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Tesla employees lots of people who pay income tax. Capital gains is taxed on the residence at time of sale, not time of purchase. So if Musk sells when he’s no

Tesla employees lots of people who pay income tax. Capital gains is taxed on the residence at time of sale, not time of purchase. So if Musk sells when he’s not a resident of CA, he won’t pay CA taxes.

outside1234 5y ago
That's not actually true - California will probably consider this California income because he earned it while in California.
- deadmutex 5y ago
  Are you a tax lawyer by any chance? or is this just guessing?
  - KingMachiavelli 5y ago
    This is somewhat unique to CA but it was in the news recently. https://www.sambrotman.com/personal-income-tax-residency-california/income-sources-california-state-tax https://www.sambrotman.com/personal-income-tax-residency-cal... https://www.ftb.ca.gov/forms/misc/1004.html https://www.ftb.ca.gov/forms/misc/1004.html
  - holler 5y ago
    I know people who have been harassed by CA franchise tax board many years after leaving the state, and had to prove they had left.
    - deadmutex 5y ago
      Sure, though, they probably weren't one of the wealthiest people on Earth that could afford ton of accountants and lawyers. Billionaires aren't known for paying taxes, so pardon me for being skeptical.
dmitrygr 5y ago
CA already came up with a convoluted way to tax even that: https://www.upstartwealth.com/blog/will-you-owe-ca-tax-after-you-leave https://www.upstartwealth.com/blog/will-you-owe-ca-tax-after... And yes indeed, the taxable event is vesting, it indeed happens outside of ca, and yes CA still intends to tax you! They will even come after you in another state for it, after you permanently move out. !!!
deleted 5y ago
[deleted]
AmericanChopper 5y ago
Isn’t any equity he is awarded for the period of work he did as a tax resident of California, taxable in California, regardless of whether those gains are realized today or in 20 years?
- brianwawok 5y ago
  Equity is taxed on sale. He will never sell it. He will give it to a bank and take a loan against it. When he dies bank can sell it and pay itself back.
  - AmericanChopper 5y ago
    I really don’t think this is true. Being granted the stock is a taxable event, even if you don’t liquidate any of it, and even if that means you have to sell some to pay the taxes. Also, the methodology you’ve described for avoiding taxes is used to benefit from offshore holdings, not avoid paying taxes on locally held assets.
    - jessaustin 5y ago
      This scheme finances the personal spending of every American worth more than $50M. Sure, any time they're sloppy enough to personally receive real income, they pay taxes on it. Usually they are not that sloppy. The income goes to shells or other assets in which they've "invested". The assets become more valuable, and thus can be used as collateral for larger loans.
      - AmericanChopper 5y ago
        I’ve worked with organisations that trade SLOCs other types of instruments that are typically used for these types of transactions. They can be used to defer taxable events in some cases (by taking a loan today instead of selling your shares/options), but there’s no way to use them to avoid paying taxes on local assets. This is especially true with Musk, because he’ll have to sell expiring options soon, which will be a taxable event no matter what. The only way they can be used to avoid paying taxes all together is if you’re trying to derive income from assets held (usually secretly) offshore, and this is almost always criminal tax evasion. The only thing they’re achieving in this circumstance is basically an international fund transfer without creating any taxable income. There are no secret tricks you can do to transfer your assets beyond the control of the IRS, you can’t “give” them to a bank, and if they’re collected as collateral on a defaulted loan, that’s a taxable event too. Companies can get away with moving their profits to other jurisdictions, because a collection of subsidiary companies can exist in as many different tax jurisdictions as you want. Individuals can’t (legally) do this, especially not US citizens, because they remain US tax residents for their entire lives, regardless of where they live or work. A lot of billionaires don’t pay a lot of taxes every year, because they don’t have a lot of income every year. The only way to turn it into a scandal is if you ignore all the years in which they do pay a lot of taxes. Which is, of course, fundamentally stupid.
sjg007 5y ago
He will pay gains on where the stock vested. So CA in this case.
paxys 5y ago
Nope. CA taxes you on the shares you earned in the state, regardless of where you sold it.
- 8note 5y ago
  They don't tax it at the time you recieved the shares?
  - paxys 5y ago
    Depending on the grant type receiving it might not be a taxable event. And even otherwise, in a lot of cases the majority of income is realized in the form of capital gains.

