Zuckerberg’s Big Tax Bill May Benefit Facebook - NYT
When company options are exercised, they are generally treated as ordinary compensation, and the federal tax rate on such income tops out at 35 percent. The exercise of Mr. Zuckerberg’s options would therefore mean more than $1.5 billion in estimated federal income taxes and $500 million more in California income taxes.
The taxes Mr. Zuckerberg and other Facebook shareholders pay on exercised stock options will translate into a big tax benefit for the company. The I.R.S. allows companies to take a mirror deduction for the employees’ option compensation. Facebook anticipates that the deduction will eliminate the tax bill on its $1 billion in 2011 profits, according to its regulatory filings. The company also expects the break to generate as much as $500 million in additional deductions, which can be used for refunds for 2009 and 2010 and for reductions in future years. Facebook declined to comment further on Mr. Zuckerberg’s tax plans.
