Meet Dr. Hustler: An Impressive MD Who Made Millions and Retired at 37 (True Story)
Tax Strategies That Could Have Helped Him Keep More Money in His Pocket
That Guy Was Impressive.
I met Dr. Hustler (fictional name for privacy) at the White Coat investor Conference. He hung up his gloves at age 37 as soon as he made his FU money from selling his clinics to private equity for millions of dollars.
His story was both amazing and inspiring—he started an addiction clinic and expanded to several locations while still working full-time as a hospitalist.
You guys can do it too!
Despite paying seven figures in taxes, he still had enough to retire at a young age.
I’m not sure if he used any tax planning strategies to reduce his tax bill, but meeting him inspired me to introduce you to a several capital gains tax mitigation strategies.
That way, when you turn your side gigs into millions (yes, you, Dr. MM!), you’ll be ready to use these techniques to reduce your tax burden.
Dr. Hustler’s Tax Situation: Illustration
For illustration purposes only, let’s assume
Dr. Hustler sold his business in 2025 for $5 million in capital gains.
He is filing jointly with his spouse.
Their taxable income (excluding capital gains) is $600,000.
How His Capital Gains Would Be Taxed:
Federal capital gains tax rate: 20%
State income tax rate (marginal): 10%
Net Investment Income Tax (NIIT): 3.8%
Total marginal tax rate: 33.8% (rounded to 34%)
Without any strategies, his tax bill on the sale of his business would be $1.7 million.
Ouch.
But, even after taxes, he would still have $3.3 million in his pocket—which may be enough to retire at age 37.
Capital Gains Mitigation Strategies
Here are four powerful strategies to reduce capital gains taxes:
#1: Opportunity Zone Investing
Dr. Hustler could have invested all or part of his $5 million in capital gains into an Opportunity Zone (OZ) fund, unlocking two major tax benefits:
Tax Deferral with Possible Tax Mitigation – No capital gains tax due until 12/31/2026, with the potential to reduce taxable capital gains.
Tax-Free Growth – If he holds his interest in the OZ fund for 10+ years, all appreciation may be tax-free when sold.
Example: Tax Deferral with Tax Mitigation
Let’s assume Dr. Hustler invests 50% ($2.5M) of his capital gains into an OZ fund.
This would defer taxes ($850K) on $2.5M until April 15, 2027.
Better yet, if the OZ fund is structured strategically, the capital gains tax due on April 15, 2027, could be reduced by 20–40% (illustrative estimate).
How Is This Possible?
A key tax provision states that the taxable capital gain is the lesser of:
The deferred gain ($2.5M), or
The fair market value of the OZ fund investment at the time of taxation.
If the fund’s value decreases by 30% due to smart structuring, the deferred capital gain would also be reduced by 30%, lowering it to $1.75M.
Tax Savings Breakdown:
Original deferred gain: $2.5M
Reduction in taxable gain (30%): $750K
Revised taxable gain: $1.75M
Tax savings: $250K ($750K × 34% tax rate)
Additionally, some OZ funds pay dividends, which can help offset his deferred and reduced tax liability.
Example: Tax-Free Growth
If he holds his investment for at least 10 years, and the value of his OZ investment grows from $2.5M to $5M, then the entire $2.5M gain that occurred during his ownership will be tax-free when he sells his ownership interest.
Downsides of OZ Investing
There are downsides to investing in an Opportunity Zone (OZ) fund.
Long-Term Commitment: Dr. Hustler’s money may be tied up for 10 years to qualify for tax-free growth.
Investment Risk: Like any other investment, there is no guarantee that the fund will appreciate—it could even lose value!
#2: Installment Sale
Dr. Hustler could have structured his business sale as an installment sale over 10 years instead of receiving the full $5 million upfront.
Main Tax Benefit:
Instead of recognizing $5 million in gains all at once, which could result in $1M in federal capital gains tax (20%), Dr. Hustler would recognize $500K per year in capital gains, which would be taxed at a lower rate.
Example of Capital Gains Tax Savings:
Assuming that Dr. Hustler and his spouse have no other income:
The first $100K of capital gains would be tax-free each year (approximate).
The next $400K would be taxed at 15%.
Overall tax rate: 12% (vs. 20% for a lump sum sale).
Total savings over 10 years: $400,000 in federal capital gains tax savings ($600K tax in installment vs. $1M in lump sum sale).
Note: I will skip potential state tax savings, as the math can get complicated and is not suitable for this format.
Other Tax Considerations
Dr. Hustler will receive annual interest income from the installment sale. The interest rate is generally higher than the Applicable Federal Rate (AFR), which is around 5% for a 10-year installment note in March 2025.
Example:
Installment Sale Amount: $5M
Interest rate: 5%
Year 1 interest payment: $25K ($5M × 5%)
Tax impact: The $25K interest payment is taxable as ordinary income.
Key Risk of Installment Sale:
If the private equity firm defaults on payments, Dr. Hustler may face legal challenges trying to foreclose on the loan and may not be able to reclaim his business.
#3: Buying Real Estate + Cost Segregation + Accelerated Depreciation
I’m going to make another assumption (wishful thinking): I’m assuming that 100% bonus depreciation is available.
If Dr. Hustler buys a $15 million apartment complex with his $5 million down payment, he could use:
Cost Segregation + Bonus Depreciation to potentially generate a $3M paper loss.
This loss could offset his $5M capital gain, reducing his taxable gain to $2M.
This could potentially cut his tax bill by $1M.
Main Challenge in the Following Year:
He would still owe taxes on the $2M remaining gain (~$700K tax bill).
He would need liquidity to cover the tax or get a loan against the apartment complex to pay the tax bill.
#4: Deferred Sales Trust (DST)
A DST is an advanced tax strategy that defers capital gains by selling the business to a trust.
How It Works:
Dr. Hustler creates a DST and sells his business to the DST under an installment sale.
The DST immediately sells the business to private equity for $5M.
The DST, managed by a third party trustee, invests the $5M (e.g., in an S&P 500 portfolio).
The DST pays Dr. Hustler $500K per year under a 10-year installment sale plus interest (at least the federal Applicable Federal Rate (AFR), which fluctuates monthly and is around 5% for a 10-year installment in March 2025).
Tax Benefits:
First $100K of capital gains (roughly)is tax-free each year (assuming Dr. Hustler has only $25,000 in interest income).
The remaining $400K is taxed at 15% ($60k), keeping his effective tax rate at 12% instead of 20%.
Total tax savings over 10 years: $400,000 in federal capital gains tax savings ($600K tax in installment vs. $1M in lump sum sale).
Non-Tax Benefit: Nearly Eliminated Default Risk
Unlike a straight installment sale, where Dr. Hustler would be exposed to default risk from private equity, the DST assumes the obligation. Since the installment obligation comes from the DST (which Dr. Hustler created but is managed by a third-party trustee), the default risk is essentially eliminated.
Downside: Higher Costs & Complexity
Since a third-party trustee is involved and a trust must be created and maintained for the duration of the installment sale(e.g., 10 years), setup and maintenance costs are high, and the process is more complex. It requires multiple levels of expertise, including a tax professional and an attorney.
Final Thoughts
Meeting Dr. Hustler was truly inspiring—he accomplished something that no other MDs in my circle have done.
If you ever experience a big exit like Dr. Hustler, consider capital gains mitigation strategies to:
Significantly reduce your tax bill (from $1.7M to hundreds of thousands less).
Keep more of your hard-earned money in your pocket.
Smart tax planning can make all the difference—it’s worth its weight in gold!
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