Case Study — Dr. G (GTA Pediatric Specialist): MPC Restructure for Cross-Border US Practice Preserves TFSA + Eliminates Double-Tax Exposure
Engagement summary: GTA pediatric specialist providing telehealth to US patients through a US LLC alongside Ontario practice through an MPC. Insight restructured the arrangement to eliminate double-tax exposure, preserve TFSA planning capacity, and remove US GILTI/PFIC classification risk on the MPC’s investment holdings.
Client archetype
Dr. G is a 45-year-old GTA-based pediatric specialist. Primary practice: hospital-based Ontario clinical work through her MPC ($480K annual billing). Secondary practice: US telehealth consulting for US-domiciled families (about $180K USD annual). US telehealth income initially flowed through a Delaware LLC of which the MPC was the sole member. Personal TFSA fully funded ($95K). Dr. G is a Canadian tax resident and US non-resident.
The challenge
Three problems. (1) Delaware LLC held by the MPC created US GILTI (Global Intangible Low-Taxed Income) exposure – CRA and IRS could both tax the same telehealth income with no tax-treaty relief mechanism. (2) MPC’s passive investment portfolio (approximately $600K) could be classified as a PFIC (Passive Foreign Investment Company) if triggered on any future US filing, exposing Dr. G to punitive US taxation. (3) TFSA was not recognized as tax-sheltered under US treaty rules; any US filing obligation would trigger US tax on TFSA growth despite CRA sheltering. (4) Dr. G’s cross-border filing exposure was undocumented; risk of unfiled Form 5471 (US persons and CFC ownership).
Insight Accounting CPA approach
Insight ran a 5-month restructuring in coordination with US cross-border counsel:
- Unwind the Delaware LLC. Distributed the LLC’s operating assets back to Dr. G’s MPC, dissolved the LLC. Rebuilt the US telehealth service delivery through a direct MPC-to-patient arrangement using US-compliant telehealth platform. No US legal entity; no CFC exposure; no GILTI.
- US withholding tax cleanup. Structured US telehealth invoicing so each US patient/insurer treats the MPC as a Canadian professional service provider under Article XIV of the Canada-US Tax Treaty; withholding tax at the reduced treaty rate (Article VII business profits exempt from US tax where there is no US permanent establishment). Filed appropriate W-8BEN-E for the MPC.
- MPC investment portfolio review. Confirmed all MPC investments held in Canadian-listed funds (no US mutual funds, no US ETFs that would trigger PFIC exposure). Segregated any potentially-problematic holdings into a personal non-registered account outside the MPC.
- TFSA protection. Since Dr. G has no US filing obligation and no US-source PE, her TFSA remains fully protected. Documented the position in a memorandum for future audit reference.
- Filing. Filed a US IRS Form 8869/5471 protective disclosure closing out the historical LLC ownership year, along with a US 1120-F final return for the LLC’s residual US-source income. Cleaned the US filing history.
Measurable outcome
Cross-border double-tax exposure fully eliminated. TFSA preserved at $95K with continued Canadian tax shelter and zero US exposure. No US corporate filing obligations going forward. Estimated ongoing tax savings vs. the pre-restructure LLC structure: approximately $28K per year (GILTI + PFIC + withholding elimination) plus removal of the risk of a catastrophic PFIC classification retroactive to portfolio-acquisition dates. Dr. G continues to earn US telehealth income at Ontario CCPC rates only; annual USD-CAD conversion managed by the MPC.
Key facts
- US filing entities: reduced from LLC + 5471 to nil ongoing.
- Treaty basis: Canada-US Tax Treaty Articles VII and XIV.
- PFIC risk: eliminated via holdings review.
- Annual savings: ~$28K vs. pre-restructure double-tax.
— Bader A. Chowdry, CPA, CA, LPA — Insight Accounting CPA
Confidentiality: All identifying details anonymized; specifics protected under CPA Ontario Rule of Professional Conduct 208 (Confidentiality). Archetype descriptions are composites illustrative of engagement patterns.
Disclaimer: Bader A. Chowdry, CPA, CA, LPA is a Licensed Public Accountant regulated by CPA Ontario. Insight Accounting CPA Professional Corporation is a Chartered Professional Accountant firm. This content is general information only and does not constitute professional advice for your specific facts. Confirm current rules and figures with your own advisor before acting.