Question

Catherine is a U.S. citizen who is employed by DSC, Inc., a global company. Beginning on August 1, 2020, Catherine began working in Augsburg, Germany. She worked for 153 days of 2020. She worked there until March 31, 2021, when she transferred to Kamnik, Slovenia. She worked in Kamnik for the remainder of 2021. Her salary for the first seven months of 2020 was $225,000, and it was earned in the United States. Her salary for the remainder of 2020 was $165,000, and it was earned in Augsburg. Catherine's 2021 salary from DSC was $425,000, with part being earned in Augsburg and part being earned in Kamnik.
Assume the 2021 indexed statutory amount is the same as the 2020 indexed amount. Assume a 365-day year for both years. When required, round any fractions out to four decimal places.

a. Is Catherine eligible for the foreign income exclusion for 2020?
b. Catherine may exclude ___________ from her gross income for 2020.

Answer 1

Answer:

a. Is Catherine eligible for the foreign income exclusion for 2020?

Yes

b. Catherine may exclude $45,104 from her gross income for 2020.

Explanation:

In order for Catherine to qualify for the foreign income exclusion, she must have lived in a foreign country for at least 1 one (physical presence test). She lived for more than 1 year if we combine her residence in Germany and Slovenia.  

The foreign income exclusion amount for 2020 is $107,600, and Catherine can exclude up to (153 days / 365 days) x $107,600 = $45,103.56 ≈ $45,104.