California resident Edwin Castro is the most important lottery winner of all time, after hitting a $2.04 billion Powerball jackpot in 2022. However would he be liable beneath a proposed California regulation to tax the wealth of billionaires?
The solution, it seems, is difficult and a ways from transparent. However Castro’s case highlights the trouble of pinpointing a taxpayer’s internet value with precision beneath the proposed new regulation, which has a posh method to valuing actual property holdings.
When Castro hit the Powerball jackpot, he opted for the lump-sum fee of $997.6 million. After paying federal taxes on the best marginal charge of 37% (California does not tax state lotteries), he would have walked away with round $629 million. However Castro’s wealth tale does not finish there.
An research via Realtor.com® estimates that Castro’s present internet value is most likely proper across the a very powerful $1 billion threshold. For Castro and different well to do Californians on this state of affairs, who’re doubtlessly at the cusp of big tax legal responsibility, the precise valuation and tax remedy in their property via state tax creditors would possibly develop into a very important query.
Those well to do Californians might be intently staring at the result of the overall election in November, when citizens are anticipated to make a decision whether or not the California Billionaire Tax Act turns into regulation. If the measure qualifies for the poll and is authorized, it could impose a one-time tax of as much as 5% on somebody with $1 billion in international property who was once dwelling in California as of Jan. 1, 2026.
“As soon as the Billionaire Tax Act is handed this November, folks above the edge $1 billion might be required to report a net-worth declaration with their 2026 state tax go back,” says the Billionaire Tax Now coalition, which subsidized the measure.
Estimating Edwin Castro’s internet value
In line with the Billionaire Tax Now coalition, led via a hard work union, the proposed tax at the roughly 214 billionaires within the Golden State would lift $100 billion over 5 years, with 90% of price range going to healthcare and 10% to public Okay-14 schooling and state meals help methods.
However how will the state determine those billionaires? The gang issues to “public information” and the Forbes actual time billionaires listing. Castro isn’t at the listing, because of his take-home lump sum minus taxes falling wanting the billionaire threshold.
Then again, Castro has had greater than 3 years to make that $629 million develop. May just it have grown sufficient to make him a freshly minted billionaire, surroundings him up for a far better than same old tax invoice?
Most of the people with that amount of cash do not stick it in a financial savings account incomes scant passion, which might make it simple for the federal government to pinpoint their internet value.
As a substitute, Castro, like maximum excessive internet value folks, most likely would have assorted his cash—in all probability hanging it into the inventory marketplace, houses, companies, funding price range, and extra glamorous property like yachts, vehicles, artwork, and gem stones.
Best Castro and his wealth advisers (reportedly, highschool friend Jacqueline Dilanchyan runs his circle of relatives administrative center and is helping organize his winnings) know the place his money went, however it is widely recognized that the previous structure advisor has been snapping up actual property. His purchasing spree began in early 2023 and persisted till a minimum of April 2025.
There are his a number of trophy houses, which reportedly come with a $4 million Altadena Eastern-style domestic for his oldsters, a $45.76 million Bel-Air mansion (which he reportedly picked up for “affordable,” because it was once initially indexed for $87 million), and a $25.5 million Hollywood Hills manse.
There could also be a $3.8 million waterfront Malibu space, which was once decreased to concrete pillars and smoldering wooden right through the January 2025 wildfires.
Information display that 14 burned out plots in Altadena, the place Castro used to are living, had been bought in April 2025 to Black Lion Homes LLC, Castro’s actual property funding arm, headed up via his brother, Jesse. In overall, data display he paid $10.4 million for them.
This brings his reported actual property holdings to a complete valuation of about $74 million—factoring in that many of the houses have most likely misplaced some worth since they had been bought, consistent with Realtor.com information and estimates.
Whilst that is not a trifle, the majority of Castro’s wealth appears to be somewhere else. He would have had roughly $536 million left after buying the houses. If he put that into the inventory marketplace, he would have hit a outstanding bull run that noticed the S&P 500 just about double since January 2023, when he had keep an eye on of his winnings. This, even with a large dip in March when the Iran battle broke out.
That $536 million in an S&P 500 index fund can be value about $938 million lately in accordance with underlying features by myself. With all dividends reinvested, it could be nearer to $975 million.
Including his actual property holdings, that might take his internet value to round $1.01 billion to $1.05 billion—simply above the a very powerful threshold for the proposed billionaire tax.
After all, Castro most likely did not make investments each spare penny that he hasn’t spent on actual property, and will have indulged in important purchases or donated a few of his winnings to charity. And he would have had bills to pay, and taxes on any funding features he cashed out.
Additionally it is imaginable that his investments have outperformed the benchmark S&P, hanging him deeper into billionaire territory. However for the sake of an estimated internet value, it is believable that Castro’s overall go back on funding reflected the S&P 500, hanging him simply above the proposed tax threshold.
With an estimated internet value under $1.1 billion, Castro would not be hit with the total 5% tax, however his wealth would possibly nonetheless be topic to a one-time tax of two.5% to 0.5%, in accordance with the provisions of the invoice. That may upload as much as a tax hit of round $26 million at the excessive finish to $5 million at the low finish.
Realtor.com reached out to Castro’s circle of relatives administrative center for remark however gained no reaction.
