Paul L. CaronDean
Friday, February 10, 2012
By Paul Caron
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Judging by their articles on Facebook, The Citizens for Tax Justice are a group of fools. They seriously claim that stock options "cost Facebook nothing"? The stock options cost them exactly what the value of the stock is at the time of redemption, minus the cost of exercising the options. Without the stock options, Facebook would be able to exchange that stock for its FMV during the IPO. Take for example the mural painter; sure, Facebook didn't give him $200M in cash, but they gave him something valued at $200M, and in the process diluted the value of the overall "Facebook Pie" by that amount. Bottom line, they gave away something worth $200M, and that is a cost.
Posted by: Thomas | Feb 10, 2012 8:17:42 AM
Shouldn't it be obvious to all that if Facebook could not deduct the "cost" of the options exercised by Mr. Zuckerberg that Facebook (and all other corporations) would simply restructure the arrangement so that the recipients would only be entitled to the cash value of the options and the corporations would then issue new shares to obtain the cash needed to fund the compensation payment. Would we still be arguing about whether the corporation could take the deduction? What's the difference?
Posted by: Mark | Feb 10, 2012 2:16:09 PM
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