Buildings can typically be sold in two ways either as real estate or packaged in an inc (single purpose company). Such an INC is then sold without any assets or liabilities other than the property. 

If the property is purchased, the main part of the property value will be placed on balance group i (commercial building) at a rate of 2% or balance group h (building and construction, hotels, etc.) at a rate of 4%. The new transaction value is then used here. 

If the property is sold wrapped in an AS, the continuity principle will be followed, one will then continue to use the balances from before the sale as a depreciation basis. It is AS and not the property that changes hands. 

Remember to show key solution expressions that you use in the long-answer question. a) In such cases where the property is sold through an AS, a tax rebate is usually given on the basis that the new buyer misses the present value of future tax savings. For balance group i (2%), a tax rebate of 10% of the difference between the agreed property value and the book tax value booked on the balance group is often given. 

Discuss What is implicit in such a discount and carry out a sensitivity analysis with regard to return requirements. 

Discuss How much higher the tax rebate should be if the building had belonged to balance group h (4%) instead of balance group i (2%). Use different return requirements.