Megan accepts an assignment working in Germany for the first 9 months of 2018 from Ferguson Corporation. Ferguson Corporation paid Megan's salary of $78,000 plus an additional $7,000 bonus. Megan paid $5,000 to the German government in taxes on this income. During 2018, Megan also earned $9,000 of interest income from corporate bonds and $4,000 of dividend income from U.S. corporations. The maximum foreign earned income exclusion for 2018 is $103,900. How much should Megan include in her gross income on her U.S. tax return for 2018?
A) $98,000
B) $20,000
C) $13,000
D) zero

Question

Quizplus · Accepted Answer

Megan is eligible for the foreign earned income exclusion since she worked in Germany for at least 330 days out of 365 days. However, the exclusion has a limit of $103,900 for 2018, and Megan's total income exceeds this limit. Therefore, she must include all of her income in her gross income on her U.S. tax return. Her gross income includes salary ($78,000), bonus ($7,000), interest income ($9,000), and dividend income ($4,000), minus the taxes she paid to the German government ($5,000). Therefore, her gross income for U.S. tax purposes is $98,000.

Megan Accepts an Assignment Working in Germany for the First