Capital Gains Tax

[head of joaquin]

So you've just shown, that they don't take the money raised from the IPO, they are just issued millions of shares (a proper percentage ) in exchange for their original ownership shares. They then proceed to sell these shares on the open market. The cash from the IPO was untouched and can serve the company in future endeavors.

No, I've shown that the capital that came in as part of the IPO is structured to immediately go out in the offer of sale or options to the founders. So in Facebook's case $20B went directly to Zuckerman. That $20B did not capitalize the company. That was the point, and that's why Zuckermann set up the IPO. Why else would he do it -- just so other people can own his company?

This is quite simple: who got the $20B, Facebook or Zuckerman?

 

[ForcedAppeal]

No, I'm not confused. The offer to sale is part of the IPO. If it weren't Zuckerman would have lost money on the sale, since the stock fell after the IPO.

What's true of Facebook is true of Google, World Wresting Federation, Yahoo and any modern IPO. The offer to sale is part of the IPO structure, so that a large part of the capital infusion goes to the owners.

The founders had original shares that were traded in for the company's newly issued shares. Not all the newly issued shares are reserved to be sold during the IPO, some are traded to the founders for their original shares. That's where their wealth is generated - not from cash diverted from sales of the IPO.

 

[YoungConserv]

What does bank interest have to do with shares sold on the secondary market?

A stock certificate is a crowd source method of funding a buisness through people buying a part of the buisness and part of the companies profit is given to certificate holder just like intrest in a bank loan.

 

[head of joaquin]

Mark exercised stock options which is different than someone selling shares they already owned.

Yep and it was paid for by the IPO as part of its structure. If it weren't he wouldn't have sold his company off.

So who got the $20B -- Facebook or Zuckerman. That's all that matter as to the issue of capitalization.

 

[ForcedAppeal]

No, I've shown that the capital that came in as part of the IPO is structured to immediately go out in the offer of sale or options to the founders. So in Facebook's case $20B went directly to Zuckerman. That $20B did not capitalize the company. That was the point, and that's why Zuckermann set up the IPO. Why else would he do it -- just so other people can own his company?

This is quite simple: who got the $20B, Facebook or Zuckerman?

Zuckerberg got it for SELLING SHARES, not diverting cash raised by Facebook during their IPO.

 

[head of joaquin]

A stock certificate is a crowd source method of funding a buisness through people buying a part of the buisness and part of the companies profit is given to certificate holder just like intrest in a bank loan.

That happened when the company was founded. It doesn't happen again when the stock is sold.

 

[head of joaquin]

Zuckerberg got it for SELLING SHARES, not diverting cash raised by Facebook during their IPO.

Yep, that's what I said: the IPO was partially structured as an offer for sale. So he got the money not the company.

Why are you mystified by this? The $20B went to him not to Facebook. Period. It didn't capitalize Facebook.

 

[greyhat]

Yep. You don't seem to understand that that means the capital infusion doesn't go to the company. It goes to the founders as part of the IPO structure.

Zuckerman got $20B. It came from the company. The company did not use it as capital. That was the point and Zuckerman wouldn't have done an IPO is he didn't get the $20B.

What aren't you understanding about this?

LOL- this is too funny..look, you're wrong. If you doubt me and the others who are trying to help you, then I suggest that you do some reading into corporate finance.

Oh and BTW is is Mark Zuckerberg...

 

[head of joaquin]

The founders had original shares that were traded in for the company's newly issued shares. Not all the newly issued shares are reserved to be sold during the IPO, some are traded to the founders for their original shares. That's where their wealth is generated - not from cash diverted from sales of the IPO.

As part of a structured offer for sale and/or option which resulted in the IPO cash going substantially to the founders, not to capitalize the company. Why does this mystify you?

Again who actually got the $20B -- Zuckerman or the company? Zuckerman did, so it didn't capitalize the company. That's typical of an IPO.

 

[head of joaquin]

LOL- this is too funny..look, you're wrong. If you doubt me and the others who are trying to help you, then I suggest that you do some reading into corporate finance.

Oh and BTW is is Mark Zuckerberg...

Who got the $20B again? You can say it. Keep pretending it capitalized Facebook, despite the facts.

 

[greyhat]

Who got the $20B again? You can say it. Keep pretending it capitalized Facebook, despite the facts.

This is silly now; I tell you what, just do some research into how an IPO works, you sound petty confused at best...

 

[head of joaquin]

This is silly now; I tell you what, just do some research into how an IPO works, you sound petty confused at best...

You're silly.

