[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

or

[  ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Inland Land Appreciation Fund, L.P.

(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code: 630-218-8000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

LIMITED PARTNERSHIP UNITS

(Title of class)

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 such filing requirements for the past 90 days. Yes X No ___

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]

State the aggregate market value of the voting stock held by nonaffiliates of the registrant. Not applicable.

Indicate by a checkmark whether the registrant is an accelerated filer (as defined in Securities Exchange Act

Rule 12b-2)    __ Yes     X  No

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INLAND LAND APPRECIATION FUND, L.P.

(a limited partnership)

TABLE OF CONTENTS

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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 inves tments according to the number of units held. As of December 31, 2004, 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 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 continue 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 4, 6 and 7 have completed two phases of improvements for an industrial park and sites are being marketed and sold. We have also begun planning and zoning on the residential portion of these parcels. Zoning and land planning discussions have begun on Parcels 14, 17, 18, 19 and 22.

On February 20, 2004, we sold approximately 224 acres of Parcel 20 for $12,500,000. On March 10, 2004, we sold approximately 90 acres of Parcel 12 for $3,500,000. In March 2004, we paid distributions totaling $10,000,000, which includes $7,864,450 paid to the limited partners and $2,135,550 paid to the general partner. We received sales proceeds of $850,000 from the sale of lots of Parcel 4, 6 and 7. In December 2004, we paid an additional distribution of $3,100,000 to the limited partners and $499,480 to the general partner. In addition to these sales which occurred in 2004, we anticipate additional sales of Parcels 4, 6 and 7 during 2005. Proceeds from the 2004 sales were used to repay the note payable to our general partner. Undistributed net sales proceeds will be used to cover our operations, including property upgrades. We will evaluate our cash needs throughout the year to determine future distributions.

We had no employees during 2004.

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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 450 Fifth Street, NW, 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 through our general partner's website, and 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. Our general partner's website address is www.inland-investments.com. The information contained on this website, or other websites linked to our website, is not part of this document.

Item 2. Properties

We acquired fee ownership of the following real property investments:

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.

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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

Consistent with our partnership agreement, there were no matters submitted to a vote of our security holders during 2004.

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PART II

Item 5. Market for Our Limited Partnership Units and Related Security Holder Matters

As of March 7, 2005, there were 2,998 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, 2004 and 2003, we paid the following distributions:

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Item 6. Selected Financial Data

INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)

For the years ended December 31, 2004, 2003, 2002, 2001 and 2000

(not covered by the Report of Independent Registered Public Accounting Firm)

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.

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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 condition s 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, 2004, 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.

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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, 2004, the partnership has evaluated the mortgage loans receivables and written off $867,832 of previously reserved mortgage loans receivable. In addition, the partnership has recorded and 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, 2004, we have had multiple sales transactions, through which we have disposed of approximately 1,891 acres of the approximately 3,102 acres originally owned. As of December 31, 2004, cumulative distributions to the limited partners have totaled $33,169,906 (which exceeds the original capital) and $4,054,072 to the general partner. Through December 31, 2004, we have used $18,002,009 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, 2004, we own, in whole or in part, twelve 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, 2004, we had cash and cash equivalents of approximately $602,000, 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.

On February 20, 2004, we sold approximately 224 acres of Parcel 20 for $12,500,000. On March 10, 2004, we sold approximately 90 acres of Parcel 12 for $3,500,000. On March 24, 2004, we paid distributions totaling $10,000,000, which includes $7,864,450 paid to the limited partners and $2,135,550 paid to the general partner. We received sales proceeds of $850,000 from the sale of lots of Parcel 4,6 and 7. In December 2004, we paid an additional distribution of $3,100,000 to the limited partners and $499,480 to the general partner. In addition to these sales which occurred in 2004, we anticipate additional sales of Parcels 4, 6 and 7 during 2005. Proceeds from the 2004 sales were used to repay the note payable to our general partner. Undistributed net sales proceeds will be used to cover our operations, including property upgrades. We will evaluate our cash needs throughout the year to determine future distributions. We continue to market our remaining acres for sale.

