Musk Cuts Taxes by 450 Billion Won Due to Tesla Stock Price Drop... "Income Tax Down 450 Billion Won"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] After Tesla CEO Elon Musk posted a tweet asking whether he would sell shares, Tesla's stock price fell, significantly reducing the taxes he must pay due to exercising stock options.

According to the Wall Street Journal (WSJ) on the 23rd (local time), Musk exercised 6.4 million stock options between the 8th and 19th of this month. As a result, it is estimated that the taxes he owes to the federal government amount to $2.7 billion (approximately 3.2103 trillion KRW).

However, WSJ reported that thanks to Tesla's stock price dropping more than 15% over the week following Musk's Twitter poll on the 6th asking if he would sell 10% of his holdings, his tax burden decreased.

Tesla's stock price had been on the rise, buoyed by better-than-expected quarterly earnings and a favorable order of 100,000 electric vehicles from rental car company Hertz. On the 4th of this month, the closing price reached an all-time high of $1,229.91.

WSJ estimated that compared to the taxes based on this all-time high, Musk's tax liability decreased by $380 million (approximately 451.8 billion KRW).

Taxes on stock options are levied on the difference between the stock option exercise price and the actual stock price at the time of exercise.

The exercise price of the stock options granted to Musk was $6.24 per share.

Based on Tesla's peak stock price, the tax Musk owed was $481.51 per share, but due to the stock price decline during his consecutive exercises of stock options, the tax burden decreased to $421.59 per share, WSJ explained.

However, Tesla suffers a loss as the company's income tax deduction decreases proportionally with the reduction in compensation paid to the CEO.

WSJ estimated that for every $1 million decrease in Musk's gains from exercising stock options, Musk's tax payment decreases by $370,000, and Tesla's income tax deduction decreases by $210,000, respectively.

This content was produced with the assistance of AI translation services.