Intangible amortization when buying/selling a medical practice

By Reed Tinsley, CPA, CVA, CFP, CHBC
Medical Practice Broker, Physician CPA, Healthcare Consultant, Value Analyst, Author, Speaker

When buying or selling a medical practice, goodwill and covenant not to compete may be included in the purchase price. In addition, the seller may enter into some kind of a consulting agreement as part of the transaction. The tax treatment of goodwill, a covenant not to compete and a consulting agreement can be summarized as follows:

     Buyer Seller
Goodwill Amortize 15 years Sec. 1231 asset
Covenant not to compete Amortize 15 years Ordinary income
Consulting agreement Deduct as incurred Ordinary income

These are but a few of the complex considerations and feasibility analysis that are taken into account when buying or selling a medical practice. As qualified medical practice brokers, Tinsley Medical Practice Brokers can help decipher your best options.