By Brian Liberty, Senior Analyst, The Bloom Organization

As the 2012 presidential election rapidly approaches, many of our clients are asking about the importance of selling before potential increases in capital gains taxes. If the Bush tax cuts expire, capital gains taxes could go from 15% to 20%, or even greater.

Let’s take a look at a simple example.

XYZ Surgery Center has $2,000,000 of EBITDA and $0 in long-term debt. The Bloom Organization consults with XYZ Surgery Center and helps the ASC increase EBITDA to $3,000,000. Next, The Bloom Organization identifies a buyer that agrees to purchase 51% of XYZ Surgery Center for 6.5x EBITDA. The payment for 51% is $9,945,000.

15% Long-Term Capital Gains - If Doctor X owns 10.0% total and sells 5.0%, his proceeds are $975,000, let’s assume his basis is $75,000, and therefore, he would pay $135,000 in taxes.

20% Long-term Capital Gains – Same story, except Doctor X pays $180,000 in taxes

Doctor X paid $45,000 more under a 20% capital gains rate versus the current 15% rate… that’s just about annual tuition at one of America’s top colleges.