Asset purchase of practice allows tax deductions

Q: I'm negotiating with a retiring doctor to purchase his practice by buying the stock. My accountant tells me that I won't be able to take a tax deduction for my down payment or subsequent payments to the bank. Can I structure the purchase so parts of it will be deductible?

A: You are describing a stock purchase method of acquiring a practice. In this transaction, you will acquire all assets and liabilities of the practice. Your accountant is correct that the purchase of stock is not deductible.

A more favorable alternative is an asset purchase, in which you limit your exposure to liabilities and more clearly define what you are buying. Generally, a practice purchase of this type consists of tangible (fixed assets and equipment) and intangible (goodwill). The tangible assets you purchase usually can be depreciated over a 5- to 7-year schedule, but some may be deducted fully the first year of purchase.

Send your money management questions to medec@advanstar.com. Answer provided by Steven Podnos, MD, MBA, CFP, principal of Wealth Care LLC in Merritt Island, Florida.