Tom, a calendar-year taxpayer, worked in Japan from July 1, 2017 through June 30, 2018. He earned $80,000 in 2017 and $90,000 in 2018 while in Japan. The maximum foreign earned income exclusion amount is $102,100 for 2017 and $103,900 for 2018. Which of the following statements is true?

Question

Quizplus · Accepted Answer

As a calendar-year taxpayer, Tom worked from July 1, 2017, to December 31, 2017, in the United States and earned $80,000. Hence, he qualifies for the maximum foreign earned income exclusion of $102,100 in 2017 because he meets the physical presence test (which requires him to be outside the U.S. for 330 full days in a 12-month period). Therefore, $21,100 ($102,100 - $80,000) can be excluded in the income earned in 2017.

For the income earned in 2018, he meets the same test, and the maximum foreign earned income exclusion is $103,900. Since he earned $90,000 in 2018, $51,900 ($103,900 - $90,000) can be excluded in the income earned in 2018. Therefore, option D is correct.

Tom, a Calendar-Year Taxpayer, Worked in Japan from July 1