Discussion:Qualifying for Foreign Earned Income Exclusion

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Discussion Forum Index --> Advanced Tax Questions --> Qualifying for Foreign Earned Income Exclusion


Discussion Forum Index --> Tax Questions --> Qualifying for Foreign Earned Income Exclusion

Angelarich3 (talk|edits) said:

16 April 2009
I'm having a hard time determining if a new client qualifies for the foreign earned income exclusion. Client has a recurring 330 day contract to work in a foreign country, but only spends abut 250+ days/yr in the foreign country. So, he works for 3 months abroad, comes back to the US for 1 month, goes back for the 3 months, etc...

I would consider his "tax home" to be in a foreign country because that is where is main place of business is. He does not work when he is in the US. He is here for rest. Is that right? Or since his home is in the US, can he not have a "tax home" abroad?

Secondly, he obviously does not meet the physical presence test b/c he is not physically present in the country for 330 days, but does he meet the bona fide residence test? This test seems vague as the IRS determines this on a case by case basis, based on intent, length of stay, etc... His intent is to work in that foreign country and his contract has been renewed for the last 5 years. He spends about 70% of his time overseas. Is that enough to satisfy the bona residence test? Or since his contract specifies only 330 days, which does not include a full tax year, does that mean the requirements aren't met even though he worked there last year too?

Thanks for your ideas, suggestions, and insights as this is a new area of taxation for me.

Riley2 (talk|edits) said:

17 April 2009
Take a look at AOD 1991-014 for the Service's litigating position on this issue.

If the taxpayer has strong personal and economic connections to the United States and none to the foreign country, this could be a problem with the bona fide residence test.

RoyDaleOne (talk|edits) said:

17 April 2009
"for the last 5 years", and how was this issued resolved in the last five years?

Smktax (talk|edits) said:

17 April 2009
For cases with similar facts where the taxpayer was treated as not having a tax home in a foreign country (a requirement for both the 330 day physical presence test and the bona residence test), see Bujol v. Comr., 53 TCM 762 (1987) and Lemay v. Comr., 837 F.2d 681 (5th Cir. 1988).

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