Facebook creator Mark Zuckerberg may owe up to a staggering $2 billion in taxes, but will still emerge a billionaire, when the social networking site comes up for its initial public offering (IPO) late this year, according to reports.
The massive tax bill may result from Zuckerberg’s plans to exercise company stock options valued at an estimated $5 billion. Zuckerberg’s options are taxable because they’re considered a form of regular income, and can be taxed when exercised, even if the shareholder doesn’t intend to sell them. That could leave Zuckerberg owing the taxman the balance between the 6 cents-a-piece he paid for his 414 million shares of Facebook stock, and what their market value may be when he does sell, currently valued at $40 per share.
Zuckerberg also has an option to buy 120 million more shares of company stock. At 27 years old, Zuckerberg’s $23 billion net fortune makes him the world’s youngest billionaire. If and when he decides to exercise his stock options, the $2 billion in taxes can be broken down into $1.5 billion in federal income taxes and $500 million in income taxes for California, Zuckerberg’s home state.
Reports show that Facebook may rework its IPO filing several times over the next few months, which could change some financial details. So far, the company hasn’t revealed how many shares they intend to sell, or at what value. But according to an assessment of its own company stock at the end of 2011, Facebook valued its worth at $29.73 per share.