Question

1. Riley is a US citizen that works for Deloitte and has no U.S. abode. During 2019, he spent 333 days working in Paris. His salary was $125,000 for the entire year. He also received $2,500 of interest from a certificate of deposit and $10,000 of dividends from Ford. What is his adjusted gross income for 2019?

   		$31,900
   		$40,884
   		$109,116
   		$28,384

Answer 1

Calculation of Adjusted Gross Income
Particulars	Amount ($)
Foreign Salary Earned (A)	$125,000
Less: Foreign Earned Income Exclusion (B) (Expn. 1)	$96,616
(Pro-rate Max. Exclusion)
($ 105,900 * 333days / 365 days)
Salary Taxable (A-B)	$28,384
Add: Other Income
Interest on Certificate of Deposit	$2,500
Dividend from Ford	$10,000
Adjusted Gross Income	$40,884
Expn. 1 :
Riley working for Deloitte in Paris for 333 days and with no U.S. Abode is eligible for Foreign Earned Income Exclusion. As per Law, an assessee is considered to be physically present in a foreign country if you reside there for at least 330 qualifying full days in any consecutive 12-month period. The amount of foreign wages and salary that a taxpayer can exclude each year is limited to actual foreign earned income or the annual maximum dollar limit, whichever is less. Using the number of days Riley was physically present in the foreign country during the tax year the exclusion has been pro-rated for the maximum exclusion.