Mark Zuckerberg Will Donate 99% of Facebook Shares

[Phanuthier]

Originally Posted by topfiverecords

He should pay capital gains tax on the sale of the shares, donate the remaining funds and then allocate the benefit of the charitable tax credit to whatever he wishes. This kind of stuff is the reason the US is in financial trouble.

The US is in financial trouble (?) because philanthropists don't pay enough taxes on money they donate?

I mean, I get why some may be skeptical, but look at the circumstance here. I doubt MZ was thinking "To honor and inspire my daughter who was just born, I will use my fortune to... find ways to minimize taxes through LLC"

I think its pretty obvious this is a philanthropist deed. MZ isn't like the Clintons spending tons of money on suites, nice cars, political lobbying, owning resort homes and having expensive parties. MZ is more like Buffet, normal car, living a very simple live home (besides buying neighboring houses for privacy?) and very modest social gatherings. The world would be better if more wealthy people were like him (despite reducing taxes to the USA)

[topfiverecords]

Originally Posted by Phanuthier

The US is in financial trouble (?) because philanthropists don't pay enough taxes on money they donate?

I mean, I get why some may be skeptical, but look at the circumstance here. I doubt MZ was thinking "To honor and inspire my daughter who was just born, I will use my fortune to... find ways to minimize taxes through LLC"

I think its pretty obvious this is a philanthropist deed. MZ isn't like the Clintons spending tons of money on suites, nice cars, political lobbying, owning resort homes and having expensive parties. MZ is more like Buffet, normal car, living a very simple live home (besides buying neighboring houses for privacy?) and very modest social gatherings. The world would be better if more wealthy people were like him (despite reducing taxes to the USA)

The country is obviously not bankrupt, but the number one topic this election is tax reform for a reason. They are struggling to maintain federal services meanwhile platforms of the election wish to extend medical service and education. The country also has a massive amount of infrastructure that needs trillions in investment.

https://en.wikipedia.org/wiki/Expend...federal_budget

[Phanuthier]

Originally Posted by topfiverecords

The country is obviously not bankrupt, but the number one topic this election is tax reform for a reason. They are struggling to maintain federal services meanwhile platforms of the election wish to extend medical service and education. The country also has a massive amount of infrastructure that needs trillions in investment.

https://en.wikipedia.org/wiki/Expend...federal_budget

Yes I know about tax reform, but I would imagine things like corporations offshoring their headoffice are a bigger deal then not taxing charity donations. On the list of things plaguing the USA, not taxing charity donations is very very low on the list. Its common sense.

Infrustructure is crap because of political bantering that bogs down work getting done. Example : In Santa Monica, construction for a small highway exit takes over 15 years!

[peter12]

Originally Posted by Phanuthier

Yes I know about tax reform, but I would imagine things like corporations offshoring their headoffice are a bigger deal then not taxing charity donations. On the list of things plaguing the USA, not taxing charity donations is very very low on the list. Its common sense.

Infrustructure is crap because of political bantering that bogs down work getting done. Example : In Santa Monica, construction for a small highway exit takes over 15 years!

This.

Infrastructure stimulus spending is code for lots of bureaucratic red tape. Most of the 2008-2010 packages in both the US and Canada have not even been spent yet.

[Coach]

Originally Posted by Phanuthier

Yes I know about tax reform, but I would imagine things like corporations offshoring their headoffice are a bigger deal then not taxing charity donations. On the list of things plaguing the USA, not taxing charity donations is very very low on the list. Its common sense.

I think you're focusing on the wrong part. It's not that not taxing charitable donations is a problem, it's that really rich people are using it as a vehicle to avoid paying massive tax bills, similar to what corps do when moving their assets off shore. Rich people move their assets into a structure like this, or into a corporation where tax rates are lower, to avoid paying what they fully owe.

You can argue that they ARE paying what they owe under the letter of the law, but there are valid arguments that something like that should be changed. Not that charitable donations should be taxed, that people with incredibly high net-worth shouldn't be able to shelter their assets in this way to avoid paying tax bills that actually COULD help.

Either way, we need to see what he actually ends up doing until we fully judge it, but legal as it may be, it looks kind of scuzzy right now.

[The Yen Man]

But isn't that the whole point of giving tax breaks to charities? To encourage rich people to donate part of their money to charity? Does it matter what motives these wealthy people have as long as the money ends up being for charitable purposes?

