The Facebook Playbook

No Taxes for Facebook? Senator Cries Foul - Yahoo! Finance: "Basically, the loophole works like this: According to the company's IPO filing, Facebook CEO Mark Zuckerberg will exercise options to buy 120 million shares at 6 cents per share. The shares are now currently estimated at the value of $40 per share or about $5 billion total, but under the current corporate tax code, Zuckerberg will be able to report to investors and regulators that the stock options cost just six cents per share. This amount will also be recorded in the company's books. However, on Facebook's tax return, the company can claim the options at the price the shares actually sell for when the company goes public and take a tax deduction on the larger amount.
"So the books show a highly profitable company, profitable in part because of the relatively small expense that the company shows on its books for the stock options that it grants to its employees," Levin said. "But when it comes time to pay taxes, to pay Uncle Sam, the loophole in the tax code allows the company to take a tax deduction for a far larger expense than they have shown on their books.""

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