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 31,2013 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.What is her foreign earned income exclusion for 2013?

Question

Quizplus · Accepted Answer

The foreign earned income exclusion limit for 2013 is $97,600. However, since Sara only worked for one month before returning to the United States, she is only eligible for a proportional limit based on the number of days in the year that she was physically present in a foreign country. Assuming she meets the requirements for the physical presence test for the remainder of the year, she would be eligible for a prorated exclusion of $8,255 ($97,600 / 365 days * 31 days). The fact that she did not pay any foreign taxes does not affect her eligibility for the exclusion.

Sara,a Cash-Basis,calendar-Year Taxpayer,worked Overseas for the Past Three Years and Is