Billionaire Stock Donations to Kids Trigger a $10B Tax Windfall

A Sept. 30 U.S. Treasury rule change has quietly transformed how American billionaires approach philanthropy, unlocking a capital gains tax loophole that is now funneling volatile corporate stock directly into children’s investment accounts.

The new regulation permits individuals to donate shares to so-called Trump Accounts provided the recipients hold the assets for at least five years. For founders and executives sitting on massive unrealized gains, the math is decisive. Donors can deduct the full market value of their shares while entirely avoiding capital gains taxes on the asset’s appreciation. Recipients will eventually owe income tax when they sell the stock, but the immediate tax liability shifts away from the donor.

Elon Musk announced on X yesterday that he plans to give every child under 18 in the U.S. a share of SpaceX next year. At $147.96 per share, the total distribution amounts to roughly $10.7 billion worth of stock. Days earlier, SpaceX President Gwynne Shotwell pledged to distribute more than 2 million shares of her own stock through the same program. Shotwell wrote on X that her shares would be dispersed with “a bit more emphasis for those that live near our central Texas home,” an area where SpaceX has faced lawsuits and protests from local residents.

This targeted geographic distribution highlights a structural flaw absent from traditional cash philanthropy. Last year, Susan and Michael Dell donated $6.25 billion in cash to similar accounts. Cash carries no conflict-of-interest baggage. Stock does. Federal ethics rules frequently bar government workers and their families from holding shares in companies they regulate or contract with, yet there is currently no mechanism to prevent specific equities from landing in a minor’s locked account. A five-year mandatory holding period forces millions of underage shareholders to ride out corporate volatility without the ability to exit if the company’s fundamentals deteriorate.

The tax incentive extends beyond aerospace. Anthropic co-founder and President Daniela Amodei announced the artificial intelligence company will commit 5% of its as-yet-unissued shares to the Anthropic Public Benefit Fund. The entity is structured as a wholly owned LLC dedicated to the public benefit rather than a 501(c)(3) charity. That distinction means Anthropic CEO Dario Amodei or other executives retain control over how the capital is deployed. The pledge arrives ahead of the company’s anticipated $2 trillion IPO.

Forced public ownership of private enterprise rarely happens outside of systemic emergencies. During the 2008 financial crisis, the U.S. government took direct equity stakes in AIG, GM, and Citibank to prevent economic collapse. The current wave of distributions operates under a different premise: utilizing retail investors, including minors, as tax-efficient vehicles for executive wealth transfer.

Alternative models exist. Industry observers have proposed regulating frontier AI labs like public utilities, establishing independent trusts subject to audits and distributing dividends based on shared infrastructure usage such as energy and intellectual property. No major technology executive has publicly endorsed surrendering asset control to a government-managed fund.

Contact CEO Daily via Diane Brady at diane.brady@fortune.com

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CEO Daily is curated and edited by Joseph Abrams, Jason Ma, Claire Zillman, and Lee Clifford.