If Elon Musk's Twitter $44 billion deal falls through, experts say that he will save $400 million of his $1 billion fine by writing it off as a tax loss, the Daily Mail reported on Monday.
"It's good to keep in mind that the payment would be treated as a capital loss, which [Musk] can use to offset capital gains he realized upon his recent sales of some of his portfolio holdings," New York tax lawyer Robert Willens said, explaining, "If that capital loss can offset short-term capital gains, the real cost of the termination fee would be reduced by about 40% of its face amount."
Musk, who agreed to a $1 billion breakup fee as part of the buyout agreement, announced on Friday that he was walking away from the deal, because the company refused to provide information on the number of fake accounts on its site.
In an effort to force him to complete the deal, Twitter is expected to file a lawsuit against Musk this week in Delaware's chancery courts, which generally deal with business matters in hearings with no jurors.
The company contends that it has provided Musk with a "firehose" of raw data concerning hundreds of millions of tweets since he brought up the issue once again in June after initially raising it upon the agreement's inception in April, the Daily Mail reported.
Wedbush analyst Dan Ives told the Daily Mail that "this is going to be a long and ugly court battle ahead in which the fake account/bot issue will be scrutinized for all to see and casts a dark cloud over Twitter's head in the near term."
He added that "for Twitter this fiasco is a nightmare scenario and will result in an Everest-like uphill climb for Parag & Co. to navigate the myriad of challenges ahead around employee turnover/morale, advertising headwinds, investor credibility around the fake account/bot issues, and host of other issues."
Brian Freeman ✉
Brian Freeman, a Newsmax writer based in Israel, has more than three decades writing and editing about culture and politics for newspapers, online and television.
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