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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

#231

Earlier quoted context omitted.

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 e…

Exactly. It's not some hack that magically makes income tax liability just disappear, as many commenters are thinking it could be. Rather there are marginal tax benefits combined with strong asset protection, that make sense when you've got an obscene amount of money to manage so the administrative overhead becomes negligible - the question goes from "why" to "why not".

Another thing people are missing is that it's not an income tax dodge, but rather an estate tax dodge. The money will remain in control of his heirs, assuring they'll never go hungry or want for a place in the world.

It also creates more opportunities to play with asset valuations to evade taxes (eg separate the financial and voting interest of some stock in a closely held company, then claim the financial interest is worth very little without the control interest). But it's impossible to know if this is actually being done without seeing tax filings, including his (eventual) estate tax filing.

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

#232
post #170

Earlier quoted context omitted.

“However, crucially, when the money leaves the foundation it must go to an approved charity.” They can spend money on expenses and those expenses can benefit you. Having family members work for and be generously paid by such an orientation is a common example. Anytime you control a cash flow you can benefit from that cash flow.

yes, but that income will be fully taxed by the recipient (at whatever their tax rate is). The recipient isn't getting it tax free.

You avoid both income and gift taxes and they don’t pay taxes on benefits like health insurance so it’s a significant tax savings over just handing out money. More importantly is the social benefits as working at a charity is seen more positively than living on a trust fund.

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

#233

The public perception difference is quite easy to see. Compare these two statements: 1. "I gave $5B to charity" 2. "I gave $5B to my charity" That they're both charities does not wash away the feeling that one of them is a bit less selfless than the other.

Bill and Melinda Gates Foundation would also be "my charity", would it not? Or are you distinguishing between foundations and direct recipients of charitable donations?

You're correct, it would be.

However, when the Gates' donations are disclosed they tend to say "$xB was given to the Gates Foundation" while Musk's was apparently "donated to a charity". (Note: I do not follow this topic regularly, this conclusion was based on some basic searches.)

To dig a bit deeper, it could be argued that the contributions and outcomes of the Gates' foundation are relatively well known at this point while Musk's outcomes are less so.

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

#234
post #219

Earlier quoted context omitted.

isn't Bill Gates, Zuck, Bezos are all doing similar things. If I had that money, I will certainly donate to my own charity or some charity I firmly trust. The only exception is Buffet, who donated lots of his money to Bill Gates' charity, Buffet seems has no interests to manage that on his own. It's your money, make your call.

It's a perfectly valid thing to do and can be done for the right reasons, but for a counterpoint you can look at the Trump Foundation. Trump and his family gave money to the foundation and the foundation bought things from Trump (ie hosting events at Trump properties). There's loads of small foundations like this that exist for self-dealing, nepotism and tax evasion. That's also not really unique to self-funded found…

Agreed, my point is there is nothing unusual, it's a common practice everywhere, so I don't get why Bloomberg needs a big report, not sure if it did for all other big guys in the past, otherwise it seems it has an interest to target Elon.

As far as fraud goes, I hope the system will work out when bad things went too far there. We're all innocent with good intention until proven otherwise, Elon should be treated the same, like him or not.

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

#235

Earlier quoted context omitted.

I totally agree that there are some corrupt Charities out there and bad practices. However, I don't think that's a condemnation of the concept of Charity as a whole.

I'm not "condemning" charity, some are really good and I financially support two that are important to my own family. My point was simple, someone said charities cant buy houses, but they in fact can and do.

That person was me. I agree that non-profits can buy real estate.

Maybe I wasn't clear, but my point what that charities cant legally operate for the sole benefit of the donor.

I used buying a vacation home as example of this. A charity cant do that legally. A shady charity might buy a headquarters as a pretext an use it as a vacation home.

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

#236
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…

>these "charities" can pay out to their owners from tax-exempt gains on the back-end.

Even if this were true, that back-end would be taxable, so who cares?

That said, why would this make sense from the donor perspective? Why would I want to donate $1M to a charity to avoid taxes, just so that it can pay me $1M which I would then have to pay taxes on again?

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

#237

Its interesting how Elon Musk became a target of large media outlets' attacks since he de-facto entered US and world politics. The way he entered it is novel and technological. Fascinating to see how this story unfolds further.

That's his preferred narrative. The truth is that Elon Musk has been subject to negative attention for years because of market manipulation[0], abhorrent labour practices and safety record[1], and obsession with inserting himself into the limelight via poor behaviour[2] or over-promising things he can't deliver[3][4] — to name a few reasons why he's viewed unfavorably.

[0] https://www.sec.gov/news/press-release/2018-219

[1] https://www.forbes.com/sites/alanohnsman/2019/03/01/tesla-sa...

[2] https://www.theguardian.com/technology/2018/jul/15/elon-musk...

[3] https://www.businessinsider.com/elon-musk-tesla-ventilator-c...

[4] https://jalopnik.com/elon-musk-promises-full-self-driving-ne...

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

#238

Earlier quoted context omitted.

You're by definitions giving it away. It does nothing to preserve your own wealth even if it goes to a charity you control. It's no longer your wealth and unless you want to do something illegal its not coming back to you and can't benefit you.

> It's no longer your wealth and unless you want to do something illegal its not coming back to you and can't benefit you. This is peak naivity - you are totally wrong. Exanple one - charity can make political donations. Example two - can hire lobbyists. Example three - it can buy voting shares in companies you want to control. Example four - it can hire your family members or friends and pay them salaries.

Do you think you could have worded your reply differently?

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

#239
post #187

Earlier quoted context omitted.

What's your take on these newer "economic development" 501c3's? Example: https://archgrants.org/ I've talked with the founder of Arch Grants, and I don't doubt their intentions are pure (there's others I'm more skeptical of), but either way it's difficult for me to wrap my head around the concept of a non profit that is by most metrics operating as a startup accelerator giving seed funding to for-profit businesses. *…

Not taking any equity is a pretty important distinction.

Even if they did take equity, I'm not sure that would be a problem. Charities and non-profits can make investments. For example, foundations have huge market investments.

The distinction is that the owners can never cash out and put the money in their pocket.

At most, they can take a salary with justification.

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

#240

Earlier quoted context omitted.

Actually, mere mortals pay tax eventually when they cash out their investments to pay for the things they want. The wealthy get to take low-interest loans against their investments to pay for the things that they want, without ever having to cash out. They never have to pay those taxes, and their inheritors don't either due to the truly insane cost basis step-up benefit you get when assets are transferred to next of…

The cost basis step-up is not insane, IMO. It's partly practical ("how am I going to find out the date purchase and basis of some shares my grandfather bought in an account that was doing dividend reinvesting?!"), and partly to avoid unexpected outcomes ("grandpa gave the house to Alice and the rest of his estate to Bob"; if capital gains were due on the house, would Alice have to pay them or would Bob?). IMO, the ba…

Stepped up basis came out of the idea that one was already paying estate tax. Now that estate tax has disappeared for many, it seems ridiculous.

The IRS has no problem requiring you to maintain paperwork across generations. For example I've got some series EE savings bonds I inherited from my grandmother, where income taxes were partially paid (you can effectively switch just your savings bonds to an "accrual" accounting method with a specific election). I've got to keep track of this aspect until they mature, so I can subtract the already-taxed income on my own taxes. Same thing.

The answer to your hypothetical is that Alice would have to pay the capital gains, but only when she sold the house. Which is the same thing that would happen currently if grandpa gave away his stuff to Alice/Bob in his lifetime.

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