Musk wants to get out of California.
He promised on May 1, 2020, that he wouldn't own a house and would sell his mansions in the Golden State. He was going to a tiny home in Texas. He moved his company from the west coast to the Lone Star state.
According to property records, he lent money to at least five buyers who used the funds to purchase his properties in the state.
He appeared to put to a vote on the matter of the tax liability after the sale of 10% of his shares, but in reality he had previously committed to in an SEC filing.
Musk needs to show that he has left California so that he doesn't have to pay a huge bill from the state on his capital gains from his stock in the company.
Musk doesn't take a salary for his work forTesla, instead taking out loans against his $300 billion fortune to live off of and avoid paying income tax. This year's stock sales are believed to be necessary to pay off some of the loans and take advantage of some stock options that will expire next year.
Most of Musk's current shares are subject to a 23.8% tax by the IRS on the amount of the value they increased since he obtained them, which is nearly the full current value given the stock's extraordinary rise in recent years.
If Musk completes his move in time, California will not charge him an additional 13.3%. Musk must show that he will remain in the new locality permanently or indefinitely in order to be exempt from taxation.
According to the August SEC filing, Musk has about 170 million shares of the electric automaker. The windfall would be $19.2 billion if he sold 10% of his stock at the company's stock price. California's cut would be around $2.5 billion.
Texas does not have income tax or capital gains tax on individuals. The strategy has likely saved him $500 million so far.
A sociology professor at Cornell University who studies taxes on the rich said that it won't matter if Musk was a California resident or not because stock sales are recorded.
Young said that Musk is shirking his tax responsibilities. He needed talent to build the company.
"That's a complex analysis," tax attorney Christopher Manes said. California has an incentive to audit him if he's claiming to be a non-resident.
Musk didn't respond to Insider's request for comment.
The full story can be read from the company.
