He Gave Up His U.S. Citizenship

[Leatherneck 693]

Eduardo Saverin, the billionaire co- founder of Facebook Inc. (FB), renounced his U.S. citizenship before an initial public offering that values the social network at as much as $96 billion, a move that may reduce his tax bill.

Facebook plans to raise as much as $11.8 billion through the IPO, the biggest in history for an Internet company. Saverin's stake is about 4 percent, according to the website Who Owns Facebook. At the high end of the IPO valuation, that would be worth about $3.84 billion. His holdings aren't listed in Facebook's regulatory filings.

May 11 (Bloomberg) -- Results of a Bloomberg investor poll show that 79 percent of respondents say Facebook is overvalued at $96 billion. Dominic Chu reports on Bloomberg Television's "In The Loop." (Source: Bloomberg)

Saverin, 30, joins a growing number of people giving up U.S. citizenship, a move that can trim their tax liabilities in that country. The Brazilian-born resident of Singapore is one of several people who helped Mark Zuckerberg start Facebook in a Harvard University dorm and stand to reap billions of dollars after the world's largest social network holds its IPO.

"Eduardo recently found it more practical to become a resident of Singapore since he plans to live there for an indefinite period of time," said Tom Goodman, a spokesman for Saverin, in an e-mailed statement.

Saverin's name is on a list of people who chose to renounce citizenship as of April 30, published by the Internal Revenue Service. Saverin made that move "around September" of last year, according to his spokesman.

It may help him cut the tax bill stemming from his Facebook stake, and avoid capital gains taxes on his future investments. Singapore doesn't have a capital gains tax.

Exit Tax

Saverin won't escape all U.S. taxes. Americans who give up their citizenship owe what is effectively an exit tax on the capital gains from their stock holdings, even if they don't sell the shares, said Reuven S. Avi-Yonah, director of the international tax program at the University of Michigan's law school. For tax purposes, the IRS treats the stock as if it has been sold.

Renouncing your citizenship well in advance of an IPO is "a very smart idea," from a tax standpoint, said Avi-Yonah. "Once it's public you can't fool around with the value."

Saverin's estimated gain, and subsequent tax bill, would be based on an appraisal by his tax advisers. They could have valued his Facebook stake at less than it will be worth once shares trade publicly, reducing his liability. For tax purposes, Saverin can argue that the value of his stake should be discounted because of the potential difficulty of selling the shares while the company remains private.

Zuckerberg Scuffle

Saverin previously scuffled with Zuckerberg, his Harvard University classmate, over his ownership in Facebook. Saverin sued him and settled for an undisclosed amount.

The 2010 movie "The Social Network" added to Saverin's fame after it portrayed him as a scorned friend who provided the company's early financing and then was squeezed out. In the film, written by Aaron Sorkin, Saverin was portrayed by Andrew Garfield, who will play Spider-Man in "The Amazing Spider- Man."

Saverin moved to the U.S. in 1992, and became a citizen in 1998, his spokesman said. He has invested in Asian, U.S. and European companies, according to his spokesman.

He plans to invest in Brazilian and in other global companies that have strong interests in entering the Asian markets. "Accordingly, it made the most sense for him to use Singapore as a home base," Goodman said in the statement.

Jumio, ShopSavvy

His U.S. holdings include Jumio Inc., an online payments company, and ShopSavvy Inc., a price-comparison service.

Renouncing citizenship is an option chosen by increasing numbers of Americans. A record 1,780 gave up their U.S. passports last year compared with 235 in 2008, according to government records.

Income-tax rates for top U.S. earners will rise to 39.6 percent from 35 percent next year and rates on capital gains and dividends also are scheduled to rise, unless Congress blocks the increases.

"It's a loss for the U.S. to have many well-educated people who actually have a great deal of affection for America make that choice," said Richard Weisman, head of the global tax practice at Baker & McKenzie in Hong Kong. "The tax cost, complexity and the traps for the unwary are among the considerations."

Combatting Evasion

Some of the world's largest wealth-management firms have ramped up efforts to fight tax evasion ahead of Washington's implementation of the Foreign Account Tax Compliance Act, known as Fatca, which seeks to prevent tax evasion by Americans with offshore accounts. HSBC Holdings Plc, Deutsche Bank AG, Bank of Singapore Ltd. and DBS Group Holdings Ltd. all say they have turned away business.

The 2010 law, to be phased in starting Jan. 1, 2013, requires financial institutions based outside the U.S. to obtain and report information about income and interest payments accrued to the accounts of American clients. That means additional compliance costs for banks and fewer investment options and advisers for all U.S. citizens living abroad, which may depress banks' returns.

