Paul L. Caron

Wednesday, May 16, 2012

Tax Savings From Facebook Co-Founder's Renunciation of U.S. Citizenship: $67 Million

FacebookFollowing up on my prior posts:

Bloomberg, Facebook’s Saverin May Save $67 Million on U.S. Tax Bill, by Jesse Drucker:

Facebook co-founder Eduardo Saverin will save at least $67 million in federal income taxes by dropping U.S. citizenship, according to a Bloomberg analysis of the company’s stock price. Those savings will keep growing if Facebook’s shares increase. ...

Saverin’s stake may be worth as much as $2.89 billion, based on the company’s 1.898 billion total shares outstanding. His stake was worth about $2.44 billion in September. Bloomberg calculated the $67 million figure by applying the 15 percent U.S. capital gains rate to the approximate $448 million spread between the two values. Bloomberg’s methodology was reviewed by Robert Willens, an independent tax adviser based in New York.

“The calculations and assumptions are not only erroneous, they also further perpetuate the false impression that tax was the reason behind Eduardo’s decision,” Goodman said, declining to cite specific errors. “His motive had nothing to do with tax and everything to do with his desire to live and work in Singapore.”

Saverin’s capital gains tax liability comes “at a time when the rate is probably the lowest it ever will be, and it’s a substantial discount to the value of what his position in Facebook will likely be two weeks from now,” said Edward Kleinbard, a tax law professor at the University of Southern California in Los Angeles. Any profit from future appreciation of Saverin’s Facebook stock will be earned free of capital gains tax in the U.S. and Singapore, which doesn’t impose the tax. “That’s got to be by far the biggest benefit, assuming Facebook’s stock appreciates at even a fraction of the level people expect,” Willens said.

Celebrity Tax Lore, Tax | Permalink

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Since the whole hyperventilating article is based on a prediction that the stock value increases, they could also specualte to the downside and title the column "Facebook’s Saverin May Lose $67 Million on U.S. Tax Bill".

And if they're publishing wildly speculative articles, why not predict that he holds the stock for 10 years, in which case he has patriotically accelerated income in a way that Warren Buffet and Fresh Prince won't.

The biggest concrete savings are his state income taxes.

Posted by: Yo Gabba Gabba | May 17, 2012 2:15:50 PM