Seems correct. Fair enough. Good on Musk.
I believe Twitter was purchased for $44 billion which was composed of:
$7.0 billion in senior secured bank loans
$6.0 billion in subordinated debt
$6.4 billion in personal loans secured by $42 billion of Musk’s Tesla stock
$20 billion in Musk’s cash
$7.1 billion from outside investors
$46.5 billion in total.
Note, that Musk pledged to provide $46.5 billion in equity and debt financing for the acquisition, which covered the $44 billion price tag and the closing costs.
So $46.5 less $7.1 outsides means Musk spent $39.4 billion so he didn’t have to pay $9.25 billion (approximately) in taxes thanks to a $25 billion tax loss.
I’m sure I’m missing something here, but so far it doesn’t sound so brilliant to me.
Well, nobody’s saying he’s a genius. Oh, wait…
As has been oft said about the Muskanator, you can be smart about some things and not so smart about others.
In a weird way, many people seem to be so driven by saving taxes on gains they are willing to navigate their way into a loss to do so.
I’ve come to view capital gains on big wins as a mandatory tip to the dealer on the way to cashing out your winnings. I honestly believe it has improved my returns to simply make what I believe is the correct decision for our portfolio rather than trying to get too cute avoiding capital gains. I usually end up reducing the taxes by inadvertently decreasing the pool of capital I had in the first place. This unfortunately looks like a similar example so far.
I gotta call BS on this theory.
Ultimately it revolves around the private company Musk formed and controls to buy Twitter now selling X/Twitter to a different private company also controlled by Musk.
First, do we have any evidence this transaction has happened?
Second, and more importantly, this smells of a sham transaction which would likely be disallowed under tax laws and regulations.
In simple terms, it’s basically a wash sale where you have the same investment position before and after the sale. Any loss on a wash sale is disallowed and the purported loss is rolled into the cost basis of the new purchase.
I suppose if some of his investors or lenders changed through such a transaction, the departing investors/lenders could recognize any losses. But not Musk.
It is too early to know.
Depends what the meaning of “is” is.
If it’s the purchase and it turns out to be the everything app, then he rules the world. Seems unlikely, but possible.
If it’s “the tax loss” then it’s a stupid argument. It’s like people who pay the bank a dollar in interest so they can get a 28¢ tax deduction on their mortgage on April 15th.