outside1234 5y ago

That's not actually true - California will probably consider this California income because he earned it while in California.

deadmutex 5y ago
Are you a tax lawyer by any chance? or is this just guessing?
- KingMachiavelli 5y ago
  This is somewhat unique to CA but it was in the news recently. https://www.sambrotman.com/personal-income-tax-residency-california/income-sources-california-state-tax https://www.sambrotman.com/personal-income-tax-residency-cal... https://www.ftb.ca.gov/forms/misc/1004.html https://www.ftb.ca.gov/forms/misc/1004.html
- holler 5y ago
  I know people who have been harassed by CA franchise tax board many years after leaving the state, and had to prove they had left.
  - deadmutex 5y ago
    Sure, though, they probably weren't one of the wealthiest people on Earth that could afford ton of accountants and lawyers. Billionaires aren't known for paying taxes, so pardon me for being skeptical.

dmitrygr 5y ago

CA already came up with a convoluted way to tax even that: https://www.upstartwealth.com/blog/will-you-owe-ca-tax-after-you-leave https://www.upstartwealth.com/blog/will-you-owe-ca-tax-after... And yes indeed, the taxable event is vesting, it indeed happens outside of ca, and yes CA still intends to tax you! They will even come after you in another state for it, after you permanently move out. !!!

deleted 5y ago

[deleted]

AmericanChopper 5y ago

Isn’t any equity he is awarded for the period of work he did as a tax resident of California, taxable in California, regardless of whether those gains are realized today or in 20 years?

brianwawok 5y ago
Equity is taxed on sale. He will never sell it. He will give it to a bank and take a loan against it. When he dies bank can sell it and pay itself back.
- AmericanChopper 5y ago
  I really don’t think this is true. Being granted the stock is a taxable event, even if you don’t liquidate any of it, and even if that means you have to sell some to pay the taxes. Also, the methodology you’ve described for avoiding taxes is used to benefit from offshore holdings, not avoid paying taxes on locally held assets.
  - jessaustin 5y ago
    This scheme finances the personal spending of every American worth more than $50M. Sure, any time they're sloppy enough to personally receive real income, they pay taxes on it. Usually they are not that sloppy. The income goes to shells or other assets in which they've "invested". The assets become more valuable, and thus can be used as collateral for larger loans.
    - AmericanChopper 5y ago
      I’ve worked with organisations that trade SLOCs other types of instruments that are typically used for these types of transactions. They can be used to defer taxable events in some cases (by taking a loan today instead of selling your shares/options), but there’s no way to use them to avoid paying taxes on local assets. This is especially true with Musk, because he’ll have to sell expiring options soon, which will be a taxable event no matter what. The only way they can be used to avoid paying taxes all together is if you’re trying to derive income from assets held (usually secretly) offshore, and this is almost always criminal tax evasion. The only thing they’re achieving in this circumstance is basically an international fund transfer without creating any taxable income. There are no secret tricks you can do to transfer your assets beyond the control of the IRS, you can’t “give” them to a bank, and if they’re collected as collateral on a defaulted loan, that’s a taxable event too. Companies can get away with moving their profits to other jurisdictions, because a collection of subsidiary companies can exist in as many different tax jurisdictions as you want. Individuals can’t (legally) do this, especially not US citizens, because they remain US tax residents for their entire lives, regardless of where they live or work. A lot of billionaires don’t pay a lot of taxes every year, because they don’t have a lot of income every year. The only way to turn it into a scandal is if you ignore all the years in which they do pay a lot of taxes. Which is, of course, fundamentally stupid.

sjg007 5y ago

He will pay gains on where the stock vested. So CA in this case.

paxys 5y ago

Nope. CA taxes you on the shares you earned in the state, regardless of where you sold it.

8note 5y ago
They don't tax it at the time you recieved the shares?
- paxys 5y ago
  Depending on the grant type receiving it might not be a taxable event. And even otherwise, in a lot of cases the majority of income is realized in the form of capital gains.