UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

		X		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
				FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2014
		¨		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2014

TRANSITION 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)


Delaware		36-3544798
(State or other jurisdiction of incorporation or organization)		(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)

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 whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ¨		Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)		Smaller reporting company X

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No X

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INLAND LAND APPRECIATION FUND, L.P.

(a limited partnership)

Balance Sheets

~~June~~September 30, 2014 and December 31, 2013

(unaudited)

Assets	2014		~~2014~~		2013		~~2013~~
Current assets:
Cash and cash equivalents (Note 1)	$	6,800,672		~~2,056,011~~		1,999,497		~~1,999,497~~
Other assets		139		~~1,182~~		2,580		~~2,580~~
Total current assets		6,800,811		~~2,057,193~~		2,002,077		~~2,002,077~~
Investment properties (including acquisition fees paid to affiliates of $216,239 at June 30, 2014 and December 31, 2013) (Note 3):
Investment properties (including acquisition fees paid to affiliates of $18,607 and $216,239 at September 30, 2014 and December 31, 2013) (Note 3):
Land and improvements		408,240		~~5,374,539~~		8,410,087		~~8,410,087~~
Total assets	$	7,209,051		~~7,431,732~~		10,412,164		~~10,412,164~~
Liabilities and Partners’ Capital
Current liabilities:
Accounts payable	$	2,225		~~8,611~~		2,629		~~2,629~~
Accrued real estate taxes		135		~~10,492~~		9,280		~~9,280~~
Due to affiliates (Note 2)		6,665		~~9,654~~		9,621		~~9,621~~
Unearned income		777		~~72,034~~		0		0
Total current liabilities		9,802		~~100,791~~		21,530		~~21,530~~
Partners’ capital:
General Partner:
Capital contribution		500		~~500~~		500		~~500~~
Cumulative net income		5,350,690		~~5,351,004~~		5,351,241		~~5,351,241~~
Cumulative cash distributions		(5,335,451	)	~~(5,335,451~~	)	(5,335,451	)	~~(5,335,451)~~
				16,053				16,290
		15,739				16,290
Limited Partners:
Units of $1,000. Authorized 30,001 Units, 29,593 Units outstanding at June 30, 2014 and December 31, 2013, (net of offering costs of $3,768,113, of which $1,069,764 was paid to affiliates)				25,873,403				25,873,403
Units of $1,000. Authorized 30,001 Units, 29,593 Units outstanding at September 30, 2014 and December 31, 2013, (net of offering costs of $3,768,113, of which $1,069,764 was paid to affiliates)		25,873,403				25,873,403
Cumulative net income		24,790,330		~~24,921,708~~		27,981,164		~~27,981,164~~
Cumulative cash distributions		(43,480,223	)	~~(43,480,223~~	)	(43,480,223	)	~~(43,480,223)~~
				7,314,888				10,374,344
		7,183,510				10,374,344
Total Partners’ capital		7,199,249		~~7,330,941~~		10,390,634		~~10,390,634~~
Total liabilities and Partners’ capital	$	7,209,051		~~7,431,732~~		10,412,164		~~10,412,164~~

See accompanying notes to financial statements.

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INLAND LAND APPRECIATION FUND, L.P.

(a limited partnership)

Statements of Operations

For the three and ~~six~~nine months ended ~~June~~September 30, 2014 and 2013

(unaudited)

			Three months ended June 30, 2014				Three months ended June 30, 2013				Six months ended June 30, 2014				Six months ended June 30, 2013
	Three months				Three months				Nine months				Nine months
Revenues:
	ended				ended				ended				ended
Rental income (Note 4)	$			35,875				36,633				71,484				72,867
	September 30,2014				September 30, 2013				September 30,2014				September 30, 2013
Total revenues				35,875				36,633				71,484				72,867
Revenues:
Expenses:
Sale of investment properties (Note 3)	$	4,866,001				0				4,866,001				0
Professional services to affiliates				8,371				11,288				21,650				25,634
Rental income (Note 4)		3,556				36,906				75,040				109,773
Professional services to non-affiliates				16,646				12,328				47,819				49,659
Total revenues		4,869,557				36,906				4,941,041				109,773
General and administrative expenses to affiliates				2,074				4,197				7,957				8,463
Expenses:
General and administrative expenses to non-affiliates				3,491				3,557				11,936				20,911
Cost of investment properties sold		4,776,139				0				4,776,139				0
Marketing expenses to affiliates				2,461				30				2,516				160
Professional services to affiliates		8,012				8,389				29,662				34,023
Land operating expenses to non-affiliates				4,966				4,336				8,178				7,219
Professional services to non-affiliates		22,329				26,085				70,148				75,744
Impairment loss on land				0				0				3,035,973				0
General and administrative expenses to affiliates		842				117				8,799				8,580
Total expenses				38,009				35,736				3,136,029				112,046
General and administrative expenses to non-affiliates		5,346				4,770				17,282				25,681
Operating income (loss)				(2,134	)			897				(3,064,545	)			(39,179)
Marketing expenses to affiliates		(139	)			0				2,377				160
Interest income				1,188				1,250				2,402				2,486
Land operating expenses to non-affiliates		1,222				2,915				9,400				10,134
Other income				1,050				1,000				2,450				2,500
Impairment loss on land		190,160				0				3,226,133				0
Net income (loss)	$			104				3,147				(3,059,693	)			(34,193)
Total expenses		5,003,911				42,276				8,139,940				154,322
Net income (loss) allocated to:
Operating loss		(134,354	)			(5,370	)			(3,198,899	)			(44,549	)
General Partner	$			1				31				(237	)			(342)
Interest income		2,062				1,252				4,464				3,738
Limited Partners				103				3,116				(3,059,456	)			(33,851)
Other income		600				700				3,050				3,200
Net income (loss)	$			104				3,147				(3,059,693	)			(34,193)
Net loss	$	(131,692	)			(3,418	)			(3,191,385	)			(37,611	)
Net income (loss) allocated to the one General Partner Unit	$			1				31				(237	)			(342)
Net loss allocated to:
Net income (loss) per Unit, allocated to LimitedPartners per weighted average LimitedPartnership Units (29,593 for the three and sixmonths ended June 30, 2014 and 2013):	$			.00*				.11				(103.38	)			(1.14)
General Partner	$	(314	)			(34	)			(551	)			(376	)
Limited Partners		(131,378	)			(3,384	)			(3,190,834	)			(37,235	)
Net loss	$	(131,692	)			(3,418	)			(3,191,385	)			(37,611	)
Net loss allocated to the one General Partner Unit	$	(314	)			(34	)			(551	)			(376	)
Net loss per Unit, allocated to Limited Partners per weighted average Limited Partnership Units (29,593 for the three and nine months ended September 30, 2014 and 2013):	$	(4.44	)			(.11	)			(107.82	)			(1.26	)

