Musk’s $ 5 billion Tesla loot rocks the charity circuit

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The richest man in the world suddenly has more money than most people can spend in their lives. What will he do with it?

Elon Musk, whose net worth is set by Forbes at $ 270 billion, had traditionally kept his wealth tied to his stake in Tesla Inc, the electric machine creator founded in 2003. He borrowed his stock when he needed more money and sold stock primarily to cover his tax obligations.

That is until this week, when his trust sold nearly $ 5 billion worth of Tesla stock in the open market after Twitter users voted for him to sell 10% of his stock in an online poll he created. He sold another $ 1.1 billion worth of Tesla stock to pay taxes associated with exercising stock options.

More stock sales are expected as it has sold only about 3% of its Tesla stock so far. It hasn’t revealed what it will do with the proceeds, but the cash crop has already created a buzz among major charities that are always vying for rich donors.

“Her opportunity to make a big impact is to donate very significant sums of money to leading organizations that are addressing the most pressing problems with global poverty and access to healthcare,” Melissa Berman, CEO of Rockefeller Philanthropy Advisors , a nonprofit that offers advice to charity giving, said in an interview.

Musk did not respond to requests for comment on his plans.

Musk’s acts of public philanthropy have so far drawn other billionaires. Musk and Amazon.com Inc founder Jeff Bezos have donated less than 1% of their net worth, while Warren Buffett and George Soros had given up more than 20% of their net worth in early September, according to Forbes.

It is possible, however, that many of Musk’s charitable donations have not been made public.

Musk signed the Giving Pledge in 2012, a pledge by some billionaires to donate at least half of their wealth to philanthropy during their lifetime or after their death. In 2001, he founded the Musk Foundation, offering grants for the “development of safe artificial intelligence for the benefit of humanity” among other causes, according to its website.

Musk’s foundation has assets of more than $ 200 million, which is “not that big” compared to its fortune, said Brad Smith, president of Candid, a nonprofit information service that provides information on other nonprofits. and foundations.

Earlier this year, Musk and his foundation offered a $ 50 million first prize to the inventor who can invent a technology to help remove carbon from the atmosphere. The prize has yet to be won.

Musk has also flirted with more ambitious philanthropic goals. He tweeted last month that “if (the United Nations World Food Program) can describe … exactly how $ 6 billion will solve world hunger, I will sell Tesla stock right now and I will.”

Musk was responding to a donation request from David Beasley, executive director of the World Food Program. Beasley tweeted that he was willing to meet with Musk to provide more details, and it’s unclear whether the two explored the idea further.

Beasley and the World Food Program did not immediately respond to a request for comment.

Musk has shown in previous tweets that he’s thinking of ways to make a big philanthropic impact. In January, he asked Twitter users “ways to donate money that really make a difference (much harder than it looks.)”

Tax incentives

There are also tax benefits associated with charitable donations. According to the United States tax code, most donations can be deducted from taxable income.

“Almost every billionaire you can think of donates money and minimizes taxes,” said Ray Madoff, a professor at Boston College Law School, where she is director of the Forum on Philanthropy and the Public Good.

In addition to donating money, there would be an additional tax benefit for Musk who donates Tesla stock. This is because shares donated to charity are not subject to capital gains tax, as they would be if they were sold.

“It’s like a double donation bonus. It’s in a position where there’s a substantial incentive to donate,” said Brian Mittendorf, an accounting professor at Ohio State University.

Musk’s younger brother Kimbal Musk, who is also a member of Tesla’s board of directors, implemented this tactic as recently as last week. He donated 25,000 Tesla shares worth $ 31 million to an unidentified charity.

With Tesla’s stock nearing record highs, Musk could benefit from their current valuation by donating more, said Bob Lord, an associate member of the Institute for Policy Studies who studies fiscal policy.

“If you’re going to donate shares, when do you want to donate them? When it’s at its peak,” Lord said.

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