Capital Gains tax hike 69% --

Capital Gains tax hike 69% --

Selling your practice or commercial real estate after January 1, 2011 could result in a 69% increase in the amount of tax you pay. Federal Capital gains tax is set to go up from 15% - 20% excluding any state increases. Plus there is a proposed surtax for incomes over $500,000. While you probably earn less than $500,000 in W-2 wages -- dividends and capital gains count as income. So if the sale price your office, real estate and w-2 income add up to more than $500,000, then look out. Uncle Sam is going to take a much bigger bite from your proceeds. That could mean another $50,000 in taxes paid to the IRS.

You would have to sell you office for $75,000 or more to pay for that extra $50,000 needed in taxes. Imagine how much you would have to grow your office to justify that increase in price? Given today’s economy and the forecast for the next several years, it is not likely that one would increase the office revenue 15%- 20%.

Most offices take up to 12 months to complete a sale. Therefore, now may be a good time to make your new year’s resolution and consider a practice sale.

To maximize value, several of our sellers have opted to sell their office today and enter in a 2-4 year employment agreement with the buyer. This allows the seller to cash-out their equity and invest in more liquid investments that will provide better returns over the short term. In addition, a part time employment allows them to continue to earn an income without the liability of running a business. This also helps the buyer in transitioning the office. The only limits to this structure are the total profits from the practice. Less profitable offices have will require the seller to work fewer hours or work on a percentage of production.

For buyers, timing is also excellent. Interest rates on loans are at their lowest level in years and buyers are finding it more difficult to get the job of their choice. Both create a perfect opportunity for buyers and sellers.

Timing the sale of any business or asset is important in recognizing the highest value for that investment. Numerous factors should be considered in the sale of any business. But for those considering selling within the next 4 years, strong consideration should be taken in considering a sale in 2010 rather than waiting.