Segal, Cohen & Landis Reviews the Foreign Income Exclusion

According to a recent article in Forbes, Robert Wood discusses whether or not an individual qualifies for Foreign Income Tax Exclusion, which allows individuals who qualify to collect money tax-free.

The primary source for information regarding this matter is a case, James F. Daly and Candace H.Daly, wherein the Tax Court ruled that the couple did not qualify for the exclusion, even though the husband worked primarily overseas in Iraq and Afghanistan. The ruling stated that although he worked in those countries, his tax home remained the United States.

It is no wonder that the Daly’s attempted to utilize the income exclusion, as it is a “great benefit” that allows income of up to $97,000 to remain tax free. In order to meet the criteria though, the individual must either be a U.S. citizen that is a resident of one or more foreign countries for an uninterrupted amount of time that includes one full tax year; or a U.S. citizen who is a present in a foreign country (or countries) for 330 in 12 consecutive months.

Unfortunately for the Daly’s, the Tax Court ruled that the Foreign Income Exclusion was not applicable to them, despite the fact that waivers have been granted in some cases.

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