Eduardo Saverin, the billionaire co- founder of Facebook Inc , 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 corporation. The offering could leave Saverin, who once owned 5 percent of the company, with a hefty capital-gains tax bill. Saverin has sold enough of his Facebook stake that he doesn't appear in IPO filing documents that list shareholders who own 5 percent or more, though his holdings are still believed to be substantial. Saverin’s stake is about 4 percent, according to the website whoownsfacebook.com(I noticed something funny on that site, Saverin and Moskovitz are listed as Former employees. These dudes just left Zuckerberg to rack in all the billions alone?). At the high end of the proposed IPO market capitalization, that would be worth about $3.84 billion. His holdings aren’t listed in Facebook’s regulatory filings.
The Brazilian-born resident of Singapore is one of several people who helped Mark "Moneyberg" start Facebook in a Harvard University dormitory and stand to reap billions of dollars after the world’s largest social network holds its IPO . "Baba" Saverin, 30, joins a growing number of people giving up U.S. citizenship ahead of a possible increase in tax rates for top earners. A record 1,780 gave up their U.S. passports last year compared with 235 in 2008, according to government records. A growing number of people giving up U.S Citizenship? Omg, how will a Nigerian seeking green card take such news. Its Heart-wrecking to know that what my fellow countrymen did an all night vigil for as at 30th of April this year ahead of the US Diversity Visa Lottery results release, is what Oga Saverin is throwing away. As at May 1st, the DV lottery site was jammed to such an extent that the site crashed, thanks to heavy data inflow from my beloveth Green-white country. What a wonderful world *singing in Louis Armstrong voice*. “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 (Story!!!I just love this public relation guys; they make a "bad" lie look so cool by restructuring the grammar..Hehehe). Besides helping cut tax bills stemming from the Facebook, the move may also help him avoid Capital gains taxes on future investments since Singapore doesn’t have a capital gains tax. OK, But what if Facebook is overvalued at $96 billion? Results of a Bloomberg investor on poll show that 79 percent of respondents say Facebook is overvalued at $96 billion as at May 11. Will this move backfire at Saverin? Isn't it a bit shrewd to give up citizenship of the US? Renouncing citizenship is a complicated and lengthy affair involving a signed oath and an appearance before a U.S. diplomatic official, according to the U.S. State Department's Web site.
Giving up citizenship is an irrevocable act, the State Department says. 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, Avi-Yonah said. “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 could say 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. Seems Saverin originates from the Igbo-tern part of Brazil. lol.
Saverin moved to the U.S. in 1992, and became a citizen in 1998. He has invested in Asian, U.S. and European companies, according to his Spokesperson. 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.
The Young man is definitely not cash-shy. 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. 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. In a world where Men are trying to even-out the ever-widening gap between the Rich and the poor, tax laws like the ones applicable in the US seems more like a step in the right direction. But this is costing the nation its best brains and unless something is done to check this, it may just be the beginning of a mass exodus. The US economy is built on a very strong middle class, and this maybe where the answer lies.
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.
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