*Amount is less than .005 per Unit

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 ~~six~~nine months ended ~~June~~September 30, 2014 and 2013

(unaudited)

	2014		~~2014~~		2013		~~2013~~
Cash flows from operating activities:
Net loss	$	(3,191,385	)	~~(3,059,693~~	)	(37,611	)	~~(34,193)~~
Adjustments to reconcile net loss to net cash provided by operating activities:
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Impairment loss on land				3,035,973				0
Gain on sale of investment property		(89,862	)			0
Changes in assets and liabilities:
Impairment loss on land		3,226,133				0
Other assets				1,398				1,324
Changes in assets and liabilities:
Accounts payable				5,982				(8,145)
Other assets		2,441				1,996
Accrued real estate taxes				1,212				1,294
Accounts payable		(404	)			(15,786	)
Due to affiliates				33				(155)
Accrued real estate taxes		(9,145	)			(533	)
Unearned income				72,034				73,312
Due to affiliates		(2,956	)			(10,580	)
Net cash provided by operating activities				56,939				33,437
Unearned income		777				36,656
Cash flows from investing activities:
Net cash used in operating activities		(64,401	)			(25,858	)
Additions to investment properties				(425	)			(6,607)
Cash flows from investing activities:
Net cash used in investing activities				(425	)			(6,607)
Proceeds from sale of investment property		4,866,001				0
Cash flows from financing activities:
Additions to investment properties		(425	)			(6,607	)
Distributions				0				(1,112)
Net cash provided by (used in) investing activities		4,865,576				(6,607	)
Net cash used in financing activities				0				(1,112)
Cash flows from financing activities:
Net increase in cash and cash equivalents				56,514				25,718
Distributions		0				(1,112	)
Cash and cash equivalents at beginning of period				1,999,497				2,070,810
Net cash used in financing activities		0				(1,112	)
Cash and cash equivalents at end of period	$			2,056,011				2,096,528
Net increase (decrease) in cash and cash equivalents		4,801,175				(33,577	)
Cash and cash equivalents at beginning of period		1,999,497				2,070,810
Cash and cash equivalents at end of period	$	6,800,672				2,037,233

See accompanying notes to financial statements.

-4-

INLAND LAND APPRECIATION FUND, L.P.

(a limited partnership)

Notes to Financial Statements

~~June~~ September 30, 2014

(unaudited)

Readers of this quarterly report should refer to the Partnership’s audited financial statements for the fiscal year ended December 31, 2013 which are included in the Partnership’s 2013 annual report, as certain footnote disclosures which would substantially duplicate those contained in such audited financial statements have been omitted from this report.

(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. Between October 12, 1988 and October 6, 1989, the Partnership sold 30,000 Limited Partnership Units (“Units”) at $1,000 per Unit, which does not include the General Partner or the Initial Limited Partner, resulting in gross offering proceeds of $30,000,000. Inland Real Estate Investment Corporation is the General Partner. 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. Through ~~June~~September 30, 2014, the Partnership had repurchased a total of 407.75 Units for $359,484 from various Limited Partners through a unit repurchase program.

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.

In the opinion of management, the financial statements contain all the adjustments necessary to present fairly the financial position and results of operations for the periods presented herein. Results of interim periods are not necessarily indicative of results to be expected for the year.

The Partnership considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents and are carried at cost, which approximates market value. The Partnership maintains its cash and cash equivalents at a financial institution. The account balances at the financial institution periodically exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance coverage of $250,000 on interest bearing and non-interest bearing accounts and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. The Partnership believes that the risk is not significant, and the Partnership does not anticipate the financial institution’s non-performance.

The Partnership recognizes income from the sale of land parcels in accordance with the full accrual method of accounting.

The Partnership’s escrow agent holds earnest money deposits from a prospective purchaser when an agreement for sale is executed. Generally, these funds are not the Partnership’s until the closing has occurred or the buyer under the sale agreement has committed a default which would entitle the Partnership to the earnest money.

Except as described in footnote (b) under “Investment properties” on page 1516, the Partnership uses the area 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. Repairs and maintenance expenses are charged to operations as incurred.

Recently Issued Accounting Guidance

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-08, which includes amendments that change the requirements for reporting discontinued operations and require additional disclosures about discontinued operations. Under the new guidance, only disposals representing a strategic shift in operations - that is, a major effect on the organization’s operations and financial results - should be presented as ~~discontinued operations. Examples include a disposal of a major geographic area, a major~~

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INLAND LAND APPRECIATION FUND, L.P.

(a limited partnership)

Notes to Financial Statements

~~June~~September 30, 2014

(unaudited)

discontinued operations. Examples include a disposal of a major geographic area, a major line of business, or a major equity method investment. Additionally, the ASU requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The guidance is effective for transactions that occur in annual periods beginning on or after December 15, 2014, and in interim periods within those years. Early adoption is permitted, but only for disposals or held for sale classifications that have not been reported in financial statements previously issued or made available for issuance. The Partnership ~~expects~~has adopted the reporting requirements as of September 30, 2014. The new guidance toeliminates ~~eliminate~~ the reporting of discontinued operations from sales of parcels ~~on a going forward basis~~.

In May 2014, the ~~Financial Accounting Standards Board (“~~FASB”) issued ~~Accounting Standards Update (“~~ASU”) 2014-09 that introduces a new five-step revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. This standard is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. The Partnership is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.

