Mark Zuckerberg’s Large Tax Bill

Mark Zuckerberg will be a billionaire with his upcoming IPO, but he could also be taxed up to $2 billion – a tax so high that most people have never seen anything like it. Zuckerberg plans to exercise stock options that are worth billions and this is what will lead to the tax hit. The kind of options that he holds are considered ordinary income when they’re exercised even if Zuckerberg were to hold onto the shares without selling them.

Zuckerberg currently owns nearly 414 million shares of Facebook and holds options to buy another 120 million shares for six cents each. He plans to exercise his options and then sell just enough of his shares to pay the tax bill. Facebook’s IPO filing values its shares at $29.73. But analysts say that the public will buy Facebook shares at a premium more like $40 per share and this would make Zuckerberg’s options worth around $5 million. Various CPAs support Zuckerberg’s plan as the smart way to do things.

See Stacy Cowley, Facebook Founder Zuckerberg Faces $1 billion-plus Tax Bill, CNNMoney.com, Feb. 7, 2012.  

Special thanks to David S. Luber (Attorney at law, Florida Probate Attorney Wills and Estates Law Firm) for bringing this article to my attention.