Mark Zuckerberg Taxes

February 8, 2012 by staff 

Mark Zuckerberg Taxes, Facebook’s upcoming IPO will make founder and CEO Mark Zuckerberg a billionaire — but it will also stick him with an eye-popping tax bill that could reach as high as $2 billion.
“I personally have never seen a bill into the billions — close, but not quite,” said Anthony Nitti, a Colorado-based CPA and partner with Withum, Smith and Brown. “I talked to a few buddies of mine at the Big Four accounting firms, and it’s something not many people have seen.”

The giant tax hit is a consequence of Zuckerberg’s plan to exercise stock options worth billions. The move will significantly increase his ownership stake in the company he founded eight years ago.

Zuckerberg currently owns almost 414 million shares of Facebook, but he also holds options to buy another 120 million shares at the bargain price of 6 cents a piece. Facebook said in its IPO paperwork that Zuckerberg plans to exercise those options and will sell some of his shares during Facebook’s initial offering to cover the tax bill.

The type of options Zuckerberg holds are taxable as ordinary income when they’re exercised, even if the shareholder hangs onto the shares and doesn’t sell them. That means Zuckerberg will owe taxes on the difference between what he pays for his Facebook shares — 6 cents — and their market value the day he exercises the options.

Facebook said in its IPO filing that it values its shares at $29.73. At that price, Zuckerberg’s options windfall would be worth $3.6 billion.

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