be no assurance that our efforts to cause these authorities to change the zoning classification(s) which apply to a given parcel of land owned by the partnership will be successful. Sometimes citizens oppose our efforts. Moreover, these authorities may require us to spend funds to facilitate future development of the land as a condition of rezoning.  There can be no assurance that we will have sufficient funds to accomplish the required changes.  Restricted or Limited Access to Utilities and Roadways.  The value of our land will be affected by ease of access to utilities and transportation.  If public utility providers are not located in sufficient proximity to a parcel owned by the partnership, the cost of arranging for such utility access may be prohibitive to the partnership or a potential purchaser of the parcel, thereby reducing the value of the parcel. Delays and/or postponements in the construction of roads in areas by our parcels likely would adversely affect the value of our parcels.  Environmental Risks. Federal and state environmental laws can impose substantial liability on owners of real estate without regard to fault, even when other parties are or were responsible for the environmental impairment.  Environmental liabilities could cause us to incur significant expenses, including (but not limited to) the obligation to remedy or clean up hazardous substances (such as pesticides commonly used on farmland) or other pollutants, regardless of fault.  Such liabilities could require us to dispose of a property at a loss, which could be substantial.  In addition, the value of our land is affected by the drainage pattern of such land and the surrounding area, the susceptibility of such land to flooding and the possibility that such land might be classified as "wetlands" by a government agency, thereby inhibiting or precluding development of the parcel.  Nature of Farm Leases and Limited Current Income.  With the exception of limited amounts of cash which may be generated from leasing the land as farmland or for other revenue-producing activities, pre-development land does not  -4-  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, L.P. Partnership Agreement and IRS Regulation Section 1.7704-1(j), we have reached the maximum threshold of partnership units that can be transferred/assigned during 2007. Therefore, no other sales of partnership interests can take place during 2007.  Conflicts of Interest.   We may be subject to various conflicts of interest arising out of our relationship with our general partners and its affiliates.   If the general partner or its affiliates breach their fiduciary obligations to us, or do not resolve these conflicts of interest to our benefit, we could suffer consequences which we might not otherwise be subject to if such conflicts of interest did not exist.  Federal Income Tax Aspects  Potential Receipt of UBTI. The incurrence of debt in connection with our pre-development and/or sales activities could cause the gain on the sale of parcels to constitute unrelated business taxable income ("UBTI") and affect limited partners that are tax-exempt entities.   Item 1(b). Unresolved Staff Comments  None  -5-  Item 2. Properties  We acquired fee ownership of the following real property investments:  Gross AcresRemainingPurchase/SalesParcel & LocationPurchased/SoldAcresDateParcel 1, Kendall County, Illinois84.7360-01/19/89(3.5200sold 12/24/96)(.3520sold 11/25/97)(80.8640sold 12/29/97)Parcel 2, McHenry County, Illinois223.4121-01/19/89(183.3759sold 12/27/90)(40.0362sold 05/11/00)Parcel 3, Kendall County, Illinois20.0000-02/09/89(20.0000sold 05/08/90)Parcel 4, Kendall County, Illinois69.2760-04/18/89(.4860sold 02/28/91)(27.5850sold 08/25/95)(4.4017sold various 2001)(2.1400sold various 2002)(23.0933sold various 2003)(6.7800sold various 2004)(4.7900sold various 2005)Parcel 5, Kendall County, Illinois372.2230-05/03/89(Optionsold 04/06/90)(372.2230sold 06/20/03)Parcel 6, Kendall County, Illinois78.390011.013006/21/89(3.9500sold 11/01/00)(30.0000sold 07/12/05)(33.4270sold 07/27/06)Parcel 7, Kendall County, Illinois77.049077.049006/21/89Parcel 8, Kendall County, Illinois5.0000-06/21/89(5.0000sold 10/06/89)Parcel 9, McHenry County, Illinois51.030051.030008/07/89Parcel 10, McHenry County, Illinois123.9400-08/07/89(123.9400sold 12/06/89)Parcel 11, McHenry County, Illinois30.592030.592008/07/89  As part of the purchase agreement for parcel 5, we were required to buy an option to purchase an additional 243 acres immediately to the west of this parcel. The 1990 sale transaction relates to the sale of this option.    -6-   Gross AcresRemainingPurchase/SalesParcel & LocationPurchased/SoldAcresDateParcel 12, Kendall County, Illinois90.2710-10/31/89(.7090sold 04/26/91)(89.5620sold 03/10/04)Parcel 13, McHenry County, Illinois92.7800-11/07/89(2.0810sold 09/18/97)(90.6990sold 02/15/01)Parcel 14, McHenry County, Illinois76.202076.202011/07/89Parcel 15, Lake County, Illinois84.5564-01/03/90(10.5300sold various 1996)(5.4680sold various 1997)(68.5584sold various 1998)Parcel 16, Kane/Kendall Counties,72.4187-01/29/90Illinois(30.9000sold 07/10/98)(10.3910sold 12/15/99)(3.1000sold 12/12/00)(28.0277sold 05/19/03)Parcel 17, McHenry County, Illinois99.924072.414001/29/90(27.5100sold 01/29/99)Parcel 18, McHenry County, Illinois71.487069.967001/29/90(1.0000sold various 1990)(.5200sold 03/11/93)Parcel 19, McHenry County, Illinois63.691563.691502/23/90Parcel 20, Kane County, Illinois224.1480-02/28/90(.2790sold 10/17/91)(223.8690sold 02/20/04)Parcel 21, Kendall County, Illinois172.4950-03/08/90(172.4950sold various 1998)Parcel 22, McHenry County, Illinois254.5250254.525004/11/90Parcel 23, Kendall County, Illinois140.0210-05/08/90(4.4100sold various 1993)(35.8800sold various 1994)(3.4400sold various 1995)(96.2910sold 08/26/99)Parcel 24, Kendall County, Illinois298.4830211.577005/23/90(12.4570sold 05/25/90)(4.6290sold 04/01/96)(69.82sold 11/26/02)Parcel 25, Kane County, Illinois225.0000225.000006/01/90  -7-     Our general partner anticipates that the land we acquired will produce sufficient income to pay property taxes, insurance and other miscellaneous expenses. Income will be derived through leases to farmers or from other activities compatible with undeveloped land. Although the general partner believes that leasing our land will generate sufficient revenues to pay these expenses, there can be no assurance that this will in fact occur. Our general partner has agreed to make a supplemental capital contribution to us if and to the extent that real estate taxes and insurance payable with respect to our land during a given year exceed the revenue earned by us from leasing our land during such year. Any supplemental capital contribution will be repaid only after limited partners have received, over the life of our partnership, a return of their original capital plus the 15% cumulative return. A majority of the parcels purchased by us 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, 2006, 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 2006.  PART II   Item 5. Market for Our Limited Partnership Units and Related Security Holder Matters  As of February 26, 2007, there were 2,819 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, 2006 and 2005, we paid the following distributions:  Distributions to:20062005General partners$200,000291,379Limited partners2,000,0002,000,000Total$2,200,0002,291,379   -8-  Item 6. Selected Financial Data   INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
For the years ended December 31, 2006, 2005, 2004, 2003 and 2002
