Written by Reed Tinsley |
October 12, 2007
Tax Treatment of Goodwill, Covenants, and Consulting in Medical Practice Transactions
When buying or selling a medical practice, goodwill and coventant not to competes may be including in the purchase price. In addition, the seller may enter in to 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:
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Buyer
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Seller
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Goodwill
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Amortize 15 years
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Sec. 1231 asset
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Covenant not to compete
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Amortize 15 years
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Ordinary income
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Consulting agreement
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Deduct as incurred
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Ordinary income
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About the Author
Reed Tinsley CPA
This article is written by Reed Tinsley, a Houston, TX-based CPA with over 30 years of experience advising physicians and medical practices across Texas and the United States. Reed holds certifications as a Certified Valuation Analyst (CVA), Certified Healthcare Business Consultant (CHBC), and Certified Financial Planner (CFP), specializing exclusively in the healthcare sector. He is a published author, nationally recognized speaker, and trusted advisor to physicians on
accounting & tax,
practice management, and
financial planning.
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