Question

Required Information Problem 5-62 (LO 5-3) [The following information applies to the questions displayed below.] Fred currently earns $10,400 per month. Fred has been offered the chance to transfer for three to five years to an overseas affiliate. His employer is willing to pay Fred $11,400 per month if he accepts the assignment. Assume that the maximum forelgn-earned Income exclusion for next year is $105,900. Problem 5-62 Part-c-2 c-2. If Fred's employer also provides him free housing abroad (cost of $16,700 next year), how much of the $16,700 is excludable from Fred's Income? Assume that Fred will be abroad for 305 days out of 365 days next year. (Use 365 days in a year. Do not round Intermediate calculations. Round your final answer to the nearest whole dollar amount.) * Answer is complete but not entirely correct. Amount to be excluded 16.700

Answer 1

Please find below table useful to compute desired results: -

А 1 Current earning per month 10400 2 Earning per month in abroad 11400 3 Maximum income exclusion (105900 4 Cost of free housing abroad 16700 5 Fred is not abroad the entire year, the foreign 6 housing exclusion is also reduced 7 Costs must exceed =B3*305/365*16% 8 Max. exclusion =B3*305/365*14% 9 Fred may exclude the lesser of 10 (a) =B4-B7 11 (6) =B8 12 Included in gross income =B4-B10

End results would be as follows: -

A B 1 Current earning per month 10,400 2 Earning per month in abroad 11,400 3 Maximum income exclusion 105,900 4 Cost of free housing abroad 16,700 5 Fred is not abroad the entire year, the 6 foreign housing exclusion is also reduced 7 Costs must exceed 14,159 8 Max. exclusion 12,389 9 Fred may exclude the lesser of: 10 (a) 2,541 11 (6) 12,389 12 Included in gross income 14.159