Tax Loss Harvesting

First off, Happy New Year to you all! When I reflect over the past year, certainly the Celsius crypto scam I endured and a private equity company taking over the office I work at were both big ticket items. While both matters still strike a chord with me, time has helped me not feel quite so overwhelmed by them. In terms of the Celsius fiasco, the Chapter 11 bankruptcy is still underway; but what has helped me cope is giving up on any expectations of seeing any of that money returned to us. The feelings of betrayal, and ignorance, and outright stupidity I once felt for falling for such a con – that has slowly subsided. Since then, yet another big crypto company (FTX) has collapsed; and while I thankfully did not have any money tied up in that embezzlement, I certainly can empathize for those that did. In the new year, I am resolved to return to the traditional, tried and true, much more conservative means of investing.

On the dental practice front, I had explored several partnership and ownership opportunities but ultimately decided to stay put. I talked briefly in a previous post about why I have remained an associate for so long; and at the end of all my recent explorations to find my own office, I realized that the time with my family is more valuable to me then equity in a business. Truth be told, I am still a little nervous about what changes have yet to come. Will I have to clock-in now? Will they start to dictate what supplies we can and cannot order? How soon do they intend on selling our office to an even bigger DSO? As of this new year, they are officially my new employer – so time will tell how tumultuous this transition will truly be. Let’s hope it is not as chaotic as my mind makes it out to be.

This past week, we vacationed with my sister-in-law and her family in their new home in Tampa, Florida. Towards the end of the trip, a few days shy of the new year, I received a call from one of the managing partners of some investment property we did in Arizona a few years ago. To my surprise, she notified me that the property was expected to sell before the end of the year and they had sold for nearly 3x the original amount of our investment. Now there are management, legal and accounting fees that are withdrawn before investors like us are paid out in syndication deals such as these, but still, it was music to my ears to close out an otherwise rough investment year.

As fate would have it, I so happened to be in the house with a Certified Public Accountant (CPA) at the time I received this news. Now, I am a simple W2 employee, with a buy-and-hold investment strategy, who has never inherited any amount of money to where I would need to be concerned about the tax burden on it. However, the profits on this AZ syndication investment would stick me with a 20% long-term capital gains tax rate on that amount.

The concept of ‘tax loss harvesting’ is a tax-planning strategy where you can offset some capital gains with some losses you incurred in the same or other securities. It can be a complex, and fortunately I had a knowledgeable CPA available to me at the time to help walk me through many of the intricacies in implementing this. Since the S&P 500 finished down nearly 20% for the year (2022), and many of my hand-picked stocks (including TSLA, AAPL, NFLX just to name a few) did even worse – I had plenty of stocks to sell (and therefore ‘realize’ losses on) that could help counter my tax liability on the gains I am looking to make from the AZ property.

Even with this tax loss harvesting technique, it comes with rules to abide by so not to void its efficacy with the Internal Revenue Service (IRS). One such rule is called the ‘wash sale rule’. The gist of this rule states that an investor cannot buy a ‘substantially identical security’ within a 30-day period before OR after the sale. For example, I cannot buy any shares of TSLA within the next 30 days, otherwise this eliminates my ability to use that original sales losses for tax purposes.

If you have any interest in this topic whatsoever, please visit the White Coat Investors Tax Loss Harvesting Rules website. He goes into much greater detail and knows significantly more about this topic then I have gleamed within this mere past week.

The only real mistake is the one from which we learn nothing.
– Henry Ford

Another potential route I would love to have explored (if I had more time then just two days) is to consider selling my Celsius claims at a loss. I read an article in the Wall Street Journal that states some customers are selling their bankruptcy claims (at steep discounts) to a broker/buyer (Cherokee Acquisition and XClaim). I already expect to see pennies on the dollar by the time the Chapter 11 bankruptcy concludes, I would have loved to utilize the financial losses this year and just have emotional closure to that whole mess. With such little notice between hearing of the AZ property sale and the end of the year, this was not unfortunately an option I was able to execute.

