Question

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?

Answer 1

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