Question

Required information (The following information applies to the questions displayed below.] Fred currently earns $9,000 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 $10,000 per month if he accepts the assignment. Assume that the maximum foreign-earned income exclusion for next year is $107,600. c-2. If Fred's employer also provides him free housing abroad (cost of $16,000 next year), how much of the $16,000 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.) Amount to be excluded

Answer 1

	Maximum foreign-earned income exclusion is $107,600
	As Fred will be abroad for 305 days only, therefore foreign housing exclusion will also reduced proportionately
	Exclusion will be the lower of the following
	a) Housing Cost minus 16% of the maxium foreign income exclusion proportionate to the number of days stayed abroad
	a) 14% of the maxium foreign income exclusion proportionate to the number of days stayed abroad
a)	16000-16% * 107600 * 305/365 = 1614.027
b)	14%*107600*305/365 = 12587.73
	Lowe amongst a or b is 1614.027
	Therefore Fred exclude only 1614.03 from 16000
	Amount included in Fred's gross income is (16000-1614.03) 14,386