[topfiverecords]

Wow, why is it so difficult for people to comprehend.

1. Owner of corporation XYZ has 100 shares worth 1 million that were acquired and were valued significantly less at original acquisition. For Zuckerberg, he created the company so his shares have increased 100%.
2. XYZ would like to donate a large portion to charity.
3. Scenario 1, XYZ sells his 100 shares and profits 1 million dollars. He claims 1 million dollars of capital gains and pays $330,000 to the IRS for capital gains tax. He then is left with $670,000. He donates all of it to charity, receiving a charitable tax credit applicable towards his following tax year.
4. Scenario 2, XYZ transfers his shares to a LLC foundation. The foundation sells the 100 shares for 1 million dollars exempt of capital gains. The foundation then has 1 million free cash to donate to a charity or invest in for-profit businesses.

In Scenario 2, the government sees none of the $330k.

In Zuckerberg's case he's avoiding roughly 14.985 billion in taxes.

[Coach]

Originally Posted by The Yen Man

But isn't that the whole point of giving tax breaks to charities? To encourage rich people to donate part of their money to charity? Does it matter what motives these wealthy people have as long as the money ends up being for charitable purposes?

Again, it's not a problem of giving tax breaks to charities, that is separate from giving tax breaks for donations to those charities. The charity doesn't have to pay tax on a donation regardless of who or where it comes from, or how much it is. But the donor is also getting a tax break for their donation, which is the incentive you're talking about.

I'm not saying donors shouldn't get tax breaks, but when you're talking about sheltering billions of dollars from tax, that is a substantial amount. And the issue here is (I'd have too look deeper, I may be wrong here), it's going into a private, tax-exempt corporation and not necessarily to charities. It seems as though as long as he can show the funds are going to endeavors that promote "progress", he can use it for whatever he wants. My guess is he donates a lot of it, but it seems like he's more interested in setting up his own charities and organizations to do their own work, rather than writing a big cheque to Breast Cancer America (or whatever). Again, this is not necessarily bad, it's likely that Zuckerberg and his resources can do a lot more good this way, but that remains to be seen. As of now, he's just sheltered about bunch of dough from tax.

[Phanuthier]

do you guys just not consider context?

i guess you guys are more concerned about dollars going to the US government then charity, i guess. to eat their own.

yes, this letter just screams trying to avoid paying taxes.

