35
Volume2 Issue7
|
S
upporting
Y
our
P
ractice
Selling your practice, one of your most valuable assets, can be difficult.
Inmany cases, it’s not just a financial decision, but also an emotional one.
Not only do you want to secure your financial future, you also want to
ensure that the long-term needs of your patients and teammembers are
taken careof.The easiestway to achieve this goal is toplan several years in
advance, keeping inmind the following:
LifetimeCapitalGainsExemption (CGE)
TheCGEallows adentist to receiveup to$813,600 (2015 limit, indexed to inflation) of capital
gains tax-freeon the saleof dental practice shares,whichcanbeworthup to$201,000 in tax
savings. Because therearehurdles toclaiming theCGE, you shouldplan for the saleof your
practiceat least 3years inadvanceandaccount for the following:
1. TheCGEonlyapplies to the saleof shares and is theprimary reasonwhy sellers
generallyprefer to sell sharesover assets andwhymanydentists set upaProfessional
Corporation (PC). If youdon’t haveaPC, youwill have to set oneup. This takes time
andcoulddelay the saleof your practice.
2. Before sellingPC shares, consultwithyour taxadvisor toconfirm if youor a
familymember have tohold thePC shares for at least 24months. Theremaybe
circumstanceswhere thePCcanbe set upandnot be subject to the24month
holdingperiod.
3. APCcannot have significant inactiveassets; theCGEappliesonly to small business
shares. Todetermine if your PC shares are small business shares, consider theamount
of inactiveassets it holds. Inactiveassets includeexcess cash, GICs, termdeposits,
shares inpubliccompanies and investments in real estatenot related to thedental
practice. If your PC’s inactiveassets aremore than50%of the total fairmarket valueof
thePCat any time in the last 24months, thenyour PC shareswill not qualifyas small
business shares. If this is thecase, youmayhave todelay the saleof your shares for up
to24months.
Alternatively, youcould reduce the inactiveassetswithin thePCbypaying
shareholdersdividendsor salaries. Thismay trigger a largepersonal taxbill. However,
workingwithyour accountantwell inadvancecanhelpyouminimize taxes associated
with the saleof your PC shares.
DavidChongYen
CPA,CA,CFP
Mr.ChongYen isa
charteredprofessional
accountant, tax specialist
and certifiedfinancial
planner.Forover30years,
hehas providedadvice to
dentistsandotherhealth
careprofessionals on
taxes, estateandfinancial
planning, valuationsand
accounting.
Towatchan interview
withDavidChongYen
on sellingadental
practice, see:
Not onlydo youwant to secure yourfinancial future, youalso
want to ensure that the long-termneeds of your patients and
teammembers are taken care of.
