Question

Fred currently earns $11,300 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 $12,300 per month if he accepts the assignment. Assume that the maximum foreign-earned income exclusion for next year is $104,100.

Suppose that Fred’s employer offers Fred a permanent overseas assignment beginning on March 1 of next year. How much U.S. gross income will Fred report next year if he accepts the permanent assignment abroad? Assume that Fred will be abroad for 305 days out of 365 days next year. (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.)

Answer 1

Answer:

Fred will earn 22,600 during January - February and 123,000 during the remainder of the year .However ,he will be able to claim a partial exclusion of 86,987 based upon his time abroad{[104,100*305/365] (days in foreign country / days in year)}. Thus Fred will report gross income of 58,613(145,600-86,987)