Dear Max,
Your mother and I don't yet have the words to describe the hope you give us for the future. Your new life is full of promise, and we hope you will be happy and healthy so you can explore it fully. You've already given us a reason to reflect on the world we hope you live in.
Like all parents, we want you to grow up in a world better than ours today.
While headlines often focus on what's wrong, in many ways the world is getting better. Health is improving. Poverty is shrinking. Knowledge is growing. People are connecting. Technological progress in every field means your life should be dramatically better than ours today.
We will do our part to make this happen, not only because we love you, but also because we have a moral responsibility to all children in the next generation.
We believe all lives have equal value, and that includes the many more people who will live in future generations than live today. Our society has an obligation to invest now to improve the lives of all those coming into this world, not just those already here.
But right now, we don't always collectively direct our resources at the biggest opportunities and problems your generation will face.
Consider disease. Today we spend about 50 times more as a society treating people who are sick than we invest in research so you won't get sick in the first place.
Medicine has only been a real science for less than 100 years, and we've already seen complete cures for some diseases and good progress for others. As technology accelerates, we have a real shot at preventing, curing or managing all or most of the rest in the next 100 years.
Today, most people die from five things -- heart disease, cancer, stroke, neurodegenerative and infectious diseases -- and we can make faster progress on these and other problems.
Once we recognize that your generation and your children's generation may not have to suffer from disease, we collectively have a responsibility to tilt our investments a bit more towards the future to make this reality. Your mother and I want to do our part.
Curing disease will take time. Over short periods of five or ten years, it may not seem like we're making much of a difference. But over the long term, seeds planted now will grow, and one day, you or your children will see what we can only imagine: a world without suffering from disease.
There are so many opportunities just like this. If society focuses more of its energy on these great challenges, we will leave your generation a much better world.
• • •
Our hopes for your generation focus on two ideas: advancing human potential and promoting equality.
Advancing human potential is about pushing the boundaries on how great a human life can be.
Can you learn and experience 100 times more than we do today?
Can our generation cure disease so you live much longer and healthier lives?
Can we connect the world so you have access to every idea, person and opportunity?
Can we harness more clean energy so you can invent things we can't conceive of today while protecting the environment?
Can we cultivate entrepreneurship so you can build any business and solve any challenge to grow peace and prosperity?
Promoting equality is about making sure everyone has access to these opportunities -- regardless of the nation, families or circumstances they are born into.
Our society must do this not only for justice or charity, but for the greatness of human progress.
Today we are robbed of the potential so many have to offer. The only way to achieve our full potential is to channel the talents, ideas and contributions of every person in the world.
Can our generation eliminate poverty and hunger?
Can we provide everyone with basic healthcare?
Can we build inclusive and welcoming communities?
Can we nurture peaceful and understanding relationships between people of all nations?
Can we truly empower everyone -- women, children, underrepresented minorities, immigrants and the unconnected?
If our generation makes the right investments, the answer to each of these questions can be yes -- and hopefully within your lifetime.
• • •
This mission -- advancing human potential and promoting equality -- will require a new approach for all working towards these goals.
We must make long term investments over 25, 50 or even 100 years. The greatest challenges require very long time horizons and cannot be solved by short term thinking.
We must engage directly with the people we serve. We can't empower people if we don't understand the needs and desires of their communities.
We must build technology to make change. Many institutions invest money in these challenges, but most progress comes from productivity gains through innovation.
We must participate in policy and advocacy to shape debates. Many institutions are unwilling to do this, but progress must be supported by movements to be sustainable.
We must back the strongest and most independent leaders in each field. Partnering with experts is more effective for the mission than trying to lead efforts ourselves.
We must take risks today to learn lessons for tomorrow. We're early in our learning and many things we try won't work, but we'll listen and learn and keep improving.
• • •
Our experience with personalized learning, internet access, and community education and health has shaped our philosophy.
Our generation grew up in classrooms where we all learned the same things at the same pace regardless of our interests or needs.
Your generation will set goals for what you want to become -- like an engineer, health worker, writer or community leader. You'll have technology that understands how you learn best and where you need to focus. You'll advance quickly in subjects that interest you most, and get as much help as you need in your most challenging areas. You'll explore topics that aren't even offered in schools today. Your teachers will also have better tools and data to help you achieve your goals.
Even better, students around the world will be able to use personalized learning tools over the internet, even if they don't live near good schools. Of course it will take more than technology to give everyone a fair start in life, but personalized learning can be one scalable way to give all children a better education and more equal opportunity.
We're starting to build this technology now, and the results are already promising. Not only do students perform better on tests, but they gain the skills and confidence to learn anything they want. And this journey is just beginning. The technology and teaching will rapidly improve every year you're in school.
