Elon Musk donated nearly $2 billion worth of Tesla shares to charity

Philanthropy or tax evasion?
Ameya Paleja
Elon Musk

Elon Musk, the world's second richest person, donated Tesla stock worth $1.9 billion last year, as per filings with the Securities and Exchange Commission (SEC) published on Tuesday. A total of 11.6 million shares were gifted to an unnamed charity in the second half of 2022.

Musk, who enjoyed the honor of being the world's richest for the larger part of last year, lost the coveted top spot to luxury goods tycoon Bernard Arnault after the price of Tesla stock began to dip in April. Musk, who had by then declared his intent to acquire social media company Twitter, also began selling Tesla stock to fund his purchase.

Donations to minimize the tax bill

As per U.S. laws, stockholders are not required to pay taxes on the wealth accrued by holding stock options. This wealth accrual is called unrealized gains and is not liable for tax. However, when the stock holdings are sold, the wealth obtained is subject to a capital gains tax. However, this can be waived if the stock is donated to a charity.

Last year, Musk sold $22 billion worth of Tesla stock between August and December. The 49 million shares sold during this process are subject to capital gains tax and have brought down Musk's ownership is Tesla to approximately 13 percent. While these shares are subject to capital gains taxation, the donation of 11.6 million shares will also bring him some relief.

As per filings with the SEC, Musk began to donate the stock in August itself, but about 70 percent of the donation happened over three days in December 2022, which is a strong indication that they were done for tax-saving purposes for the financial year.

Last year, Elon Musk became the largest taxpayer in U.S. history as he was due to pay $11 billion for his earnings in 2021. 2022 was a different year, with Tesla's share price dipping nearly 65 percent in valuation. Musk is only liable to pay taxes for the share of Tesla stock sold, and donating to charity will help reduce the tax bill.

It is unclear, though, which charity the Tesla CEO donated his stock to. Nearly a decade ago, Musk signed up for the Giving Pledge, where billionaires have committed to giving away half their wealth to philanthropies in their lifetimes.

Musk has also set up the Musk Foundation, which funds cause such as the development of safe artificial intelligence among other things. It is not clear whether Musk donated the Tesla stock to his own Foundation but in November 2021 had donated $5 billion of stock to an unnamed charity as well.

This news piece contains information that also appeared in Reuters, Forbes.

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