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Zuckerberg’s taxes on IPO? How about $2 billion

K. Jackson

Commentary from Kevin Jackson:

Zuckerberg’s IPO of Facebook could cost him a cool $2B. Not big deal for a big baller. However, Zuckerberg wants to limit his future tax liability. So much for paying HIS fair share, right? If Zuckerberg weren’t a hypocrite on taxes, one might could see his point…



Facebook chief Mark Zuckerberg may be on the hook for $2 billion in taxes with his company going public. But he’s not necessarily all that upset about it.

As The New York Times’ David Kocieniewski reports, the 27-year-old CEO plans to exercise options worth about $5 billion, and with such transactions generally being treated by the IRS as regular compensation, Zuckerberg would be liable for the $2 billion figure–perhaps one of the highest tax payouts by an individual ever.

Zuckerberg owns 413 million B shares of Facebook stock and was granted options in 2005 to buy 120 million shares at 6 cents apiece. The shares are now worth more than $40 each.

The federal tax rate on regular compensation maxes out at 35 percent, so an exercise of $5 billion in options would mean about $1.5 billion in federal income taxes, and another $500 million in California income tax, Kocieniewski reports.

However, the IRS lets companies take a mirror deduction for employees’ option compensation. That means Zuckerberg’s Facebook could see its tax bill for last year covered by the deduction (the company raked in $1 billion in profits in 2011). And the deduction could lead to tax refunds for 2009 and 2010 as well (and reductions in future years), Kocieniewski reports.

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