A CNBC Report says that Elon Musk faces a tax bill of more than $15 billion in the coming months on stock options.
Over the weekend, Musk asked his 62.7 million Twitter followers whether he should sell 10% of his Tesla holdings.
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“Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock,” he tweeted.
Musk was awarded options in 2012 as part of a compensation plan. Because he doesn’t take a salary or cash bonus, his wealth comes from stock awards and the gains in Tesla’s share price.
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The 2012 award was for 22.8 million shares at a strike price of $6.24 per share. Tesla shares closed at $1,222.09 on Friday, meaning his gain on the shares totals just under $28 billion.
The company has also recently disclosed that Musk has taken out loans using his shares as collateral, and with the sales, Musk may want to repay some of those loan obligations.
Since the options are taxed as an employee benefit or compensation, they will be taxed at top ordinary-income levels, or 37% plus the 3.8% net investment tax. Musk will also have to pay the 13.3% top tax rate in California since the options were granted and mostly earned while he was a California tax resident.
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According to Tesla, “If the price of our common stock were to decline substantially, Mr. Musk may be forced by one or more of the banking institutions to sell shares of Tesla common stock to satisfy his loan obligations if he could not do so through other means. Any such sales could cause the price of our common stock to decline further.”
Elon Musk is the richest person in the world, with a net worth of more than $185 billion, recently exceeding Amazon CEO Jeff Bezos, who is worth $184 billion.
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