U.S. citizen who has a calendar tax year establishes a tax home and residence in a foreign country and qualifies for the foreign-earned income exclusion for 60 days in 2018; 365 days in 2019; and 60 days in 2020. The maximum earned income exclusion for 2020 rounded to the nearest whole number is?

Question

Quizplus · Accepted Answer

To qualify for the foreign-earned income exclusion, a taxpayer must have a tax home in a foreign country and meet either the bona fide residence test or the physical presence test. In this case, the taxpayer meets the physical presence test as they were present in a foreign country for at least 330 full days in a 12-month period. 
For tax year 2020, the maximum foreign-earned income exclusion is $107,600. However, since the taxpayer only qualifies for the exclusion for 60 days in 2020, the maximum exclusion amount is prorated based on the number of days present in the foreign country. 
The prorated exclusion amount for 2020 is calculated as follows: 
($107,600 / 366) x 60 = $17,638.80 
Rounding this amount to the nearest whole number results in a maximum earned income exclusion of $17,639. Therefore, the correct answer is B.

US Citizen Who Has a Calendar Tax Year Establishes a Tax