(not covered by the Report of Independent Registered Public Accounting Firm)    20062005200420032002Total assets$15,850,03015,602,18315,372,72021,527,19127,611,879Total income$3,317,5043,799,31717,079,72313,116,0541,916,049Net income$2,397,6842,571,59310,150,3236,436,652314,651Net income (loss) allocated to the one general partner unit$200,542291,7122,632,9851,265,292(8,513)Net income allocated per limited partnership unit$74.2577.04254.02174.7510.92Distributions per limited partnership unit from sales$67.5867.58370.51239.9351.76Weighted average limited partnership units29,59329,59329,59329,59329,593  The above selected financial data should be read in conjunction with the financial statements and related notes appearing elsewhere in this annual report.  The net income per unit and distributions per unit data is based upon the weighted average number of units outstanding.  All distributions from sales represent a return of original capital until such time as the limited partners have received distributions totaling their original capital.  As of March 2004, the limited partners had received distributions in excess of their original capital.   -9-  Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations  Certain statements in this  "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this annual report on Form 10-K constitute  "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. These factors include, among other things, the ability to obtain annexation and zoning approvals required to develop our properties; the approval of local governing bodies to develop our properties; successful lobbying of local "no growth" or limited development homeowner groups; adverse changes in real estate, financing and general economic or local conditions; eminent domain proceedings; changes in the environmental conditions or changes in the environmental positions of governmental bodies; and potential conflicts of interest between us and our affiliates, including our general partner.  Critical Accounting Policies On December 12, 2001, the Securities and Exchange Commission issued Financial Reporting Release or FRR No. 60 "Cautionary Advice Regarding Disclosure About Critical Accounting Policies."  A critical accounting policy is one that would materially affect our operations or financial condition, and requires management to make estimates or judgements in certain circumstances. We believe that our most critical accounting policies relate to how we value our investment properties and mortgage loans receivable and revenue recognition.  These judgements often result from the need to make estimates about the effect of matters that are inherently uncertain.  The purpose of the FRR is to provide investors with an understanding of how management forms these policies.  Critical accounting policies discussed in this section are not to be confused with accounting principles and methods disclosed in accordance with accounting principles generally accepted in the United States of America or GAAP.  GAAP requires information in financial statements about accounting principles, methods used and disclosures pertaining to significant estimates.  The following disclosure discusses judgements known to management pertaining to trends, events or uncertainties known which were taken into consideration upon the application of those policies and the likelihood that materially different amounts would be reported upon taking into consideration different conditions and assumptions.  Valuation of Investment Properties - On a quarterly basis, in accordance with Statement of Financial Accounting Standards No. 144, we conduct an impairment analysis to ensure that the carrying value of each property does not exceed its estimated fair value.  If this were to occur, we would be required to record an impairment loss equal to the excess of carrying value over fair value. In determining the value of an investment property and whether the property is impaired, management considers several factors such as projected capital expenditures and sales prices. The aforementioned factors are considered by management in determining the value of any particular property.  The value of any particular property is sensitive to the actual results of any of these uncertain factors, either individually or taken as a whole.  Should the actual results differ from management's judgement, the valuation could be negatively or positively affected. The valuation and possible subsequent impairment of investment properties is a significant estimate that can and does change based on management's continuous process of analyzing each property. For the year ended December 31, 2006, we had recorded no such impairment.  Cost Allocation - We use the area method of cost allocation, which approximates the relative sales method of cost allocation, whereby a per acre price is used as the standard allocation method for land purchases and sales. The total cost of the parcel is divided by the total number of acres to arrive at a per acre price.  Valuation of Mortgage Loans Receivable - On a quarterly basis, we conduct an analysis to ensure that the carrying value of each mortgage loan receivable is recoverable from the borrower.  If we determine 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.  -10-   In determining the value of mortgage loans receivable, management considers projected sales proceeds available and expenses related to the property associated with the mortgage. Should the actual results differ from management's judgement, the valuation could be negatively or positively affected.  The valuation and possible subsequent allowance for doubtful accounts is a significant estimate that can and does change based on management's continuous process of analyzing each mortgage loan receivable. As of December 31, 2006, the partnership has recorded an allowance for doubtful accounts of $1,233,175 on the remaining mortgage loan receivable.  Revenue Recognition - We recognize income from the sale of land parcels in accordance with Statement of Financial Standards No. 66, "Accounting for Sales of Real Estate".   Liquidity and Capital Resources  On October 12, 1988, we commenced an offering of 10,000 (subject to increase to 30,000) limited partnership units or units pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933.  On October 6, 1989, the offering terminated after we had sold 30,000 units to the public at $1,000 per unit resulting in $30,000,000 in gross offering proceeds, which does not include proceeds from the initial limited partner and the general partner.  All of the holders of our units were admitted to our 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 $25,187,069 of gross offering proceeds to purchase on an all-cash basis twenty-five parcels of undeveloped land and an option to purchase undeveloped land. These investments include the payment of the purchase price, acquisition fees and acquisition costs of such properties. Fourteen of the parcels were purchased during 1989 and eleven during 1990.  As of December 31, 2006, we have had multiple sales transactions, through which we have disposed of approximately 1,959 acres of the approximately 3,102 acres originally owned. As of December 31, 2006, cumulative distributions to the limited partners have totaled $37,169,906 (which exceeds the original capital) and $4,545,451 to the general partner. Through December 31, 2006, we have used $19,012,108 of working capital for rezoning and other activities. Such amounts have been capitalized and are included in investments in land.  Our capital needs and resources will vary depending upon a number of factors, including the extent to which we conduct rezoning and other activities relating to utility access, the installation of roads, subdivision and/or annexation of land to a municipality, changes in real estate taxes affecting our land, and the amount of revenue received from leasing.  As of December 31, 2006, we own, in whole or in part, eleven of our twenty-five original parcels, the majority of which are leased to local farmers and are generating sufficient cash flow from farm leases to cover property taxes and insurance.  At December 31, 2006, we had cash and cash equivalents of $1,813,040, 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.  We anticipate additional sales of the residential portion of Parcels 6 and 7 during July 2007. However, there can be no assurance that any sales will be completed or that a distribution will be made to the limited partners. Undistributed net sales proceeds will be used to cover our operations, including property upgrades, and for distributions. We will evaluate our cash needs throughout the year to determine future distributions.   -11-  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. Parcels 6 and 7 have completed and sold two phases of improvements for an industrial park and sites are being marketed. We have also completed the planning process and received favorable zoning on the residential portion of these parcels. Marketing efforts have been successful to date and a contract is in place for the sale of the residential portion of these parcels. The first of three closings occurred during July 2005. The second of three closings occurred during July 2006.  Provided the buyer performs, the final closing is anticipated to occur during 2007.  Zoning discussions and land planning are in progress on Parcels 14, 17, 18, 19 and 22.  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 $53,304, $45,316, and $48,039 are included in professional services to affiliates and general and administrative expenses to affiliates for the years ended December 31, 2006, 2005 and 2004, respectively, of which $5,006 and $7,423 was unpaid as of December 31, 2006 and 2005, respectively.  