- Physician practices are most often organized as either Subchapter C or S corporations for federal and state income tax purposes.
- The most typical physician recapitalization structure is the payment of cash and rollover equity to the selling physicians and practice.
- If interest is not paid on deferred payments in physician recapitalization transactions, the IRS will impute interest. However, tax on these deferred payments is typically deferred until payment is actually received.
- Structuring a portion of the transaction consideration as a sale of personal goodwill by the individual physicians is a tax-efficient way to address the disconnect between the share of the sale of a physician practice and physician sellers’ percentages of ownership.
- Most physician recapitalization transactions involve a rollover contribution by the selling physicians on a tax-deferred basis, but payouts to departing physicians can be structured to avoid a tax bill for the remaining physicians.
- Proper structuring is needed to ensure selling physicians retain the benefit of the tax deduction associated with bonuses given to junior or associate physicians not participating in the transaction.
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