Case Study — Dr. Y (Ontario Orthodontist): Practice Acquisition Through Holdco Structure Saves $85K on $2.4M Purchase

Engagement summary: Ontario orthodontist acquiring an established $2.4M orthodontic practice from a retiring vendor. Insight designed a Holdco + Dental Professional Corporation acquisition structure that funded the deal through a $1.8M bank loan on the Holdco balance sheet, preserved the vendor’s LCGE eligibility, and produced $85K in first-cycle tax savings for the buyer.

Client archetype

Dr. Y is a 34-year-old orthodontist finishing a 3-year associateship in an established practice. Vendor is retiring at age 65 and offered Dr. Y the first right to buy for $2,400,000 (independent appraisal supported). Practice: 2 chairs, established referral base, 5 employees, current-year EBITDA $580,000. Real estate is separately owned by the retiring dentist’s family holding company; the practice acquisition is asset-only (not the building).

The challenge

Vendor wanted a share deal to claim the $1,275,000 (2026) LCGE. Dr. Y wanted an asset deal to step up depreciation basis and avoid inheriting historical liabilities. Financing $2.4M required roughly $1.8M of debt; putting the debt on Dr. Y personally would have made the interest non-deductible against Dr. Y’s employment or professional service income. A simple straight share sale would have left Dr. Y with a $1.8M non-deductible personal loan.

Insight Accounting CPA approach

Insight designed a hybrid acquisition structure with three steps:

1. Set up Dr. Y’s structure. Incorporate Dr. Y’s Dental Professional Corporation (voting shares to Dr. Y, RCDSO-compliant; non-voting family shares available for future planning). Incorporate Dr. Y’s Holdco (numbered CBCA corp, 100% owned by Dr. Y). Holdco will be the borrower and the initial acquirer.
2. Hybrid share/asset acquisition. Holdco borrowed $1.8M from a Big 5 bank on the strength of the practice cashflow; Dr. Y contributed $600,000 equity (personal savings and family bridge). Holdco bought 100% of the vendor’s Dental Corporation shares for $2.4M. Vendor claimed $1,275,000 LCGE on the gain, saving the vendor about $340,000 of personal tax. Immediately post-closing, vendor’s Dental Corp (now owned by Holdco) was wound up under Section 88(1) into Holdco (which meets the 90% ownership threshold), stepping up cost base on identifiable assets under the bump provisions of s. 88(1)(d) where possible.
3. Operating structure. Post-wind-up, Holdco holds the operating practice assets and leases them (via a s. 156 nil-consideration election) to Dr. Y’s Dental PC, which delivers clinical services and bills patients/insurers. Bank loan interest of $110,000/year is deductible against Holdco’s rental/service revenue (traceable to income-earning source under s. 20(1)(c)). Dr. Y’s Dental PC pays SBD-rate corporate tax on its net clinical income; retained earnings distribute to Dr. Y as salary/dividend mix.

Measurable outcome

First-full-year outcome: interest deductibility on the $1.8M loan saved Dr. Y approximately $58,000 in tax that would otherwise have been personally-nondeductible interest cost. Section 88(1) bump on Class 14.1 goodwill provided incremental CCA generating another $27,000 of first-year corporate tax deferral. Total year-1 tax savings vs. a naive personal-loan / share-purchase alternative: $85,000. Vendor concurrently claimed $1,275,000 LCGE, saving about $340,000 personal tax and unblocking the deal price. Deal closed 11 weeks from engagement.

Key facts

• Practice value: $2.4M asset value; $580K EBITDA.
• Structure: Dr. Y’s Holdco acquires vendor’s Dental Corp shares; wind-up under s. 88(1); Dental PC operates clinically.
• Interest deductibility: $110K/year on $1.8M loan, traceable to Holdco’s income-producing source under s. 20(1)(c).
• Vendor’s LCGE: $1,275,000 (2026) claimed on gain.

— Bader A. Chowdry, CPA, CA, LPA — Insight Accounting CPA

Confidentiality: All identifying details anonymized; specifics protected under CPA Ontario Rule of Professional Conduct 208 (Confidentiality). Archetype descriptions are composites illustrative of engagement patterns.

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.