A nice tax loop hole for Mr. Zuckerberg
Mr. Zuckerberg can avoid ever paying tax on $28 billion of stock he won’t immediately sell. He can simply use his stock as collateral to borrow against his tremendous wealth and avoid all tax. That’s what Lawrence J. Ellison, the chief executive of Oracle, did. He reportedly borrowed more than a billion dollars against his Oracle shares and bought one of the most expensive yachts in the world.
When you die, you don't pay income tax on your appreciated stock. Your heirs only pay tax on appreciation in value since your death.
Your possibly vast appreciation of stock avoids all income tax when you die.
Another thing you can do is donate stock to a charity. Say you have stock that has appreciated 10x since you bought it. When you donate it to charity, you get to write off the entire value of the stock even though you never paid tax on it. If you are in the 30% tax rate, you get to reduce your taxes by $300,000 (30% of $1,000,000) for every $100,000 you originally spent on it. If you had to pay tax on the gain first, you would pay $270,000 tax (30% of $900,000 gain), but get a $300,000 tax deduction. This makes sense since you are getting a net $30,000 deduction for something that cost you $100,000 in the first place.
Consider the case of Steven P. Jobs. After rejoining Apple in 1997, Mr. Jobs never sold a single Apple share for the rest of his life, and therefore never paid a penny of tax on the over $2 billion of Apple stock he held at his death. Now his widow can sell those shares without paying any income tax on the appreciation before his death. (There never is inheritence tax when giving wealth to your spouse.)
Now compare Mr. Zuckerberg with Lady Gaga. Last year she told Ellen DeGeneres that she had to get “completely wasted” to sign her tax returns because she owed so much. Lady Gaga reportedly earned $90 million in 2010. Because she earns fees and royalties, she’s subject to the highest income-tax rate. So, assuming she’s just as successful this year, she will certainly pay more than $30 million in taxes and probably more than $45 million, which is infinitely more tax than Mr. Zuckerberg will pay on the $28 billion of Facebook stock he now holds.