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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."
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."
It was land, then railway, then oil, then information technology. Now, it's cloud services; there will always be a 'job creator' to take the position of overlord. The problem is the recent habit of giving them multiple tax breaks means they create fewer and fewer jobs to feed the 'trickle-down' fallacy that Reagonomics invented.
I imagine this move allows ownership of the LLC to be transferred to his children without invoking an inheritance tax. However, I suspect he intends to create something like the Bill & Melinda Gates Foundation; it's enough money it could be distributed to numerous semi-autonomous sub-organizations to figure out how to spend, and be directed towards thousands of different projects, many of which would fall outside the scope of a normal charity. For example, how many charities directly engage in R&D? At most they'd funnel money towards companies already doing desired research, but if none currently exists? It could do things like what Google X does.
Making shady donations to charity for tax writeoff purposes is nothing new. I remember in the late 90s Microsoft donated large amounts of software to charity, and used its retail value (which they are able to arbitrarily set!) to calculate the value of their charitable donation. Of course since it's an infinite good it costs them near nothing.
Corruption is convincing someone that the selfless ideal is the same as their selfish ideal.
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.
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.
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.
....a "big "fuck you" to the American mainstream media who spun this in that prick's favor all week.
We'd probably all be better off with no news at all than this click bait bullshit system we've ended up with.
The Snopes website did an analysis of the tax implications and control issues. They also elicited additional comments from a Facebook representative. http://www.snopes.com/2015/12/...