Maria's Dental Practice
Business Sale — 10-Year Structured Note at 6%
The Challenge
Maria started her dental practice in 2005 with $250,000 in startup costs. After 20 years of building her patient base, reputation, and team, a buyer offered $800,000 for the practice — a $550,000 capital gain. She was ready to retire, but the tax bill stood in the way.
Business sales are more complex than real estate for tax purposes. The $800,000 sale price isn't taxed uniformly — it's allocated across multiple asset categories, each with different tax rates:
| Asset Category | Tax Treatment | Examples |
|---|---|---|
| Capital Assets (Goodwill) | Long-term capital gains (15–20%) | Largest component in most practice sales |
| Depreciable Assets (Equipment) | Depreciation recapture at ordinary rates (up to 25%) | Dental chairs, X-ray machines, sterilization equipment |
| Inventory (Supplies) | Ordinary income (up to 37%) | Materials, supplies, consumables on hand |
| Non-Compete Agreement | Ordinary income (up to 37%) | Common in professional practice sales |
Estimated Tax Burden at Closing
Across all asset categories — capital gains (15–20%), depreciation recapture (up to 25%), NIIT (3.8%), and state taxes — Maria faced an estimated $135,000 in taxes due at closing. That meant walking away with $665,000 instead of $800,000 — and losing her practice income with no replacement revenue stream.
The SIS Solution
Maria used a Structured Installment Sale through Iron Gate Holdings to defer her entire tax liability and create a predictable retirement income stream:
Promissory Note Issued
Maria selected a 10-year structured note at 6%. The IGH Trust issued a secured promissory note for quarterly payments of $22,500 ($90,000/year).
Practice Sold & Funds Entered Trust
At closing, the $800,000 in sale proceeds went directly from the buyer into the IGH Trust. Maria never took constructive receipt. The allocation across asset categories (goodwill, equipment, inventory, non-compete) is maintained for tax reporting purposes.
Deferred Taxation & Retirement Income Began
Maria began receiving quarterly payments of $22,500. All tax categories — capital gains, depreciation recapture, and ordinary income — are spread proportionally across each installment per IRC Section 453.
Revenue Estimator Comparison
Traditional Sale
SIS — 10-Year Note at 6%
Key Outcomes for Maria
Retirement Income Secured
$90,000/year replaces her practice income, funding retirement and travel without the day-to-day demands of running a dental office.
All Tax Categories Deferred
Capital gains, depreciation recapture, and ordinary income on non-compete/inventory are all spread proportionally across 10 years of payments.
No 1031 Option Available
1031 exchanges don't apply to business sales. The SIS was one of the few strategies available to defer capital gains on a dental practice sale.
Estate Planning Benefits
The trust structure supports step-up in basis for heirs, potentially eliminating any remaining deferred capital gains taxes entirely.
IRS Compliance for Business Sales
Business sales structured through an SIS comply with IRC Section 453 (installment sales) and IRS Publication 537. Asset allocation between the buyer and seller must be consistent on both parties' tax returns. The trust must be established before the sale closes. Eligible entities include sole proprietorships, partnerships, LLCs, LLPs, and S-Corporations. C-Corporation stock sales qualify; asset sales face double taxation considerations.
Frequently Asked Questions
Related Resources
David's Investment Property
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Selling a Business
Full guide to tax deferral for dental practices and business sales
Revenue Estimator
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Pro Forma Report
Generate a detailed financial analysis for your business sale
Selling a Business or Professional Practice?
See how much you could defer in taxes and earn in retirement income with your specific numbers.
This case study is for illustrative purposes only and based on a hypothetical scenario using representative transaction data. Individual results will vary based on sale price, cost basis, asset allocation, entity type, tax bracket, and state of residence. Tax rates shown are estimates based on current federal rates as published by the IRS. This is not tax, legal, or financial advice. Consult your CPA, tax attorney, or financial advisor before making any tax deferral decisions. IRS Code Section 453 and Publication 537 govern installment sale treatment.