An affiliate of our general partner performed marketing and advertising services for us and was reimbursed for direct costs. Such costs of $24,079, $29,982 and $19,280 have been incurred and are included in marketing expenses to affiliates for the years ended December 31, 2006, 2005 and 2004, respectively, of which $4,443 and $0 was unpaid as of December 31, 2006 and 2005.  An affiliate of the general partner performed property upgrades, rezoning, annexation and other activities to prepare our parcels for sale and was reimbursed for salaries and direct costs. For the years ended December 31, 2006 and 2005, we incurred $170,645 and $156,306, respectively, of such costs. The affiliate did not recognize a profit on any project. Such costs are included in investments in land, of which $39,515 and $38,063 was unpaid as of December 31, 2006 and 2005, respectively.   Results of Operations  As of December 31, 2006, we owned eleven parcels of land consisting of approximately 1,143 acres. Of the 1,143 acres owned, approximately 880 acres are tillable, leased to local farmers and generate sufficient cash flow to cover property taxes, insurance and other miscellaneous expenses.  Rental income was $171,448, $160,380 and $166,438 for the years ended December 31, 2006, 2005 and 2004, respectively. The increase in rental income for 2006 is due to an increase in negotiated lease rates.  Sale of investments in land and improvements of $3,046,294 and cost of land sold of $702,839 for the year ended December 31, 2006 are the result of the sale of approximately 33 acres of Parcel 6.  Sale of investments in land and improvements of $3,577,683 and cost of land sold of $1,039,366 for the year ended December 31, 2005 are the result of the sale of two lots of Parcel 4 and 30 acres of Parcel 6.  Sales of investments in land and improvements of $16,847,378 and cost of land sold of $6,492,519 for the year ended December 31, 2004 were a result of the sale of additional lots of Parcel 4 and the sale of the balance of Parcels 12 and 20.  The increase in sales activity for the year ended December 31, 2004 was the result of favorable zoning as well as a change in our marketing approach to target homebuilders, industrial users and land developers.  Interest income was $78,282, $52,546 and $58,782 for the years ended December 31, 2006, 2005 and 2004, 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.   -12-  Other income was $21,480, $8,708 and $7,125 for the years ended December 31, 2006, 2005 and 2004, respectively.  The increase in other income in 2006 is due to tender offer fees received.  Professional services to affiliates were $38,133, $24,216 and $27,543 for the years ended December 31, 2006, 2005 and 2004, respectively.  The increase in professional services to affiliates is due primarily to an increase in fees for accounting services.  Professional services to non-affiliates were $52,828, $44,415 and $55,829 for the years ended December 31, 2006, 2005 and 2004, respectively.  Professional services to non-affiliates increased for the year ended December 31, 2006 compared to the year ended December 31, 2005, due to an increase in fees for accounting services.  Professional services to non-affiliates decreased for the year ended December 31, 2005 compared to the year ended December 31, 2004 due to a decrease in fees for accounting services.  General and administrative expenses to affiliates were $15,171, $21,100 and $20,496 for the years ended December 31, 2006, 2005 and 2004, respectively.  The decrease in 2006 is due to a decrease in data processing costs and investor service charges.  General and administrative expenses to non-affiliates were $37,956, $29,925 and $33,559 for the years ended December 31, 2006, 2005 and 2004, respectively.  The increase in general and administrative expenses in 2006 is due to an increase in printing costs.  Income tax expenses were $18,408, $8,417 and $139,258 for the years ended December 31, 2006, 2005 and 2004, respectively.  Income tax expenses include Illinois state taxes paid and accrued at the partnership level.  Income tax expenses fluctuate in accordance with land sales.  Marketing expenses to affiliates were $24,079, $29,982 and $19,280 for the years ended December 31, 2006, 2005 and 2004, respectively.  Marketing expenses to affiliates are costs incurred for preparing and marketing parcels for sale.  Marketing expenses to non-affiliates were $33,329, $19,782 and $54,982 for the years ended December 31, 2006, 2005 and 2004, respectively.  In 2004, we fully implemented the change in our marketing approach to target homebuilders, industrial users and land developers through direct mailings, newspaper and trade publication advertising and an enhanced website. In 2005, marketing expenses decreased as we took advantage of our established marketing plans. In 2006, marketing expenses increased due to signage expenditures.  Land operating expenses to non-affiliates were $67,881, $70,521 and $65,826 for the years ended December 31, 2006, 2005 and 2004, respectively. These costs primarily include real estate tax expense, ground maintenance and insurance expense on the parcels we own.  For the years ended December 31, 2006 and 2005, respectively, the Partnership received payments of $70,804 and $60,000 on mortgage loan receivables previously reserved and recorded the payments as recovery of loan losses and bad debt expense.  We determined that the maximum value of Parcels 1, 15, 21 and 23 could be realized if the parcels were developed and sold as individual lots. However, if we had followed that plan, there is a possibility that the limited partners may have been subject to unrelated business taxable income. Therefore, we sold the parcels to a third party developer whereby 100% of the sales price was represented by notes receivable from the buyer. The transactions were deemed installment sales. After the sales, the developer, through a limited liability company or LLCs, secured third party financing to cover the deferred down payment owed to us as well as provide proceeds to begin the development of the project. The sales were structured so that the deferred down payment received was sufficient to provide a distribution to our limited partners that equated to the invested capital allocated to the parcel (parcel capital) plus approximately a 6% return per annum on the parcel capital through the date of the distribution.  The velocity of the developer's individual lot sales was slower than originally projected and consequently the developer's carrying costs were higher. The developer obtained a loan from an affiliate of our general partner. These  -13-  funds were used for operating costs and to continue the development of the project.  As a result of the slower lot sales, the net sale proceeds available to us were lower than anticipated. We continued to review the project and determined that the collectability of the receivable was doubtful. As a result, we elected to reserve $1,233,175 of principal and $423,794 of accrued interest relating to the mortgage receivable. The deferred gain of $60,752 relating to the mortgage loans receivable was also reserved and recorded against bad debt expense.  Our general partner guaranteed the third party development loans owed by the limited liability company. In reviewing the developments financial situation, our general partner determined that it would be in its best interest to have an affiliate acquire the interest in the LLCs. The general partner and its affiliates concluded that they could better control the continuing costs to complete the development and would therefore have the best opportunity to limit their exposure under the guarantee agreements and possibly recover a portion of the amount owed to us. An affiliate of our general partner acquired the interest in the LLCs and paid off the debt under its guarantee of the LLC loans. The affiliate of the general partner will complete the development and sale of the projects. Based on our continuing review of developments financial situation, we do not anticipate receiving any additional proceeds. However, any write-off will not take place until such time as we are certain that no further proceeds will become available to reduce the amount of the receivable. Our limited partners received distributions that equated to the parcel capital plus approximately a 6% return per annum on the parcel capital through the date of the distribution.   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 a sale of our properties is first allocated among the partners in proportion to the negative balances, if any, in their respective capital accounts.  Thereafter, except as provided below, net gain is allocated to the general partner in an amount equal to the proceeds distributed to the general partner from such sale and the balance of any net gain is allocated to the limited partners.  