Q: How can I invest in my daughter without getting an unreasonable tax burden with my federal taxes?

A: There are a few options to consider for investing in your daughter's Panama LLC while minimizing your federal tax burden:

1. Gift tax exclusion: You can gift up to $18,000 per year (as of 2024) to your daughter without triggering any gift tax. If you're married, you and your spouse can each give $18,000, for a total of $36,000 per year. This can be a good way to provide some initial capital.

2. Loan to the LLC: You could lend money to your daughter's Panama LLC and charge a reasonable interest rate. The interest income would be taxable to you, but you could potentially deduct the interest expense on the LLC's tax return. Just be sure to properly document the loan with a promissory note.

3. Invest in the LLC: You could become a member (owner) of the Panama LLC by investing capital. The LLC's income would flow through to your personal tax return based on your ownership percentage. However, you may be able to defer U.S. tax on the foreign income by making a special election (Form 8832) to treat the LLC as a corporation for U.S. tax purposes.

4. Employ your daughter: As you mentioned, the U.S. LLC could employ your daughter and pay her a reasonable salary for her work managing the Airbnb property. Her salary would be a deductible expense for the LLC, reducing its taxable income. Just be sure her compensation is at fair market value for the services provided.

Keep in mind, Panama LLCs are foreign entities, so additional U.S. tax and reporting requirements will likely apply, such as filing Form 5471 or 8865 to report foreign ownership/transactions. The specific rules depend on the LLC's ownership and tax classification.

I recommend consulting with a tax professional experienced in international tax matters to determine the most tax-efficient strategy for your situation while ensuring proper compliance. They can provide guidance tailored to your specific circumstances and goals.