I am not a financial expert, nor am I qualified to give financial advice. I simply write about my own experiences, and if my ventures into crypto and individual stock picking has taught me anything, it’s that I still have so much to learn about. Hopefully some of the stuff I talk about helps others avoid similar mistakes and come out ahead. Hope everyone is having a good start to their new year!

Private Dental Practice vs. DSO Dominance

Dentistry, Lifestyle

Spoiler alert! This post is ALL about dental talk. You see, for the past several months – since I was notified that the company I work for (for the last seven years of my life mind you) was now under the ownership of a large dental support organization (DSO) – I have been deliberating whether it is time for me to pursue an ownership or partnership arrangement of my own. I have written about this very subject here; however, that was under the (much more ideal) circumstances of being employed by two pediatric dentists and not some massive private equity company that buys up dental offices for investment purposes. While the name of the new owners is irrelevant, their portfolio currently consists of over 250 dental offices across the country and they are continuously growing aggressively.

This business model is not new. In fact, I am sure you have seen many of your local, private-practice physicians selling to private equity companies. As a pediatric dentist that works closely with anesthesiology doctors, I witnessed first-hand when they started to be taken over. Once a large investment firm enters the picture, and really gets its claws into an asset class, you have to believe they are going to streamline the shit out of it in order to drain every last dime of profit out of a business they acquire. In the case of the anesthesiologists I work with; all of a sudden they were forced to work with an expanded lineup of surgeons, taking on more call schedules, learning new systems, performing post-op surveys, and more.

For someone that is close to retiring, some of these DSO offers may not be so bad. I imagine they give a very hefty upfront payout, and after mandating the doctor(s) stay on for ‘x’ amount of years (to ensure minimal attrition occurs), I am sure there is a golden parachute that many people receive on the tail end of the acquisition as well. My bosses both have to stay on four more years, but after which, they can and likely will retire from dentistry forever. Me? on the other hand. As a mere employee, with absolutely no equity stake, I get squat from the buyout and have yet to see how they plan to ‘trim the fat’ (so to speak) within our company. They’re a big company that tries to entice you with a matching 401k plan you can enroll in, some solid health insurance plans you can participate in, and some perks that smaller run organizations may not be able to afford to provide their employees with – but, its the changes in the day to day operations that scare me.

For example, I heard the words ‘production goal’ uttered from my office managers mouth for the first time in seven years last week. She also asked my lead assistant ‘why we ordered so many nitrous oxide tanks’ for our office? Something that has neither changed/increased, nor been scrutinized or questioned, up until this point. The way I see it, they are still in a transitionary period where they do not want to rock the boat (i.e. don’t spook the staff, keep changes to a minimum, etc.) – but certainly, the tides are changing.

While I am grateful that the transition has at least kept me gainfully employed; in the last couple months I have updated my CV, set up a LinkedIn and Indeed profile, arranged lunches with some pediatric dentists around the valley, reached out to dental supply reps and expressed interest in any partnership/ownership opportunities they may be aware of. Out of the five dentists that I reached out to, two recently sold some or all of their practice to a DSO, one is content and is not interested in any arrangement, but two are willing to discuss my coming onboard with some equity stake on the table.

“Success comes from taking the Initiative and following up…Persisting…

What simple action could you take today to produce a new momentum toward Success in your life?
– Tony Robbins

For the last seven years, I have worked for someone else because it has afforded me a comfortable working environment, good pay, a flexible work schedule, and no interference in how I chose to practice clinically. And, I am not a risk-taker. Or, I have been too afraid of failure. Unfortunately, I have come to realize all the time I have worked, was to build up someone else’s brand and valuation.

One of the pediatric dentists I met with recommended a book called “The Millionaire Master Plan” by Roger James Hamilton. He spoke highly of the book, and claimed it would expand my way of thinking and put me quite a few years ahead in terms of wisdom and self-awareness. I am a few chapters in, and so far a good portion of it has been dedicated to helping someone recognize their ‘genius’, their strengths and weaknesses, and talks about expanding on those traits to build your wealth.

