Broker Check

The Sale of a Dental Practice and Subsequent Sale of Commercial Property

The client was a successful Dentist contemplating retirement. Fortunately, his tax advisor was aware of the benefits of Structured Sale Strategies and referred him to Lambertson Financial Services so that planning could begin well in advance.

Knowing that he wanted to maximize the value of his practice, approximately 18 months before he planned to retire, the dentist enacted a plan to accelerate revenue and income growth. The plan worked and in the process, his personal income grew to the highest point of his career.

The business was sold in July, but rather than have his highest personal income year coincide with sale of one of his largest assets, the Dentist elected to use a Structured Sale to defer the first payment from the practice sale into January of the following year. This enabled him to sell a highly appreciated asset, yet recognize no income from the sale in that tax year. The resulting savings on taxes was approximately $120,000. Furthermore, the sale was structured so that it would yield an income stream of $8,000 per month for 8 years, that would be taxed at the more favorable capital gains rate.

The client then sold a commercial property for $1.6 million using a 1031 exchange to purchase another investment property for $600,000. The entire purchase was moved into the 1031 and the $1 million boot was structured on day 46. The payments from that sale were scheduled to begin immediately following the original 8-year payment stream. This provided the client with a continuous stream of income for more that 20 years, and resulted in an additional tax savings of $250,000.

Later in the year, the client is planning to sell his dental office building. He will structure the sale and schedule this new payment stream to start immediately after the two previous streams. This will yield another 10 years of payments for a total of more than 30 years of fully funded retirement, without having to touch his tax deferred retirement accounts until he is required by law to begin minimum mandatory withdrawals.