If the amount of net gain realized from a sale is less than the amount of cash distributed to the general partner from such sale, we will allocate income or gain to the general partner in an amount equal to the excess of the cash distributed to the general partner with respect to such sale as quickly as permitted by law.   Any net loss from a sale will be 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 or parcel capital, plus a 6% per annum noncompounded cumulative preferred return thereon.  After the amounts described in items (i) and (ii) above and any previously subordinated distributions to the general partner have been paid, and the amount of any supplemental capital contributions have been repaid to the general partner, subsequent distributions shall be paid 75% to the limited partners and 25% to the general partner without considering parcel capital. If, after all net sale proceeds have been distributed, the general partner has received more than 25% of all net sale proceeds (exclusive of distributions made to the limited partners to return their original capital), the general partner shall contribute to the partnership for distribution to the limited partners an amount equal to such excess.  -14-   Any distributions from net sale proceeds at a time when invested capital is greater than zero shall be deemed applied first as a reduction of such invested capital before application to payment of any deficiency in the 15% cumulative preferred return  Other  In accordance with Article XVI Section 16.1 of the Inland Land Appreciation Fund, L.P. Partnership Agreement and IRS Regulation Section 1.7704-1(j), we have reached the maximum threshold of partnership units that can be transferred/assigned during 2007. Therefore, no other sales of partnership interests can take place during 2007.  Off-Balance Sheet Arrangements, Contractual Obligations, Liabilities and Contracts and Commitments  None    Item 7(a). Quantitative and Qualitative Disclosures About Market Risk  Not Applicable.  -15-  Item 8.  Financial Statements and Supplementary Data INLAND LAND APPRECIATION FUND, L.P. (a limited partnership)   Index   PageReport of Independent Registered Public Accounting Firm17Financial Statements:Balance Sheets, December 31, 2006 and 200518Statements of Operations, for the years ended December 31, 2006, 2005 and 200420Statements of Partners' Capital, for the years ended December 31, 2006, 2005 and 200421Statements of Cash Flows, for the years ended December 31, 2006, 2005 and 200422Notes 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.            -16-  Report of Independent Registered Public Accounting Firm   To the Partners of Inland Land Appreciation Fund, L.P.  We have audited the accompanying balance sheets of Inland Land Appreciation Fund, L.P. (a limited partnership) (the Partnership) as of December 31, 2006 and 2005, 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, L.P. as of December 31, 2006 and 2005, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.   Grant Thornton LLP  Chicago, Illinois March 22, 2007     -17-  INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Balance Sheets
December 31, 2006 and 2005  Assets   20062005Current assets:Cash and cash equivalents (Note 1)$1,813,0401,426,760Accounts and accrued interest receivable (net of allowance for doubtful     accounts of $423,794 at December 31, 2006 and 2005) (Note 6)18,2349,224Mortgage loans receivable (net of allowance for doubtful accounts of     $1,233,175 at December 31, 2006 and 2005) (Note 6)--Other current assets6,6388,966Total current assets1,837,9121,444,950Other assets-5,729Investments in land and improvements, at cost (including acquisition fees paid   to Affiliates of $479,219 and $486,732 at December 31, 2006 and 2005,   respectively) (Notes 3 and 4)14,012,11814,151,504Total assets$15,850,03015,602,183      See accompanying notes to financial statements.  -18-  INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
December 31, 2006 and 2005  Liabilities and Partners' Capital   20062005Current liabilities:Accounts payable$79,25627,183Accrued real estate taxes29,23434,621Due to Affiliates (Notes 3)48,96445,487Unearned income23,17023,170Total current liabilities180,624130,461Partners' capital:General Partner:Capital contribution500500Cumulative net income4,560,7014,360,159Cumulative cash distributions(4,545,451)(4,345,451)15,75015,208Limited Partners:Units of $1,000. Authorized 30,001 Units, 29,593 outstanding at       December 31, 2006 and 2005, (net of offering costs of $3,768,113, of       which $1,069,764 was paid to Affiliates)25,873,40325,873,403Cumulative net income26,950,15924,753,017Cumulative cash distributions(37,169,906)(35,169,906)15,653,65615,456,514Total Partners' capital15,669,40615,471,722Total liabilities and Partners' capital$15,850,03015,602,183  See accompanying notes to financial statements.  -19-  INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Statements of Operations
For the years ended December 31, 2006, 2005 and 2004   200620052004Income:Sale of investments in land and improvements (Note 4)$3,046,2943,577,68316,847,378Rental income (Note 5)171,448160,380166,438Interest income78,28252,54658,782Other income21,4808,7087,1253,317,5043,799,31717,079,723Expenses:Cost of land sold702,8391,039,3666,492,519Professional services to Affiliates38,13324,21627,543Professional services to non-affiliates52,82844,41555,829General and administrative expenses to Affiliates15,17121,10020,496General and administrative expenses to non-affiliates37,95629,92533,559Income tax expense18,4088,417139,258Marketing expenses to Affiliates24,07929,98219,280Marketing expenses to non-affiliates33,32919,78254,982Land operating expenses to non-affiliates67,88170,52165,826Amortization of deferred loan fees--20,108Bad debt (recovery) expense(70,804)(60,000)-919,8201,227,7246,929,400Net income$2,397,6842,571,59310,150,323Net income allocated to (Note 2):General Partner$200,542291,7122,632,985Limited Partners2,197,1422,279,8817,517,338Net income$2,397,6842,571,59310,150,323Net income allocated to the one General Partner Unit$200,542291,7122,632,985Net income per Unit allocated to Limited Partners per   weighted average Limited Partnership Units (29,593   for the years ended December 31, 2006, 2005 and   2004)$74.2577.04254.02    See accompanying notes to financial statements.  -20-  INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Statements of Partners' Capital
For the years ended December 31, 2006, 2005 and 2004   GeneralLimitedPartnerPartnersTotalBalance at January 1, 2004$16,92018,623,74518,640,665Net income (Note 2)2,632,9857,517,33810,150,323Distributions to Partners ($370.51 per weighted average Limited Partnership Units of 29,593) (Note 2)(2,635,030)(10,964,450)(13,599,480)Balance at December 31, 200414,87515,176,63315,191,508Net income (Note 2)291,7122,279,8812,571,593Distributions to Partners ($67.58 per weighted average   Limited Partnership Units of 29,593) (Note 2)(291,379)(2,000,000)(2,291,379)Balance at December 31, 200515,20815,456,51415,471,722Net income (Note 2)200,5422,197,1422,397,684Distributions to Partners ($67.58 per weighted average   Limited Partnership Units of 29,593) (Note 2)(200,000)(2,000,000)(2,200,000)Balance at December 31, 2006$15,75015,653,65615,669,406     See accompanying notes to financial statements.  -21-  INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Statements of Cash Flows
For the years ended December 31, 2006, 2005 and 2004    200620052004Cash flows from operating activities:Net income$2,397,6842,571,59310,150,323Adjustments to reconcile net income to net cash provided     by (used in) operating activities:Gain on sale of investments in land and improvements(2,343,455)(2,538,317)(10,354,859)Bad debt (recovery) expense(70,804)(60,000)-Amortization of deferred loan fees--20,108Changes in assets and liabilities:Accounts and accrued interest receivable(9,010)(7,823)(1,009)Other assets8,05710,444(1,483)Accounts payable52,073(60,303)84,031Accrued real estate taxes(5,387)(8,837)(12,260)Due to Affiliates3,47724,049(329,953)Unearned income-(5,660)9,550Net cash provided by (used in) operating activities32,635(74,854)(435,552)Cash flows from investing activities:Principal payments collected on mortgage loans receivable70,80460,000-Additions to investments in land and improvements(563,453)(446,646)(719,464)Proceeds from disposition of investments in land and     improvements3,046,2943,577,68316,847,378Net cash flow provided by investing activities2,553,6453,191,03716,127,914Cash flows from financing activities:Principal payments on notes payable to Affiliates--(2,456,682)Cash distributions(2,200,000)(2,291,379)(13,599,480)Net cash flow used in financing activities(2,200,000)(2,291,379)(16,056,162)  See accompanying notes to financial statements.  -22-  INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Statements of Cash Flows
