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for his work for Tesla, instead taking out loans against his roughly $300 billion fortune to live off of and avoid paying income tax. This year's stock sales are widely believed to be necessary to pay off some of those loans and take advantage of certain stock options that will expire next year.
Most of Musk's current shares are subject to a 23.8% tax by the IRS on the amount of the value they increased since he obtained them, which is nearly the full current value given the stock's extraordinary rise in recent years.Ordinarily, California would charge an additional 13.3%, but Musk can avoid this if he completes his move in time. In order to be exempt from taxation under
, Musk must show that he will"remain in the new locality permanently or indefinitely."According to anAugust SEC filing from Tesla, Musk owns about 170 million shares of the electric automaker. Selling 10% of his hoard — about 17 million shares — at the company's stock price of about $1,130 a share as of midmorning Tuesday would produce a windfall in the neighborhood of $19.2 billion. California's 13.3% cut, then, would be around $2.5 billion. headtopics.com
Texas has no income tax or capital gains tax on individuals. So far, Bloomberg estimates, the strategy has likely saved him about $500 million.Cristobal Young, a sociology professor at Cornell University who studies taxes on the rich, told Bloomberg that it won't matter that nearly all the gains occurred while Musk was a California resident — all that matters is when the stock sales are recorded.
Musk is"basically shirking his tax responsibilities," Young said."California provided access to the talent he needed to build the company.""That's a complex analysis," tax attorney Christopher Manes told Bloomberg."If he's claiming he's a nonresident, obviously California has an incentive to audit him and find out."
Musk did not respond to Insider's request for comment on this story.Sign up for notifications from Insider! Stay up to date with what you want to know.Subscribe to push notificationsAn icon in the shape of a lightning bolt.Read more: Business Insider »
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