After decades building a practice, the sale can be taxed brutally in a single year, federal capital gains, recapture on your equipment, the 3.8% surtax, and California's 13.3%. Here's how to spread it out and keep more.
A plain-English guide for sellers: how a structured installment sale defers the tax when you sell a business, practice, or property — the math, the alternatives, and how to know if your deal fits.
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📞 Hans Goldstein · 213-290-4977 · CA Insurance License #4322192 · Independent §453 specialist · Goldstein & Co. LLC
You've spent a career building a medical, dental, or professional practice. When you sell, to a partner, an associate, a DSO, or a group, the proceeds can be taxed at the worst possible rate because it all lands in one year. The good news: the structure of the sale, and the timing of the tax, are both things you can plan.
Under IRC §453, you can receive the proceeds, and pay tax on the capital-gain portion, over a schedule of future years instead of a lump sum. For a retiring practitioner, this can double as a guaranteed retirement income stream funded by an A-rated carrier, while keeping more of the gain in lower brackets. The recapture on your equipment is generally recognized up front, so plan that piece deliberately.
A practice sale is the financial event of your career. Don't let a one-year tax bill take a third of it. Plan the structure and timing before the letter of intent, ideally with your CPA and a deferral specialist at the table.
It's taxed as a mix: capital gains on goodwill and practice appreciation, depreciation recapture on equipment (ordinary income), the 3.8% NIIT, and California state tax up to 13.3%. How the price is allocated across these categories significantly affects the total.
Yes. A §453 structured installment sale lets you receive the proceeds and pay tax on the capital-gain portion over several years instead of all at once, which can also provide guaranteed retirement income. Depreciation recapture is generally recognized in the year of sale.
Amounts allocated to goodwill are taxed as capital gain, equipment as depreciation recapture (ordinary), and a consulting or non-compete agreement as ordinary income. Negotiating this allocation before closing directly changes your tax bill.
Each component is taxed differently, cash at sale, rollover equity often deferred until a later liquidity event. Coordinating the structure and timing is important; a structured installment sale can apply to the cash portion.
Before you have the legal right to the proceeds, generally before closing. Once you can access the money, constructive receipt taxes it, so the deferral planning must happen before the deal closes.
Before you sign anything, run your numbers with someone who structures the deal to be tax-smart and audit-ready from day one.
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