The stock market debut of Facebook left Mark Zuckerberg, the company’s founder and CEO, with a very large fortune, and a very large tax bill.
According to an article in CNNMoney, the tax bill is the result of a decision Zuckerberg made in May to increase his stake in the company. Zuckerberg, on the day the company went public, decided to exercise a stock option and purchased 60 million shares of Facebook at 6 cents each.
The IRS views the shares as ordinary income, regardless of whether or not the shares are ever sold. The article notes that the rationale for classifying it is income is that options such as those are a form of compensation, not unlike regular wages.
The billion dollar tax bill that Zuckerberg is facing is unusual, according to tax experts that CNNMoney consulted with in the process of writing the article. According to Silicon Valley tax attorney, Toby Johnston, it is usually capital gains, and not ordinary income, that result in a tax bill that large.Segal, Cohen & Landis 9100 Wilshire Blvd., Ste. 601E Beverly Hills, CA 90212 (310) 285-3999