(2) Transactions with Affiliates

The General Partner and its affiliates are entitled to reimbursement for salaries and expenses of employees of the General Partner and its affiliates relating to the administration of the Partnership. Such costs of $2938,~~607~~461 and $3442,~~097~~603 have been incurred and are included in professional services to affiliates and general and administrative expenses to affiliates for the ~~six~~nine months ended ~~June~~September 30, 2014 and 2013, respectively, of which $86,~~304~~665 and $9,621 was unpaid as of ~~June~~September 30, 2014 and December 31, 2013, 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 $2,~~516~~377 and $160 have been incurred and are included in marketing expenses to affiliates for the ~~six~~nine months ended ~~June~~September 30, 2014 and 2013, respectively, of which ~~$1,175~~all ~~and $0~~ was paid ~~unpaid~~ as of ~~June~~September 30, 2014 and December 31, 2013, respectively.

An affiliate of the General Partner performed activities to prepare our investment properties for sale and was reimbursed for salaries and direct costs. Such costs of $425 have been incurred for the ~~six~~nine months ended ~~June~~September 30, 2014. Such costs are included in investment properties, all of which ~~$175~~ was ~~unpaid~~paid as of ~~June~~September 30, 2014. The affiliate did not recognize a profit on any project.

As of ~~June~~September 30, 2014, the Partnership held all cash and cash equivalents with Inland Bank and Trust, an affiliate of the General Partner.

(3) Investment Properties

As of ~~June~~September 30, 2014, the Partnership owned ~~four~~one ~~parcels~~parcel of land consisting of approximately ~~491~~64 acres. ~~There~~On August 28, ~~were~~2014, ~~no land~~the ~~sales~~Partnership ~~during~~sold the ~~six~~remaining ~~months~~acres ~~ended~~of ~~June~~Parcel 17/18/22 and on September 304, 2014, the Partnership sold the remaining acres of Parcel 9 and Parcel 11.

-6-

INLAND LAND APPRECIATION FUND, L.P.

(a limited partnership)

Notes to Financial Statements

~~June~~September 30, 2014

(unaudited)

(a)	Reconciliation of investment properties owned:

			June 30, 2014				December 31, 2013
	September 30, 2014				December 31,2013
Balance at January 1,	$	8,410,087		~~8,410,087~~		8,403,480		~~8,403,480~~
Additions during period		425		~~425~~		6,607		~~6,607~~
Impairment loss on land				(3,035,973	)			0
Sale of investment properties		(4,776,139	)			0
Balance at end of period,	$			5,374,539				8,410,087
Impairment loss on land		(3,226,133	)			0
Balance at end of period,	$	408,240				8,410,087

(b) The Partnership has taken the steps necessary to reduce costs and maintain sufficient reserves of cash and cash equivalents to cover all ~~our~~its costs for an extended period of time. We have farm leases in place which generate sufficient income to cover the costs of insurance expense and real estate taxes. Our remaining land is not encumbered by debt and is located in ~~areas~~an area that we believe ~~are~~is in the ~~paths~~path of future development. During the first quarter of 2014, management formally changed its intent to hold the remaining parcels for an indefinite period of time. As a result, the Partnership recorded its investment properties at the lower of cost or market value as of ~~June~~September 30, 2014. Based on sales offers and the estimated market value of the remaining parcels, management estimated a decrease in current land value, which resulted in an impairment loss on land of $3,~~035~~226,~~973~~133 for the ~~six~~nine months ended ~~June~~September 30, 2014.

In determining the value of an investment property and whether the property is impaired, management considers several indicators which require difficult, complex and/or subjective judgments, such as projected sales prices, capital expenditures, assessment of current economic conditions and management’s intent to hold the remaining parcels until such time as reasonable and acceptable offers are received. These indicators are considered by management in determining the value of any particular property. The value of any particular property is sensitive to the actual results of any of these uncertain indicators, either individually or taken as a whole. Should the actual results differ from management’s judgment, the valuation could be negatively or positively affected.

The valuation and possible subsequent impairment of investment properties is a significant estimate that can and does change based on management’s continuous process of analyzing each property.

(4) Rental Income

The Partnership has determined that all leases relating to the farm parcels are operating leases. Accordingly, rental income is reported when earned. Farm rent is fully collected during the first quarter. As such, a portion of the farm rent is classified as unearned income. As of ~~June~~September 30, 2014, unearned income was $~~72,034~~777.

As of ~~June~~September 30, 2014, the Partnership had ~~farm~~a ~~leases of generally~~ one year infarm ~~duration,~~lease for approximately ~~425~~19 acres of the approximately ~~491~~ 64 acres owned.

(5) Subsequent Events

The Partnership evaluates subsequent events occurring between the most recent balance sheet date and the date that the financial statements are available to be issued in order to determine whether the subsequent events are to be recorded in and/or disclosed in the Partnership’s financial statements and footnotes. The financial statements are considered to be available to be issued at the time that they are filed with the Securities and Exchange Commission. ~~There are no subsequent events to report that would have a material impact on the Partnership’s financial statements.~~

-7-

INLAND LAND APPRECIATION FUND, L.P.

(a limited partnership)

Notes to Financial Statements

September 30, 2014

(unaudited)

On October 1, 2014, the Partnership entered into a sales contract to sell the remaining acres of Parcel 19, the final parcel of the Partnership. The contract sales price is approximately $430,000. Provided the buyer performs pursuant to the terms of the contract, the sale is expected to close during the fourth quarter of 2014.

There are no other subsequent events to report that would have a material impact on the Partnership’s financial statements.

-8-

Item 2. 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 quarterly report on Form 10-Q 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, adverse changes in real estate, financing and general economic or local conditions; 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; 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.

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.

Critical Accounting Policies

The SEC previously issued Financial Reporting Release (FRR) 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 judgments in certain circumstances. We believe that our most critical accounting policies relate to how we value, classify, and allocate costs of investment properties and revenue recognition. These judgments 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 judgments 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 - During the first quarter of 2014, management formally changed its intent to hold the remaining parcels for an indefinite period of time. As a result, the Partnership recorded its investment properties at the lower of cost or market value as of ~~June~~ September 30, 2014. On a quarterly basis, we review impairment indicators and if necessary, conduct an impairment analysis to ensure that the carrying value of each investment property does not exceed its estimated fair value. If an investment property is considered impaired, we would be required to record an impairment loss equal to the excess of carrying value over the estimated fair value.

