Do you know if establishing proper "economic substance" requires a physical presence in the Cayman Islands? Or would hiring local directors and maintaining an actual office there be sufficient?

Proper economic substance typically requires more than just a local address and hired directors. The Cayman Islands themselves have economic substance requirements that include things like adequate physical presence, locally-managed bank accounts, local employees, and appropriate local expenditure relative to the level of activity. The key issue in your specific case though is that if you're physically sitting in New York making the trading decisions and executing trades, it's going to be very difficult to argue that the economic activity isn't occurring in the US. The IRS looks at where the value-creating activity is actually happening, not just where the paperwork says it's happening.

You're right - there is no tax treaty between the US and Cayman Islands, which actually makes things more complicated. Without a treaty, there are fewer protections against double taxation and fewer clearly defined rules. Also, as a US-based trader (even temporarily), FATCA reporting kicks in at $50K for foreign accounts, and the OP mentioned potentially making $135K+ which would definitely trigger those thresholds.

But doesn't the SECURE Act eliminate the stretch IRA approach you're describing? I thought that's what the 10-year rule was about - that I have to empty the account within 10 years now instead of spreading it over my lifetime. I'm so confused because different sources say different things!

You're right to be confused - the SECURE Act did eliminate the lifetime stretch for many beneficiaries, replacing it with the 10-year rule. However, there are exceptions based on when the original owner died and your relationship to them. Since your father died in 2022 and hadn't yet reached his required beginning date (age 72), you might still qualify for special treatment under certain circumstances. This is why your calculation seemed low - if you do qualify for the life expectancy method, you'll get a much smaller initial distribution than if you were simply dividing by 10 years. I'd recommend getting professional tax advice specific to your situation to confirm which method applies to you. The penalties for getting this wrong are significant (25% of the underpayment).

OMG yes! TD Ameritrade told me I had to take all the money out in 5 years, then Schwab said 10 years, and my tax guy said I could stretch it over my lifetime. I ended up requesting a private letter ruling from the IRS which cost me $10,000 but was worth it to get a definitive answer for my situation. The rules are so complicated now with all the SECURE Act changes.

Do you need to get a new appraisal specifically for this, or can you use the appraisal from when you purchased the property? My purchase appraisal has a land value listed but it's way higher than what the tax assessment suggests.

You can absolutely use the appraisal from when you purchased the property, assuming it breaks out the land value separately from improvements. That's actually one of the best documents to use since it's specific to your property and was done around the time of purchase. If your purchase appraisal shows a higher land value than the tax assessment suggests, you can use either method - but the appraisal might be more accurate since tax assessments can sometimes be outdated. The key is to pick a reasonable method and be consistent. Just document your reasoning and keep the appraisal with your tax records in case of questions later.

Ohhhh that makes so much sense now! I was driving myself crazy trying to figure out why the numbers were so far off. Thanks for explaining this so clearly!

Do you remember what specifically changed on Schedule C? I'm working on mine now and want to make sure I get it right.

The main differences weren't dramatic, but there were some COVID-related options that existed only for 2020 returns. For example, there were special provisions for the Employee Retention Credit and paid sick/family leave credits that appeared on that year's forms. The core expense categories stayed the same (advertising, car expenses, insurance, etc.), but some of the instructions and limitations were different due to pandemic relief provisions. Your best bet is to download the actual 2020 Schedule C form and instructions directly from the IRS website rather than using any current year references. That way you'll be working with the exact form as it existed then.

Not to mention the possibility of having to amend your state return too depending on where you live. Some states require you to file a state amendment if you change your federal return.

That's a good idea! I just checked and they do have an investor portal, but unfortunately, it also says the K-3s aren't ready yet. The message says "K-3s will be available by June 15th" which is the same thing the phone rep told me. I did email my contact at the partnership to ask if they could provide draft numbers, but haven't heard back yet. Do you think it would be bad to file an extension, then amend later if the numbers change significantly?

Filing an extension and then potentially amending later is absolutely fine and very common, especially with these K-1/K-3 situations. Many partnerships and investment firms routinely issue K-1s close to or even after the filing deadline, and the IRS fully expects that investors will need to file extensions. If the numbers end up being close to what you estimated, you might not even need to amend. You only really need to consider amending if there's a significant difference that would affect your tax liability. The threshold for "significant" varies, but generally a few hundred dollars difference in foreign tax credits might not warrant an amendment unless you're trying to maximize every credit.

TurboTax does have a section for K-1s but honestly it's not great with these special situations. Last year when this happened to me, TurboTax kept flagging it as an error that I couldn't resolve without the missing info. I ended up having to file an extension anyway. H&R Block's software actually handled it better - they have a specific option for "K-3 not yet available" that lets you proceed with filing while flagging which items might need to be amended later. Might be worth switching if you're not too far along in TurboTax.

Thanks for the tip about H&R Block! I haven't gotten too far in TurboTax yet so switching wouldn't be a big deal. I'm just so annoyed that these partnerships can just decide not to provide necessary tax forms until after the filing deadline and somehow that's completely legal. Seems like the IRS should hold THEM accountable rather than making all of us jump through hoops.