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That’s because the options are treated much like salary, as income paid to Musk for his work at Tesla.īut the timing of the exercise of the options could also be designed to reduce taxes. Those options he exercised? If treated as compensation and subject to ordinary income taxes, California would generally still have a right to tax whatever was earned before he moved - probably the bulk of the options. Musk can’t totally escape his tax obligations to the Golden State. After the billionaire listed four of his Bel Air homes in May 2020 for $US62.5 million, a Los Angeles developer, Ardie Tavangarian, announced that he’d reached an agreement to buy them.Ī home in the San Francisco Bay area took longer to offload, but Musk never listed it as his personal address. Taxpayers are generally advised to wait six months to a year, or risk facing California’s auditors.įor well over a year, Musk has been making moves that would bolster the case that he’s now a Texas resident. “If he’s claiming he’s a non-resident, obviously California has an incentive to audit him and find out.”Ī key issue is the length of time between an official move date and when a large transaction occurs.
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“That’s a complex analysis,” said Christopher Manes, an attorney in Palm Springs who specialises in California tax residency issues.
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The rules take into account a variety of criteria: Taxpayers need to show they’re actually cutting ties to the state, while physically relocating themselves and demonstrating they intend to “remain in the new locality permanently or indefinitely,” according to the tax board. A spokesperson for the state’s Franchise Tax Board, which oversees tax collections, declined to comment, saying the law prohibits it from disclosing confidential information about individual taxpayers.Įscaping California’s taxes isn’t as simple as hopping on a private jet. Governor Gavin Newsom has also touted California’s role in Musk’s ascension, saying that its history of innovation and policies promoting clean energy paved the way for Tesla to become the behemoth it is today.