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Musk’s $5.7B Mystery Gift Went to His Own Charity

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Re: Musk’s $5.7B Mystery Gift Went to His Own Charity

#91

Post by bena »

ceejayoz wrote: post #23
beckingz wrote: post #7

The classic billionaire tax move. Donate money to your own foundation to work on things you want while getting a big tax break.

Donating $5.7B to save an absolute max (37% tax bracket; he's probably much lower with most income via capital gains) of about $2.1B in taxes doesn't make financial sense, unless you've got a plan to siphon off at least $3.6B tax-free out of the charity. Why do people think a $1B donation saves $1B in tax?

Yes, but the charity can pay for things for him. He needs to go to Europe and do "charity business", the charity can charter a jet for him, pay for his expenses, etc. Even better if he owns the jet, then he can essentially charter his own jet and have the charity cover the fuel and maintenance for that trip.

That $5.7B is still effectively his, untaxed.

Re: Musk’s $5.7B Mystery Gift Went to His Own Charity

#92

Post by Bilal_io »

badrequest wrote: post #58
Someone1234 wrote: post #50

Earlier quoted context omitted.

Billionaire's 501(c)(3)s aren't charities in the typical sense. They're tax-exempt piles of money that are controlled exclusively by billionaire and their families (in this case Musk and his brother). The Musk Foundation in particular has donated less than 1% of the "charities" assets (most donations less than $500K, most years less than $1M) and these "charities" can pay out to their owners from tax-exempt gains on…

> Billionaire's 501(c)(3)s aren't charities in the typical sense. They're tax-exempt piles of money that are controlled exclusively by billionaire and their families Ah, so basically the exact same as every other billionaire family's charity.

What's your point? Pointing out other billionaires doesn't make the billionaire we're discussing less horrible. Most billionaires are horrible in my opinion.

This is due to the idea that you cannot get that rich without exploiting people, taking money from government (while simultaneously talking against people receiving help), and this charity scheme is yet another loophole that needs to be closed.

Re: Musk’s $5.7B Mystery Gift Went to His Own Charity

#93

Post by ensignavenger »

brookst wrote: post #32
c22 wrote: post #8

If I had money to donate I'd donate it to the charity I thought would be most effective at helping the cause I cared most about. If I had enough money to create my own charity it would be focused on the cause I cared most about. My giant ego and hubris would make it hard for me to come to the conclusion that a charity I created wasn't the most effective at its goals, even if that didn't happen to be the case.

All true and a perfectly valid model. But also try: If I were incredibly wealthy and obsessed with running the score up, I’d see any taxes or other loss of wealth as a threat to my ego. If my tax accountants came to me and said I could have a greater net worth by founding a charity optimized for my personal benefit, I’d happily shuffle money there rather than paying taxes. I think that’s also a valid model. I don’t h…

And you would be violating the law.

Re: Musk’s $5.7B Mystery Gift Went to His Own Charity

#94

Post by Schweigi »

ceejayoz wrote: post #23
beckingz wrote: post #7

The classic billionaire tax move. Donate money to your own foundation to work on things you want while getting a big tax break.

Donating $5.7B to save an absolute max (37% tax bracket; he's probably much lower with most income via capital gains) of about $2.1B in taxes doesn't make financial sense, unless you've got a plan to siphon off at least $3.6B tax-free out of the charity. Why do people think a $1B donation saves $1B in tax?

He doesn’t need to shiphon anything. All the “donated” money is still in his control. In order to be effective at tax deference you need to separate the concept of who ownes the money and who controls it. As long as you still control it, it doesn’t matter who ownes it. That’s why a donner advised funds and similar concepts are used to reduce taxes or defer them.

In addition it’s also great for asset protection. For example if he gave a personal guarantee on some of the Twitter debt, then moving money into the foundation (as long as his Twitter stint was not fraud) will remove that out of his name and make it untouchable to the banks.

He can now use those funds to support trips to Mars and other projects. For those projects the charity might pay his expenses - for example a flight to attend a meeting in Hawaii. He can even use the money to hire his kids. The kids would have a much lower (w2) tax rate so effectively he reduced tax but kept the money in the family.

Re: Musk’s $5.7B Mystery Gift Went to His Own Charity

#95

Post by yardie »

brookst wrote: post #51
onlyrealcuzzo wrote: post #24

Earlier quoted context omitted.

