Frank S. Duke, Jr. wrote:

- quote -

This sounds like the other post of yours "Resident Alien
Status" that I already replied to. What's different about
this one other than you changed the date to July 1 rather
than Sept. 1?

I can't find a citation that allows an election to be a
resident alien for the whole year in your last year of
residency if you are not a resident again for any part of
the next year. They are dual status.

--
Alan
http://taxtopics.net

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Situation:
Employee of US based multinational has lived and worked in
the US since 1999. After the first year he and his family
filed a form 1040 as resident aliens, declaring worldwide
income. They are citizens of the UK. In 2003, he was
reassigned to the Netherlands and left on 1 July and did not
return. His family left on 10 August to permanently move to
the Netherlands.

Questions:
1. What kind of return to file? It appears that I have a
choice to file him as a resident alien for the whole year
because he met the substantial presence test or to file a
1040NR covering only his US based income.

2. 1040 as a resident alien - Initial results seem to
indicate this is the way to go. He exempts gain on a house,
get to claim child credits, deduct rental loss on a UK
property, and gets to claim exemptions for his wife and 2
kids. I showed his worldwide income for the whole year and
created a substitute W-2 for the income after he left. I
showed all the tax he had withheld in the Netherlands as a
Foreign Tax paid on a 1116. Is this right or should I say
that his residency termination date is 1 July and only count
US source income up until then?

3. 1040NR seems very restrictive - He can't claim his wife
or his kids exemptions and his itemized deductions are
limited to state and federal taxes and charitable
contributions. He can't take RE taxes or mortgage interest,
or the loss on his rental property in the UK. From a tax
standpoint, the 1040 as a resident alien seems like a
no-brainer.

4. Residency termination date - Should he go with the
default and claim 31 Dec 2003 or claim 1 July? If he claims
1 July, there is some US based pay and some dividend income
that was paid after that and the water gets very muddy. If
he chooses an earlier date, does he still get all the
exemptions and deductions he would get if he had claimed 31
Dec.?

5. Ohio tax and local tax - Is it okay to say he left 1 July
and cut off Ohio and local tax at that point? It would be
okay if he had moved to another state.

I have been reading the pubs until I am about to turn blue
but I would sure appreciate help from anyone who deals with
these on a regular basis.

All freely provided advice guarantee correct or double your
money back

Frank S. Duke, Jr. CPA
Cincinnati, OH USA

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