This issue is often the biggest focus of discussion and negotiation between a seller and buyer. that the sale price be for fair market value without regard to the value of future referrals. This article originally appeared in Managed Care Contracting & Reimbursement Advisor, October 2013. The structure of the sale is one of the first decisions to make, he says. Selling physicians should utilize fair mar… These transactions involve many complex nuances, such as differentiating between goodwill of the health care provider and the practice entity. In this post, we examine the treatment of accounts receivable in the sale of a practice. 2005-03-01 FORUM Magazine. "ACOs are increasing the sales, and so are other drivers like physician practice management groups." The CPM issue must be addressed early in the consideration of a sale, in accordance with state law. In most industries, when a purchaser desires to acquire a target business from its owners, the parties structure an M&A transaction involving the acquisition of either the target’s business assets or its equity. It's a judgment call about the value of assets and the revenue the practice brings in but also how badly the buyer and seller want to make a deal. There's no medical practice valuation calculator to crunch numbers for buying or selling a practice. When determining the proper tax treatment of proceeds from the sale of a service company, it must be determined what amount, if any, may be allocated as payments attributable to personal goodwill. Thus, it is in the buyer’s best interest to maximize the purchase price allocated to tangible practice assets, and minimize the amount allocated to goodwill. Therefore, any amount allocated to equipment that exceeds the book value of that equipment will be taxed at an ordinary income rate. In this example, GST/HST would have to be remitted on 40% of the value of the client list. By properly reallocating practice income valuation, there’s a $20,751 tax savings. Valuation should be used as a benchmark for negotiation of the purchase price. Once that issue is settled, you can move on to the tax implications of an asset versus a stock sale, Riley says. ... 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Kennedy was the sole shareholder of his employee benefits co… The price has to reflect the practice's value. Under section 1221(a)(3), copyrights were, in some cases, denied capital gain status when sold. Before buying or selling a dental practice, great care and planning should be taken to consider the tax consequences regarding the allocation of the sale price to the various assets involved in the transaction. While New York's sales tax generally applies to most transactions, certain items have special treatment in many states when it comes to sales taxes. Classes of assets include the following: IRS regulations state that if the buyer and seller of a business agree on the allocation of the purchase price, the IRS will respect the agreed upon allocation unless it is “not appropriate.”. Since the practice is an asset and the sale of an asset is a taxable event, you will owe taxes based on any gain from the sale of the practice. 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