(continued)
For the years ended December 31, 2006, 2005 and 2004    200620052004Net increase (decrease) in cash and cash equivalents$386,280824,804(363,800)Cash and cash equivalents at beginning of year1,426,760601,956965,756Cash and cash equivalents at end of year$1,813,0401,426,760601,956Cash paid for interest$--387,189      See accompanying notes to financial statements.  -23-  INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements For the years ended December 31, 2006, 2005 and 2004  (1) Organization and Basis of Accounting  The Registrant, Inland Land Appreciation Fund, L.P. (the "Partnership"), was formed in October 1987, pursuant to the Delaware Revised Uniform Limited Partnership Act, to invest in undeveloped land on an all-cash basis and realize appreciation of such land upon resale. On October 12, 1988, the Partnership commenced an Offering of 10,000 (subject to increase to 30,000) Limited Partnership Units ("Units") pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933. Inland Real Estate Investment Corporation is the General Partner. The Offering terminated on October 6, 1989, with total sales of 30,000 Units, at $1,000 per Unit, not including the General Partner or the Initial Limited Partner. All of the holders of these Units were admitted to this Partnership. The Limited Partners of the Partnership share in their portion of benefits of ownership of the Partnership's real property investments according to the number of Units held. As of December 31, 2006, the Partnership has repurchased a total of 407.75 Units for $359,484 from various Limited Partners through the Unit Repurchase Program. Under this program Limited Partners may under certain circumstances have their Units repurchased for an amount equal to their Invested Capital.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.  Offering costs have been offset against the Limited Partners' capital accounts.  The Partnership considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents which are carried at cost, which approximates market.  The Partnership recognizes income from the sale of land parcels in accordance with Statement of Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate".  Except as described in footnote (b) to Note 4 of these notes, the Partnership uses the area method of allocation, which approximates the relative sales method of allocation, whereby a per acre price is used as the standard allocation method for land purchases and sales. The total cost of the parcel is divided by the total number of acres to arrive at a per acre price.  A presentation of information about operating segments as required in SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information" would not be material to an understanding of the Partnership's business taken as a whole as the Partnership is engaged in the business of real estate investment which management considers to be a single operating segment.  -24-  INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)  The Partnership is required to pay a withholding tax to the Internal Revenue Service with respect to a Partner's allocable share of the Partnership's taxable net income, if the Partner is a foreign person. The Partnership will first pay the withholding tax from the distributions to any foreign partner, and to the extent that the tax exceeds the amount of distributions withheld, or if there have been no distributions to withhold, the excess will be accounted for as a distribution to the foreign partner. Withholding tax payments are made every April, June, September and December.  No provision for Federal income taxes has been made as the liability for such taxes is that of the Partners rather than the Partnership.  The Partnership's records are maintained on the accrual basis of accounting in accordance GAAP. The Federal income tax return has been prepared from such records after making appropriate adjustments, if any, to reflect the Partnership's accounts as adjusted for Federal income tax reporting purposes. Such adjustments are not recorded in the records of the Partnership. The net effect of these items is summarized as follows:  20062005TaxTaxGAAPBasisGAAPBasisBasis(unaudited)Basis(unaudited)Total assets$15,850,03019,618,14615,602,18319,364,568Partners' capital:General Partner15,750(700)15,208(4,538)Limited Partners15,653,65619,390,32115,456,51419,196,475Net income allocated:General Partner200,542203,838291,712291,670Limited Partners2,197,1422,149,4062,279,8812,244,652Net income per Limited Partnership Unit74.2572.6377.0475.85  The net income per Unit is based upon the weighted average number of Units of 29,593 during 2006 and 2005.  New Accounting Pronouncements  In April 2006, the FASB issued FASB Staff Position ("FSP") 46R-6: Determining the Variability to Be Considered in Applying FASB Interpretation No. 46(R).  This FSP addresses certain implementation issues related to FIN 46(R). Specifically, FSP FIN 46R-6 addresses how a reporting enterprise would determine the variability to be considered in applying FIN 46(R).  The variability that is considered in applying FIN 46(R) affects the determination of (a) whether an entity is a variable interest entity (VIE), (b) which interests are "variable interests" in the entity, and (c) which party, if any, is the primary beneficiary of the VIE.  That variability affects any calculation of expected losses and expected residual returns, if such a calculation is necessary.  The Partnership is required to apply the guidance in this FSP prospectively to all entities (including newly created entities) with which it first becomes involved and to all entities previously required to be analyzed under FIN 46(R) when a "reconsideration event" has occurred, beginning July 1, 2006.  The Partnership will evaluate the impact of this FSP at the time any such "reconsideration event" occurs, and for any new entities with which the Partnership becomes involved in future periods.   -25-  INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)   In June 2006, the FASB ratified the EITF's consensus on Issue No. 06-3: How Taxes Collected from Customers and Remitted to Governmental Authorities should be Presented in the Income Statement (That is, Gross versus Net Presentation).Specifically, EITF No. 06-3 addresses any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, sales, use, value added, and some excise taxes.  An accounting policy decision determines if the presentation should be on a gross or a net basis in the income statement.  The consensus in this issue is to be applied to financial reports for interim and annual reporting periods beginning after December 15, 2006.  The Partnership primarily accounts for the sales taxes and other taxes subject to the consensus in EITF No. 06-3 on the gross basis in its statement of operations.  Also in June 2006, the FASB issued Interpretation No. 48: Uncertainty in Income Taxes  an Interpretation of FASB Statement No. 109. This Interpretation defines a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognizing, classification, interest and penalties, accounting in interim periods, disclosure and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006. The Partnership is currently evaluating and has not yet completed our evaluation on whether the adoption of Interpretation No. 48 will have a material effect on our financial statements.  In September 2006, the SEC's staff issued SAB No. 108: Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.  This Bulletin provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment.  The guidance in this Bulletin must be applied to financial reports covering the first fiscal year ending after November 15, 2006.  The Partnership has applied this guidance in its assessment of the materiality of prior year misstatements on its current year financials and determined that the adoption of SAB 108 did not have a material impact on its financial statements.  -26-  INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)   (2) Partnership Agreement  The Partnership Agreement defines the allocation of profits and losses, and available cash.  If and to the extent that real estate taxes and insurance payable with respect to the Partnership's land during a given year exceed revenues of the Partnership, the General Partner will make a Supplemental Capital Contribution of such amount to the Partnership to ensure that it has sufficient funds to make such payments.  Profits and losses from operations (other than capital transactions) will be allocated 99% to the Limited Partners and 1% to the General Partner.  