Your mother and I have both taught students and we've seen what it takes to make this work. It will take working with the strongest leaders in education to help schools around the world adopt personalized learning. It will take engaging with communities, which is why we're starting in our San Francisco Bay Area community. It will take building new technology and trying new ideas. And it will take making mistakes and learning many lessons before achieving these goals.
But once we understand the world we can create for your generation, we have a responsibility as a society to focus our investments on the future to make this reality.
Together, we can do this. And when we do, personalized learning will not only help students in good schools, it will help provide more equal opportunity to anyone with an internet connection.
• • •
Many of the greatest opportunities for your generation will come from giving everyone access to the internet.
People often think of the internet as just for entertainment or communication. But for the majority of people in the world, the internet can be a lifeline.
It provides education if you don't live near a good school. It provides health information on how to avoid diseases or raise healthy children if you don't live near a doctor. It provides financial services if you don't live near a bank. It provides access to jobs and opportunities if you don't live in a good economy.
The internet is so important that for every 10 people who gain internet access, about one person is lifted out of poverty and about one new job is created.
Yet still more than half of the world's population -- more than 4 billion people -- don't have access to the internet.
If our generation connects them, we can lift hundreds of millions of people out of poverty. We can also help hundreds of millions of children get an education and save millions of lives by helping people avoid disease.
This is another long term effort that can be advanced by technology and partnership. It will take inventing new technology to make the internet more affordable and bring access to unconnected areas. It will take partnering with governments, non-profits and companies. It will take engaging with communities to understand what they need. Good people will have different views on the best path forward, and we will try many efforts before we succeed.
But together we can succeed and create a more equal world.
• • •
Technology can't solve problems by itself. Building a better world starts with building strong and healthy communities.
Children have the best opportunities when they can learn. And they learn best when they're healthy.
Health starts early -- with loving family, good nutrition and a safe, stable environment.
Children who face traumatic experiences early in life often develop less healthy minds and bodies. Studies show physical changes in brain development leading to lower cognitive ability.
Your mother is a doctor and educator, and she has seen this firsthand.
If you have an unhealthy childhood, it's difficult to reach your full potential.
If you have to wonder whether you'll have food or rent, or worry about abuse or crime, then it's difficult to reach your full potential.
If you fear you'll go to prison rather than college because of the color of your skin, or that your family will be deported because of your legal status, or that you may be a victim of violence because of your religion, sexual orientation or gender identity, then it's difficult to reach your full potential.
We need institutions that understand these issues are all connected. That's the philosophy of the new type of school your mother is building.
By partnering with schools, health centers, parent groups and local governments, and by ensuring all children are well fed and cared for starting young, we can start to treat these inequities as connected. Only then can we collectively start to give everyone an equal opportunity.
It will take many years to fully develop this model. But it's another example of how advancing human potential and promoting equality are tightly linked. If we want either, we must first build inclusive and healthy communities.
• • •
For your generation to live in a better world, there is so much more our generation can do.
Today your mother and I are committing to spend our lives doing our small part to help solve these challenges. I will continue to serve as Facebook's CEO for many, many years to come, but these issues are too important to wait until you or we are older to begin this work. By starting at a young age, we hope to see compounding benefits throughout our lives.
As you begin the next generation of the Chan Zuckerberg family, we also begin the Chan Zuckerberg Initiative to join people across the world to advance human potential and promote equality for all children in the next generation. Our initial areas of focus will be personalized learning, curing disease, connecting people and building strong communities.
We will give 99% of our Facebook shares -- currently about $45 billion -- during our lives to advance this mission. We know this is a small contribution compared to all the resources and talents of those already working on these issues. But we want to do what we can, working alongside many others.
We'll share more details in the coming months once we settle into our new family rhythm and return from our maternity and paternity leaves. We understand you'll have many questions about why and how we're doing this.
As we become parents and enter this next chapter of our lives, we want to share our deep appreciation for everyone who makes this possible.
We can do this work only because we have a strong global community behind us. Building Facebook has created resources to improve the world for the next generation. Every member of the Facebook community is playing a part in this work.
We can make progress towards these opportunities only by standing on the shoulders of experts -- our mentors, partners and many incredible people whose contributions built these fields.
And we can only focus on serving this community and this mission because we are surrounded by loving family, supportive friends and amazing colleagues. We hope you will have such deep and inspiring relationships in your life too.
Max, we love you and feel a great responsibility to leave the world a better place for you and all children. We wish you a life filled with the same love, hope and joy you give us. We can't wait to see what you bring to this world.
Love,
Mom and Dad

