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Mark Zuckerberg sells 30.2 million shares of $FB common stock at $37.58

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Re: Mark Zuckerberg sells 30.2 million shares of $FB common stock at $37.58

#131

Post by jws »

tosseraccount wrote: post #36
albertsun wrote: post #5

Probably to pay his tax bill, right?

No. His stock was near zero when he acquired (created) them. He'll pay full cap gain rates when he realizes them (which is 15% cap gains rate which is not too bad for him; I pay a lot more on my labor gains). He owes no tax until then. If you received stock worth , say, one million , you might want to sell 1/3 to pay the tax. Otherwise if stock price goes to zero you've got a million in losses to write off which is h…

…15% cap gains rate which is not too bad for him; I pay a lot more on my labor gains

For people that feel that the capital gains crowd gets special treatment…

How would you be with waiting 8 years for each paycheck, or being paid now in 2004 dollars ( paid 82 cents for each dollar you earn)?

Part of the long term capital gains reduction is a crude compensation for inflation. In this case it fails miserably because of the ludicrous ratio between profit and investment, but in the more normal case where you might make 40% while inflation came up 25% it achieves a sort of balance between tax and inflation's erosion of capital.

Re: Mark Zuckerberg sells 30.2 million shares of $FB common stock at $37.58

#132

Post by anamax »

dlokshin wrote: post #88
keltex wrote: post #3

It was in the S-1 filing, so it's not new news: http://www.marketwatch.com/story/facebooks-zuckerberg-thiel-...

Even less of news when he has to make this type of sale to pay taxes.

> Even less of news when he has to make this type of sale to pay taxes.

What did he do so he owes taxes?

Exercising in-the-money options is taxable. Receiving stock grants is a taxable event.

Owning stock (or options) in a company that goes public is not a taxable event.

Note that he got to sell (some?) now. Ordinary employees are still in lockout.

Re: Mark Zuckerberg sells 30.2 million shares of $FB common stock at $37.58

#133

Post by tbeseda »

koglerjs wrote: post #87
dageshi wrote: post #44

Ummm does anyone else think that maybe Mark Zuckerberg is now going to be filling the Steve Jobs shaped hole in the worlds tech publications?

Have you seen him speak? No.

Correct. He's more similar to the still occupied Bill Gates shaped hole.

Re: Mark Zuckerberg sells 30.2 million shares of $FB common stock at $37.58

#134

Post by guimarin »

anamax wrote: post #132
dlokshin wrote: post #88

Earlier quoted context omitted.

Even less of news when he has to make this type of sale to pay taxes.

> Even less of news when he has to make this type of sale to pay taxes. What did he do so he owes taxes? Exercising in-the-money options is taxable. Receiving stock grants is a taxable event. Owning stock (or options) in a company that goes public is not a taxable event. Note that he got to sell (some?) now. Ordinary employees are still in lockout.

he excercised twice as many shares.

Re: Mark Zuckerberg sells 30.2 million shares of $FB common stock at $37.58

#135

Post by otterley »

anamax wrote: post #132
dlokshin wrote: post #88

Earlier quoted context omitted.

Even less of news when he has to make this type of sale to pay taxes.

> Even less of news when he has to make this type of sale to pay taxes. What did he do so he owes taxes? Exercising in-the-money options is taxable. Receiving stock grants is a taxable event. Owning stock (or options) in a company that goes public is not a taxable event. Note that he got to sell (some?) now. Ordinary employees are still in lockout.

Does anyone know why, as a Facebook employee, Mark Zuckerberg is not subject to the same 90-day lockup period for disposing of his shares on the public market as the rest of the employees?

EDIT: The lock-up period isn't an SEC requirement; it's an agreement made with the underwriters. The S-1 filing states:

"Morgan Stanley & Co. LLC may, in its sole discretion, permit our executive officers, our directors, and the selling stockholders to sell shares prior to the expiration of the restrictive provisions contained in the “lock-up” agreements with the underwriters."

And it looks like they let him do just that.

Re: Mark Zuckerberg sells 30.2 million shares of $FB common stock at $37.58

#136

Post by te_chris »

otterley wrote: post #135
anamax wrote: post #132

Earlier quoted context omitted.

> Even less of news when he has to make this type of sale to pay taxes. What did he do so he owes taxes? Exercising in-the-money options is taxable. Receiving stock grants is a taxable event. Owning stock (or options) in a company that goes public is not a taxable event. Note that he got to sell (some?) now. Ordinary employees are still in lockout.