How much capital did Facebook raise from the IPO and how much cash did Zuckerberg get (leave aside the other founders)?

Come on, you can google it!

 

[YoungConserv]

That happened when the company was founded. It doesn't happen again when the stock is sold.

Not true that money is often used for capital for new projects.

 

[greyhat]

You're silly.

How much capital did Facebook raise from the IPO and how much cash did Zuckerberg get (leave aside the other founders)?

Come on, you can google it!

LMFAOL- you're making the argument that bc Mark (and others) got some money thru the IPO that the IPO doesn't serve to capitalize the company and that it only serves as a mechanism for the founders to "cash out". Yes, pump-and-dump schemes do exists but those are usually microcaps- FB btw isn't a microcap..neither was GOOG or V etc..

Yes, founders and early private investors do make money at the IPO, whether by selling privately owned shares or exercising stock options, but you're missing the point as to WHY an IPO occurs- that is to capitalize the company!

You're also making the argument that if a company, say FB, is successful that instead of listing that they should just issue debt- you do realize that debt has to be paid back and it carries a cost called interest? IPO proceeds do not get paid back. A CFO would of course determine which route makes sense depending on how much they need and what it's needed for. Historically listing is more cost efficient than debt.


If a company has enough cash flow it can fund expansion thru such, even while remaining private; if they don't have enough cash flow and want to expand, then they need capital. This capital is most effectively acquired thru an IPO, which again serves to capitalize the company. The net proceeds of the IPO go to the company's treasury and are then used for expansion.

Like I said, at best you're confused.

 

[ForcedAppeal]

Yep, that's what I said: the IPO was partially structured as an offer for sale. So he got the money not the company.

Why are you mystified by this? The $20B went to him not to Facebook. Period. It didn't capitalize Facebook.

Wrong. The IPO was for 421 million shares. FB has over 2 billion shares. MZ shares were never part of the IPO and the IPO price was calculated factoring in the 1.8 billion other outstanding shares. No IPO money was diverted to MZ. They raised what they said they would raise. MZ sold his personal shares that had NOTHING to do with the IPO shares.

And , by the way, HE NEVER SOLD HIS SHARES, so he didn't get 20 billion - he HOLDS about 20 billion of FB stock (give or take). Little bit different.

And the 20billion was AFTER market, AFTER the IPO which raised money for the corp

 

[ForcedAppeal]

You're silly.

How much capital did Facebook raise from the IPO and how much cash did Zuckerberg get (leave aside the other founders)?

Come on, you can google it!

To date he's sold about 2 bil of his personal FB stock holdings. FB raised 16 billion with their IPO

 

[greyhat]

HOJ:

Here is the FB red herring:

http://www.sec.gov/Archives/edgar/data/1326801/000119312512034517/d287954ds1.htm

READ IT! But I'll help you out:

"The principal purposes of our initial public offering are to create a public market for our Class A common stock and thereby enable future access to the public equity markets by us and our employees, obtain additional capital, and facilitate an orderly distribution of shares for the selling stockholders. We intend to use the net proceeds to us from our initial public offering for working capital and other general corporate purposes; however, we do not currently have any specific uses of the net proceeds planned"

"We will not receive any proceeds from the sale of shares of Class A common stock by the selling stockholders. Mark Zuckerberg, our founder, Chairman, and CEO, will offer and sell shares in our initial public offering. We expect that substantially all of the net proceeds Mr. Zuckerberg will receive upon such sale will be used to satisfy taxes that he will incur upon his exercise of an outstanding stock option to purchase 120,000,000 shares of our Class B common stock."

Was that so hard to do?! Like I said, you're confused at best..

 

[Campbell]

I wish I could give you a good answer but it's not that simple. Right now the cap gains rate for long term gains is set to go to 10% for taxpayers in the 15% or lower bracket and 20% for everyone else but that's not exactly carved in stone. Congress usually makes this determination in Nov. but in recent years the decision hasn't been finalized until Dec or Jan.

There is also supposed to be a Medicare premium of 3.8% on investment income for taxpayers with an AGI in excess of $200k.

What difference does it make anyway? It's all a bull**** game with rich people buying off the lawmakers. When a corporation like General Electric can pay zero tax on $14 billion of income how can anything be considered fair? Check it out.....in taxable year 2010 GE paid no tax on it's profits.

In taxable year 2011 Mitt Romney was taxed at a 14% rate on $14 million while my wife and I paid almost exactly that percentage on less than $100,000.

This country was built and developed based upon a progressive tax system. It has progressed.....for the rich.

