Roblox CEO Was Found to be Using a Popular Legal Tax Dodge

Lindsay Robertson / 06 Jan 2022

Roblox CEO Was Found to be Using a Popular Legal Tax Dodge image

Apparently, a tax break that was aimed to help small businesses in the 90s can also be used by giant businesses, allowing them to save an enormous amount of money on taxes. This tax break is called the Qualified Small Business Stock exemption and was meant to shield small businesses from paying taxes on one-half of their profits as long they don’t exceed 50 million dollars.

Back in 2004, when Roblox Corporation was founded, they qualified for this exemption since their assets were valued lower than $50 million. However, the problem with this exemption is that it can be cloned by simply gifting stocks of your company to family members or friends. Even though, these people didn’t spend a dime on the company, they are still qualified for the exemption.

As a result, this allowed David Baszucki to clone the exemption 12 times by gifting stocks of his company to his 4 children, wife, and numerous relatives. Even though this practice sounds cheaty as hell, it is 100% legal, used by many of Silicon Valley’s ultra-wealthy, and has even been dubbed “stacking” or “peanut-buttering” due to how easy it is to get these exemptions.

Biden administration has proposed to cut the exemption benefit by half, but this won’t really solve the problem, since it will simply force people to do even more stacking. Thus, this problem remains to be solved.

Despite the fact that Roblox was used as a primary example of misuse of this exemption, many other companies that started small but grew into giants use this method to avoid paying 50% of their taxes. This tax break is just too good and too easy not to abuse!

If you were David Baszuchi, would you have used stacking to avoid paying 50% of your taxes? Do you think the government will spend that money more wisely? Share your thoughts in the comment section.

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