How Mark Zuckerberg's Altruism Helps Himself (nytimes.com)

HughPickens.com writes: Jesse Eisinger writes in the NYT that if you heard that Mark Zuckerberg donated $45 billion to charity, you are wrong. Here's what really happened: Zuckerberg did not set up a charitable foundation, which has nonprofit status. Instead Zuckerberg created an investment vehicle called a limited liability company (LLC) that can invest in for-profit companies, make political donations, and lobby for changes in the law. What's more an LLC can donate appreciated shares to charity, which will generate a deduction at fair market value of the stock without triggering any tax. "He remains completely free to do as he wishes with his money," writes Eisinger. "That's what America is all about. But as a society, we don't generally call these types of activities 'charity.'"

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 won't be subject to those rules and won't have any transparency requirements. According to Eisinger what this means is that Zuckerberg has amassed one of the greatest fortunes in the world — and is likely never to pay any taxes on it. "Instead of lavishing praise on Mr. 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," concludes Eisinger. "The point is that we are turning into a society of oligarchs. And I am not as excited as some to welcome the new Silicon Valley overlords."

Comments

Interesting. I took advantage of the same thing

[Solandri]

I donated some shares to a non-profit last year. Normally when you donate, you get a tax deduction for the value of your donation. Contrary to what the NYTimes article says, this isn't a bonus. It merely zeros out the donation from your income. That is, for tax purposes it's like you redirected the donation straight from your income source to the non-profit, and it never passed through your hands. If you didn't get the deduction, you'd be paying taxes on money you gave away.

However, in the case of my shares, they'd appreciated in value considerably since I received them. I helped set up a non-profit charity, and billed them $400 for my services. They didn't have the cash, so paid me in shares instead. 15 years later those shares were worth $16k. I wasn't really interested in the money, so I donated them back to the charity. When doing my taxes this year, I ran across this tax peculiarity. I never sold the shares so I never received $16k in income, and so didn't have a capital gains tax liability on $15.6k. Yet by donating the shares I got a deduction as if I did have a capital gains tax liability.

That seemed wrong, so I asked two different CPAs about it.

• If I had sold the shares to the charity at market value, then donated the $16k back to the charity, the deduction for the donation would've zeroed out my capital gains tax liability on the $16k I received as payment. (Actually not exactly since my income tax rate and capital gains tax rate are different, but the idea is that the donation money comes from my higest-tax rate income.)
• If I donated the shares directly to the charity, I got the deduction even though I incurred no capital gains liability.

The net result is the same in both cases - I get no money, charity pays no money, charity gets all the shares. But the tax implications are very different.

When I explained it like that, they scratched their heads for a bit, one hit the books and researched it a bit, and both came back to me with the same answer. Yeah it's weird and seems wrong, but that's the way it works.

Except he gave it to himself

[Anonymous Coward]

" you'd be paying taxes on money you gave away."

The point here is, that he didn't give it away, its in a company that he controls, so really he just gave it to himself.

Chan Zuckerberg LLC

[Anonymous Coward]

There have been high net worth people in my family who have left their money and assets to various people , universities, and entities - WITH instructions on what was to be said with said inheritance. The wishes were never followed through. Even with the intervention of the living people it was basically impossible to have the money and assets used as instructed. The lesson is to give your money or assets while you are living. Enjoy what you have and share it. Because if you think it will do XYand Z when you are gone, you are only kidding yourself. So what the Gates, the Buffets, the Zuckerberg's are doing is the responsible thing. They all realize that that kind of money is beyond their needs, and having such a large amount of money can accomplish great things that otherwise could not be accomplished. I look forward to seeing what they do in the future.