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U.S. Cross-Border Tax Services for Canadian Residents with US Connection and Snowbirds

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Signing Bonuses

Generally, bonuses paid to Canadian residents or to nonresidents of Canada for work performed in Canada are included in an athlete’s total income. However, the maximum tax rate is 15%. Similar rules apply to how signing bonuses are taxed in the United States. At the same time, taxation of signing bonuses varies depending on the country of residence of the athlete.

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Selective Representation

Developed arguments and a tax filing position for claiming substantial amount of certain tax deductions (missed by previous tax return preparer) for a professional athlete defrauded by their agent.
Structured several investments in US real property, as well as advised on tax-efficient structuring of similar investments.
Advised professional athletes on applicable US cross-border tax consequences and implications arising from a proposed Retirement Compensation Arrangement (RCA), including developing a corresponding tax filing position.
Advised professional athletes on US tax residency (income tax) and domicile (US estate and gift tax) considerations designed to effectively manage the athletes’ US tax exposure.
Advised professional athletes on tax-efficient endorsement income structuring.
Prepared various successful Notice of Objections related to income souring for non-resident athletes, resulting in significant tax savings.

Agent and Legal Fees

Legal and agent fees are often a significant expense for a professional athlete. In Canada, legal fees must meet particular requirements in order to be deductible. In the United States, these fees are typically deductible, with few exceptions. In Canada, agent fees are not deductible. Importantly, they are deductible, as an itemized deduction, in the United States.

This is one of the examples when pro-active planning may result in significant tax reduction for some professional athletes. Residency planning for professional athletes may be critical, especially, when there may be such an opportunity before they established their tax residency in a particular jurisdiction.

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Proper and early Retirement Compensation Planning is crucial to professional athletes in particular as their careers are comparatively shorter than other careers, especially if they are narrowed down to a few crucial years. This means that a young athlete, especially in her/his peak years, may benefit significantly from a tax-efficient retirement compensation plan in order to receive benefits and receive optimal financial opportunities after retirement.

Retirement Compensation Arrangements (RCAs) in Canada may be a perfect mechanism for a professional athlete to secure his future, once he no longer can play. Such planning can also help protect the athlete from potential loss of employment (for example, due to a long-term injury).

RCAs are available to both Canadian resident and US resident athletes who play on both sides of the border. RCAs are also a popular planning tool for European players playing in Canada.

 

Assets Protection Strategies

Many professional athletes end up losing a large amount of their earnings due to poor financial decisions. Effective strategies are crucial and need to be implemented in order to protect an athlete’s assets to allow them to thrive financially. The asset protection may be relevant to professional athletes who may be prey to “gold-diggers.”

Part of asset protection planning may involve cross-border estate and gift tax planning for a professional athlete. The significant challenge in this respect is to gain the athlete’s attention, when they are young and do not want to think about retirement.

It is crucial to develop an asset protection plan ahead of time and as early as possible. Any potential creditor may be an obstacle to implementing a sound asset protection plan, had it been implemented before such creditor appeared.

 

Endorsement Income Planning

One of the areas of interest for established professional athletes is the tax-efficient structuring for endorsement income. Depending on the particular facts and circumstances, such planning, while not overly complex, may help a professional athlete achieve his financial goals.

 

 

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