For purposes of real estate investment
analysis, the acquisition price of a
property subject to adjustments for
deductions and additions pursuant to the
Income Tax Act.
The adjusted cost base is used in
determining the gain or capital gain arising
from the disposition of property. The gain
or capital gain is subsequently applied in
calculations leading to tax liability on
sale and ultimately the sale proceeds after
taxes. Sale proceeds after taxes is a
necessary component in calculating the
internal rate of return for a property from
an after tax perspective. Often referred to
as the adjusted cost base at sale, this
calculation requires forecasting operations
cash flow and sale proceeds cash flow for a
specified holding period to point of sale.
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