2 Billion is 2 Billion
282– via Elite Daily –
But the Facebook founder would be well advised to put at least a few dollars of his predicted $5billion windfall aside.
That is because an eye-watering $2billion – the highest ever single fee demanded by the Internal Revenue Service – will have to be paid out in tax.
‘I personally have never seen a bill into the billions – close, but not quite,’ Anthony Nitti, Colorado-based CPA and partner with Withum, Smith and Brown, told CNN.
He added: ‘I talked to a few buddies of mine at the Big Four accounting firms, and it’s something not many people have seen.’
The 27-year-old, who founded the firm eight years ago and is now worth an estimated $17.5billion, will be hit by the giant tax bill because of the way the deal is going to go through.
He owns 414million shares, and will exercise his options to buy 120million more shares at the bargain price of 6 cents each – a steal compared to the $40 valuation given last week.
He will then sell some of the shares to cover his tax bill, but it will mean he will own more of the company.
As the shares are taxable as ordinary income, when exercised, it means he will owe taxes on the difference between what he pays for his shares (6 cents) and their market value the day he exercise his options.
In its IPO filing last week, the firm said the shares were valued at $29.73 each, meaning Zuckerberg’s options would be worth $3.6billion.
But the shares are expected to sell at around $40 each, so the value of his stock would soar to $5billion – giving the firm an overall value of $100billion.
Analysts say Zuckerberg will have to pay the unprecedented sum of $1.5billion to $2billion – as the top U.S. marginal tax rate is 35 per cent and his home state of California also takes 10.3 per cent.
IRS statistics show the average annual tax bill for someone in the top one per cent of America’s earners is $49million.
Zuckerberg’s would obliterate that figure, and he would contribute significantly to the overall $19.6billion paid by the top 400 earners per year.
Accountants say that, despite the hefty tax bill, Zuckerberg was floating his firm ‘the smart way’ because he was selling some of his shares to cover it.
This is in contrast to many dot-com bubble entrepreneurs who, in the early noughties, saw their stock plunge before they sold shares.
Because of IRS rules, it meant they still had the same tax bill, but a much smaller value of stock.
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