Own Your Office Building? Decide Its Exit Before You Sign the LOI

Same address. Two deals.

The chairs, the charts, and your team go to the DSO. The walls, the roof, and the parking lot are a second asset, with their own buyers, their own lease, and their own tax bill.

Here is the short answer. If you own your building, you are selling two things: your practice and your real estate. A DSO often wants your practice and a lease, not the building. You can keep it and collect rent, sell it to the DSO, or sell it to an investor with a lease in place. Decide before the LOI, while you still have leverage.

Two assets, two buyers

Your practice and your building feel like one thing because you walk into both every morning. On paper, they are separate.

Your practice is valued by a practice broker or a qualified appraiser. Your building is valued by an independent commercial appraiser. I do not value either one. What I can do is help you see how each choice fits the life you want after the sale.

Your three options, side by side

Option	Cash now	Income later	Risk you keep	Effort
Keep it and lease to the DSO	Little	Rent for the lease term	A single tenant in a single-use building	You are a landlord
Sell it to the DSO	Yes	None	Little from the building	Low after closing
Sell to an investor with the DSO's lease in place	Yes	None	Little from the building	One more closing to coordinate

None of these is right for everyone. The best choice depends on how much income you need, how much concentration you can live with, and what you want to leave your heirs.

The lease decides what the building is to a buyer

Whatever you choose, the lease with the DSO is the center of the building's story. A long, clean lease makes the building easier to sell. A short or messy one can make it harder.

Settle these terms before the LOI, not after:

• Who pays what. Taxes, insurance, and maintenance: you or the tenant?
• Term and renewal options. How long, and who controls the renewals?
• Rent increases. How and when rent goes up.
• Assignment. What happens to the lease if the DSO is sold or restructures?
• Ownership and rent. Is the building owned in a separate entity from your practice, and does the lease between them reflect a fair rent?

An independent appraiser sets the building's value. Your attorney negotiates the lease. Your job is to know which option you are negotiating toward.

The tax side, in plain words

Your CPA sets the specifics. Here are the two pieces to ask about.

Depreciation you have taken can come back. If you sell, part of your gain may be unrecaptured section 1250 gain. IRS Topic 409 says that portion of the gain from selling section 1250 real property is taxed at a maximum 25% rate. Whether and how much applies to you depends on your depreciation history and your income. Your CPA runs that number.

A like-kind exchange can defer the gain. Under IRC section 1031, if you exchange business or investment real property solely for like-kind real property, gain is generally not recognized. Cash or other property you receive can be taxed. The timelines are strict: replacement property must be identified within 45 days and received by the earlier of the 180th day or your return due date (including extensions) (IRS Publication 544). It is reported on Form 8824. If you are not ready to reinvest in real estate, this option may not fit.

Keeping it changes your plan

If you keep the building, it becomes one of your largest assets after the sale. It has one tenant, one use, and one location. That is a concentration question, an income question, and an estate question all at once.

Research I helped underwrite found that 79.2% of entrepreneurs want guidance on nonliquid assets, such as businesses, real estate, and private equity stakes. Only 17.2% receive it (CEG Insights, 2025, p. 13, N = 3,108). Those owners were not all dentists. But a dental building after a sale is exactly that kind of asset, and it often gets less planning than the cash.

Ask yourself:

1. Do you want rent checks in retirement, or do you want the cash?
2. If the DSO leaves at the end of the lease, could you re-lease a dental building?
3. Who in your family would manage it if you could not?

Who does what

• Your commercial appraiser values the building.
• Your broker or a qualified appraiser values your practice.
• Your attorney negotiates the lease and the sale documents.
• Your CPA models the tax under each option.

My role is to keep them working from one plan, so the building decision supports your income, your risk, and your estate, not just the deal.

[[CONFIRM: When an owner tells me the building is "just part of the deal," it is usually the decision they have thought about least.]]

Decide the building first

Once the LOI is signed, the building tends to follow your practice. Before it is signed, it is a choice.

Book your 25-minute exploratory call and we will lay your three options side by side.

So, if your practice sold tomorrow, would you know what you want your building to do?

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Sources

1. IRS Topic No. 409, Capital Gains and Losses (unrecaptured section 1250 gain taxed at a maximum 25% rate). https://www.irs.gov/taxtopics/tc409
2. IRS Publication 544, Sales and Other Dispositions of Assets (2025): sales of business real property, section 1250 and 1231, and like-kind exchange identification (45 days) and receipt (180 days or return due date, including extensions) requirements. https://www.irs.gov/publications/p544
3. Internal Revenue Code section 1031 (like-kind exchanges of real property). https://www.law.cornell.edu/uscode/text/26/1031
4. IRS, Like-kind exchanges: Real estate tax tips (Form 8824 reporting). https://www.irs.gov/businesses/small-businesses-self-employed/like-kind-exchanges-real-estate-tax-tips
5. Research I helped underwrite: CEG Insights (2025), The Great Entrepreneurial Wealth Migration, Section C, "Gap 2: Nonliquid asset management," p. 13, N = 3,108.

This article is for educational purposes only and is not tax, legal, or investment advice. Consult your own qualified professionals about your situation.