 

[YoungConserv]

What difference does it make anyway? It's all a bull**** game with rich people buying off the lawmakers. When a corporation like General Electric can pay zero tax on $14 billion of income how can anything be considered fair? Check it out.....in taxable year 2010 GE paid no tax on it's profits.

In taxable year 2011 Mitt Romney was taxed at a 14% rate on $14 million while my wife and I paid almost exactly that percentage on less than $100,000.

This country was built and developed based upon a progressive tax system. It has progressed.....for the rich.

That's why we need a flat tax with no write offs except the essentials for human existance.

 

[Campbell]

That's why we need a flat tax with no write offs except the essentials for human existance.

Flat tax....you gotta love it. That's the bull**** Steve Forbes has been spewing for years. A working man who pays payroll tax, excise tax, sales tax, gasoline tax, possible property tax, fees and other schemes to make money,....which the rich don't even notice...will then have to add some kind of level tax at the same rate as an asshole who drives a Farrari and owns an island where he docks his yacht. That's about the epitome of arrogance.

 

[jaeger19]

They weren't earnings those years. They were only "earnings" when you sold the property. See, short term investments ARE taxed as regular income. They aren't eaten up by inflation like long term investments are and if you buy something now and sell it in 9 months, you don't get some special fat-cat discount on the taxes for the profits. Long terms capital gains taxes only apply to those assets held over 1 year. What you seem to have a hard time grasping is that a price going up because of inflation is not an increase in value for the assets you own and you don't really profit because of that. You don't profit from inflation but the capital gains tax, since it doesn't account for this, DOES tax you for inflation. This is why there are calls for indexing of capital gains. it is possible to pay in excess of 100% for profits from capital gains if they're not indexed and they're not. You never have that problem with earnings.

See: Issues in the Indexing of Capital Gains for Inflation | Tax Foundation

Sure they were earning, that's why its an investment... you sell if for 20 million.. are you really telling me it didn't EARN anything?. You could have sold it any time that each year for more money than the year before because of inflation.. but instead you decided to hold on to it to let that added value continue to build.

You trying to tell me that growth in an investment from is not an increase in value for assets is a bunch of bull. I'll tell you what.. you buy a piece of property and sit on it for 10 years.. let inflation and the market drive its assessed value go up and then take a loan from the bank using it as collateral. You think they are going to say.. "sorry... we only loan on what you paid 10 years ago".. or do you think they loan on TODAYS VALUE? They loan on todays value.

And lets please stop crying a river about how poor long term investments are because they "get eaten up by inflation". First of all, if you are talking stock? If your investment isn't averaging better than inflation (remember averaging) then you sell the stock when its price is lower for a moment than its average and lower than initial. take the loss and then use the loss against your capital gains .

AND if we are talking property? Lets not act like that land is just sitting there. You are using the land for rent, or your own use and paying yourself, and getting the depreciation on that building.. so on and so forth.. and then you sell it at the end for a big profit.. which is only taxed at 20%.

For example.. I buy property. the corporation then leases the property and I basically pay myself by sending rent money to myself and I have other tenants that also send me money... then I depreciate the building so that it looks like I am not making any money or much off the leases. then when I have depreciated it down, getting rent, and ready to move.. Sell the building and collect the profit from the sale at 20%.

the main fact is this... capital gains is huge tax advantage... when capital gains rates went down.. there was a huge surge in investing and changing of corporate compensation to take advantage of capital gains rates... its why Romney had it worked so his compensation became "deferred compensation".. so that he could take advantage of the capital gains rate versus earned income rates....

That move toward capital gains vehicles didn't occur because rich people were stupid and didn't realize that "inflation eats up their profits".. It happened because the capital gains rate is a huge advantage.

 

[jaeger19]

Flat tax....you gotta love it. That's the bull**** Steve Forbes has been spewing for years. A working man who pays payroll tax, excise tax, sales tax, gasoline tax, possible property tax, fees and other schemes to make money,....which the rich don't even notice...will then have to add some kind of level tax at the same rate as an asshole who drives a Farrari and owns an island where he docks his yacht. That's about the epitome of arrogance.

Actually most working men probably won't pay much tax under a flat tax. Most flat tax proposals exempt everyone from a certain amount of income.. I think forbes was something like 32,000? (should check that for me).. so everyone gets the first amount tax free.. after that its a straight flat tax.

That fact is that right now.. the fellow who drives a Ferrari and owns an island often pays a lower percentage than an upper middle class worker.

 

[Peter Grimm]

Oh look, it's the predictable "double taxation" canard.