In determining the value of an investment property and whether the property is impaired, management considers several indicators which require difficult, complex and/or subjective judgments, such as projected sales prices, capital expenditures, assessment of current economic conditions, and management’s intent to hold the remaining parcels until such time as reasonable and acceptable offers are received. These indicators are considered by management in determining the value of any particular property. The value of any particular property is sensitive to the actual results of any of these uncertain indicators, either individually or taken as a whole. Should the actual results differ from management’s judgment, the valuation could be negatively or positively affected.

The valuation and possible subsequent impairment of investment properties is a significant estimate that can and does change based on management’s continuous process of analyzing each property. Based on sales offers and the estimated market value of the remaining parcels, management estimated a decrease in current land value which resulted in an impairment loss on land of $3,~~035~~226,~~973~~133 for the ~~six~~nine months ended ~~June~~September 30, 2014. Subsequent costs incurred above the estimated fair value for any parcels that may be deemed to be impaired will be expensed and included in land operating expenses.

-89-

Cost Allocation – We use the area 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.

Revenue Recognition - We recognize income from the sale of land parcels in accordance with the full accrual method of accounting.

Assets Held for Sale - In determining whether to classify an asset as held for sale, we consider whether: (i) management has committed to a plan to sell the asset; (ii) the asset is available for immediate sale in its present condition; (iii) we have initiated a program to locate a buyer; (iv) we believe that the sale of the asset is probable; (v) the due diligence period as defined in the sales agreement has expired and a closing date has been set; (vi) we are actively marketing the asset for sale at a price that is reasonable in relation to its current value; and (vii) actions required for us to complete the plan indicate that it is unlikely that any significant changes will be made to the plan.

If all of the above criteria are met, we classify the asset as held for sale. The assets and liabilities associated with those assets that are held for sale are classified separately on the balance sheets for the most recent reporting period. Additionally, the operations for the periods presented are included in the statements of operations as discontinued operations for all periods presented. As of ~~June~~September 30, 2014 and December 31, 2013, we have not classified any investment properties as investment property held for sale.

From time to time, we may determine that a “held for sale property” no longer meets the criteria to continue to be classified as held for sale. If this occurs, we record the property at the lower of the carrying amount before the property was classified as held for sale or the fair value at the decision date not to sell.

Liquidity and Capital Resources

Between October 12, 1988 and October 6, 1989, we sold 30,000 limited partnership units to the public at $1,000 per unit resulting in $30,000,000 in gross offering proceeds.

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. Through ~~June~~September 30, 2014, we have had multiple sales transactions disposing of approximately 23,~~611~~038 acres of the approximately 3,102 acres originally owned. As of ~~June~~September 30, 2014, cumulative distributions to the limited partners have totaled $43,480,223, which is is equivalent to 145% of the original capital raised which was $30,000,000, and $5,335,451 to the general partner. Through ~~June~~September 30, 2014, we have used $20,317,708 of working capital for rezoning and other activities. Such amounts have been capitalized and are included in investment properties.

Our capital needs and resources will vary depending upon a number of factors, including the extent to which we conduct rezoning and other activities relating to utility access, the installation of roads, subdivision and/or annexation of land to a municipality, changes in real estate taxes affecting our land, and the amount of revenue received from leasing. As of ~~June~~September 30, 2014, we own, inone ~~whole or in part, four~~ of ~~our~~the twenty-five original parcels, ~~the majority of~~ which ~~are~~is leased to a local ~~farmers~~farmer and ~~are~~is generating sufficient cash flow from the farm ~~leases~~lease to cover the parcel’s real estate taxes and insurance expense.

At ~~June~~September 30, 2014, we had cash and cash equivalents of $26,~~056~~800,~~011~~672, 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~~parcel.

~~There were~~On ~~no land sales for the six months ended June~~August 3028, 2014 ~~and 2013~~, ~~respectively. We believe~~ we sold ~~have taken~~ the ~~steps~~remaining ~~necessary~~acres toof ~~reduce~~Parcel ~~costs~~17/18/22, ~~and~~resulting ~~maintain~~in ~~sufficient~~net ~~reserves~~sales proceeds of ~~cash~~$3,934,719 and ~~cash~~a ~~equivalents~~gain toon ~~cover~~sale ~~all our costs for an extended period~~ of ~~time~~$67,400. WeOn ~~have~~September 4, ~~farm~~2014, ~~leases~~we insold ~~place which generate sufficient income to cover~~ the ~~costs of insurance expense and real estate taxes. Our~~ remaining ~~land~~acres isof ~~not~~Parcels ~~encumbered~~9 ~~by debt~~ and is11, ~~located~~resulting in ~~areas~~net ~~that~~sales weproceeds ~~believe~~of ~~are~~$931,282 inand ~~the paths of~~a ~~future~~gain ~~development.~~on Assale ~~land~~of ~~sales occur~~$22,462. The net sales proceeds will be used to cover our current and future operations, ~~including~~as ~~land~~well ~~improvements~~as ~~and~~future ~~land use activities~~distributions. WeThere ~~will~~were ~~evaluate~~no ~~our~~land ~~cash~~sales ~~needs~~for ~~throughout~~ the ~~year~~nine tomonths ~~determine~~ended ~~future distributions~~September 30, 2013.

~~-9-~~On October 1, 2014, we entered into a sales contract to sell the remaining acres of Parcel 19, the remaining parcel of the Partnership. The contract sale price is approximately $430,000. Provided the buyer performs pursuant to the terms of the contract, the sale is expected to close during the fourth quarter of 2014. Following the sale of Parcel 19, we presently

We-10- continue to closely monitor the real estate market trends, especially within the areas where our remaining parcels are located. We have seen continued improvements in the residential resale real estate markets and are now seeing signs of national homebuilders entering back into the market place. We are aware of farm parcel sales in surrounding communities from both speculators looking to hold land until the market rebounds, as well as farmers looking to increase their farming businesses. Inquiries on the Partnership’s land holdings continue to increase as evidenced by recent offers received from current farm tenants, which have led to contracts with third party purchasers for the sale of approximately 427 acres.

intend to distribute the net sales proceeds to the limited partners in accordance with the liquidation provisions of the Partnership’s partnership agreement and dissolve the Partnership.

