Question

Catherine is a U.S. citizen who is employed by DSC, Inc., a global company. Beginning on August 1, 2018, Catherine began working in Augsburg, Germany. She worked for 153 days of 2018. She worked there until March 31, 2019, when she transferred to Kamnik, Slovenia. She worked in Kamnik for the remainder of 2019. Her salary for the first seven months of 2018 was $225,000, and it was earned in the United States. Her salary for the remainder of 2018 was $165,000, and it was earned in Augsburg. Catherine's 2019 salary from DSC was $425,000, with part being earned in Augsburg and part being earned in Kamnik.

Assume the 2019 indexed statutory amount is the same as the 2018 indexed amount. Assume a 365-day year.

When required, round any fractions out to four decimal places. Round final answers to the nearest dollar.

a. Is Catherine eligible for the foreign income exclusion for 2018? Yes

b. Catherine may exclude $ ? from her gross income for 2018.

c. Is Catherine eligible for the foreign income exclusion for 2019? Yes

d. Catherine may exclude $ 103,900 from her gross income for 2019.

Answer 1

Ans. (a): Yes

Catherine is eligible for the foreign income exclusive for 2018.

Explanation: To qualify foreign income exclusive, there are two rules:

1. One should resident of united states or

2 He or she can be out of states for 330 days from the total 365 days.

Catherine is resident of U.S., she worked in Augsburg, Germany from August 1, 2018 to March 31, 2019. She worked August to December ( five months) in Augsburg in 2018 for less than 330 days out of country. Both conditions are true, so that, she is eligible for foreign income exclusive 2018.

Ans. (b): $104,100

Explanation: In 2018, Catherine worked in united states, and her salary was $225,000. After that,she worked in Augsburg, Germany from August to December(for only 2018). Her foreign earning was $165,000 for those five months; from which $104,100 was excluded under Foreign Earned Income Exclusion. The Amount $104,000 was increased from $102,100 for 2018 under Section 911 of the US tax code.

Ans. (c): Yes

Catherine worked in Augsburg, Germany from August 1,2018 to March 31,2019. She transferred to Kamnik, Slovenia, and she worked at there for the remaining months of 2019. So, she lived out country for the whole year. so that Second is false. However, first condition is true that she is a citizen of united states, so, she is eligible for the foreign income exclusion, 2019. [two conditions for the foreign income exclusion are given in answer of question (a)]

Ans. (d): Catherine may exclude $105,900 from her gross income for 2019. It is increased from $103,900 that is for the previous year.