Facebook Co-Founder Severin Could Save $67 Million
You might recall last Friday when we reported on Facebook co-founder Eduardo Saverin. Eduardo attended Harvard with Mark Zuckerberg and helped Facebook arrange for much of the financing that got it to where it is today. Before the social network site really took off, Eduardo was forced out of the loop, but some years later he filed a lawsuit against Zuckerberg and others involved in the creation of the site and won a sizable settlement along with a 4% share of the company.
The Brazilian-born Saverin has been a resident of the United States since 1998, but more recently moved to live in Singapore. As of late september he appears on a list of US residents who have renounced their citizenship. This decision stands to save Severin millions in taxes to the IRS.
Tom Goodman, a spokesman for Saverin, commented on Saverin’s decision:
“Eduardo recently found it more practical to become a resident of Singapore since he plans to live there for an indefinite period of time,”
According to Bloomberg, Saverin would owe taxes on a sum total of about $2.44 billion, which, according to a tax professional’s calculations, would run him about $67 million in US tax. By choosing to leave the country and denounce his citizenship, Saverin would owe an exit tax of about $365 million. He could indefinitely delay paying this tax until the shares are actually sold, as the figure is derived from an estimated capital gains tax based on him actually selling the shares.
Tom Goodman commented to Bloomberg about these tax calculations and Saverin decision to leave the United States:
“The calculations and assumptions are not only erroneous, they also further perpetuate the false impression that tax was the reason behind Eduardo’s decision,”
“His motive had nothing to do with tax and everything to do with his desire to live and work in Singapore.”
There has been no word from Saverin on what he is currently working on or if he plans to ever return to the United States. Either way, his 4% stake is bound to increase in value once Facebook goes public. After the exit tax is paid, Eduardo won’t owe any future capital gains tax on appreciation in the United States and Singapore doesn’t have a similar tax.