Transactions with Related Parties

Our general partner and its affiliates are entitled to reimbursement for salaries and expenses of their employees relating to our administration. Such costs of $2938,~~607~~461 and $3442,~~097~~603 have been incurred and are included in professional services to affiliates and general and administrative expenses to affiliates for the ~~six~~nine months ended ~~June~~September 30, 2014 and 2013, respectively, of which $86,~~304~~665 and $9,621 was unpaid as of ~~June~~September 30, 2014 and December 31, 2013, respectively.

An affiliate of our general partner performed marketing and advertising services for us and was reimbursed for direct costs. Such costs of $2,~~516~~377 and $160 have been incurred and are included in marketing expenses to affiliates for the ~~six~~nine months ended ~~June~~September 30, 2014 and 2013, respectively, all of which ~~$1,175 and $0~~ was ~~unpaid~~paid as of ~~June~~September 30, 2014 and December 31, 2013, respectively.

An affiliate of the general partner performed activities to prepare our investment properties for sale and was reimbursed for salaries and direct costs. Such costs of $425 have been incurred for the ~~six~~nine months ended ~~June~~September 30, 2014. Such costs are included in investment properties, all of which ~~$175~~ was ~~unpaid~~paid as of ~~June~~September 30, 2014. The affiliate did not recognize a profit on any project.

As of ~~June~~ September 30, 2014, the Partnership held all cash and cash equivalents with Inland Bank and Trust, an affiliate of the general partner.

Results of Operations

As of ~~June~~ September 30, 2014, we owned ~~four~~one ~~parcels~~parcel of land consisting of approximately ~~491~~64 acres. Of the ~~491~~64 acres owned, approximately ~~425~~19 acres are leased to one local ~~farmers~~farmer and generate sufficient cash flow to cover real estate taxes and insurance expense. Rental income was $7175,~~484~~040 and $72109,~~867~~773 for the ~~six~~nine months ended ~~June~~September 30, 2014 and 2013, respectively. Rental income decreased due to athe ~~small~~sale ~~decrease~~of inland ~~tillable~~parcels ~~acreage~~during the third quarter of 2014. Farm rent payments are fully collected during the first quarter. A portion of the farm rent collected is classified as unearned income of $~~72,034~~777 as of ~~June~~September 30, 2014.

On ~~April~~August 1628, 2014, ~~the~~we ~~Partnership~~sold ~~entered into a sale contract with a third party purchaser to sell~~ the remaining acres of Parcel 17/18/22, ~~for~~resulting ~~approximately~~in ~~$4.1~~net ~~million.~~sales ~~The~~proceeds ~~Partnership previously recorded an impairment~~ of ~~approximately~~ $~~2.2~~3,934,719 ~~million~~and ~~during~~a ~~the~~gain ~~first~~on ~~quarter~~sale of ~~2014~~$67,400. ~~Provided the~~We ~~buyer~~previously ~~performs~~recorded ~~pursuant~~an toimpairment ~~the terms~~ of ~~the~~approximately ~~contract,~~$2.2 ~~the~~million ~~sale is expected to close~~ during the ~~third~~first quarter of 2014.

On ~~June~~September 174, 2014, ~~the Partnership~~we ~~entered~~sold ~~into a sale contract with a third party purchaser to sell~~ the remaining acres of Parcels 9 and 11 ~~for $979~~,~~464.~~ ~~The~~resulting ~~Partnership~~in ~~previously~~net ~~recorded~~sales anproceeds ~~impairment~~ of ~~approximately~~ $~~234~~931,~~000~~282 ~~during~~and ~~the~~a ~~first~~gain ~~quarter~~on sale of ~~2014~~$22,462. ~~Provided~~ ~~the~~We ~~buyer~~previously ~~performs~~recorded ~~pursuant~~an toimpairment ~~the terms~~ of ~~the~~approximately ~~contract~~$234,000 ~~the sale is expected to close~~ during the ~~third~~first quarter of 2014.

Parcel 19 previously received approval required from certain Village of McHenry municipal departments for a preliminary plan approving a 41 unit well and septic residential subdivision to be called Hunters Woods. Following the downturn in the real estate market, we sought an extension in the time limit for recording the final plat for the Hunters Woods Subdivision. The extension expired on May 5, 2011. During the first quarter of 2011, we submitted a formal request for an additional extension as allowed by the Village of McHenry. We received a response which required addressing minor storm water comments raised by the McHenry County Department of Planning and Development. These matters have been addressed in a formal response. During May 2013 we received notice of a recent policy change by the Planning and Development Committee of the County Board regarding subdivisions extensions. The Committee will no longer grant extensions to subdivisions, as had become common practice over the last five years. Instead, subdivision applicants that are currently in the final plat stage will now have the option of suspending the subdivision application for a period of up to four years. We have accepted this option and as a result of this policy change we have until April 18, 2017 to reinitiate our request to proceed with the previously approved plan. As a result of management’s change in intent to hold the remaining parcels for an indefinite period of time, the Partnership recorded an impairment of approximately $584,000 during the first quarter of 2014. On October 1, 2014, we entered into a sales contract to sell the remaining acres of Parcel 19. The contract sales price is approximately $430,000. This sale price net of estimated closing costs required a further impairment of approximately $190,000 at September 30, 2014. Provided the buyer performs pursuant to the terms of the contract, the sale is expected to close during the fourth quarter of 2014.

-10-

to reinitiate our request to proceed with the previously approved plan. As a result of management’s change in intent to hold the remaining parcels for an indefinite period of time, the Partnership recorded an impairment of approximately $584,000 during the first quarter of 2014.

Professional services to affiliates and non-affiliates were $69,469 and $75,293 for the six months ended June 30, 2014 and 2013, respectively. Professional services primarily include accounting and legal fees. Professional services to affiliates and non-affiliates decreased primarily due to a decrease in accounting fees.