For the sake of completeness, I should say that I have also toured a couple of empty, grey-shell office spaces as well. The problem here is that, dental build-outs can be quite costly, plus you have no cash flow for the first several months/years, plus you’re competing against the deep-pocketed DSO’s with their endless marketing dollars and – it really steepens the curve when it comes to opening up a start-up. I also have investigative work to do (with the help of an attorney), to review my existing contract and gauge the enforceability of my non-compete and other restrictive covenant clauses.

My way of thinking is changing. I am now seeking opportunities I would normally be too nervous to pursue. I hope to write again soon to share the results of some of these meetings, and with any luck, announce that I may have new endeavors underway. Thank you for taking the time to read all of this, and sorry to limit it primarily to the dental folk out there. Enjoy your day!

Conquering Change

Dentistry, Lifestyle

Recently, I was made aware that the office I have gainfully been employed at for the past seven years was going to be sold to a larger, private-equity company. One of two owners called me to break the news about the transition, and nonchalantly tried to reassure me that not much should change about the terms of my employment other then who signs my paycheck.

I have never been one to embrace change well. I would almost go so far as to say I fear it.

I see day-to-day change take place in front of me constantly, and I struggle to accept even that. My kids getting older is a prime example. Google Photos reminds me of this day ‘7 years ago’ and I am an emotional wreck. Why do they have to grow up so freaking fast?

Listen, I know, it is a part of life and we cannot control it. Without a doubt, my best days are when I manage to block out the seemingly infinite “what if’s” scenarios that float around in my head. When I somehow silence all that noise that occupies my mental space, my days are much more peaceful and happier.

Years ago, I read a book called “Who Moved My Cheese” by (Patrick) Spencer Johnson. From what I remember, it was a quick enough read with a very simple message. Life moves on, and so should we. “The quicker you let go of old cheese, the sooner you find new cheese.” The author devotes the book to trying to embrace change in work and throughout our lives.

I have worked for enough large DSO’s (Dental Support Organization’s) to know they are not run the same as smaller, privately-owned offices. In an attempt to streamline operations and cut costs (and maximize profits), something’s gotta give – it may impact the quality of dental materials, the staff, the schedule – it could touch on every aspect of the practice.

As a mere associate, I am not privy to the terms of the sale and transition of ownership. Only time will tell what changes will come. The way I see it, at best, my office stays as-is and nothing changes. At worst – the autonomy I have enjoyed in picking out my own materials and setting my own schedule starts to disappear. What would be utterly devastating is if my beloved staff get spooked and decide to quit.

This is the second office now that has been sold out from underneath me. Because I have been just an employee, as the practice changes hands – even though I worked hard to build it up, because I have no equity stake – I reap none of the benefits of its successes throughout this sale taking place. The two original owners (not much older then I am currently) have now paved a pathway for retirement for themselves; and I am but a commodity being sold along with the chairs and other equipment.

On the flip side, I have been compensated well over the years and had I invested more wisely (thanks a lot Celsius Network), I might also in my own right have been on a path towards financial independence. Plus, over the last seven years I have not been burdened by administrative hassles of running this practice – and when the A/C fails, addressing staffing issues, dealing with payroll matters – none of that has really weighed on my shoulders.

“Change happens when the pain of holding on becomes greater than the fear of letting go.”
― Spencer Johnson, Who Moved My Cheese?

How my staff will respond to the new owners, how my pay will be affected, how my patient schedule may change – all of these are unknowns that occupy my mental bandwidth these days. Mixed in with regrets about not building up equity all these years and reaping zero ownership benefits. And do not get me started on the massive financial setback I have incurred with the atrocious investing missteps on the Celsius ordeal.

Lately though, when I am not caught in a moment of self-doubt and insecurity, I am convinced that – however horrendous these last several months may have been – I am more open to taking on the challenges of practice ownership, I am a wiser/more cautious investor, and I am, for the most part, optimistic about what the future has in store for me. I am even finding ways to enjoy my kids getting older and the fun activities I can do with them now versus seven years ago.

Hope you handle change better than I do. Every day I feel I have to convince myself there is light at the end of the tunnel. Thank you for taking the time to read my post today! Please feel free to share with me your own stories of taking on change in your life!