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| Zuckerberg's big tax bill may benef |
| Zuckerberg's big tax bill may benefit Facebook
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| UNITED STATES OF AMERICA
, 4-February-2012
8:0:37 AM |
| Few billionaires are willing to reveal much about their taxes.
But the Facebook co-founder Mark Zuckerberg has indirectly done so in the documents for his company's public stock offering later this year.
Mr. Zuckerberg, 27, one of the world's youngest billionaires, plans to exercise stock options with an estimated value of $5 billion ahead of the offering. That could create a stunning tax bill of $2 billion.
Although I.R.S. officials declined to discuss where it might rank, Mr. Zuckerberg's bill would most likely be among the highest ever for an individual. The 400 wealthiest filers paid an average of $48 million in federal income taxes in 2009, according to government data. Warren E. Buffett, the billionaire investor who has called for higher taxes on the wealthy, revealed in The New York Times last year that he paid less than $7 million in federal income and payroll taxes in 2010.
Mr. Buffett's overall rate was about 17 per cent, largely because the federal government taxes most investments as capital gains at a top rate of 15 per cent, far less than the top rate on wages.
In addition to more than 413 million B shares of the stock Mr. Zuckerberg owns outright, he received options to buy 120 million shares of Facebook for 6 cents a share in 2005. The shares are currently valued at more than $40 a share.
When company options are exercised, they are generally treated as ordinary compensation, and the federal tax rate on such income tops out at 35 per cent. The exercise of Mr. Zuckerberg's options would therefore mean more than $1.5 billion in estimated federal income taxes and $500 million more in California income taxes.
The taxes Mr. Zuckerberg and other Facebook shareholders pay on exercised stock options will translate into a big tax benefit for the company. The I.R.S. allows companies to take a mirror deduction for the employees' option compensation.
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