I get a paycheck. That income is taxed. The money to pay me came from a transaction with a customer, which is (in many states) taxed. The customer got that money from their job, and that income is taxed. Both of our employers pay taxes on income for the company, as well as "their" share of payroll taxes. So I take that money from my paycheck and buy something from somebody else and pay taxes on that transaction. That money is income to the person who made the thing I'm buying, and they're taxed on that income.

But no, capital gains taxes are unfair double taxation! :lamo

Canard huh?

OK, how should I spend my free money? Let's see. Let's say I have two choices.... I can go blow it on strippers and coke and pay no tax, or I can invest for my kids future and put money in the stock market.

Welp.... if I put money in to stocks, I know I'm going to have to pay the tax man that capital gains tax. Because, as we know, in America success is penalized.

There's no tax penalty for seeing strippers and snorting cocaine, though, but there sure is one if I want to invest in my family's future.

And that's pretty screwed up, IMO.

Double-taxation, in general, is pretty screwed up. That's why a flat tax is the only solution that makes any sense.

One more point - you can trade from anywhere. If I derived most of my income from investments, you can bet your ass I would be on the first plane out of the United States and I would most certainly take up residence in one of the world's tax-haven paradises like the Bahamas. People came to America to flee ridiculous taxes, I feel fleeing is part of the American Spirit.

I would move to the Bahamas, not pay a dime in taxes, and fly my American flag in the front yard to rep my country. That's called the free market of choosing where you want to live based on the government you want to be governed by.

Our government sucks balls. The only reason I'm still here is because I make my money in Texas (the only semi-sane state in the country).

 

[jaeger19]

Canard huh?

OK, how should I spend my free money? Let's see. Let's say I have two choices.... I can go blow it on strippers and coke and pay no tax, or I can invest for my kids future and put money in the stock market.

Welp.... if I put money in to stocks, I know I'm going to have to pay the tax man that capital gains tax. Because, as we know, in America success is penalized.

There's no tax penalty for seeing strippers and snorting cocaine, though, but there sure is one if I want to invest in my family's future.

And that's pretty screwed up, IMO.

Double-taxation, in general, is pretty screwed up. That's why a flat tax is the only solution that makes any sense.

One more point - you can trade from anywhere. If I derived most of my income from investments, you can bet your ass I would be on the first plane out of the United States and I would most certainly take up residence in one of the world's tax-haven paradises like the Bahamas. People came to America to flee ridiculous taxes, I feel fleeing is part of the American Spirit.

I would move to the Bahamas, not pay a dime in taxes, and fly my American flag in the front yard to rep my country. That's called the free market of choosing where you want to live based on the government you want to be governed by.

Our government sucks balls. The only reason I'm still here is because I make my money in Texas (the only semi-sane state in the country).

No offense but not true.. you already paid tax on the money you blew on strippers and coke (assuming you held a legal job).

The money that you put in the stock market? Its exactly the same as the strippers and coke... you already paid tax on it...

When you sell your stock for a profit? You DO NOT pay tax again on that money... only on the NEW money that you earned through your investment.

But here is a difference between investing in stocks and investing in strippers... The money that you spent on strippers? No deduction for that

However, in this great nation, ... if you lose money when you sell your stock? You get to take that as a deduction against future earnings.

That's why the whole.. "double taxation" bit is a canard.

 

[Papa bull]

No offense but not true.. you already paid tax on the money you blew on strippers and coke (assuming you held a legal job).

The money that you put in the stock market? Its exactly the same as the strippers and coke... you already paid tax on it...

When you sell your stock for a profit? You DO NOT pay tax again on that money... only on the NEW money that you earned through your investment.

But here is a difference between investing in stocks and investing in strippers... The money that you spent on strippers? No deduction for that

However, in this great nation, ... if you lose money when you sell your stock? You get to take that as a deduction against future earnings.

That's why the whole.. "double taxation" bit is a canard.

Well, you could tell the IRS that you "invested" in lap dances and coke and lost your ass because you consumed everything you bought yourself instead of reselling it and see how that works for you. You can try that with your groceries, too, if you want. Maybe you're onto something.

I think the problem is that you can only write off your losses against future profits and eventually you'd have to make a good deal and make a profit before you could actually execute a write-off and if you keep doing coke and getting lapdances with your money, I'd say your chance of turning a profit on those investments is pretty close to zero.

And then, there's always the chance that the IRS might tell you to go piss up a rope because lap dances, coke and groceries don't count as long-term investments. But you can try. The worst that can happen is that the you get a huge tax bill from the IRS when they straighten you out and apply all the penalties.