Facebook founder and CEO, Mark Zuckerberg, with an estimated fortune of $13 billion, has to pay taxes totaling $1.1 billion for his 2012 income. The huge amount comes from Zuckerberg’s earnings at the time of Facebook listing on the stock exchange, namely the exercise of options by which the businessman took over 60 million shares at a preferential price of only 6 cents per share to maintain a majority vote in the company, according to a CNN Money analysis.
Even though he bought the shares, the IRS treats them as revenue recorded at the time of exercising the option, because such operations are considered a form of compensation or bonus. Zuckerberg has reported an income of nearly $2.3 billion resulting from the exercise of his stock options, plus other income from other sources. With a federal tax of 35% on personal income plus 13.3% in the state of California, Zuckerberg would have to pay 48.3% of his income last year, before taking into account any exemptions.
Billionaire’s personal tax situation can not be verified independently, but three accounting offices in California have estimated, at the request of CNN Money, that Zuckerberg has to pay taxes of over $1 billion for 2012.
“With numbers that large, it’s usually capital gains, not ordinary income,” says a partner at Silicon Valley office of Moss Adams LLP accounting firm, which works with rich clients. Capital gains are taxed at a much lower rate of 15%.
Authorities can not divulge personal tax situation of citizens, but publishes annually anonymous data on 400 taxpayers with the largest incomes. According to the latest such report, which covers the year 2009, the average personal income declared in that year was $202 million, with an average tax bill of $41 million.
Zuckerberg started since last year to prepare himself for the huge amount of tax payable to the account of shares bought at the symbolic price of 6 cents. He sold 30.2 million Facebook shares, pocketing $ 1.135 billion, company stating at the time that the CEO would use the funds to pay taxes.
Facebook founder can get, by 2015, another 60 million shares at a preferential price, which would be, at the current quotation, a taxable income of $1.6 billion – resulting in a tax of $800 million at current rates.
U.S. Treasury and government of California will benefit this year from the substantial tax charged to Facebook employees who will exercise their stock grants and options. California expects to get $1.5 billion in revenue generated by the listing of Facebook on the stock exchange.
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