The Sale of a Dental Practice and Office Building

Our client was a Dentist, age 51, who wanted to retire early. She was selling her practice for $600K and her office building for $1.6MM, for a total $2.2MM.

• After all deductions, the taxes on a conventional sale would have been $575K, or more than 26% of the entire sale price.
  • $125K for the Practice
  • $450K for the Building
• This would have left her with net income of $1.625MM after tax on a lump sum sale.

By using Structured Installment Sales Strategies, we were able to dramatically improve these results.

For the practice sale, a Structured Installment Sale enabled the client to spread the income from her practice sale over 8 years at $80K per year and defer income from the building to the back end after the practice income had been received.

• The client took no other income for the 8 years
• The net after tax numbers on $80K per year were:
  • Total Federal Taxes = $0
  • Total State Taxes = $5K
  • Total Tax Savings of $120K ($125K - $5K)
  • Total Net Income on $640K over 8 years is $635K, with a tax savings of 96%
• Additional benefit: letting qualified assets grow untouched and tax-deferred

Office Building:
By using a Structured Installment Sale, proceeds from the Office Building were deferred 8 years and were scheduled to begin immediately after the payments from the practice sale were completed. Payments from the building were spread over the next 16 years, for a total coverage of 24 years of installment payments.

• Office Building payments started in year 9, after the conclusion of the Practice sale payments
• This provided the client a massive reduction in taxes and the effect of a nearly tax-free pension plan
• In addition, the client’s defer qualified assets were allowed to remain untouched and continued to grow until required distributions begin at age 72.