General and administrative expenses to affiliates and non-affiliates were $19,893 and $29,374 for the six months ended June 30, 2014 and 2013, respectively. General and administrative expenses primarily include data processing costs, postage, printing expenses and farm management fees. General and administrative expenses to affiliates and non-affiliates decreased primarily due to a decrease in printing and postage costs as a result of the mini-tender offer in 2013, as well as a decrease in farm management fees in 2014.

Marketing expenses to affiliates were $2,516 and $160 for the six months ended June 30, 2014 and 2013, respectively. Marketing expenses to affiliates increased due to the sales efforts for Parcel 17/18/22, Parcel 9 and Parcel 11.

Land operating expenses to non-affiliates were $8,178 and $7,219 for the six months ended June 30, 2014 and 2013, respectively. These costs primarily include real estate taxes and insurance. The increase is due to an increase in real estate taxes.

During the first quarter of 2014, management formally changed its intent to hold the remaining parcels for an indefinite period of time. As a result, the Partnership recorded its investment properties at the lower of cost or market value as of June 30, 2014. Based on sales offers and the estimated market value of the remaining parcels, management estimated a decrease in current land value, which resulted in an impairment loss on land of $3,035,973 for the six months ended June 30, 2014.

Interest income was $2,402 and $2,486 for the six months ended June 30, 2014 and 2013, respectively. Interest income is primarily a result of the cash available to invest on a short term basis.

Other income was $2,450 and $2,500 for the six months ended June 30, 2014 and 2013, respectively. Other income is due primarily to transfer fee income as a result of the number of completed unit transfers. The decrease is due to less transfer fee income as a result of a decrease in the number of completed unit transfers.

-11-

Professional services to affiliates and non-affiliates were $99,810 and $109,767 for the nine months ended September 30, 2014 and 2013, respectively. Professional services primarily include accounting and legal fees. Professional services to affiliates and non-affiliates decreased primarily due to a decrease in accounting fees.

General and administrative expenses to affiliates and non-affiliates were $26,081 and $34,261 for the nine months ended September 30, 2014 and 2013, respectively. General and administrative expenses primarily include data processing costs, postage, printing expenses and farm management fees. General and administrative expenses to affiliates and non-affiliates decreased primarily due to a decrease in printing and postage costs as a result of the mini-tender offer in 2013, as well as a decrease in farm management fees in 2014.

Marketing expenses to affiliates were $2,377 and $160 for the nine months ended September 30, 2014 and 2013, respectively. Marketing expenses to affiliates increased due to the sales efforts for Parcel 17/18/22, Parcel 9 and Parcel 11.

Land operating expenses to non-affiliates were $9,400 and $10,134 for the nine months ended September 30, 2014 and 2013, respectively. These costs primarily include real estate taxes and insurance. The decrease is due to a decrease in real estate taxes due to the sales of parcels prior to September 30, 2014.

During the first quarter of 2014, management formally changed its intent to hold the remaining parcels for an indefinite period of time. As a result, the Partnership recorded its investment properties at the lower of cost or market value as of September 30, 2014. Based on sales offers and the estimated market value of the remaining parcels, management estimated a decrease in current land value, which resulted in an impairment loss on land of $3,226,133 for the nine months ended September 30, 2014.

Interest income was $4,464 and $3,738 for the nine months ended September 30, 2014 and 2013, respectively. Interest income is primarily a result of the cash available to invest on a short term basis. The increase in 2014 is due to an increase in invested cash due to net sales proceeds from land sales.

Other income was $3,050 and $3,200 for the nine months ended September 30, 2014 and 2013, respectively. Other income is due primarily to transfer fee income as a result of the number of completed unit transfers. The decrease is due to less transfer fee income as a result of a decrease in the number of completed unit transfers.

-12-

Investment properties

We acquired fee ownership of the following real property investments. The table below summarizes the detail activity of all the land parcels owned by the Partnership from the purchase date through the quarter ending ~~June~~September 30, 2014.

Investment properties activity:

	Illinois	Gross Acres			Purchase/Sales		Initial Costs						CostsCapitalized		Costs of		TotalRemainingCosts of			Current YearGain(Loss)
		Gross Acres					Initial Costs						CostsCapitalized		Costs of		TotalRemainingCosts of		Current YearGain(Loss)
		Purchased					Original		Acquisition		Total		Subsequent to		Property		Parcels at			on Sale
	Illinois	Purchased			Purchase/Sales		Original		Acquisition		Total		Subsequent to		Property		Parcels at		on Sale
Parcel	County	(Sold)			Date		Costs		Costs		Costs		Acquisition		Sold/Impaired		0609/30/14		Recognized	~~Recognized~~
1	Kendall		84.7360			01/19/89	$	423,680		61,625		485,305		5,462,589		5,947,894	0	0	0	0
			(3.5200	)		12/24/96
			(.3520	)		11/25/97
			(80.8640	)		12/29/97
2	McHenry		223.4121			01/19/89		650,000		95,014		745,014		26,816		771,830	0	0	0	0
			(183.3759	)		12/27/90
			(40.0362	)		05/11/00
3	Kendall		20.0000			02/09/89		189,000		13,305		202,305		0		202,305	0	0	0	0
			(20.0000	)		05/08/90
4	Kendall		69.2760			04/18/89		508,196		38,126		546,322		1,223,376		1,769,698	0	0	0	0
			(.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
			(4.7900	)		Var 2005
5	Kendall (a)		372.2230			05/03/89		2,532,227		135,943		2,668,170		456,398		3,124,568	0	0	0	0
			(Option	)		04/06/90
			(372.2230	)		06/20/03
6	Kendall (b)		78.3900			06/21/89		416,783		31,691		448,474		1,461,256		1,909,730	0	0	0	0
			(3.9500	)		11/01/00
			(30.0000	)		07/12/05
			(33.4270	)		07/27/06
			(11.0130	)		08/22/07
7	Kendall (b)		77.0490			06/21/89		84,754		8,163		92,917		1,438,727		1,531,644	0	0	0	0
			(71.2070	)		08/22/07
			(5.8420	)		03/20/08

-12-

Investment properties activity (continued):

