Tom,a calendar-year taxpayer,worked in Kuwait from July 1,2012 through June 30,2013.He earned $80,000 in 2012 and $90,000 in 2013 while in Kuwait.Which of the following statements is true?

Question

Quizplus · Accepted Answer

As Tom worked in Kuwait from July 1, 2012 through June 30, 2013, he meets both the physical presence test and the bona fide residence test for foreign earned income exclusion. However, since he earned $80,000 in 2012 and the maximum exclusion amount for that year is $48,800, he cannot exclude all of his income in 2012. 
Therefore, Option A is incorrect. 
For 2013, he earned $90,000, which is within the maximum exclusion limit ($97,600 for tax year 2013). Therefore, he can exclude up to $97,600 of his foreign earned income in 2013. Since he met the physical presence test for the entire period from July 1, 2012, through June 30, 2013, he can exclude up to the maximum limit for that year ($97,600). Thus, Option C is incorrect.
Therefore, the correct answer is Option D, as he can exclude up to $48,800 in 2013.

Tom,a Calendar-Year Taxpayer,worked in Kuwait from July 1,2012 Through June