Foreign-Earned Income Exclusion . Dillion, a U.S. citizen, resides in Country K

Question

Foreign-Earned Income Exclusion. Dillion, a U.S. citizen, resides in Country K for all of 2014. Dillion is married, files a joint return and claims two personal exemptions. The following items pertain to his 2014 activities:

Employment-related expenes b.

a. All of Dillons salary and allowances are attributable to services performed in Country K.

b. Dillion claims the employment-related expenses as itemized deductions.

What is Dillion's net U.S. tax liability for 2014( assume that Dillion excludes his earned income and housing cost amount)?

Salary and allowances (other than housing) a. $175,000 Housiong allowance 28,000

Employment-related expenes b.

7,500 Housing costs 30,000 Other itemized deductions 4,000 Country K income taxes 12,000

Explanation / Answer

Answer:-A) If you are a U.S. citizen or a resident alien of the United States and you live in other country, you are taxed on your worldwide income.In addition, you can exclude or deduct certain foreign housing amounts.

B) Dillions Net U.S tax liablity for 2014:-

Dillions work a 5-day week, Monday through Friday. After subtracting your vacation, you have a total of 240 workdays in the year. You worked in the United States during the year for 6 weeks (30 workdays). Subtract Country K income taxes.

175000*30/240= 21,875-12000= 9,875

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