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Mark Zuckerberg donates $500 million

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Re: Mark Zuckerberg donates $500 million

#51

Post by chalst »

rms wrote: post #7

I'm curious for someone to explain the choice of charity. It looks like Silicon Valley Community Foundation is an organization that specializes in helping people and companies set up large spendings of charitable donations. Does anyone else do that on this scale? It seems the alternative is spending a fair amount of mental overhead to set up a charitable foundation or donating to an existing foundation institutionall…

It's not a normal charitable foundation, but it's more like a fund that donors house their donations, and that then act as a sort of clearing house to match up these donations with grant applicants, where the donor keep a directorial role. The SVCF doesn't seem to have much in the way of limits on the kind of charitable projects they support - from what I can see, the money might go to malaria prevention in the Congo or it might go to funding prestigious professorial chairs.

I guess Zuckerberg likes the kind of projects the SVCF has funded in the past and the way the donor-applicant matching works.

Recall that Zuckerberg has already pledged half his wealth to charity: http://www.bloomberg.com/news/2010-12-09/seventeen-of-wealth...

Re: Mark Zuckerberg donates $500 million

#52

Post by wilfra »

mochizuki wrote: post #10

I don't entirely understand why he donated shares of Facebook instead of dollars, can they sell the shares all at once and use the money or is there a catch to that? Did it cost him less money to donate shares in the long run? It's probably my lack of understanding of stocks and economics but it seems like it would be easier for everyone to just donate money.

Stock can be used as collateral to get a bank loan (the uber rich use this to avoid capital gains taxes). I would imagine that is what they'll do to generate cash for disbursements from the foundation (they have to pay out at least 5% per year).

I would be shocked to find they sold the shares. I'm sure them keeping them for a long period of time (possibly forever) and Zuck retaining voting power over them was a key part of this transaction.

Re: Mark Zuckerberg donates $500 million

#53

Post by law »

philipn wrote: post #28
mochizuki wrote: post #10

I don't entirely understand why he donated shares of Facebook instead of dollars, can they sell the shares all at once and use the money or is there a catch to that? Did it cost him less money to donate shares in the long run? It's probably my lack of understanding of stocks and economics but it seems like it would be easier for everyone to just donate money.

Community Foundations[1] such as the Silicon Valley Community Foundation can receive stock donations that are tax-deductible to the owner. If the donation was in dollars it would also be deductible for the owner, but the owner would need to sell the stock first, which would mean paying capital gains taxes. 1. Differences between Community Foundations / donor-advised funds and Private Foundations can be found here: ht…

Additionally, if the entities receiving the shares happen to be C corporations (which I believe can have 501(c)(3) status), they can deduct the lesser of: (i) 70% of dividends received on the stock; or (ii) 70% of the corporation's taxable income. As such, the implied tax rate on any dividends received from the shares would only be 11.88% (30% * 39.6%), assuming the corporation is in the 35% ordinary income bracket. This is important for 501(c)(3)'s, too, because there are plenty of exceptions to the general notion of "tax exemption" associated with that code section (See, e.g., 26 USC §§ 507-09, 511-15, and 527).

EDIT: of course, this only applies if the company issues a dividend

Re: Mark Zuckerberg donates $500 million

#54

Post by 001sky »

jfoster wrote: post #46
001sky wrote: post #31

Earlier quoted context omitted.

this is a great gesture on his part, I applaud him. == Why? Can you explain? How is this not a PR exercise: Oopps. Here's $500MM.

Investment of $500MM is going to result in very poor ROI if this is a PR exercise. It's going to be roughly a few days (perhaps a week) of "Zuck is nice" news stories and then be mostly forgotten.

$1Bn was not material enough for FB bod to even be briefed on instagram. this is 1/2 that for scale. Furthermore, after tax shields, this is only $250 out of pocket. Spending $250 to protect a $10-50bn asset base is actually good math. Same as instagram purchase logic. BTW, $250m is also the amount that evaporated from the instagram deal for instagram shareholders during the 6m it took to close the deal (FB stock portion decreased in value). At the scale of FB, these numbers are not so impressively generous, in other words.

While I don't think its a one sided discussion, its certainly open for debate if you are looking at the maths.

Re: Mark Zuckerberg donates $500 million

#55

Post by jfoster »

001sky wrote: post #54
jfoster wrote: post #46

Earlier quoted context omitted.

Investment of $500MM is going to result in very poor ROI if this is a PR exercise. It's going to be roughly a few days (perhaps a week) of "Zuck is nice" news stories and then be mostly forgotten.

$1Bn was not material enough for FB bod to even be briefed on instagram. this is 1/2 that for scale. Furthermore, after tax shields, this is only $250 out of pocket. Spending $250 to protect a $10-50bn asset base is actually good math. Same as instagram purchase logic. BTW, $250m is also the amount that evaporated from the instagram deal for instagram shareholders during the 6m it took to close the deal (FB stock por…

It's not so much that I would consider $250MM too much to spend on a PR exercise. I think there would be much more effective PR exercises available for that price.

Re: Mark Zuckerberg donates $500 million

#56

Post by loceng »

jfaucett wrote: post #16

People can say what they want about Zuckerberg, maybe he doesn't have the amazing charisma of Jobs, or the genius of Torvalds, and Facebook gets constantly hammered in the press (and him as well), but this is a great gesture on his part, I applaud him.

It depends - does he benefit personally from a tax writeoff from this? From all of his previous behaviour it would seem that this would more likely be the motivating factor here.

Re: Mark Zuckerberg donates $500 million

#57

Post by loceng »

saurik wrote: post #50

I'm somewhat confused. If $500 million in shares are donated by Zuckerberg, does that mean a tax write-off of that amount? Also, to verify, the foundation would have to liquidize the shares, right? That kind of instant sell-off would cause massive drops in price... I really hate to ask this (as I honestly don't have anything against Zuckerberg, and really don't feel that "rich people" or "all companies" are evil or a…

I'm curious about if this benefits him (and/or the company) with tax writeoffs. Just want a clear picture to understand.

Re: Mark Zuckerberg donates $500 million

#59

Post by patd »

VMG wrote: post #45
meaty wrote: post #23

Earlier quoted context omitted.

Well he deserves the hammering. The guy is clearly immoral and has damaged people's privacy and the world wide web forever. $500mil doesn't suddenly make that ok, especially considering the charity is basically a quango.

Who's privacy was damaged in a way where the victim didn't voluntarily give it up?

Guys like these maybe : http://blogs.sfweekly.com/thesnitch/2012/10/facebook_bobbi_d...

Re: Mark Zuckerberg donates $500 million

#60

Post by ry0ohki »

saurik wrote: post #50

I'm somewhat confused. If $500 million in shares are donated by Zuckerberg, does that mean a tax write-off of that amount? Also, to verify, the foundation would have to liquidize the shares, right? That kind of instant sell-off would cause massive drops in price... I really hate to ask this (as I honestly don't have anything against Zuckerberg, and really don't feel that "rich people" or "all companies" are evil or a…

Donating stock is not that uncommon, the receiver can choose to sell, hold, or some combination. I'm not an accountant but he should be able to write off the taxes for the market value of the stock at the time of the donation? "Many people" may think the stock is overvalued, but the open market is valuing it at it's current price, so that's what it's worth right now.
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