	Illinois	Gross AcresPurchased			Purchase/Sales		Initial Costs						CostsCapitalized		Costs of		TotalRemainingCosts of		Current YearGain(Loss) on
							Original		Acquisition		Total		Subsequent to		Property		Parcels at		Sale
Parcel	County	(Sold)			Date		Costs		Costs		Costs		Acquisition		Sold/Impaired		06/30/14		Recognized
8	Kendall (b)		5.0000			06/21/89	$	60,000		5,113		65,113		0		65,113		0	0
			(5.0000	)		10/06/89
9	McHenry (b)		51.0300			08/07/89		586,845		22,482		609,327		94,784		146,176		557,935	0
10	McHenry (b)		123.9400			08/07/89		91,939		7,224		99,163		600		99,763		0	0
			(123.9400	)		12/06/89
11	McHenry (b)		30.5920			08/07/89		321,216		22,641		343,857		94,659		87,631		350,885	0
12	Kendall		90.2710			10/31/89		907,389		41,908		949,297		246,964		1,196,261		0	0
			(.7090	)		04/26/91
			(89.5620	)		03/10/04
13	McHenry		92.7800			11/07/89		251,306		19,188		270,494		18,745		289,239		0	0
			(2.0810	)		09/18/97
			(90.6990	)		02/15/01
14	McHenry		76.2020			11/07/89		419,111		23,402		442,513		206,810		649,323		0	0
			(76.2020	)		09/13/12
15	Lake		84.5564			01/03/90		1,056,955		85,283		1,142,238		1,661,344		2,803,582		0	0
			(10.5300	)		Var 1996
			(5.4680	)		Var 1997
			(68.5584	)		Var 1998
16	Kane/		72.4187			01/29/90		1,273,537		55,333		1,328,870		706,718		2,035,588		0	0
	Kendall		(30.9000	)		07/10/98
			(10.3910	)		12/15/99
			(3.1000	)		12/12/00
			(28.0277	)		05/19/03
17/18/22	McHenry		425.9360			Var 1990		3,844,632		223,856		4,068,488		2,348,907		2,550,076		3,867,319	0
			(1.0000	)		Var 1990
			(0.5200	)		03/11/93
			(27.5100	)		01/29/99
			(51.0000	)		10/02/08

-13-

Investment properties activity (continued):

	Illinois	Gross Acres							Initial Costs						CostsCapitalized		Costs of			TotalRemainingCosts of		Current YearGain(Loss)
		Gross Acres					Initial Costs						CostsCapitalized		Costs of		TotalRemainingCosts of		Current YearGain(Loss)
		Purchased			Purchase/Sales				Original		Acquisition		Total		Subsequent to		Property			Parcels at		on Sale
	Illinois	Purchased			Purchase/Sales		Original		Acquisition		Total		Subsequent to		Property		Parcels at		on Sale
Parcel	County	(Sold)			Date		Costs		Costs		Costs		~~Costs~~Acquisition		~~Acquisition~~Sold/Impaired		~~Sold~~09/~~Impaired~~30/14		Recognized	~~06/30/14~~		~~Recognized~~
19	McHenry		63.6915			02/23/90	$			490,158		29,158		519,316		663,244		584,160			598,400	0
8	Kendall (b)		5.0000			06/21/89	$	60,000		5,113		65,113		0		65,113	0		0
20	Kane		224.1480			02/28/90				2,749,800		183,092		2,932,892		1,938,930		4,871,822			0	0
			(5.0000	)		10/06/89
			(.2790	)		10/17/91
9	McHenry (b)		51.0300			08/07/89		586,845		22,482		609,327		94,784		704,111	0		24,116
			(223.8690	)		02/20/04
			(51.0300	)		09/04/14
21	Kendall		172.4950			03/08/90				1,327,459		75,822		1,403,281		954,415		2,357,696			0	0
10	McHenry (b)		123.9400			08/07/89		91,939		7,224		99,163		600		99,763	0		0
			(172.4950	)		Var 1998
			(123.9400	)		12/06/89
23	Kendall		140.0210			05/08/90				1,480,000		116,240		1,596,240		909,395		2,505,635			0	0
11	McHenry (b)		30.5920			08/07/89		321,216		22,641		343,857		94,659		438,516	0		(1,654)
			(4.4100	)		Var 1993
			(30.5920	)		09/04/14
			(35.8800	)		Var 1994
12	Kendall		90.2710			10/31/89		907,389		41,908		949,297		246,964		1,196,261	0		0
			(3.4400	)		Var 1995
			(.7090	)		04/26/91
			(96.2910	)		08/26/99
			(89.5620	)		03/10/04
24	Kendall		298.4830			05/23/90				1,359,774		98,921		1,458,695		101,991		1,560,686			0	0
13	McHenry		92.7800			11/07/89		251,306		19,188		270,494		18,745		289,239	0		0
			(12.4570	)		05/25/90
			(2.0810	)		09/18/97
			(4.6290	)		04/01/96
			(90.6990	)		02/15/01
			(69.8200	)		11/26/02
14	McHenry		76.2020			11/07/89		419,111		23,402		442,513		206,810		649,323	0		0
			(211.577	)		05/04/12
			(76.2020	)		09/13/12
25	Kane		225.0000			06/01/90				2,600,000		168,778		2,768,778		301,040		3,069,818			0	0
15	Lake		84.5564			01/03/90		1,056,955		85,283		1,142,238		1,661,344		2,803,582	0		0
			(225.0000	)		09/07/12
			(10.5300	)		Var 1996
	Totals						$			23,624,761		1,562,308		25,187,069		20,317,708		40,130,238			5,374,539	0
			(5.4680	)		Var 1997
			(68.5584	)		Var 1998
16	Kane/		72.4187			01/29/90		1,273,537		55,333		1,328,870		706,718		2,035,588	0		0
	Kendall		(30.9000	)		07/10/98
			(10.3910	)		12/15/99
			(3.1000	)		12/12/00
			(28.0277	)		05/19/03
17/18/22	McHenry		425.9360			Var 1990		3,844,632		223,856		4,068,488		2,348,907		6,417,395	0		67,400
			(1.0000	)		Var 1990
			(0.5200	)		03/11/93
			(27.5100	)		01/29/99
			(51.0000	)		10/02/08
			(345.9060	)		08/28/14

-14-

Investment properties activity (continued):


