ExpertEasy1 markMultiple Choice
CPA · Question 23 · Area I: Individual Compliance and Planning
A U.S. citizen works in France for the entire Year 1. They earn $110,000 in salary. The maximum Foreign Earned Income Exclusion (FEIE) for Year 1 is $126,500. The taxpayer also has $5,000 of U.S. interest income. If the taxpayer elects the FEIE, what is their Adjusted Gross Income (AGI)?
A U.S. citizen works in France for the entire Year 1. They earn $110,000 in salary. The maximum Foreign Earned Income Exclusion (FEIE) for Year 1 is $126,500. The taxpayer also has $5,000 of U.S. interest income. If the taxpayer elects the FEIE, what is their Adjusted Gross Income (AGI)?
Answer options:
A.
$115,000
B.
$0
C.
$5,000
D.
$16,500
How to approach this question
Exclude foreign earned income up to the limit stated. Do not exclude U.S. source passive income.
Full Answer
C.$5,000✓ Correct
C
IRC §911. The salary of $110,000 is fully excluded because it is under the $126,500 limit. The U.S. interest income is not foreign earned income and remains taxable. AGI = $5,000.
Common mistakes
Excluding all income; applying the exclusion to unearned income.
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