Earlier this week, the founder and CEO of Facebook Inc (NASDAQ: FB), Mark Zuckerberg and wife Priscilla Chan, announced they will donate 99 percent of their Facebook shares to charity over the course of their life. The leader of the giant social network is currently the 7th richest person in the world, according to Forbes’ Real-Time Billionaires ranking.
Mark Zuckerberg and Priscilla Chan proposed the initiative in a letter to their newborn daughter, Max. However, it would seem that they created a limited liability company instead of a charitable foundation which has nonprofit status. That could mean they will just move their money from one source to a new one.
A limited liability company (L.L.C) can make political donations, invest in for-profit companies and generate pressure for changes in the law. In other words, Zuckerberg is not attached to any form of control that could define how he could use the money put into the company.
It is known that a charitable foundation is subdued to rules and supervision, and it has to assign a certain amount of its funds every year. The company set up by Zuckerberg and Chan won’t be obligated to do so, as it doesn’t need to be transparent in its actions.
Despite the couple wrote they wanted to focus in areas like personalized learning, finding the cure for diseases, connecting people, and building strong communities, experts explain how this could be a good way of minimizing their personal taxes.
However, Zuckerberg wrote, “If we transferred our shares to a traditional foundation, then we would have received an immediate tax benefit, but by using an LLC we do not. And just like everyone else, we will pay capital gains taxes when our shares are sold by the LLC.”
A law professor and tax specialist at the University of San Diego School of Law, Victor Fleischer, told the NY Times that if the L.L.C donated the shares to charity, Zuckerberg would get a tax reduction just like anyone else.
According to a report made by Chuck Collins and Josh Hoxie, both veteran analysts of inequality in America, the 20 wealthiest people now own more wealth than the bottom half of Americans. Also, just 158 families along the companies they control, are the source of half the contributions to the presidential candidates in both parties.
Source: NY Times