Thanks for bringing up the look-back rule - I hadn't considered that! I do have a small 1231 loss from a property I sold in 2023. So if I understand correctly, a portion of my current gain would be considered ordinary income rather than capital gain? Would that portion not be eligible for OZ investment?

Yes, exactly. If you had a 1231 loss in 2023, a portion of your current 1231 gain would be recaptured as ordinary income to the extent of that previous loss. That recaptured portion would not be eligible for OZ investment, since OZ investments can only be made with capital gains. For example, if you had a $10,000 1231 loss in 2023 and now have a $50,000 1231 gain, $10,000 of your current gain would be treated as ordinary income and only the remaining $40,000 would be treated as capital gain eligible for OZ investment.

I invested in an OZ fund after selling a small apartment building in 2022. The fees are definitely higher than typical investment funds, but remember you're getting tax benefits that can offset those costs. I went with a fund focused on multifamily development in emerging markets which aligned with my investment goals. Make sure you do due diligence on the fund manager's track record and understand the timeline - you need to hold for 10+ years to get the full tax benefits on appreciation. And be prepared for the tax bill in 2026 on your initial deferred gain.

Interesting approach! Approximately what percentage of your annual earnings were you able to shift this way? And did you face any challenges with the IRS regarding the size of the contributions relative to employee compensation?

We were able to shift around 15-20% of our annual earnings through the defined benefit plan. The exact amount depends on factors like age, compensation levels, and retirement age assumptions, but it made a meaningful difference in our accumulated earnings position. We haven't faced IRS challenges because we worked with an actuary to ensure our contributions were justifiable based on legitimate factors like age and compensation. The key is ensuring the plan is properly designed as a genuine retirement vehicle, not just a tax avoidance mechanism. Having multiple real employees (not just family members) participating in the plan also helps demonstrate its legitimacy.

I strongly advise against offshore structures for avoiding PHC or AET taxes. The IRS has extremely robust anti-avoidance rules for foreign corporations owned by US persons. You'll trigger Controlled Foreign Corporation (CFC) rules, GILTI (Global Intangible Low-Taxed Income) taxes, PFIC (Passive Foreign Investment Company) regulations, and face extensive foreign reporting requirements with massive penalties for non-compliance. The compliance costs alone would likely exceed any theoretical tax benefits, and aggressive offshore structures specifically designed for tax avoidance could trigger significant penalties or even criminal charges.

Thanks for mentioning this! I had no idea there was a separate credit. Does this replace the medical expense deduction or can I potentially use both? Also, does it matter that I'm not physically taking care of her myself (since she's in a facility)?

You cannot double-dip by claiming the same expenses for both the Dependent Care Credit and as medical expense deductions. You'll need to choose which is more beneficial based on your overall tax situation. Generally, credits are more valuable than deductions, but it depends on your specific numbers. The good news is that you don't need to physically care for her yourself to claim the Dependent Care Credit. Expenses paid to a care facility qualify as long as part of the expense is for the care of your mom. However, if the facility provides medical care, you need to separate out the cost of care from the medical expense portion if you want to use both benefits for different expenses.

Is there any way to fix this if you've already been giving the money to the parent? My sister and I deposit money in our dad's account and he pays his care facility.

That's helpful, thanks! I moved October 10th and was in the US until December 18th when we returned for the wedding. We stayed in Canada until January 2nd, so that's about 27 days total in Canada for 2024. Sounds like I should be well under the 183-day threshold. Do pre-move days count toward this calculation too? Like, I was obviously in Canada from January-October before moving.

Yes, all days physically in Canada during the calendar year count toward the 183-day threshold, including January-October before your move. So you'd have roughly 9 months plus 27 days, which would put you over the 183-day threshold for 2024. However, this doesn't automatically make you a resident for the whole year. The CRA can recognize a change in residency status during the year. For people leaving Canada, they often consider you a part-year resident up to your departure date if you've legitimately established non-residency after that point. This is why your accountants are focusing on your ties after October, because they're trying to determine if you successfully established non-residency upon your departure.

I'd be careful with NR73. It can be helpful but it's also known to trigger extra scrutiny. My cross-border tax specialist advised against filing it unless absolutely necessary because it essentially puts you on CRA's radar and can lead to additional questions and reviews. Sometimes it's better to take a reasonable position based on your facts and circumstances and be prepared to defend it if questioned, rather than proactively asking for a determination.

This is really helpful - I hadn't thought about the pass-through issue. In my case, the artists are receiving payment directly from their platforms and then sending me my percentage (usually 15-20%). So if they make $1000, they'd send me $150-$200 via Venmo. Does that simplify things since I'm only receiving my commission portion?

That definitely simplifies your situation! Since you're only receiving your commission portion directly, there's no pass-through income to worry about. The full amount you receive through Venmo is indeed your business income that should be reported on your Schedule C. Just make sure you're tracking each payment received with details on which artist it came from, what platform earnings it relates to, and the commission percentage applied. This documentation will help support your reported income if you're ever questioned. It's also smart business practice to send your artists an annual statement showing the total commissions they paid you, both for their records and yours.

This might be overkill for small payments though. I pay VAs in the Philippines less than $5k each per year and my accountant said as long as I have good documentation of the work performed and payments made, I don't need to worry about additional foreign reporting forms. Might depend on the dollar amount?