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We plan to enhance the value of our land through pre-development activities such as rezoning, annexation and land planning. We have already been successful in, or are in the process of, pre-development activity on several of our land investments. Parcels 4, 6 and 7 have completed two phases of improvements for an industrial park and sites are being marketed. We have also begun planning and zoning on the residential portion of these parcels. Zoning and land planning discussions have begun 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 $48,039, $55,631 and $62,640 are included in professional services to affiliates and general and administrative expenses to affiliates for the years ended December 31, 2004, 2003 and 2002, respectively, of which $5,422 and $5,672 was unpaid as of December 31, 2004 and 2003, respectively.

An affiliate of our general partner performed marketing and advertising services for us and was reimbursed for direct costs. Such costs of $19,280, $16,120, and $16,346 have been incurred and are included in marketing expenses to affiliates for the years ended December 31, 2004, 2003, and 2002, respectively, all of which was paid as of December 31, 2004 and 2003.

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, 2004 and 2003, we incurred $98,576 and $144,857, respectively, of such costs. The affiliate did not recognize a profit on any project. Such costs are included in investments in land, of which $16,016 and $30,187 was unpaid as of December 31, 2004 and 2003, respectively.

On December 31, 1998, we obtained a loan from the general partner in the amount of $2,493,750 solely collateralized by Parcel 5. During 2002, the general partner advanced an additional $12,234. The note accrued interest at prime plus .5% and had a maturity date which was extended to December 29, 2003. For the year ended December 31, 2003, interest of $63,822 was capitalized. During 2003, all principal and interest on this loan was repaid.

On December 6, 2000, we obtained a loan from the general partner in the amount of $1,500,000 collateralized by Parcels 17, 18 and 22. During 2002, the general partner advanced an additional $15,000. The note accrued interest at prime plus .5% and had a maturity date of November 30, 2004. For the years ended December 31, 2004 and 2003, interest of $49,046 and $80,642, respectively, was capitalized, of which $0 and $229,921 was unpaid as of December 31, 2004 and 2003, respectively. During 2004, all principal and accrued interest on this loan was repaid.

On May 9, 2002, the general partner advanced us a loan in the amount of $200,000. The note accrued interest at 5.25%. This advance was repaid in full on September 17, 2002. For the year ended December 31, 2002, interest of $3,797 was capitalized, all of which was paid as of December 31, 2002.

On September 17, 2002, we obtained a loan from the general partner in the amount of $1,600,000, collateralized by Parcels 4, 6 and 7. The note accrued interest at a rate of prime plus .5% and had a maturity date of September 17, 2005. For the years ended December 31, 2004 and 2003, interest of $22,609 and $65,546 was capitalized, of which $0 and $85,611 was unpaid as of December 31, 2004 and 2003, respectively. During 2004, all principal and accrued interest on this loan was repaid.

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Results of Operations

As of December 31, 2004, we owned twelve parcels of land consisting of approximately 1,211 acres. Of the 1,211 acres owned, approximately 965 acres are tillable, leased to local farmers and generate sufficient cash flow to cover property taxes, insurance and other miscellaneous expenses. Rental income was $166,438, $225,179, and $274,768 for the years ended December 31, 2004, 2003, and 2002, respectively. The decrease in rental income is due to the decrease in tillable acres as a result of the sale of land.

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 are a result of the sale of additional lots of Parcel 4 and the sale of the balance of Parcels 12 and 20. Sales of investments in land and improvements of $12,827,798 and cost of land sold of $4,289,425 for the year ended December 31, 2003 are a result of the sale of approximately 23 acres of Parcel 4, the sale of approximately 372 acres of Parcel 5 and the sale of approximately 28 acres of Parcel 16. The increase in sales activity for the years ended December 31, 2004 and 2003 is the result of favorable zoning as well as a change in our marketing approach to target homebuilders, industrial users and land developers. Sales of investments in land and improvements of $1,609,108 and cost of land sold of $450,778 for the year ended December 31, 2002 are a result of the sale of two lots of Parcel 4 and the sale of approximately 70 acres of Parcel 24.