How actual property is handled within the tax proposal
As a result of Castro’s actual property holdings are doubtlessly what take him over the billionaire threshold, the tax invoice’s remedy of the ones property might be a very powerful in his case, and others who’re at the cusp.
The billionaire tax would explicitly exclude actual property held without delay via a taxpayer in their very own title or revocable agree with from calculations of internet value. However a spokesperson for the Billionaire Tax Now staff showed that actual property held via an LLC or different company entities can be integrated in internet value calculations.
As a result of all the actual property houses publicly connected to Castro are owned via LLCs, they’d most likely depend towards his internet value.
For taxation functions, that is an ordinary difference, says Clayton Bland, leader wealth advisory officer for accounting {and professional} services and products company CliftonLarsonAllen (CLA), who has been advising high-net-worth folks in California for 27 years.
Bland tells Realtor.com: “An LLC in California that has a couple of proprietor is via default handled as a partnership; alternatively, an LLC with just one proprietor is skipped over for source of revenue tax functions and the pieces of source of revenue or expense are handled at the suitable shape.
“In different phrases, actual property in a single-member LLC is [typically] no other, from a tax perspective, than actual property owned for my part.”
However this is not the best way single-member LLCs might be handled within the billionaire tax valuation procedure, Bland notes. “Actual property owned via a single-member LLC may not be excluded from a person’s internet value beneath the proposed billionaire tax,” he explains in regards to the invoice’s language.
“Extremely-wealthy taxpayers could be tempted to argue {that a} 100%-owned, tax-disregarded LLC is tantamount to a sole proprietorship and will have to thus be regarded thru for the reason that financial fact is equal to direct possession,” he says.
“Then again, absent any specific provision to that impact, such an issue faces an uphill fight. The measure’s actual wording and construction—plus its authors’ choice to say sole proprietorships however no longer skipped over LLCs—point out {that a} taxpayer’s passion in a single-member LLC is supposed to be valued like another industry passion.”
The invoice has different exclusions, together with some retirement plans, and $5 million of “more difficult to price property” equivalent to highbrow belongings rights and nonpublicly traded monetary tools.
Demanding situations of valuing a billionaire
For the ones like Castro whose property hover close to the edge however are tough to price right down to the greenback, that process might be left to the California Franchise Tax Board (FTB).
“The initiative makes use of usual valuation strategies already implemented in federal property and tax regulation. Those are smartly established and mechanically enforced via the state of California,” says the coalition on its web site.
However Los Angeles-based global circle of relatives attorney Alphonse Provinziano, who focuses on high-net-worth divorce, says that calculating a well to do particular person’s property is not normally easy.
“I paintings with property making plans pros that experience controlled property everywhere the sector, with trusts in Bermuda, Switzerland, and offshore trusts,” he tells Realtor.com. “The secret is asset coverage.”
As for the way California’s tax bureau will determine its billionaires, he says: “I feel they are hoping to forged the web as huge as imaginable. Possibly they would possibly not seize everybody, but when they may be able to get a fragment, that is most definitely what they are in search of when it comes to the tax earnings.”
He notes a lot of his high-net-worth purchasers are transferring from California to tax pleasant states equivalent to Florida, Nevada, or Texas that let for nameless possession, then setting up trusts.
“There might be a definite contingent of people that pays the 5% and transfer on, however a large number of folks will say they may be able to spend 1,000,000 bucks on attorneys and battle it, and in the event that they win, they save some huge cash,” he says.
“There may be going to be a large number of time and sources spent via the Franchise Tax Board and the Lawyer Normal’s Place of job going after folks, however that takes cash clear of different issues—like prosecuting criminals.”
Monetary planner Melissa Pavone is of the same opinion that the FTB has its paintings reduce out for it.
“How internet value is calculated is the place issues get nuanced,” she tells Realtor.com. “Illiquid property, privately held companies, concentrated inventory positions, deferred reimbursement; those don’t seem to be easy to price or plan round.”
Who is subsequent?
The wealth adviser Bland mentioned his worry is that the billionaire tax is a slippery slope that may sooner or later see asset taxation trickle right down to nonbillionaires.
“The prison framework and administrative equipment [for the new tax] will now exist, permitting it to extend additional with out an extra vote,” he says. “It is believable that over the years the edge will transfer from one thousand million to right down to a $100 million. There are millions of families that meet that threshold within the state. And tens of 1000’s with a internet value of over $10 million.”
“As soon as California has the valuation regulations, the reporting gadget, and the audit groups, the demanding situations or the marginal price of increasing it from $1 billion to $100 million could be very, very low.”
He says it’s tough to understand how the valuations will play out—particularly for individuals who don’t seem to be obviously above or under the edge.
“What is in reality necessary is solely how extraordinary this in reality is,” he continues. “This is not source of revenue tax or capital features tax. The core worry is valuation chance.”
“There may be the possibility of overtaxation if valuations are too excessive.”
Contacted via Realtor.com, the FTB wrote in an e-mail, “We do not touch upon proposed poll projects, however FTB is acutely aware of this measure and is monitoring its growth.”
The hard work coalition additionally says {that a} billionaire would have a chance to disagree with their valuation. Without a doubt, many will.
Get actual property information on your inbox
