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Chapter2 Solutions

# Chapter2 Solutions - TAX 6527 CASE 1 SUGGESTED SOULUTIONS...

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TAX 6527 CASE 1 - SUGGESTED SOULUTIONS Fall 2011 1.a. Calculation of Taxable Foreign Source Income for 2011 Wages 100,000 Housing Allowance 25,000 125,000 Housing Exclusion Total Expenditures 25,000 Base Housing Amount (.16 X \$91,400) -14,864 10,136 Taxable Foreign Source Income Total Foreign Source Income 125,000 Less: Housing Exclusion -10,136 Sec. 911 Income Exlusion -92,900 Taxable Income 21,964 (note for 2009 the housing exclusion is limited to (.16 X \$91,400) = \$14,624 2011 100000 2012 0 2010 80000 2012 0 2.a. Disallowed Moving Expense (Code Sec. 911(d)(6)): Excluded Foreign Income 105,000 Divided by Total Foreign Income 140,000 =Exclusion Ratio 75.00% X Moving Expenses 10,000 = Disallowed Moving Expenses 7,500 1.b. Reg Sec. 1.911-3(e)(1) shifts income into the year earned for purposes for the earned income exclusion. 1.c. Same result as in b., but note that if payment is after the close of the tax year following the year in which the income was earned, no exclusion is available

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TAX 6527 CASE 1 - SUGGESTED SOULUTIONS Fall 2011 2.b. Disallowed Foreign Tax Credit (Reg. Sec. 1.911-6(c) Total Excluded Foreign Income 105,000 Less: Excluded Expenses (Moving) -2,500 Net Excluded Income 102,500 Total Income 140,000 Less: Allowed Moving Expenses -2,500 /Total Income Less Total Exclusions 137,500 = Exclusion Ratio 74.55% X Foreign Taxes Paid 35,000 = Disallowed Foreign Taxes 26,091 Or if Sec. 911 exclusion is not elected, no reduction since all foreign
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Chapter2 Solutions - TAX 6527 CASE 1 SUGGESTED SOULUTIONS...

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