Sara, a cash-basis, calendar-year taxpayer, worked overseas for the past three years and is eligible for the foreign earned income exclusion for the income earned from January 1 through January 31, 2018 before she returned to the United States. She was paid $30,000 including bonuses for this month's work but she did not have to pay any foreign taxes on this income. The maximum foreign earned income exclusion for 2018 is $103,900. What is her foreign earned income exclusion for 2018?

Question

Quizplus · Accepted Answer

Sara is eligible for the foreign earned income exclusion for the income earned from January 1 through January 31, 2018. This is a total of one month's income, which is $30,000. Since she did not pay any foreign taxes on this income, her foreign earned income exclusion is limited to the lesser of her foreign earned income or the maximum foreign earned income exclusion amount. Therefore, her foreign earned income exclusion for 2018 is $30,000, which is Option C.

Sara, a Cash-Basis, Calendar-Year Taxpayer, Worked Overseas for the Past