The net gain from a sale of Partnership properties is first allocated among the Partners in proportion to the negative balances, if any, in their respective capital accounts.  Thereafter, except as provided below, net gain is allocated to the General Partner in an amount equal to the proceeds distributed to the General Partner from such sale and the balance of any net gain is allocated to the Limited Partners.  If the amount of net gain realized from a sale is less than the amount of cash distributed to the General Partner from such sale, the Partnership will allocate income or gain to the General Partner in an amount equal to the excess of the cash distributed to the General Partner with respect to such sale as quickly as permitted by law.   Any net loss from a sale 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 Sale Proceeds at a time when Invested Capital is greater than zero shall be deemed applied first as a reduction of such Invested Capital before application to payment of any deficiency in the 15% Cumulative Preferred Return.    -27-  INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)   (3) Transactions with Affiliates  The General Partner and its Affiliates are entitled to reimbursement for salaries and expenses of employees of the General Partner and its Affiliates relating to the administration of the Partnership. Such costs are included in professional services and general and administrative expenses to Affiliates, of which $5,006 and $7,423 were unpaid as of December 31, 2006 and 2005, 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 $24,079, $29,982 and $19,280 have been incurred and are included in marketing expenses to Affiliates for the years ended December 31, 2006, 2005 and 2004, respectively, of which $4,443 and $0 was unpaid as of December 31, 2006 and 2005.  An Affiliate of the General Partner performed property upgrades, rezoning, annexation and other activities to prepare the Partnership's land investments for sale and was reimbursed (as set forth under terms of the Partnership Agreement) for salaries and direct costs. For the years ended December 31, 2006 and 2005, the Partnership incurred $170,645 and $156,306, respectively, of such costs. The Affiliate did not recognize a profit on any project. Such costs are included in investments in land and improvements, of which $39,515 and $38,064 were unpaid as of December 31, 2006 and 2005, respectively.           -28-


INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)  (4) Investments in Land and Improvements  Initial CostsIllinoisGross Acres PurchasedPurchase/SalesOriginalAcquisitionTotalCosts  Capitalized Subsequent toCosts of PropertyTotal Remaining Costs of Parcels atCurrent Year Gain on SaleParcelCounty(Sold)DateCostsCostsCostsAcquisitionSold12/31/06Recognized1Kendall84.736001/19/89$423,68061,625485,3055,462,5895,947,894--(3.5200)12/24/96(.3520)11/25/97(80.8640)12/29/972McHenry223.412101/19/89650,00095,014745,01426,816771,830--(183.3759)12/27/90(40.0362)05/11/003Kendall20.000002/09/89189,00013,305202,305-202,305--(20.0000)05/08/904Kendall69.276004/18/89508,19638,126546,3221,223,3761,769,698--(.4860)02/28/91(27.5850)08/25/95(4.4017)Var 2001(2.1400)Var 2002(23.0933)Var 2003(6.7800)Var 2004(4.79)Var 20055Kendall (a)372.223005/03/892,532,227135,9432,668,170456,3983,124,568--(Option)04/06/90(372.2230)06/20/036Kendall (b)78.390006/21/89416,78331,691448,4741,428,0091,377,357499,1262,343,455(3.9500)11/01/00(30.0000)07/12/05(33.4270)07/27/067Kendall (b)77.049006/21/8984,7548,16392,9171,388,735-1,481,652-8Kendall (b)5.000006/21/8960,0005,11365,113-65,113--(5.0000)10/06/89   -29-  INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)  (4) Investments in Land and Improvements (continued)  Initial CostsIllinoisGross Acres PurchasedPurchase/SalesOriginalAcquisitionTotalCosts Capitalized Subsequent toCosts of PropertyTotal Remaining Costs of Parcels atCurrent Year Gain on SaleParcelCounty(Sold)DateCostsCostsCostsAcquisitionSold12/31/06Recognized9McHenry (b)51.030008/07/89$586,84522,482609,32765,317-674,644-10McHenry (b)123.940008/07/8991,9397,22499,16360099,763--(123.9400)12/06/8911McHenry (b)30.592008/07/89321,21622,641343,85769,952-413,809-12Kendall90.271010/31/89907,38941,908949,297246,9641,196,261--(.7090)04/26/91(89.562)03/10/0413McHenry92.780011/07/89251,30619,188270,49418,745289,239--(2.0810)09/18/97(90.6990)02/15/0114McHenry76.202011/07/89419,11123,402442,513184,690-627,203-15Lake84.556401/03/901,056,95585,2831,142,2381,661,3442,803,582--(10.5300)Var 1996(5.4680)Var 1997(68.5584)Var 199816Kane/72.418701/29/901,273,53755,3331,328,870706,7182,035,588--Kendall(30.9000)07/10/98(10.3910)12/15/99(3.1000)12/12/00(28.0277)05/19/0317McHenry99.924001/29/90739,63561,038800,6731,038,390320,9611,518,102-(27.5100)01/29/99   -30-  INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)  (4) Investments in Land and Improvements (continued)  Initial CostsIllinoisGross Acres PurchasedPurchase/SalesOriginalAcquisitionTotalCosts Capitalized Subsequent toCosts of PropertyTotal Remaining Costs of Parcels atCurrent Year Gain on SaleParcelCounty(Sold)DateCostsCostsCostsAcquisitionSold12/31/06Recognized18McHenry71.487001/29/90$496,11626,259522,375314,17211,109825,438-(1.0000)Var 1990(.5200)03/11/9319McHenry63.691502/23/90490,15829,158519,316319,871-839,187-20Kane224.148002/28/902,749,800183,0922,932,8921,938,9304,871,822--(.2790)10/17/91(223.869)02/20/0421Kendall172.495003/08/901,327,45975,8221,403,281954,4152,357,696--(172.4950)Var 199822McHenry254.525004/11/902,608,881136,5592,745,440350,767-3,096,207-23Kendall140.021005/08/901,480,000116,2401,596,240909,3952,505,635--(4.4100)Var 1993(35.8800)Var 1994(3.4400)Var 1995(96.2910)08/26/9924Kendall298.483005/23/901,359,77498,9211,458,69591,590436,6381,113,647-(12.4570)05/25/90(4.6290)04/01/96(69.82)11/26/0225Kane225.000006/01/902,600,000168,7782,768,778154,325-2,923,103-Totals$23,624,7611,562,30825,187,06919,012,10830,187,05914,012,1182,343,455   -31-


INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)  (4) Investments in Land and Improvements (continued)  (a) Included in the purchase agreement of Parcel 5 was a condition that required the Partnership to buy an option to purchase an additional 243 acres immediately to the west of this parcel.  The 1990 sale transaction relates to the sale of this option.  (b) The Partnership purchased from two third parties, two sets of three contiguous parcels of land (Parcels 6, 7 and 8; and Parcels 9, 10 and 11). The General Partner believes that the total value of this land will be maximized if it is treated and marketed to buyers as six separate parcels and closed the transactions as six separate purchases to facilitate this. Parcels 6, 7 and 8 will be treated as one parcel and Parcels 9, 10 and 11 will be treated as one parcel for purposes of computing Parcel Capital (as defined) and distributions to the Partners.  (c) Reconciliation of investments in land and improvements owned:  20062005Balance at January 1,$14,151,50414,744,224Additions during year563,453446,646Sales during year(702,839)(1,039,366)Balance at December 31,$14,012,11814,151,504  (d) The aggregate cost of investments in land and improvements owned at December 31, 2006 for Federal income tax purposes was approximately $14,100,000 (unaudited).  (e) On a quarterly basis, in accordance with Statement of Financial Accounting Standards No. 144, the Partnership conducts an impairment analysis to ensure that the carrying value of each property does not exceed its estimated fair value.  If this were to occur, the Partnership would be required to record an impairment loss equal to the excess of carrying value over fair value.  In determining the value of an investment property and whether the property is impaired, management considers several factors such as projected capital expenditures and sales prices. The aforementioned factors are considered by management in determining the value of any particular property.  The value of any particular property is sensitive to the actual results of any of these uncertain factors, either individually or taken as a whole.  Should the actual results differ from management's judgment, the valuation could be negatively or positively affected.  The valuation and possible subsequent impairment of investment properties is a significant estimate that can and does change based on management's continuous process of analyzing each property. For the year ended December 31, 2006, the Partnership had recorded no such impairment.  (5) Rental Income  The Partnership has determined that all leases relating to the farm parcels are operating leases.  Accordingly, rental income is reported when earned.  As of December 31, 2006 the Partnership had farm leases of generally one year in duration, for approximately 880 acres of the approximately 1,143 acres owned.


