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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

#291

Post by s1artibartfast »

SQueeeeeL wrote: post #285
s1artibartfast wrote: post #239

Earlier quoted context omitted.

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.

If you can't cash out of equity it makes a deeply insecure situation for everyone involved. It basically becomes a weird way to perform stock buy backs and would almost certainly be immediately exploited

I dont think I understand what you are saying. Companies can already do stock buybacks with pretax money, and non-profits can already invest and hold equity.

I don't understand why a company would want to use a non-profit to buy back stock. The point of a buyback is to destroy the stock, driving up the price. If a non-profit holds the stock, then it doesnt work.

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

#292

Post by knorker »

yunohn wrote: post #283
knorker wrote: post #191

Earlier quoted context omitted.

If you have $1B you can already pay for everything you need or want. Donating it to your own non-profit, only to pay for your own expenses, is an extremely expensive way to "launder" that $1B into a tax deduction.

Makes total sense, that’s why poor people commit tax fraud, not rich people who have no reason to want more money! /s

If I understand you right you're saying that a 501c3 is a net gain in money?

Would you mind walking me through that?

You start off with $1B net. Presumably these are capital gains. You donate it to your own 501c3, and get 125M back on your taxes. Now you take out salary (taxed at what, 37%?), and get a total of $755M (including the $125M). No, that was a losing bet.

Ok, so you also spend it on other things. But to net gain on this you still have to actually spend less than $125M not only on actual charity, but also on overhead.

Basically can you launder this money at less than 12.5%? Keeping in mind that once laundered it's still not really yours. Sure, you control it. But it'll always be just mostly assets under your control.

You can't use that money to buy Twitter.

Also keep in mind that real money laundering can cost about 20-30%.

Is it even worth 12.5% if the billion comes with these huge restrictions?

Am I missing something?

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

#293

Post by HDThoreaun »

compsciphd wrote: post #175
Retric wrote: 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.

Paying all your family members $200k a year until the end of time has a much lower tax liability than taking a billion dollars of income in one year.

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

#294

Post by HDThoreaun »

sokoloff wrote: post #117
aisengard wrote: post #109

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…

Couldn't disagree more. Buy, borrow, die, is an insidious loophole that is costing the government billions in lost taxes.

> 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?

Capital gains taxes are paid when the asset is sold. When the house is sold the owner should have to pay the full capital gain tax, not the amount that has accrued since grandpa's death. If alice doesn't want to sell the house that's up to her.

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

#295

Post by maerF0x0 »

c22 wrote: post #273
aisengard wrote: post #109

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…

No they don't. Mere mortals don't receive enough income from their tax-deferred investments (lol), social security, and elderly side-hustle (part time cashier at Ross?) to incur a tax liability. Even taking full advantage of the senior discount at Denny's they won't leave behind much to their kin.

+1 the tricky part is realizing that if someone isnt earning enough to pay taxes, they're often net recipients of "stuff" (ie, money, services, etc) .

This means a lot of society has a net negative tax rate in the sense that they consume more than they give.

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

#296

Post by HDThoreaun »

nailer wrote: post #140
moonchrome wrote: post #48

Earlier quoted context omitted.

Gates foundation actually does charitable work from what I can tell ?

Yep so do Musk and Zuck's charities.

Musk's foundation does effectively no charity work. Gates foundation is donating 100x as much per year.

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

#297

Post by maerF0x0 »

mindslight wrote: post #240
sokoloff wrote: post #117

Earlier quoted context omitted.

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" accoun…

not trying to say blockchain is the answer to everything, but an asset ownership chain (keyed by the asset, so a tree if you think of it as all assets) . Would be a fantastic system of record for keeping cost basis of assets history.

Eg my home has a linked list of ownership w/ cost basis details back to it's inception/root.

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

#298

Post by HDThoreaun »

chollida1 wrote: post #216
bushbaba wrote: post #211

Earlier quoted context omitted.

It’s not a vacation. It’s a mission trip. It’s not a plane ticket to Vegas. It’s a ticket to a charity summit. It’s not a club table fee, it’s a team building event. Lots of ways to get what you want through qualified, albeit non frugal, business expenses.

Ok, sure, then this is no different than your own company paying for "business" trips. So no benefit or difference here. You just need to be willing to relax your morals and hope you don't get caught by the IRS.

> this is no different than your own company paying for "business" trips.

Except this foundation will exist until the end of time and who knows how long tesla will be around.

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

#299

Post by hcknwscommenter »

boringg wrote: post #130
TuringNYC wrote: post #104

Earlier quoted context omitted.

>> The Musk Foundation in particular has donated less than 1% of the "charities" assets That is how almost all endowments work -- they give away their interest income or other income, not the principal, this way they can theoretically last forever. In the past, this was easier since you could earn 5% or 7% interest on a 1-yr Certificate of Deposit. Now, rates have been 0% so charities have to either dig into principa…

Oh but most people think how it works is you give away all your money and if you don't do that you aren't very charitable. However the smart way to donate is keep principal alive and any money that money makes it goes to the charity therefore ensuring money in perpetuity. You bring up the challenge in the current environment.

"smart"? I'm not so sure. That assumes doing good deeds later (forever later really) is more valuable than doing them now/soon.

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

#300

Post by coliveira »

93po wrote: post #264
coliveira wrote: post #5

What a big "gift". It is obvious he need ways to avoid paying taxes after selling so many shares of Tesla.

Avoiding paying taxes by spending even more money that he can no longer use for himself? There is no way to financially come out ahead by donating to charity.

You didn't think this through. There is little charity in a private foundation: besides the immediate tax breaks the billionaires receive, the foundation is required to spend only 5% of its endowment on things that are remotely related to charity. The rest of the money is used like always: to buy assets, like stocks. These assets are in practice still controlled by the owner of the foundation. For example, Gates has for decades used his billions to invest in biotech that will ultimately benefit his personal investments. And I'm not event talking about the political power you can buy with your "charity giveaways".
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