ref link : https://www.facebook.com/notes/mark-...53375081581634

[Coach]

Phauthier, it sounds great, and honestly I have little doubt that Zuckerberg is doing this for all the right reasons. But he would hardly be the first billionaire to do something similar to basically avoid taxes. It's understandable that people are a little wary until the good actually starts to happen.

[CaptainYooh]

Originally Posted by Itse

...

So when somebody does something that obviously benefits himself but isn't in any way necessary to do the vaguely described good things he says he's about to do, it's understandable that people are sceptical. ...

Not really. He doesn't owe anyone anything. And I don't even like Zuckerberg! He simply says: I will use my shares in FB to benefit charitable causes. This is not an income tax declaration filing. Whatever he does, from a transaction standpoint at some time in the future, no doubts will adhere fully to the current tax regulations, whatever they are and whenever it happens.

He only made a statement of intent publicly. An absolutely great and admirable statement, regardless of what I might think of Zuckerberg and Facebook. For anyone to dismiss this announcement as an elaborate tax evasion scheme is pure absurd and envy.

[Phanuthier]

Originally Posted by MattyC

Phauthier, it sounds great, and honestly I have little doubt that Zuckerberg is doing this for all the right reasons. But he would hardly be the first billionaire to do something similar to basically avoid taxes. It's understandable that people are a little wary until the good actually starts to happen.

Again, context - the other ones, do they live simple lives or lavish lives? I personally believe it because I have a lot of friends and a cousin that know him through school or worked closely with him, so I believe this definitely an act of good will. I probably shouldn't be annoyed by what's written on the internet, but I'm a little embarrassed that what I believe (and is obvious) an act of good will gets comments like this. But I digress, I'll move on.

[Coach]

Originally Posted by Phanuthier

Again, context - the other ones, do they live simple lives or lavish lives? I personally believe it because I have a lot of friends and a cousin that know him through school or worked closely with him, so I believe this definitely an act of good will. I probably shouldn't be annoyed by what's written on the internet, but I'm a little embarrassed that what I believe (and is obvious) an act of good will gets comments like this. But I digress, I'll move on.

I totally agree, there's not much about Zuckerberg's personality that should lead someone to believe it's anything but what he says it is. But what about the people advising him to do this? Zuckerberg's a smart cat, but finance isn't his background, maybe he's got people doing this in his best interest vs what he actually intends it to be, or was explained it is (these things are very doubtful, just playing devil's advocate).

This new crop of billionaires (Zuckerberg, Kalanick, Musk) come from different types of money than those of an older generation. Their fortunes were built on the creation of world-changing applications which they created out of necessity, not because they wanted to be rich. They never cared about having money so they go through things like this. But this is very much a strange concept to a lot of people, and so people tend to look at it suspiciously until it's proven otherwise.

My point is there are valid reasons for all points in here:

"Why not just donate it directly to charities?" - He could, but maybe there are no charities doing what he wants, or are run inefficiently to the point that he'd rather create his own method for helping the problem.

"He's just avoiding tax!" - Well yeah, technically he is. And there are arguments to be made that this type of money in the hands of properly funded government programs may negate the need for a charity all together. ex: Maybe we wouldn't need so many charities for disease research if the federal healthcare system was properly set up and funded.

"Set up an LLC and distribute it how you want." - This way, Zuckerberg can invest in projects he truly finds beneficial without the obligation to create profit from it (he still might). I'm all for this type of scenario, but only because Zuckerberg is well known for not caring about money. If Trump did the same thing (I'm sure he already has is some forms), it wouldn't be as easy to swallow.

Context definitely matters, but the trust people have in billionaires is not exactly overflowing.

[Phanuthier]

Originally Posted by MattyC

I totally agree, there's not much about Zuckerberg's personality that should lead someone to believe it's anything but what he says it is. But what about the people advising him to do this? Zuckerberg's a smart cat, but finance isn't his background, maybe he's got people doing this in his best interest vs what he actually intends it to be, or was explained it is (these things are very doubtful, just playing devil's advocate).

Why does he need advisers? He just wants to donate money to a charity.

(Agreed to your 2nd last paragraph, which is pretty much that. He's doing what he believes is best based upon the amount of info that is readily available; he's not going to hire a team of lawyers and PR people to financially engineer this, the guy just wants to make a donation to charity and you don't need a team of lawyers to do that.)

[CorsiHockeyLeague]

Originally Posted by topfiverecords

4. Scenario 2, XYZ transfers his shares to a LLC foundation. The foundation sells the 100 shares for 1 million dollars exempt of capital gains. The foundation then has 1 million free cash to donate to a charity or invest in for-profit businesses.

This is wrong, unless the LLC is in fact tax-exempt as a charity. If it's not, there are two possibilities: the members check the box to have the LLC treated as a flow-through entity, in which case each member pays its proportional share of tax on the capital gain that results from the sale of shares; or it doesn't, and the tax is paid at the corporate level out of the share sale proceeds.

Now, if it is tax exempt (it doesn't appear to be from what I can see, but for the sake of argument), sure, the LLC doesn't pay tax on the share sale... and the trade-off is that it has to use the proceeds for charitable purposes. That is, according to public policy in most western countries, a fair trade-off: we won't tax you, provided you use the money exclusively for the following things. There's a reason we exempt charities from tax. A donation of shares is a donation of property. It's no different from a car dealer giving a bunch of cars to a charity as prizes, so the charity can raise money by holding a lottery. You get a receipt for the fair value of the property donated.