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INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)  (6) Mortgage Loans Receivable  Mortgage loans receivable are the result of sales of Parcels, in whole or in part.  The Partnership has recorded a deferred gain on these sales.  The deferred gain will be recognized over the life of the related mortgage loan receivable as principal payments are received.  As of December 31, 2006, the mortgage loans receivable and the related deferred gain are fully reserved.  For the years ended December 31, 2006 and 2005, respectively, the Partnership received payments of $70,804 and $60,000 on mortgage loan receivables previously reserved and recorded the payments as recovery of loan losses and bad debt expense.  Principal BalancePrincipal BalanceAccrued Interest ReceivableDeferred GainParcelMaturityInterest Rate12/31/0612/31/0512/31/0612/31/06103/31/069.00%$  1,233,1751,233,175423,79460,752Less allowance for doubtful accounts1,233,1751,233,175423,79460,752$        ----  The General Partner determined that the maximum value of Parcels 1, 15, 21 and 23 could be realized if the parcels were developed and sold as individual lots. However, if we had followed that plan, there is a possibility that the limited partners may have been subject to unrelated business taxable income. Therefore, the Partnership sold the parcels to a third party developer whereby 100% of the sales price was represented by notes receivable from the buyer. The transactions were deemed installment sales. After the sales, the developer, through a limited liability company (LLC), secured third party financing to cover the deferred down payment owed to the Partnership as well as provide proceeds to begin the development of the project. The sales were structured so that the down payment received at the time of the sale was sufficient to provide a distribution to the Limited Partners that equated to the parcel capital allocated to the parcel plus approximately a 6% return per annum on the parcel capital through the date of the distribution. The velocity of the developer's individual lot sales was slower than originally projected and consequently the developer's carrying costs were higher. The developer obtained a loan from an affiliate of our general partner. These funds were used for operating costs and to continue the development of the project.  As a result of the slower lot sales, the net sale proceeds available to us were lower than anticipated. We continued to review the project and determined that the collectability of the receivable was doubtful. As a result, we elected to reserve $1,233,175 of principal and $423,794 of accrued interest relating to the mortgage receivable. The deferred gain of $60,752 relating to the mortgage loans receivable was also reserved and recorded against bad debt expense.  The General Partner guaranteed the third party development loans owed by the LLCs. In reviewing the developments financial situation, the General Partner determined that it would be in its best interest to have an affiliate acquire the interest in the LLCs. The General Partner and its affiliates concluded that they could better control the continuing costs to complete the development and would therefore have the best opportunity to limit their exposure under the guarantee agreements and possibly recover a portion of the amount owed to the Partnership. An affiliate of the General Partner acquired the interests in the LLCs and paid off the debt under its guarantee of the LLC loans. The affiliate of the General Partner will complete the development and the sale of the projects.


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(7) Selected Quarterly Financial Data (unaudited)  The following represents the results of operations for each quarter during the years ended December 31, 2006, 2005 and 2004.  12/31/0609/30/0606/30/0603/31/06Total income$69,0483,122,88164,62260,953Net income (loss)87,4462,340,069(68)(29,763)Net income (loss) allocated to the limited   partners86,5722,140,103(68)(29,465)Net income (loss) per limited partnership unit,   basic and diluted2.9372.32-(1.00)12/31/0509/30/0506/30/0503/31/05Total income$603,7722,978,051174,51342,981Net income (loss)215,7312,336,29148,538(28,967)Net income (loss) allocated to the limited   partners(75,823)2,335,75848,623(28,677)Net income (loss) per limited partnership unit,   basic and diluted(2.56)78.931.64(.97)12/31/0409/30/0406/30/0403/31/04Total income$58,690296,805669,85716,054,371Net income (loss)(2,404)88,104296,4369,768,187Net income (loss) allocated to the limited   partners(501,860)88,255297,5847,633,359Net income (loss) per limited partnership unit,   basic and diluted(16.96)2.9810.06257.94   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 2006.   Item 9(a).  Controls and Procedures  The general partner conducted, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by the Annual Report.  Based upon that evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in timely alerting them to material information that is required to be disclosed in the periodic reports that we must file with the Securities and Exchange Commission.  There were no significant changes in our internal controls over financial reporting during the fourth quarter of 2006 that have materially affected or are reasonably likely to materially affect our internal control 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. Our general partner is a wholly owned subsidiary of The Inland Group, Inc. The general partner has responsibility for all aspects of our operations.  During 2004, the board of directors of our general partner formalized the audit committee. The Audit Committee is not independent from our general partner and consists of Catherine L. Lynch, committee chair and financial expert, Brenda G. Gujral, Roberta S. Matlin and Cathleen M. 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.  Officers and Directors  The officers, directors, and key employees of IREIC and its affiliates that are likely to provide services to us are as follows. Ages are listed as of January 1, 2007.   Functional TitleDaniel L. GoodwinDirectorRobert H. BaumDirector, General Counsel of IREICRobert D. ParksChairmanBrenda G. GujralDirector, President and principal executive officer of the PartnershipCatherine L. LynchTreasurerRoberta S. MatlinDirector, Senior Vice President-InvestmentsGuadalupe GriffinVice President-Asset ManagementKelly TucekVice President-Partnership Accounting and principal financial officer of the PartnershipCathleen M. HrtanekAssistant Counsel, The Inland Real Estate Group, Inc., Counsel to the Partnership


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DANIEL L. GOODWIN (age 63) 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 63) 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 63) 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 64) is president, chief operating officer and a director of Inland Real Estate Investment Corporation (IREIC). She is also president, chief operating officer and a director of Inland Securities Corporation (ISC), a member firm of the National Association of Securities Dealers (NASD). Mrs. Gujral is also a director of Inland Investment Advisors, Inc., an investment advisor. She is also Chief Executive Officer and an affiliated director of Inland Western Retail Real Estate Trust, Inc., chairperson of the board of Inland Real Estate Exchange Corporation and President and an affiliated director of Inland American Retail Real Estate Trust, Inc.  Mrs. Gujral has overall responsibility for the operations of IREIC, including the distribution of checks to over 70,000 investors, review of periodic communications to those investors, the filing of quarterly and annual reports for Inlands publicly registered investment programs with the Securities and Exchange Commission, compliance with other SEC and NASD securities regulations both for IREIC and ISC, review of asset management activities, and marketing and communications with the independent broker/dealer firms selling Inlands current and prior programs.  Mrs. Gujral works with internal and outside legal counsel in structuring and registering the prospectuses for IREICs investment programs and in connection with the preparation of its offering documents and registering the related securities with the Securities and Exchange Commission and state securities commissions.  Mrs. Gujral has been with the Inland organization for more than 20 years, becoming an officer in 1982. Prior to joining Inland, she worked for the Land Use Planning Commission establishing an office in Portland, Oregon, to implement land use legislation for that state.  She is a graduate of California State University.  She holds Series 7, 22, 39 and 63 licenses with the NASD.  Mrs. Gujral is a member of the National Association of Real Estate Investment Trusts (NAREIT) and the National Association for Female Executives.   CATHERINE L. LYNCH (age 48) joined Inland in 1989 and is the treasurer of Inland Real Estate Investment Corporation. Ms. Lynch is responsible for managing the corporate accounting department. Prior to joining Inland, Ms. Lynch worked in the field of public accounting for KPMG LLP since 1980. She received her B.S. Degree in Accounting from Illinois State University. Ms. Lynch is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants and the Illinois CPA Society. She is registered with the National Association of Securities Dealers as a Financial Operations Principal.   ROBERTA S. MATLIN (age 62) joined Inland Real Estate Investment Corporation (IREIC) in 1984 as director of investor administration and currently serves as senior vice president of IREIC, directing the day-to-day internal operations.  