How does the tax break work? Don't you still have to pay income and/or capital gains tax on everything that goes into the fund minus a pretty small amount?

Let’s say I make $100 at an effective income tax rate of 35%. I pay $35 in taxes and keep $65. Now say I make the same $100 but I give $20 to a qualifying nonprofit. I have $80 left, on which I pay 35% ($28), leaving me with $52. I have $13 less than I would have without the contribution. But if I own the nonprofit, funds under my control go from $65 to $72.

I'll do one even better.

Let's say you give $50 to your charity from your $100. Then you "borrow" it back from the same charity to invest. You chose a high dividend investment strategy and make $10 in dividends alone. You pay $17.50 on your taxable income ($50) and $1.5 on taxable gains ($10). You can donate, borrow, and spend through that charity until the day you die. And you would still pay less in (19%) than your average working stiff.

Re: Musk’s $5.7B Mystery Gift Went to His Own Charity

#96

Post by jasonlfunk »

Instead of giving directly to charities like St. Judes - he funds his foundation which gives to charities like St. Judes. When you give away $5B, wouldn't it be irresponsible to not give it to a foundation? And if you have your own foundation, wouldn't it be dumb to not give it to your own foundation? This seems like a nothing story; except that it's in vogue to hate Musk right now.

Re: Musk’s $5.7B Mystery Gift Went to His Own Charity

#97

Post by c22 »

brookst wrote: post #64
c22 wrote: post #40

Earlier quoted context omitted.

I think he's probably optimizing for both. Don't hate the player, hate the game.

I don’t see how a charity can be simultaneously optimized for benefiting its founder and also benefiting people other than its founder. Different goals, different choices. Unless you’re suggesting that Musk is such an egomaniac that he thinks the best thing a charity can do is help him personally?

It goes like this:

I want to lower my tax liability by donating to charity > as long as I'm doing that I want to make sure I'm supporting something I agree with > I'll start my own charity to ensure that's the case.

Frankly I'm much more concerned about the billion dollar roth IRAs and 529 plans which seem to have a much lower chance of helping anyone else.

Re: Musk’s $5.7B Mystery Gift Went to His Own Charity

#98

Post by mrits »

Someone1234 wrote: post #50
c22 wrote: post #8

If I had money to donate I'd donate it to the charity I thought would be most effective at helping the cause I cared most about. If I had enough money to create my own charity it would be focused on the cause I cared most about. My giant ego and hubris would make it hard for me to come to the conclusion that a charity I created wasn't the most effective at its goals, even if that didn't happen to be the case.

Billionaire's 501(c)(3)s aren't charities in the typical sense. They're tax-exempt piles of money that are controlled exclusively by billionaire and their families (in this case Musk and his brother). The Musk Foundation in particular has donated less than 1% of the "charities" assets (most donations less than $500K, most years less than $1M) and these "charities" can pay out to their owners from tax-exempt gains on…

It does have something to do with good-cause charity if you believe Forbe's reporting. Before this they estimated he gave $280 million to charities which about 20% came from this DAF.

Re: Musk’s $5.7B Mystery Gift Went to His Own Charity

#99

Post by [deleted] »

ensignavenger wrote: post #93
brookst wrote: post #32

Earlier quoted context omitted.

All true and a perfectly valid model. But also try: If I were incredibly wealthy and obsessed with running the score up, I’d see any taxes or other loss of wealth as a threat to my ego. If my tax accountants came to me and said I could have a greater net worth by founding a charity optimized for my personal benefit, I’d happily shuffle money there rather than paying taxes. I think that’s also a valid model. I don’t h…

And you would be violating the law.

[deleted]

Re: Musk’s $5.7B Mystery Gift Went to His Own Charity

#100

Post by Hamuko »

primitivesuave wrote: post #21

This reads like a hit piece, and a poorly executed attempt if so. This is standard practice and not uncommon. If we’re going to excoriate billionaires for putting their name on a foundation, shouldn’t Gates, DeVos, and others also be held to the same scrutiny? The article throws in an SBF comparison simply because both parties support the same brand of altruism.

Doesn't Bill Gates get all sorts of shit constantly for his foundation?
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