Question

George is a U.S. citizen who is employed by Hawk Enterprises, a global company. Beginning on June 1, 2020, George began working in London (for a total of 214 days in 2020). He worked there until January 31, 2021, when he transferred to Paris. He worked in Paris the remainder of 2021. His salary for the first five months of 2020 was $100,000, and it was earned in the United States. His salary for the remainder of 2020 was $175,000, and it was earned in London. George's 2021 salary from Hawk was $300,000, with part being earned in London and part being earned in Paris. Assume the 2021 indexed amount is the same as the 2020 indexed amount. Assume 366 days in 2020 (a leap year) and 365 days in 2021.
Required:
Determine George's gross income in 2020 and 2021

Answer 1

Answer:

2020 = $212,086

2021 = $192,400

Explanation:

To determine George's gross income in 2020 and 2021 we need to calculate the amount that george can exclude from the gross income for both years.

George's gross income in 2020

George can exclude amount from his gross income  = $107,600 x 214/366 (Lower of foriegn earned income $275,000 or foriegn earned income exclusion ceiling of $107,600 for 2020)

George can exclude amount from his gross income = $62,914

Therefore

George's gross income in 2020 = $275,000 - $62,914 ($100,000 + $175,000)

George's gross income in 2020 = $212,086

George's gross income in 2021

George can exclude the amount from his gross income  = $107,600 x 365/365 (Lower of foreign earned income of $300,000 or foreign earned income exclusion ceiling of $107,600 for 2021)

George can exclude the amount from his gross income = $107,600

Therefore

george's income in 2021 = $300,000 - $107,600

george's income in 2021 = $192,400