I just retired at the age of 62 after 23 years as a nurse practitioner with a large medical group. During that time, I purchased a share in the group for $2,000. Upon retirement, I redeemed my share and received a check for about $25,000. The information that came with it said that they do not report this money to the IRS, but that the amount of the check, (minus the original $2000) is a "taxable event" and that I should get some tax advice. My only other income for 2013 will probably be my salary for the first 3 months of the year. I don't plan to start collecting any Social Security and/or pension during 2013. Is this money taxable, and to what extent? If so, what is the best way to minimize the tax hit?

ANSWER

The BIDaWIZ Team's Answer:

Congratulations on your retirement! What type of entity is the large medical group? A C corporation, partnership etc.? Depending on the type of entity, the medical practice should furnish you a tax information form such as a 1099 at the end of the year to report the gain on your investment. The gain of $23,000 or $25,000 less your $2,000 basis would likely be treated as a long-term capital gain for tax purposes. Depending on your income level and filing status (i.e. single or married filing jointly etc.), you'll be taxed at long-term capital gains tax rates. Do you anticipate you'll be in the 10% or 15% ordinary income tax bracket for 2013? This would mean your ordinary income wouldn't exceed $36,250 as a single filer and $72,500 as a joint filer. If this is the case, then you will not owe any tax on the long-term gain.