This news article shows clear power of Silicon Valley's Innovation Machinery.. Hopefully resulting around 600 Million USD one time tax gain this year for The State of California!! and 1.4 Billion USD for Federal Government and much more to continue in coming years!!
This very clearly shows another side of silicon valley.. Whatever criticism you make about higher cost of doing business or higher state/local tax.. Doesn't matter.. If you want to do something new/innovative thing.. this is "The Best" place on the face of earth.. as of now.. and hope that it will continue like this..
Now the hope is that it will be used for something useful to continue oiling this Innovation Machinery instead of sucking it out..
Mark Zuckerberg’s $2 Billion Tax Bill
By Robert Frank
Buried in the registration statement of Facebook’s IPO was this startling line:
“We expect that substantially all of the net proceeds Mr. Zuckerberg will receive upon such sale will be used to satisfy taxes that he will incur upon his exercise of an outstanding stock option to purchase 120,000,000 shares of our Class B common stock.”
What that means, in dollar terms, is that Facebook founder Mark Zuckerberg may face a tax bill this year of more than $2 billion. The Financial Times puts the figure at $1.5 billion. But if the IPO values the company at the hoped-for $100 billion, his bill could be higher.
Facebook declined comment. But here’s the math. Zuckberberg received the 120 million options in 2005, presumably for being CEO and being, well, Mark Zuckerberg. Those options will be treated as ordinary income, which means he would pay the top federal income tax rate of 35%.
The cost basis for those options is six cents a share. So if the company is valued at $100 billion, and the shares are valued at around $50 each, his gain from the sale would be up to $6 billion. Taxed at 35%, the tax bill would be more than $2 billion. The FT puts a more conservative value on the company for its $1.5 billion total.
What’s more, Zuckerberg would have to pay an additional 10.3 percent for California sate taxes, though he would likely be able to deduct those taxes from his federal bill.
It’s unclear whether the $2 billion would make him America’s biggest taxpayer, since the IRS doesn’t disclose such things. But given that the 400 top earners in the U.S. paid an average of $48 million each in taxes, chances are he’ll be at least one of the biggest taxpayers in 2012 or 2013.
Mr. Zuckerberg’s tax bill will also provide an important counter-point to the notion that the rich pay lower tax rates than the rest of America. That may be true for professional investors and private-equity chiefs, but not for dot-commers and many entrepreneurs.
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