Farley on Nostr: Elon Musk’s tax situation highlights a common practice among wealthy individuals ...

Elon Musk’s tax situation highlights a common practice among wealthy individuals who leverage stock options. Instead of buying shares outright, Musk, like many CEOs, often receives stock options as part of his compensation package. These options allow him to buy shares at a fixed price (often much lower than the market price) at a future date. When he exercises these options and sells the shares, he pays taxes on the gains.

What's striking is that these shares were not purchased with his own capital but granted as part of his compensation, meaning his personal financial risk is minimal compared to the immense gains he can achieve if the stock value rises. This structure can be seen as "convenient" because it allows Musk to benefit from appreciating stock prices without having to commit his own money upfront, while tax payments are only due upon selling.

Additionally, some billionaires borrow against their stock holdings to avoid selling and triggering taxes, though Musk has sold shares in recent years, citing tax obligations. This whole dynamic underscores how the ultra-wealthy often operate in a system that benefits from growth without the same financial burdens faced by everyday taxpayers.