Does anyone know why, as a Facebook employee, Mark Zuckerberg is not subject to the same 90-day lockup period for disposing of his shares on the public market as the rest of the employees? EDIT: The lock-up period isn't an SEC requirement; it's an agreement made with the underwriters. The S-1 filing states: "Morgan Stanley & Co. LLC may, in its sole discretion, permit our executive officers, our directors, and the se…

He's CEO, bitch? (sorry), but maybe other directors were allowed to as well? I imagine my first answer is sadly not far from the truth..

Re: Mark Zuckerberg sells 30.2 million shares of $FB common stock at $37.58

#138

Post by aidenn0 »

mkr-hn wrote: post #100
peeters wrote: post #57

Earlier quoted context omitted.

Which is extra confusing, because it's in the capital city.

The capitol in the capital on capitol hill, down the parkway past the park. No, the park park, not the car park. English is a fun language. No opinion on the English though.

Sounds like we'll have a capital time!

Re: Mark Zuckerberg sells 30.2 million shares of $FB common stock at $37.58

#139

Post by metamatt »

its_so_on wrote: post #95
asmithmd1 wrote: post #93

Earlier quoted context omitted.

You absolutely owe the tax on the income - I personally know people who got bit by this. It was your choice to let your bet ride by keeping it in the stock. You can use the capital loss to off-set capital gains but you owe income tax on money you make when cashing out options.

Wow. All I can say is, "Are you sure?" How was it "your choice to let the bet ride." I mentioned a very short window - what if you were hospitalized between receiving the security and being able to dispose of it because you didn't want to keep it? How can a type of income possibly be in a different bucket from loss of that very type of income? This doesn't make any sense to me.

The example you gave is pretty unlikely: (a) someone gives you a million dollars in stock and (b) you didn't know that was coming to prepare for it and (c) the stock immediately goes to 0 before you can sell it. Just noting that.

Still, this would likely end up in separate buckets. Someone giving you a million dollars in stock very likely counts as income, not capital gains. You'll have a tax liability for $1MM in income. Then, should it actually go to zero, you've got a $1MM capital loss. In general, capital losses are not fully deductible against income, only capital gains. I hope you also had a $1MM capital gain so you can do something with the loss...

But again, this case is pretty contrived. Likely if you're getting a large amount of stock like in this example, you know it's coming, and can decide what to do about it before it suddenly goes to 0. (Hint: holding onto it is deciding to let it ride.)

How can this possibly be what the tax code says? It just is.

Re: Mark Zuckerberg sells 30.2 million shares of $FB common stock at $37.58

#140

Post by metamatt »

tedunangst wrote: post #107
its_so_on wrote: post #95

Earlier quoted context omitted.

Wow. All I can say is, "Are you sure?" How was it "your choice to let the bet ride." I mentioned a very short window - what if you were hospitalized between receiving the security and being able to dispose of it because you didn't want to keep it? How can a type of income possibly be in a different bucket from loss of that very type of income? This doesn't make any sense to me.

Go read the tax code. The magic section you're looking for is Alternative Minimum Tax (AMT).

It's not so simple as a magic section; AMT may or may not apply.

If you got the stock as a gift, or (more likely in this startup context) an RSU grant, the entire value is taxed as ordinary income at the time you receive the shares. I don't think there's any special AMT treatment here.

If you purchased the stock using NQOs (non-qualified options), the difference between the strike price and fair market value is taxed as ordinary income at the time of purchase, and again I don't think there's any special AMT treatment.

If you purchased the stock using ISOs (incentive stock options), then you have to watch out for AMT -- under normal rules, you don't owe tax at time of purchase, and when you sell, if you held long enough, the gain from strike price to FMV at purchase time may be taxed as capital gains. But under AMT rules, the purchase is a taxable event, and you may owe tax at exercise time.

Under any of these, if you exercise (or are gifted) shares and hold them and they decline, you may end up owing taxes on the higher on-paper value that never meant real money to you, and this ends up feeling unfair. But this case is generally obvious enough you would see it coming, except in the ISO+AMT case which is much less obvious, and this difference is what screwed a lot of people in the 2000-era bubble burst.

Normal disclaimer: I'm not a lawyer or accountant, there are many more details that apply here, and you need to figure out what applies to you before making any important decisions. But I believe the above is basically true.

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