Eduardo Saverin, the billionaire co- founder of Facebook Inc. (FB), renounced his U.S. citizenship before an initial public offering that values the social network at as much as $96 billion, a move that may reduce his tax bill.

Facebook plans to raise as much as $11.8 billion through the IPO, the biggest in history for an Internet company. Saverin’s stake is about 4 percent, according to the website whoownsfacebook.com. At the high end of the proposed IPO market capitalization, that would be worth about $3.84 billion. His holdings aren’t listed in Facebook’s regulatory filings.

Saverin, 30, joins a growing number of people giving up U.S. citizenship ahead of a possible increase in tax rates for top earners. The Brazilian-born resident of Singapore is one of several people who helped Mark Zuckerberg start Facebook in a Harvard University dormitory and stand to reap billions of dollars after the world’s largest social network holds its IPO.

“It’s plainly lawful and at the same time profoundly ungrateful to the country that provided these opportunities for him,” said Edward Kleinbard, a tax law professor at the University of Southern California in Los Angeles. “He benefited from his U.S. education, the contacts he made at Harvard, and most important the extraordinary openness and flexibility of our economy that encourages startup ventures to flourish.”

Saverin’s name is on a list of people who chose to renounce citizenship as of April 30, published by the Internal Revenue Service. Saverin made the move “around September” of 2011, Tom Goodman, a spokesman for Saverin, said in an e-mailed statement.

“Eduardo recently found it more practical to become a resident of Singapore since he plans to live there for an indefinite period of time,” Goodman said. Saverin still does hold Brazilian citizenship, Goodman said.

Americans who give up their citizenship owe what is effectively an exit tax on the estimated capital gains from their stock holdings at the time of the renunciation, even if they don’t sell the shares, said Reuven S. Avi-Yonah, director of the international tax program at the University of Michigan’s law school. In other words, for tax purposes, the IRS treats the stock as if it has been sold.

In Saverin’s case, the gain and subsequent tax bill would be based on the estimated fair market value as calculated by his tax advisers, not an actual open market sale. They could value his Facebook stake at less than it will be worth once shares trade publicly.

Saverin and his advisers could say that the value of his stake should be reduced for tax purposes because of the potential difficulty of selling the shares while the company was private.

Renouncing citizenship well in advance of an IPO is “a very smart idea,” from a tax standpoint, Avi-Yonah said. “Once it’s public you can’t fool around with the value.”

And even the tax bill triggered by Saverin dropping his U.S. citizenship can be deferred indefinitely until he actually sells the shares. In that case, Saverin would have to pay interest during the deferral period -- currently at an annual rate of 3.28 percent per year, Kleinbard said. (Bloomberg)