There Are Ways to Reduce Taxes to the Seller and Payer When a Dental Practice is Sold

Typically, when a dental practice is sold, the seller does whatever he or she can to affect a capital gain on the seller’s side of the ledger. When that occurs, the buyer then has created a situation where he or she has ordinary income from the principal payments that are allocated to the loan used to finance the acquisition of the dental practice. If this is the arrangement in the sales agreement negotiated by the parties, there is little that can be done to plan after the fact that the agreements have been signed.

Before the signatures have been put to paper, the advisors to the selling and buying dentists have time for using their experience and creativity to make some or all the taxes go away. The dental CPA, and sometimes the attorney, can arrange to have the documents include allocations to equipment, management services and other items that can assist the buyer in changing the long term write off, into a shorter term.

This type of amendment gives the buyer the ability to quicken the time of the write offs but it also takes away some of the seller’s capital gains treatment and forces him or her to report these items as ordinary income. That is going to make the seller unhappy. This jockeying for advantage to the buyer or seller takes place throughout the negotiations before the final agreement is put to paper...
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