Kenneth G. Jarvis, CPA wrote:

- quote -

See IRS Revenue Ruling 72-497. It addresses the foreign earned
income exclusion under Sec. 911(a)(1) for citizens employed
abroad under a Status of Forces agreement.
http://www.taxlinks.com/rulings/1972/revrul72-497.htm

I've never had to personally address this issue. The ruling is
quite clear that an individual covered by the agreement is not a
bona fide resident of the foreign country. Therefore, for tax
year 2002, this person would not have been eligible for the Sec.
911(a)(1) exclusion as a bona fide resident of the UK. What's
not clear to me is whether that same person can use the physical
presence test to meet the definition of a "qualified individual"
whose tax home is in a foreign country. I leave it to others to
read the ruling and voice their opinions.

Just an aside, there is not enough information provided such that
one could make a determination as to where this person's tax home
was located. Having a foreign tax home is a separate requirement
for the exclusion.

--
Alan
http://taxtopics.net

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Kenneth G. Jarvis, CPA wrote:

- quote -

IMHO the status of forces exemption from UK taxes means that
income is treated as if he earned the income while IN the
USA. That income is not treated as foreign income because
the US military base is treated as US territory and he is
therefore not out of the USA. I suggest he contact the UK
state department location that handles US income taxes on
US military income.

--
Frederick E. Jorden http://Tax-Accounting-Payroll.com
7825 Midlothian Tpk - 207 Richmond, VA 23235-5247 EMAIL knowtax[at]bigfoot.com
(804) 320-6210 FAX (804) 320-6211

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Kenneth G. Jarvis, CPA wrote:

- quote -

This could be true but I do think there is a question about
the calculations.

If he was not required to pay UK taxes, I do not believe he
can qualify as a bona fide resident. He might still get the
exclusion but he would have to meet the physical presence
rules to do so.

As long as he was physically present in the UK for 330 days
during the previous year, he would be entitled to claim the
exclusion. He would have to meet the 330 day rule in 2003,
also, but could count back from the day he returned to the
US. The 330 day rule says that a taxpayer must be
physically present in one or more foreign countries for at
least 330 days out of any twelve month period. This means
12 months beginning or ending during the tax year.

So, for all years, the taxpayers exclusion would be a pro
rated amount based on the ration between the number of days
outside the US to the total number of days in the year.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Have a new client that has been working in the UK for a US
company with government contracts. Due to the nature of
employment he falls under the status of forces agreement
which prevents his income from being taxed in the host
country (UK). That is if I understand it correctly.

In 2003, he moved back to the US for good and it appears
that he receives a prorated foreign income exclusion the
work in the UK. If so, the total amount of income earned in
the UK is tax free from the UK and US. Sounds too good to
be true. Is there something I am missing.

In 2002, he was considered a bonifide resident of the UK for
the entire year. In 2002, all of his US income taxes was
eliminated from tax as a result of taking the foreign income
exclusion. Again, sounds too good to be true. No tax in
the UK due to the status of forces agreement and no taxes in
the US due to the foreign income exclusion. Doesn't sound
right. What am I missing.

Any help or advice is appreciated.

Best Regards,
Ken

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->