Facebook plans to price its IPO on May 17, offering 337.4 million shares at $28 to $35 each. The shares will be listed on the Nasdaq Stock Market under the symbol FB. Morgan Stanley, JPMorgan Chase & Co. and Goldman Sachs Group Inc. are leading the sale.

Link

[Bad_Daddy 2,209]

It says the guy is Brazilian also.

http://en.wikipedia.org/wiki/Eduardo_Saverin

Eduardo Saverin was born in São Paulo, Brazil, to a wealthy Jewish Brazilian family, and was raised in Miami, Florida. Eduardo's father was a Brazilian industrialist working in export, clothing, shipping, and real estate.

Edited May 11, 2012 by Why_Me

[Visitor 90]

Exit Tax?!! Why not? They tax the dead.

Oh If ONLY I had that sort of money to play the games these people play.

[Leatherneck 693]

Is there a tax the progressives have not thought of... Exit Tax?

Leave = you get the Exit Tax

Die = you get the Estate Tax

Keep living = keep paying until you die.

Edited May 12, 2012 by Leatherneck

[Gary and Alla 3,694]

This is what happens when you expect people with options to pay for everything.

FAIR TAX would bring him back and his billions and all the European business that is going to be looking for a place to FLEE to. We should snatch that up right now!

[Boiler 45,468]

Seems very sensible move.

[Leatherneck 693]

This is what happens when you expect people with options to pay for everything.

FAIR TAX would bring him back and his billions and all the European business that is going to be looking for a place to FLEE to. We should snatch that up right now!

There you go, with that logic stuff. The current tax structure allows politicians to reward, punish and divide people -- the flat tax removes that power, so it won't happen.

[james&olya 1,121]

There you go, with that logic stuff. The current tax structure allows politicians to reward, punish and divide people -- the flat tax removes that power, so it won't happen.

And it is of course mere coincidence that those who are rewarded are so patriotic that they donate generously to our electoral system. And our legislators are so wise that many of these patriotic industries find the wisdom of hiring these humble legislative servants in positions that offer ample financial reward! I guess Saverin just didn't feel patriotic enough to participate.

[james&olya 1,121]

This is what happens when you expect people with options to pay for everything.

FAIR TAX would bring him back and his billions and all the European business that is going to be looking for a place to FLEE to. We should snatch that up right now!

Who was it that said "taxes are only for the 'little' people"?

[Anh map 2,098]

Who was it that said "taxes are only for the 'little' people"?

Leona Helmsley

[Mr. Big Dog 10,747]

Is there a tax the progressives have not thought of... Exit Tax?

Well, the exit tax - which has been around for half a century - was tightened in 2004 by an all Republican Congress and signed by a Republican President. The change to the exit tax where one is now taxed on unrealized gains passed both houses of an all Democrat Congress without a single nay vote and was signed into law by a Republican President. But hey, why worry about reality when fiction makes for better much outrage?

[Dakine10 5,452]

FAIR TAX would bring him back and his billions

It might not. Former citizens who renounce to avoid paying taxes are inadmissible. Certainly would be looked at in this case if he ever tries to come back. No waiver either.

[CarlosAndSveta 808]

Well, the exit tax - which has been around for half a century - was tightened in 2004 by an all Republican Congress and signed by a Republican President. The change to the exit tax where one is now taxed on unrealized gains passed both houses of an all Democrat Congress without a single nay vote and was signed into law by a Republican President. But hey, why worry about reality when fiction makes for better much outrage?

I would just like to add that the Gross Value of your estate must exceed $5,120,000 before a return has to be filed and the tax on the estate has to exceed $1,772,800. before you owe any tax. I seriously doubt anybody posting on this forum has an estate that would have to pay tax if that person were to die.

[unlockingsky 94]

sighs... if i ever make that much and get it use that exit strategy. i am poor.

[Trompe le Monde 1,107]

Well, the exit tax - which has been around for half a century - was tightened in 2004 by an all Republican Congress and signed by a Republican President. The change to the exit tax where one is now taxed on unrealized gains passed both houses of an all Democrat Congress without a single nay vote and was signed into law by a Republican President. But hey, why worry about reality when fiction makes for better much outrage?

Bush also considered doing away with the foreign earned income exclusion of about $90k but gave it up after an outcry from various expatriate groups.

I think the fact that Uncle Sam will tax you wherever you go in the world is a key consideration for those considering becoming citizens and maybe moving back to their home countries one day.