Professional services to affiliates were $27,543, $31,832 and $37,398 for the years ended December 31, 2004, 2003 and 2002, respectively. Professional services to affiliates decreased for the years ended December 31, 2004 and 2003 compared to the year ended December 31, 2002, due to a decrease in legal services. This decrease was partially offset by an increase in fees for accounting services as a result of increased sales activity and regulatory requirements.

Professional services to non-affiliates were $55,829, $39,588 and $33,258 for the years ended December 31, 2004, 2003 and 2002, respectively. Professional services to non-affiliates increased for the year ended December 31, 2004 compared to the years ended December 31, 2003 and 2002, due to an increase in fees for accounting services.

General and administrative expenses to non-affiliates were $33,559, $17,704 and $21,894 for the years ended December 31, 2004, 2003 and 2002, respectively. The increase in general and administrative expenses in 2004 is due to the amortization of loan fees as a result of payoff of the note payable.

Tax expenses were $139,258, $8,201 and $5,970 for the years ended December 31, 2004, 2003 and 2002, respectively. The increase in tax expenses in 2004 is due to state taxes paid and accrued as a result of the land sales.

Marketing expenses to non-affiliates were $54,982, $83,826 and $125,569 for the years ended December 31, 2004, 2003 and 2002, respectively. The increase in 2002 was due to increased marketing and advertising through radio and local cable television ads. In 2003 and continuing into 2004, we changed our marketing approach to target homebuilders, industrial users and land developers through direct mailings, newspaper and trade publication advertising and an enhanced website.

Land operating expenses to non-affiliates were $65,826, $72,980 and $106,588 for the years ended December 31, 2004, 2003 and 2002, respectively. These costs primarily include real estate tax expense, ground maintenance and insurance expense on the parcels we own and have decreased due to the sale of acres.

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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 projects. As a result of the slower lot sales, the net sale proceeds available to us are lower than anticipated. As of December 31, 2002, we had recorded an allowance for doubtful accounts of $767,248 relating to a portion of the accrued interest receivable on mortgage loans resulting from the sale of these parcels. In early August 2003, we reviewed recent forecasts on these parcels, and determined that the collectibility of these receivables was doubtful. As a result, we elected to reserve an additional $2,302,787 of principal and accrued interest relating to the mortgages receivable in 2003. The deferred gain of $242,368 relating to the mortgage loans receivable was also reserved and recorded against bad d ebt expense as of December 31, 2003. We continued to monitor these transactions throughout 2004 and, based on our review of the developments' financial situation during the fourth quarter of 2004, we do not anticipate receiving any additional proceeds on Parcels 15, 21 and 23. As of December 31, 2004, the Partnership has written off the mortgage loans receivable and related accrued interest receivable and deferred gain relating to Parcels 15, 21 and 23. As of December 31, 2004, the mortgage loan receivable relating to Parcel 1 has been fully reserved, however based on our review of the developments' financial situation relating to this Parcel and potential sales of the commercial pieces of this Parcel , we have not written off this receivable at this time.

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.

Off-Balance Sheet Arrangements, Contractual Obligations, Liabilities and Contracts and Commitments

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Selected Quarterly Financial Data (unaudited)

The following represents the results of operations for each quarter during the years ended December 31, 2004, 2003 and 2002.

Inflation

Inflation in future periods may cause capital appreciation of our investments in land. Rental income levels (from leases to new tenants or renewals of existing tenants) will rise and fall in accordance with normal agricultural market conditions and may or may not be affected by inflation. To date, our operations have not been significantly affected by inflation.

Item 7(a). Quantitative and Qualitative Disclosures About Market Risk

Not Applicable.

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Item 8. Financial Statements and Supplementary Data

INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)

Index

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.

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Report of Independent Registered Public Accounting Firm

To the Partners of
Inland Land Appreciation Fund, L.P.

We have audited the accompanying balance sheet of Inland Land Appreciation Fund, L.P. (a limited partnership) ("the Partnership") as of December 31, 2004, and the related statements of operations, partners' capital, and cash flows for the year 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 audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit 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 stat ement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Inland Land Appreciation Fund, L.P. at December 31, 2004, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners of
Inland Land Appreciation Fund, L.P.