Ms. Matlin is a director of IREIC and president and director of Inland Investment Advisors, Inc., and Intervest Southern Real Estate Corporation, and a director and vice president of Inland Securities Corporation. She is the president of Inland American Advisory Services, Inc. Since 2003, she has been vice president of administration of Inland Western Retail Real Estate Trust, Inc., and since 2004, vice president of administration of Inland American Real Estate Trust, Inc.  She was vice president of administration of Inland Real Estate Corporation from 1995 until 2000 and of Inland Retail Real Estate Trust, Inc from 1998 until 2004. From June 2001 until April 2004, she was a trustee and executive vice president of Inland Mutual Fund Trust. Prior to joining Inland, she worked for the Chicago Region of the Social Security Administration of the Untied States Department of Health and Human Services.  Ms. Matlin is a graduate of the University of Illinois. She holds Series 7, 22, 24, 39, 63 and 65 licenses with the National Association of Securities Dealers.   GUADALUPE GRIFFIN (age 42) joined Inland in 1994. Ms. Griffin serves as vice president of Inland Real Estate Investment Corporation and assistant vice president of Inland Midwest Investment Corporation. Ms. Griffin is responsible for the asset management and day-to-day operations of the public and private partnerships which include the development of operating and disposition strategies for the partnerships and investor communications. Prior to joining Inland, Ms. Griffin was employed by the University of Illinois at Chicago Center for Urban Educational Research and Development as Assistant to the Director of the Nation of Tomorrow Program; a privately funded multi-


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million dollar program, which provided educational and empowerment services to youths and their families in four inner-city schools. Ms. Griffin holds an Illinois Real Estate Sales License.   KELLY TUCEK (age 44) joined Inland in 1989 and is a vice president of Inland Real Estate Investment Corporation and beginning in 2006, vice president, controller of Inland Western Retail Real Estate Advisory Services, Inc.  As of August 1996, Ms. Tucek is responsible for the investment accounting department which includes all public partnership accounting functions along with quarterly and annual SEC filings. Prior to joining Inland, Ms. Tucek was on the audit staff of Coopers and Lybrand since 1984. She received her B.A. Degree in Accounting and Computer Science from North Central College.   CATHLEEN M. HRTANEK (age 30) joined Inland in 2005 and is an Assistant Counsel of The Inland Real Estate Group, Inc., and a member of the Audit Committee for all public partnerships sponsored by IREIC.  In her capacity as their counsel, Ms. Hrtanek has been admitted to practice law in the State of Illinois.  She is also 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.    Item 11.  Executive Compensation  Our general partner is entitled to receive a share of cash distributions of net sales proceeds based upon both an aggregate overall return to the limited partners and a separate return with respect to each parcel of land purchased by us.  Our partnership agreement defines the allocation of profits and losses, and available cash.  If and to the extent that real estate taxes and insurance payable with respect to our land during a given year exceed our revenues, our general partner will make a supplemental capital contribution of such amount to us to ensure that we have sufficient funds to make such payments.


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Profits and losses from operations (other than capital transactions) will be allocated 99% to the limited partners and 1% to the general partner.  The net gain from a sale of our properties is first allocated among the partners in proportion to the negative balances, if any, in their respective capital accounts.  Thereafter, except as provided below, net gain is allocated to the general partner in an amount equal to the proceeds distributed to the general partner from such sale and the balance of any net gain is allocated to the limited partners.  If the amount of net gain realized from a sale is less than the amount of cash distributed to the general partner from such sale, we will allocate income or gain to the general partner in an amount equal to the excess of the cash distributed to the general partner with respect to such sale as quickly as permitted by law.   Any net loss from a sale will be 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 or parcel capital, plus a 6% per annum noncompounded cumulative preferred return thereon.  After the amounts described in items (i) and (ii) above and any previously subordinated distributions to the general partner have been paid, and the amount of any supplemental capital contributions have been repaid to the general partner, subsequent distributions shall be paid 75% to the limited partners and 25% to the general partner without considering parcel capital. If, after all net sale proceeds have been distributed, the general partner has received more than 25% of all net sale proceeds (exclusive of distributions made to the limited partners to return their original capital), the general partner shall contribute to the partnership for distribution to the limited partners an amount equal to such excess.  Any distributions from net sale proceeds at a time when invested capital is greater than zero shall be deemed applied first as a reduction of such invested capital before application to payment of any deficiency in the 15% cumulative preferred return.  We are permitted to engage in various transactions involving affiliates of our general partner, as described below.  Our general partner and its affiliates may be reimbursed for their expenses or out-of-pocket costs relating to our administration. For the year ended December 31, 2006, such costs included in general and administrative services to affiliates and professional services to affiliates were $53,304, of which $5,006 was unpaid as of December 31, 2006.  An affiliate of the general partner performed marketing and advertising services for us and was reimbursed for direct costs.  For the year ended December 31, 2006, we incurred $24,079 of such costs, of which $4,443 was unpaid as of December 31, 2006.  An affiliate of the general partner performed property upgrades, rezoning, annexation and other activities to prepare our land investments for sale and was reimbursed for salaries and direct costs. For the year ended December 31, 2006, we incurred $170,645 of such costs which are included in investments in land and improvements, of which $39,515 was unpaid.


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Item 12. Security Ownership of Certain Beneficial Owners and Management  (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 units317 Units directly1%  No officer or director of our general partner possesses a right to acquire beneficial ownership of units of our partnership.  All of the outstanding shares of our general partner are owned by an affiliate or its officers and directors as set forth above in Item 10.  (c) There exists no arrangement, known to us, the operation of which may at a subsequent date result in a change in our control.  Item 13. Certain Relationships and Related 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.   Item 14:  Principal Accountant Fees and Services  Fees.  Aggregate fees for professional services rendered by our independent registered public accounting firm were as follows:  Years ended December 31,20062005Audit fees for professional services rendered for the audit of our annual financial statements and quarterly reviews of our   financial statements.$31,00032,643Tax fees for professional services rendered for tax return   preparation and review of our K-1s.6,8106,200Total fees$37,81038,843


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PART IV  Item 15.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K  (a) The financial statements listed in the index at page 16 of this annual report are filed as part of this annual report.  (b) Exhibits. The following exhibits are incorporated herein by reference:  3  Restated Certificate of Limited Partnership and amended and restated Agreement of Limited Partnership, included as Exhibits A and B of the Prospectus dated October 12, 1988 as supplemented, are incorporated herein by reference thereto.  4  Form of Certificate of Ownership representing interests in the registrant filed as Exhibits 4(a) and 4(b) to Registration Statement on Form S-11, File No.  33-18607, is incorporated herein by reference thereto.  31.1Rule 13a-14(a)/15d-14(a) Certification by principal executive officer31.2Rule 13a-14(a)/15d-14(a) Certification by principal financial officer32.1Section 1350 Certification by principal executive officer32.2Section 1350 Certification by principal financial officer  (c) Financial Statement Schedules.  All schedules have been omitted as the required information is inapplicable or the information is presented in the financial statements or related notes.  (d) Reports on Form 8-K.  None.    No annual report or proxy material for the year 2006 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, L.P.Inland Real Estate Investment CorporationGeneral Partner/s/Brenda G. GujralBy:Brenda G. GujralPresident and DirectorDate:March 22, 2007  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 22, 2007/s/Guadalupe GriffinBy:Guadalupe GriffinVice PresidentDate:March 22, 2007/s/Kelly TucekBy:Kelly TucekVice PresidentDate:March 22, 2007/s/Robert D. ParksBy:Robert D. ParksChairmanDate:March 22, 2007/s/Daniel L. GoodwinBy:Daniel L. GoodwinDirectorDate:March 22, 2007


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