• Jeff Glass

Case Study: monetized installment sale of a dental practice

Updated: Apr 12


We were approached by CPA representing a late-career dentist who was planning to sell a majority interest in his long-established practice so he could obtain some liquidity while refocusing his professional energies on patient care and reducing time spent with administration.


The seller expected to retain a 10% interest in the practice and anticipated a $2.1 million capital gain on the 90% interest to be sold. Considering federal and state tax rates, the seller anticipated paying roughly $800,000 in taxes on the sale.


After talking with us about his options, the seller decided to engage in a monetized installment sale of the dental practice. He sold the 90% share of the practice to a dealer in exchange for a 30-year, interest only installment note, with a final balloon payment of principal.


Simultaneously, he obtained a loan that netted him 93.5% of his net sales proceeds in immediately cash. The loan was provided by a third-party lender, introduced to the seller by the dealer. The loan terms mirrored those of the dealer’s installment note, so that payments to the lender on the monetization loan were fully funded by the payments from the dealer.


The installment sale resulted in deferral of the capital gains tax for 30 years. The monetization loan provided cash up front that the dentist was able to invest outside of his practice, diversifying his overall financial position.


The ability to invest the loan funds for 30 years created value for this seller by increasing the net proceeds from the transaction up front by roughly $800,000, while the ultimate tax bill was delayed by 30 years.


While that tax bill eventually must be paid, the dentist walked away with freely investable cash, which could be invested and grown in value over 30 years to an amount worth much more than the present-day tax cost.


WANT TO LEARN MORE?


How to Defer Capital Gains Tax for 30 Years and

Simultaneously Obtain Cash Equal to 93.5% of Your Net Sales Proceeds​




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