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Thread: Mark Zuckerberg did not donate $45 billion to charity

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    Default Mark Zuckerberg did not donate $45 billion to charity

    Zuckerberg set up a limited liability company, which has reaped enormous benefits as public relations coup and will help minimize his tax bill.

    This story was co-published with The New York Times.

    Mark Zuckerberg did not donate $45 billion to charity. You may have heard that, but that was wrong.

    Hereís what happened instead: Zuckerberg created an investment vehicle.

    Sorry for the slightly less sexy headline.

    Zuckerberg is a co-founder of Facebook and a youthful mega-billionaire. In announcing the birth of his daughter, he and his wife, Priscilla Chan, declared they would donate 99 percent of their worth, the vast majority of which is tied up in Facebook stock valued at $45 billion today.

    In doing so, Zuckerberg and Chan did not set up a charitable foundation, which has nonprofit status. He created a limited liability company, one that has already reaped enormous benefits as public relations coup for himself. His PR return-on-investment dwarfs that of his Facebook stock. Zuckerberg was depicted in breathless, glowing terms for having, in essence, moved money from one pocket to the other.

    An LLC can invest in for-profit companies (perhaps these will be characterized as societally responsible companies, but lots of companies claim the mantle of societal responsibility). An LLC can make political donations. It can lobby for changes in the law. He remains completely free to do as he wishes with his money. Thatís what America is all about. But as a society, we donít generally call these types of activities ďcharity.Ē

    Whatís more, a charitable foundation is subject to rules and oversight. It has to allocate a certain percentage of its assets every year. The new Zuckerberg LLC wonít be subject to those rules and wonít have any transparency requirements.

    In covering the event, many commentators praised the size and percentage of the gift and pointed out that Zuckerberg is relatively young to be planning to give his wealth away. ďMark Zuckerberg Philanthropy Pledge Sets New Giving Standard,Ē Bloomberg glowed. Few news outlets initially considered the tax implications of Zuckerbergís plan. A Wall Street Journal article didnít mention taxes at all.

    Nor did they grapple with the societal implications of the would-be donations.

    So what are the tax implications? They are quite generous to Zuckerberg. I asked Victor Fleischer, a law professor and tax specialist at the University of San Diego School of Law, as well as a contributor to DealBook. He explained that if the LLC sold stock, Zuckerberg would pay a hefty capital gains tax, particularly if Facebook stock kept climbing.

    If the LLC donated to a charity, he would get a deduction just like anyone else. Thatís a nice little bonus. But the LLC probably wonít do that because it can do better. The savvier move, Professor Fleischer explained, would be to have the LLC donate the appreciated shares to charity, which would generate a deduction at fair market value of the stock without triggering any tax.

    Zuckerberg didnít create these tax laws and cannot be criticized for minimizing his tax bills. If he had created a foundation, he would have accrued similar tax benefits. But what this means is that he amassed one of the greatest fortunes in the world ó and is likely never to pay any taxes on it. Any time a superwealthy plutocrat makes a charitable donation, the public ought to be reminded that this is how our tax system works. The superwealthy buy great public relations and adulation for donations that minimize their taxes.

    Instead of lavishing praise on Zuckerberg for having issued a news release with a promise, this should be an occasion to mull what kind of society we want to live in. Who should fund our general societal needs and how? Charities rarely fund quotidian yet vital needs. What would $40 billion mean for job creation or infrastructure spending? The Centers for Disease Control and Prevention has a budget of about $7 billion. Maybe more should go to that. Society, through its elected members, taxes its members. Then the elected officials decide what to do with sums of money.

    In this case, it is different. One person will be making these decisions.

    Of course, nobody thinks our government representatives do a good job of allocating resources. Politicians ó a bunch of bums! Maybe Zuckerberg will make wonderful decisions, ones I would personally be happy with. Maybe not. He blew his $100 million donation to the Newark school system, as Dale Russakoff detailed in her recent book, ďThe Prize: Whoís in Charge of Americaís Schools?Ē Zuckerberg has said he has learned from his mistakes. We donít know whether thatís true because he hasnít made any decisions with the money he plans to put into his investment vehicle.

    But I think I might do a good job allocating $45 billion. Maybe even better than Zuckerberg. I am self-aware enough to I realize many people would disagree with my choices. Those who like how Zuckerberg is lavishing his funds might not like how the Koch brothers do so. Or George Soros.

    More: https://www.propublica.org/article/h...-helps-himself
    Last edited by Gaia; 3rd December 2015 at 18:35.

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    Default Re: Mark Zuckerberg did not donate $45 billion to charity

    It always appears strange when these famous rich profiles seem to move their wealth from where ever there is high tax rates to where there are much lower tax rates, if charity is such a haven, so be it, appears to be their logical thought process. But it might be that they find a sweet spot in gaining more control over the way they put their money to "good use" by getting added money protection. But a charity fund that does not spend the money to help, becomes an investment vehicle.

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