Question

# Fred currently earns \$10,800 per month. Fred has been offered the chance to transfer for three...

Fred currently earns \$10,800 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 \$11,800 per month if he accepts the assignment. Assume that the maximum foreign-earned income exclusion for next year is \$107,600. a-2. If Fred’s employer also provides him free housing abroad (cost of \$21,800), how much of the \$21,800 is excludable from Fred’s income?

Sollution:-1)

 Income reported \$34,000

Explanation:

Fred will earn \$1,41,600(\$11,800 per month*12) by going abroad, but he can exclude \$1,07,600 under the foreign earned income exclusion.

Hence, Fred will report gross income of \$34,000 (\$1,41,600 - \$1,07,600) from the salary earned.

Sollution:-2)

 Amount to be excluded \$4,584

Explanation:

Since Fred meets the requirements for the foreign-earned income exclusion, he may also exclude the employer-provided housing costs that exceed

= \$17,216(16% * \$1,07,600) Or

Up to a maximum exclusion of

= \$15,064(14% * \$1,07,600)

Thus, Fred may exclude \$4,584

Whichever is lower of (a) (\$21,800 - \$17,213 = \$4,584)

OR

(b)( \$15,064).

Thus, Fred includes \$17,216 (\$21,800 - \$4,584 exclusion) of the employer-provided housing in gross income.

and exclusion = \$4,584

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