		Gross Acres					Initial Costs						Costs Capitalized		Costs of		Total Remaining Costs of	Current Year Gain(Loss)
	Illinois	Purchased			Purchase/Sales		Original		Acquisition		Total		Subsequent to		Property		Parcels at	on Sale
Parcel	County	(Sold)			Date		Costs		Costs		Costs		Acquisition		Sold/Impaired		09/30/14	Recognized
19	McHenry		63.6915			02/23/90	$	490,158		29,158		519,316		663,244		774,320	408,240	0

20	Kane		224.1480			02/28/90		2,749,800		183,092		2,932,892		1,938,930		4,871,822	0	0
			(.2790	)		10/17/91
			(223.8690	)		02/20/04

21	Kendall		172.4950			03/08/90		1,327,459		75,822		1,403,281		954,415		2,357,696	0	0
			(172.4950	)		Var 1998

23	Kendall		140.0210			05/08/90		1,480,000		116,240		1,596,240		909,395		2,505,635	0	0
			(4.4100	)		Var 1993
			(35.8800	)		Var 1994
			(3.4400	)		Var 1995
			(96.2910	)		08/26/99

24	Kendall		298.4830			05/23/90		1,359,774		98,921		1,458,695		101,991		1,560,686	0	0
			(12.4570	)		05/25/90
			(4.6290	)		04/01/96
			(69.8200	)		11/26/02
			(211.577	)		05/04/12

25	Kane		225.0000			06/01/90		2,600,000		168,778		2,768,778		301,040		3,069,818	0	0
			(225.0000	)		09/07/12


	Totals						$	23,624,761		1,562,308		25,187,069		20,317,708		45,096,537	408,240	89,862

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(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 were treated as one parcel and Parcels 9, 10 and 11 will continue to be treated as one parcel for purposes of computing Parcel Capital (as defined in the Partnership Agreement) and distributions to the partners.

Subsequent Events

There are no other subsequent events to report that would have a material impact on the Partnership’s financial statements.

Other Items

In accordance with Article XVI Section 16.1 of the Inland Land Appreciation Fund, L.P. Partnership Agreement and Treasury Regulation Section 1.7704-1(j), we have not yet reached the maximum threshold of limited partnership units that may be transferred/assigned directly between parties during 2014. Therefore, we may authorize additional sales of partnership units directly between parties during 2014. For the benefit of interested limited partners, we have a relationship with a “qualified matching service” as defined under Treasury Regulation Section 1.7704-1(g). In accordance with this Treasury Regulation and the IRS private letter ruling obtained by the “qualified matching service”, we understand that limited partnership units may be transferred/assigned up to a separate maximum threshold each taxable year (in addition to the maximum threshold that may be transferred/assigned directly between parties discussed above). However, there can be no assurance that the IRS private letter ruling will apply to transfers of our units, or that any particular transfer will not violate the transfer restrictions contained in our partnership agreement or the provisions of Treasury Regulation Section 1.7704-1(g). If you have any interest in participating in a transfer/assignment of partnership units through this “qualified matching service,” please contact American Partnership Board directly at 800-736-9797. You are strongly encouraged to consult your personal legal, financial and tax advisors in connection with any such transfer/assignment.

The Illinois Department of Revenue regulates Illinois income tax withholding requirements for nonresident partners. We are also required to pay a withholding tax to the Internal Revenue Service with respect to a partner’s allocable share of our taxable net income, if the partner is a foreign person. We will first pay the withholding tax from the distributions to any nonresident and/or foreign partners, 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 such nonresident and/or foreign partners. There were no withholding payments necessary as of ~~June~~September 30, 2014.

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

None

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not Applicable

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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We have established disclosure controls and procedures to ensure that material information relating to us is made known to the members of senior management and the Audit Committee.

Based on management’s evaluation as of ~~June~~ September 30, 2014, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control - Integrated Framework, our management concluded that our internal control over financial reporting was effective as of ~~June~~September 30, 2014. This quarterly report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.

There were no changes to our internal controls over financial reporting during the quarter ended ~~June~~September 30, 2014 that ~~have~~ have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - Other Information

Items 1 through 5 are omitted because of the absence of conditions under which they are required.

Item 6. Exhibits

Exhibits:

10.1		Vacant Land Purchase and Sale Contract (re: Inland Land Appreciation Fund, L.P. Parcel 17/18/22), by and between Inland Land Appreciation Fund, L.P. and Hemmingsen Farms, LLC, dated April 16, 2014.
10.2		Vacant Land Purchase and Sale Contract (re: Inland Land Appreciation Fund, L.P. Parcel 9 and Parcel 11), by and between Inland Land Appreciation Fund, L.P. and Provision Equity, LLC and Freedom Lane, LLC, dated June 17, 2014.
31.1		Rule 13a-14(a)/15d-14(a) Certification by Principal Executive Officer
31.2		Rule 13a-14(a)/15d-14(a) Certification by Principal Financial Officer
32.1		Section 1350 Certification by Principal Executive Officer
32.2		Section 1350 Certification by Principal Financial Officer
101		The following financial information from our Quarterly Report on Form 10-Q for the ~~six~~nine months ended ~~June~~September 30, 2014 formatted in Extensible Business Reporting Language (XBRL): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows and (iv) related notes.

-1718-

SIGNATURES

Pursuant to the requirements 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.
		By:		Inland Real Estate Investment Corporation
		Its:		General Partner
		By:		/S/ GUADALUPE GRIFFIN
		By:		Guadalupe Griffin
		Its:		Senior Vice President and Principal ExecutiveOfficer of the Partnership
		Date:		August 8, 2014
		By:		/S/ DONNA URBAIN
		By:		Donna Urbain
		Its:		Principal Financial Officer of the Partnership
		Date:		August 8, 2014


				INLAND LAND APPRECIATION FUND, L.P.

By:				Inland Real Estate Investment Corporation
Its:				General Partner

By:				/S/ GUADALUPE GRIFFIN

By:				Guadalupe Griffin
Its:				Senior Vice President and Principal Executive Officer of the Partnership
Date:				November 12, 2014

By:				/S/ DONNA URBAIN

By:				Donna Urbain
Its:				Principal Financial Officer of the Partnership
Date:				November 12, 2014

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