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.
Saverin, 30, joins a growing number of people giving up U.S. citizenship, a move that can trim their tax liabilities. The Brazilian-born resident of Singapore is one of several people who helped Mark Zuckerberg start Facebook in a Harvard University dorm and stands to reap billions of dollars after the world’s largest social network holds its IPO.
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.
However, 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. For tax purposes, the IRS treats the stock as if it has been sold.
Saverin’s estimated gain, and subsequent tax bill, would be based on an appraisal by his tax advisors. 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.
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. He plans to invest in Brazilian and in other global companies that have strong interests in entering the Asian markets. 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.
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.
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.
This highly-anticipated IPO leaves a lot of investors guessing on whether it will be a “winner” or a “loser”. With the recent Bear Market becoming more and more volatile,, the stock can be a Godsend for some or a nightmare for others.
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