If and when Elon Musk sells a large chunk of his Tesla shares, it’ll probably have relatively little to do with a Twitter poll among his loyal followers — and everything to do with a looming multi-billion-dollar tax bill.
Musk published a Twitter poll over the weekend, noting that because he doesn’t receive a cash salary he pays income tax only when he sells shares. And because « much is made lately of unrealized gains being a means of tax avoidance, » he asked the Twitterverse if he should sell 10% of his shares. Some 58% of respondents said yes. The tweet got attention, as many of Musk’s social media antics do. But the move is not really about a populist vote. The real reason is because Musk is just months out from a deadline to exercise the stock options he received years ago. If he doesn’t use them, he loses them. And if he does exercise his shares, he’s going to face a monster tax bill between nearly $11 billion to as much as $16 billion at current share prices. Continued increases in the value of Tesla stock could push his tax bill even higher. Shares of the EV maker, which rose 743% last year, are up another 68% so far this year — though they did drop 3% Monday following his weekend poll. Musk received the 22.9 million stock options in question as part of his 2012 compensation package. Those options are due to expire August 13, 2022, making them worthless unless Musk exercises them before the deadline. Once he exercises, however, those shares would be treated as regular income subject to income tax, said Mark Luscombe, principal federal tax analyst for Wolters Kluwer Tax & Accounting.
