Why would I want to accomplish a tax deferred dental exchange?

The main reason to accomplish a tax deferred exchange is to defer the income tax you would pay on the sale of your dental office equipment, furniture, and computers.

What type of property from my dental practice sale can I exchange?

You can exchange office equipment, furniture, computers, cameras, and other equipment used in your practice for new office equipment, furniture, computers, cameras, and other equipment that will be used in your new replacement dental practice.

What can I not exchange from the sale of my dental practice?

You can not exchange goodwill, covenants not to compete, accounts receivable, inventory, or leasehold improvements.

Who determines what percentage of the sales price is allocated to exchangeable assets or non-exchangeable assets?

Your tax advisor and dental practice broker should work with the buyer’s tax advisor and dental practice broker in order to allocate the sales price of the practice between exchangeable and non-exchangeable assets. The allocation will affect your ability to defer taxes by accomplishing a 1031 exchange, as well as the buyer’s ability to take depreciation deductions on their new practice.

Can I exchange patient records?

Unfortunately, there is little guidance on what constitutes like-kind tangible personal property. It is not clear if you can exchange patient records of one dental practice for those of another dental practice. We suggest that you allow us to talk to your tax advisors regarding this issue.

Can I exchange a dental practice for a building?

No. You cannot exchange a dental practice for a building because they are not like-kind assets. The office equipment, furniture and fixtures and computers are considered tangible personal property while a building is considered real property. You can not exchange tangible personal property for real property. You can only exchange tangible personal property for tangible personal property.

What are the identification rules for a dental practice exchange?

You may identify up to three replacement dental practices. As an alternative, you may identify any number of practices as long as their aggregate fair market value does not exceed 200 percent of the aggregate fair market value of the practice you relinquished. As a final option, you may identify any number of practices as long as you acquire at least 95 percent of the aggregate fair market value of all the identified replacement dental practices before the end of the 180 calendar day period.

If I own my dental practice as a corporation, can I purchase my new practice with a different corporation?

No. the same entity that sells the dental practice must purchase the new dental practice in order to successfully accomplish a dental exchange.

What if I find a new dental practice to purchase before I sell my current dental practice?

If you find a new dental practice to purchase before you sell your current dental practice, you may accomplish a 1031 reverse dental practice exchange. Please see the tab for reverse exchanges for further details on how to do so.