We have audited the accompanying balance sheet of Inland Land Appreciation Fund, L.P. (a limited partnership) ("the Partnership") as of December 31, 2003, and the related statements of operations, partners' capital, and cash flows for each of the two years in the period ended December 31, 2003. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our 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. Our audit 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 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, such financial statements present fairly, in all material respects, the financial position of Inland Land Appreciation Fund, L.P. as of December 31, 2003, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

March 26, 2004
Chicago, Illinois

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INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)

Balance Sheets

December 31, 2004 and 2003


Assets

See accompanying notes to financial statements.

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INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)

Balance Sheets
(continued)

December 31, 2004 and 2003

Liabilities and Partners' Capital

See accompanying notes to financial statements.

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INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)

Statements of Operations

For the years ended December 31, 2004, 2003 and 2002

See accompanying notes to financial statements.

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INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)

Statements of Partners' Capital

For the years ended December 31, 2004, 2003 and 2002

See accompanying notes to financial statements.

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INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)

Statements of Cash Flows

For the years ended December 31, 2004, 2003 and 2002

See accompanying notes to financial statements.

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INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)

Statements of Cash Flows
(continued)

For the years ended December 31, 2004, 2003 and 2002

Supplemental schedule of non-cash investing and financing activities:

See accompanying notes to financial statements.

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INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)

Notes to Financial Statements

For the years ended December 31, 2004, 2003 and 2002

(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, 2004, the Partnership has repurchased a t otal 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.

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.

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INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)

Notes to Financial Statements
(continued)

In August 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", ("SFAS No. 144"). SFAS 144 addresses accounting and reporting for the impairment or disposal of long-lived assets. This statement supersedes SFAS No. 121. The Partnership adopted the provisions of this statement beginning January 1, 2002. SFAS No. 144 established new rules for the recognition, measurement and reporting of long-lived assets which are impaired and either held for sale or in use by the Partnership. The adoption of this statement did not have a material impact on the financial position or results of operations of the Partnership.

On January 1, 2003, the Partnership adopted FASB Interpretation No. 45 ("FIN 45") "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34". FIN 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. FIN 45 also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken. The adoption of FIN 45 did not have a material effect on the Partnership's financial statements.

In May 2003, the FASB issued Statement No. 150 ("SFAS 150") "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". This statement establishes standards for classifying and measuring certain financial instruments as liabilities that embody obligations of the issuer and have characteristics of both liabilities and equity. SFAS No. 150 is effective for all financial instruments created or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The provisions of SFAS No. 150 did not have an impact on the Partnership's financial condition and results of operations.

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INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)

Notes to Financial Statements
(continued)

Effective January 1, 2001, the Partnership adopted the provisions of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended by SFAS Nos. 137, 138 and 149. This statement standardizes the accounting for derivative instruments by requiring that an entity recognize those items as assets or liabilities in the statement of financial position and measure them at fair value. It also provides for matching the timing of gain or loss recognition on the hedging instrument with the recognition of (a) the changes in fair value of the hedged asset or liability attributable to the hedged risk or (b) the earnings effect of the hedged forecasted transaction. The net impact of the adoption of SFAS No. 133 has no effect on the Partnership's financial statements.

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:

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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.

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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 $5,422 and $5,672 were unpaid as of December 31, 2004 and 2003, 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 $19,280, $16,120 and $16,346 have been incurred and are included in marketing expenses to Affiliates for the years ended December 31, 2004, 2003 and 2002, respectively, all of which was paid as of December 31, 2004, 2003 and 2002.

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, 2004 and 2003, the Partnership incurred $98,576 and $144,857, 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 $16,016 and $30,187 were unpaid as of December 31, 2004 and 2003, respectively.

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INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)

Notes to Financial Statements
(continued)

(4) Investments in Land and Improvements

-30-

INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)

Notes to Financial Statements
(continued)

(4) Investments in Land and Improvements (continued)