Fred currently earns $9,000 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 $10,000 per month if he accepts the assignment. Assume that the maximum foreign-earned income exclusion for next year is $105,900.

1. How much U.S. gross income will Fred report if he accepts the assignment abroad on January 1 of next year and works overseas for the entire year?

Income Reported:

2. If Fred’s employer also provides him free housing abroad (cost of $20,000), how much of the $20,000 is excludable from Fred’s income?

Amount to be excluded:

2b. Suppose that Fred's employer has offered Fred a six-month overseas assignment beginning on January 1 of next year. How much U.S. gross income will Fred report next year if he accepts the six-month assignment abroad and returns home on July 1 of next year?

Income Reported:

c-1. Suppose that Fred’s employer offers Fred a permanent overseas assignment beginning on March 1 of next year. How much U.S. gross income will Fred report next year if he accepts the permanent assignment abroad? Assume that Fred will be abroad for 305 days out of 365 days next year.

Income Reported:

c-2. If Fred’s employer also provides him free housing abroad (cost of $16,000 next year), how much of the $16,000 is excludable from Fred’s income? Assume that Fred will be abroad for 305 days out of 365 days next year.

Fred may exclude the employer-provided housing costs that exceed $16944 (16% x $105900), up to a maximum exclusion of $14826 (14% x $99,200). Thus, Fred may exclude $3056 (the lesser of (a) ($20,000 housing cost less $16944 = $3056) or (b) $14826).

2b)

U.S. gross income reported by Fred = (10000*6) + (9000*6) = 60000+54000 = $114000

(He would not be eligible for any foreign earned income exclusion as he would not be present in abroad for 330 days during a consecutive 12-month period as well as he would not have a foreign tax home)

c-1

U.S. gross income reported by Fred = (9000*2)+(10000*10)-partial foreign-earned income exclusion

= 18000+100000-(105900*305/365) = 18000+100000-88492 = $29508

c-2

Housing abroad cost excluded from Fred’s income = $1841

Fred may exclude the employer-provided housing costs that exceed $14159 (16% x $105900 x 305/365), up to a maximum exclusion of $12389 (14% x $105900 x 305/365). Thus, Fred may exclude $1841 (the lesser of (a) ($16,000 housing cost less $14159 = $1841) or (b) $12389).

marvineetesh3 marvineetesh3 · Answer 2 · 2022-02-23T06:19:25+01:00

The correct options of the above illustration are:

1) $14100

2) $3056

2-b) $114000

c-1) $29508

c-2) $1841.

What is foreign-earned income?

Citizens and dwellers living and working external the U.S. may be authorised to a foreign earned income situation that trims taxable income.

Computation of the above situations:

1).

[tex]\text{U.S. gross income reported by Fred} = \text{Total salary}- \text{foreign-earned income exclusion}\\\\\text{U.S. gross income reported by Fred} =(10000\times12) - 105900 = 120000 - 105900\\\\\text{U.S. gross income reported by Fred} = $14100.[/tex]

2).

Fred may exclude the employer-provided housing costs that overstep $16944:

[tex]16\%\times \$1,05,900=\$16944[/tex]

Up to a maximum exclusion of:

[tex]14\% \times \$99,200 = \$14,826[/tex]

Thus, Fred may except $3056, the least of (a) $20,000 housing cost less $16944 = $3056

2b).

According to the given situation:

U.S. gross income reported by Fred = $1,14,000

[tex](\$10,000\times6) + (\$9,000\times6) = \$60,000+54,000 =\$1,14,000[/tex]

Note:

He would not be suitable for any foreign attained income exclusion as he would not be existing in foreign for 330 days during a sequent 12-month period of time as well as he would not have a foreign tax home.

C-1).

[tex]\text{U.S. gross income reported by Fred}= (9000\times2)+(10000\times10)text{partial foreign}-\text{earned income exclusion}\\\\\text{U.S. gross income reported by Fred}= \$18,000+\$1,00,000-(\$1,05,900\times\dfrac{305}{365})\\\\\text{U.S. gross income reported by Fred}= \$18,000+\$1,00,000-\$88,492\\\\\text{U.S. gross income reported by Fred}=\$29,508.[/tex]

C-2).

Housing abroad cost excluded from Fred’s income = $1,841

Fred may go forth off the employer-provided housing costs that go across $14,159:

[tex](16\% \times\$1,05,900\times\dfrac{305}{365})[/tex]

And, up to a maximum state of $1,23,89:

[tex]14\% \times \$1,05,900 \times \dfrac{305}{365}[/tex]

Thus, Fred may exclude $1,841:

[tex]\$16,000 \text{housing cost}-\$14,159 = \$1,841[/tex]

Thus, the correct options of the above situations are (1) $14100, (2) $3056, (2b) Foreign-earned income, (c1) $29508 and (c2) $1841.

To learn more about the Foreign-earned income, refer to:

https://brainly.com/question/8152098