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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

#101

Post by asmithmd1 »

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.

To prevent this problem you exercise your options and sell stock at the same time.

Lets say you have 10,000 options with a strike price of $1 and the stock is trading at $11.

Instead of sending a check for $10,000 to the broker and receiving the stock, you tell them to sell 3,000 options for $33,000, have them keep $10,000 to pay for the options and send $23,000 to the IRS.

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

#102

Post by chives »

ibejoeb wrote: post #75
nknight wrote: post #71

Earlier quoted context omitted.

There is an exception as mentioned there. If you pay an amount equal to 100% of the previous year's liability (110% if your AGI is over $150k), it doesn't matter how much more you owe in April. (I personally ended up with a 2011 tax liability that was something like 160% of my 2010 liability, but I'd paid estimated taxes equal to my 2010 liabilities. So I had to cut the IRS a pretty big check in April, but had no pen…

Right, you made estimated payments, and it was exactly the right way. You paid based on a reasonable estimation. The point is it's pretty hard to just avoid paying taxes all year (either by plain not paying your self-employment taxes or misrepresenting your situation on a W-4), bank it, and come out clean.

It depends. You argument is very narrow. There are LOTS of ways to avoid paying your fair share of taxes, it depends on the situation and where the cash flows are coming from.

As for the Zuckerburg situation, what he did is pretty common. Though I have heard of an alternative to selling those shares, someone in his position could use a portion of his facebook shares as leverage and get a loan to pay the tax man, then said person could pay back the loan with the cash flows generated by the stock. Though in that scenario the interest on the loan and the cash flows of the shares would have to be favorable (i e, a finance question). Additionally, I have heard that getting a loan like that is difficult (something to do with eligibility and/or regulation), but don't quote me on that last part I am not that familiar with it myself.

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

#103

Post by squarecat »

squarecat wrote: post #20
tferris wrote: post #19

This is really strange. Such a move should be prepared carefully and when executed then immediately explained with a press release. Mark doesn't believe in FB.

For better or worse, the man has never exercised traditional business practices.

And here I thought I was really beginning to understand how and when to engage in the discussion, yet the HN demigods seem to be proving me wrong more often than not lately...

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

#104

Post by nknight »

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.

It's not unprecedented for tax liabilities to be waived in extreme circumstances, but just not understanding what was going on isn't an extreme circumstance.

A lot of people got screwed badly by this during the dot-com boom/bust, and it did lead to changes in how startups grant ordinary employees equity.

If you're ever in the situation of being given stock or options and you're not 100% sure of the implications, TALK TO AN ACCOUNTANT IMMEDIATELY.

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

#105

Post by nknight »

its_so_on wrote: post #96
kevinpet wrote: post #94

Earlier quoted context omitted.

Depends on the details, but they may be in different buckets that you can't use to offset each other. Exercising the options is probably ordinary income, which can only be offset to $3k with short term capital losses.

wow. You could really fuck someone over by giving them something worth much more than their net worth and making sure it's damaged to worthlessness shortly thereafter.

That would generally be some variety of fraud. You can sue for damages, and there are tax laws and regulations dealing with losses due to bad acts like that.

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

#106

Post by emiranda »

chives wrote: post #102
ibejoeb wrote: post #75

Earlier quoted context omitted.

Right, you made estimated payments, and it was exactly the right way. You paid based on a reasonable estimation. The point is it's pretty hard to just avoid paying taxes all year (either by plain not paying your self-employment taxes or misrepresenting your situation on a W-4), bank it, and come out clean.

It depends. You argument is very narrow. There are LOTS of ways to avoid paying your fair share of taxes, it depends on the situation and where the cash flows are coming from. As for the Zuckerburg situation, what he did is pretty common. Though I have heard of an alternative to selling those shares, someone in his position could use a portion of his facebook shares as leverage and get a loan to pay the tax man, then…

Can you actually explain what Zuckerburg did? I'm quite interested.

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

#107

Post by tedunangst »

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.

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

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

#108

Post by tedunangst »

squarecat wrote: post #103
squarecat wrote: post #20

Earlier quoted context omitted.

For better or worse, the man has never exercised traditional business practices.

And here I thought I was really beginning to understand how and when to engage in the discussion, yet the HN demigods seem to be proving me wrong more often than not lately...

Well, for one thing, a move like this is traditional. You were just piling more wrong on top of wrong.

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

#109

Post by danielweber »

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-...

I remember back in the 90's that every time Bill Gates sold 1 or 2 percent of Microsoft, people would freak out that Microsoft's collapse was imminent. Even though he did it every six months.

Whatever you think of Facebook, it is extremely prudent for Zuckerberg to diversify. If he had $1 million in non-FB assets, he would still have 99.99% of his assets in Facebook. That's a crazy amount of his wealth concentrated in one stock.

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