Can I buy a dental practice through a corporation for tax purposes?
Yes, and structuring through a Dental Professional Corporation (DPC) usually with a Holdco is standard planning for a practice acquisition. Benefits include: tax-deferred accumulation of after-tax practice earnings inside the DPC, LCGE eligibility on a future arm’s-length exit, and acquisition-financing interest deductibility inside the acquiring corp at the corporate tax rate.
Two acquisition structures. Structure A – asset purchase (buyer’s typical preference): the DPC buys the seller’s dental chairs, equipment, goodwill, patient files, and leasehold improvements. Buyer allocates purchase price to Class 8 (20%), Class 10.1 (30%), Class 14.1 for goodwill (5% CCA), Class 13 (leasehold, straight-line), and inventory. Seller has recapture and s. 14.1 gain treatment.
Structure B – share purchase (seller’s typical preference): buyer’s Holdco buys the seller’s DPC shares. Seller potentially claims LCGE ($1,275,000 in 2026). Buyer inherits the corporation’s tax attributes, liabilities, and potentially any historical CRA exposure – due diligence is critical.
Hybrid transaction (Section 85 rollover of specific assets to a NewCo owned by buyer’s Holdco while seller’s Opco pays out remaining cash) can bridge the gap between buyer’s and seller’s structural preferences. Requires careful modelling.
Example: $2,000,000 dental practice acquisition. Buyer’s DPC pays $2M funded by $1.5M bank loan and $500K equity. Interest on the acquisition loan is deductible against the DPC’s active business income – the loan is repaid with tax-preferred dollars taxed at 12.2% or 26.5%, not the buyer’s 53.53% top personal rate.
Note: Financing structure matters. If the loan is on the Holdco’s balance sheet (to buy DPC shares), interest deductibility depends on the loan being traceable to income-earning shares under s. 20(1)(c). Poor documentation kills the deduction.
Source: canada.ca â Corporations
— Bader A. Chowdry, CPA, CA, LPA — Insight Accounting CPA
Disclaimer: Bader A. Chowdry, CPA, CA, LPA is a Licensed Public Accountant regulated by CPA Ontario. Insight Accounting CPA Professional Corporation is a Chartered Professional Accountant firm. This content is general information only and does not constitute professional advice for your specific facts. Confirm current rules and figures with your own advisor before acting.