There really does not appear to be anything nefarious going on here and it's just amazing how people have such strong opinions on this.

[Phanuthier]

FTR this is not uncommon. My wife works for a mid-level startup, and I was having dinner (cheap chinese takeout, not super fancy stuff) with her boss and he had just got off the phone rejecting a pretty large offer from a defense contractor for his business - he lived a good portion of the year in the back seat of his car, occasionally living in a AirBNB or friend from collage's coach. He could have made enough money to retire, especially living out of the back seat of his car and starting up his business using WiFi at a laundromat, but thats not what his dream was. He wanted to make an impact in city. Call it chasing unicorns, but from people I know who knew him pretty well, MZ is a similar breed.

[Coach]

Originally Posted by Phanuthier

Why does he need advisers? He just wants to donate money to a charity.

(Agreed to your 2nd last paragraph, which is pretty much that. He's doing what he believes is best based upon the amount of info that is readily available; he's not going to hire a team of lawyers and PR people to financially engineer this, the guy just wants to make a donation to charity and you don't need a team of lawyers to do that.)

So he's just going to draw up all the paperwork, complete the transactions, manage the assets of the LLC, etc.. all himself?

Of course he needs people handling all the intricacies of the finances and legal issues involved with this. You don't think Zuckerberg has a financial advisor, and said advisor wouldn't recommend this type of structure regardless of what Zuckerberg's motives are? he doesn't JUST want to make a donation to a charity, that's the point. This isn't like you calling your advisor and saying you want to donate 20 shares of Facebook to Meals on Wheels or something. He's creating a whole corporation for the purpose of charitable and progressive action. You bet your ass he needs a team of advisors, lawyers and accountants to set that up, especially if it's worth billions.

And if you made it past that point, you'd see I am just playing devil's advocate, as in, looking for reasons why some might be skeptical of this. This IS the guy who threw his best friend out of their own company with financial technicalities.

[Phanuthier]

Originally Posted by MattyC

So he's just going to draw up all the paperwork, complete the transactions, manage the assets of the LLC, etc.. all himself?

....

And if you made it past that point, you'd see I am just playing devil's advocate, as in, looking for reasons why some might be skeptical of this. This IS the guy who threw his best friend out of their own company with financial technicalities.

Honestly I don't know how he does his legal/financial transactions, but wouldn't surprise me if he did. Lots of people of his breed would try to pull that off. And maybe change their own car oil, change their house wiring, and do their own plumbing on weekends. The last point probably illustrates this.

Also wikipedia'ing this (as I forgot exactly what went on with that kicking out best friend part), found this donation is a part of the "Giving Pledge" he said he would in 2010 to join Gates/Buffett. So the only news here is he is writing a letter; the pledge part was stated 5 years ago. So... Rico Fata on waivers.

[Coach]

Originally Posted by Phanuthier

Honestly I don't know how he does his legal/financial transactions, but wouldn't surprise me if he did. The last point probably illustrates this.

Well I can tell you that it is basically my job to set these (and many other types of vehicles) up for clients and there is a ton of back and forth with lawyers, notaries, advisors (us) and so on to get something like this set up for just a few million. And we are people that know and understand it. There is absolutely no way Zuckerberg has the time, energy or care to do any of that himself.

My guess is he went to his advisor(s) looking for a way to do this, and this is what they suggested.

[Phanuthier]

Originally Posted by MattyC

Well I can tell you that it is basically my job to set these (and many other types of vehicles) up for clients and there is a ton of back and forth with lawyers, notaries, advisors (us) and so on to get something like this set up for just a few million. And we are people that know and understand it. There is absolutely no way Zuckerberg has the time, energy or care to do any of that himself.

My guess is he went to his advisor(s) looking for a way to do this, and this is what they suggested.

Ok fair enough, again honestly I don't know about setting up LLC's or the intimate details of who if any does MZ's legal/finance stuff... but I guess what I'm saying is, I don't think he's going with Goldman Sachs or some big legal name and paying tons of money to find the best lawyers and accountants to hide as much $$ from the IRS as possible. But that is just my speculation. Maybe it wasn't him, maybe its a friend from back in collage who does this or something... I don't think the intent was PR or evading taxes here, it was likely just that he wanted to donate money to the charity of his choosing.