5 February 2012 - 11:39am | posted by | 0 comments

The trouble with being Zuckerberg: America's biggest tax bill?

Mark Zuckerberg: Still smilingMark Zuckerberg: Still smiling

There is a downside to being Mark Zuckerberg, it seems. The wealthiest young man on the planet is, it seems, likely to become this year America's biggest tax payer.

This nugget of information has been mined by the Wall Street Journal from the densely-packed pages of Facebook's IPO submission.

Buried in the registration statement was this "startling" line says the WSJ: “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.”

The Journal explains what that means: Zuckerberg may face a tax bill this year of more than $2 billion.

Zuckberberg received the 120 million options in 2005. The price on taking up the options would be six cents a share,

The profit will be treated as ordinary income, which means he would pay the top federal income tax rate of 35%.

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.

"It’s unclear whether the $2 billion would make him America’s biggest taxpayer, since the IRS doesn’t disclose such things," says the WSJ.

But as the 400 top earners in the U.S. last year each paid an average of a piddling (my word, not theirs) $48 million each in taxes , you can make your own guess.

The Journal adds, "Mr. Zuckerberg’s tax bill will . . . provide an important counter-point to the notion that the rich pay lower tax rates than the rest of America. "

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