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Fred currently earns $9,600 per month. Fred has been offered the chance to transfer for three...

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Accounting

Fred currently earns $9,600 per month. Fred has been offered thechance to transfer for three to five years to an overseasaffiliate. His employer is willing to pay Fred $10,600 per month ifhe accepts the assignment. Assume that the maximum foreign-earnedincome exclusion for next year is $104,100.

a. If Fred’s employer also provides him free housing abroad(cost of $20,600), how much of the $20,600 is excludable fromFred’s income?

b. Suppose that Fred's employer has offered Fred a six-monthoverseas assignment beginning on January 1 of next year. How muchU.S. gross income will Fred report next year if he accepts thesix-month assignment abroad and returns home on July 1 of nextyear?
c. Suppose that Fred’s employer offers Fred a permanent overseasassignment beginning on March 1 of next year. How much U.S. grossincome will Fred report next year if he accepts the permanentassignment abroad? Assume that Fred will be abroad for 305 days outof 365 days next year.

d. If Fred’s employer also provides him free housing abroad(cost of $16,300 next year), how much of the $16,300 is excludablefrom Fred’s income? Assume that Fred will be abroad for 305 daysout of 365 days next year.

Answer & Explanation Solved by verified expert
3.6 Ratings (252 Votes)
Ansa Fred will earn 127200 1060012 by going abroad but he can exclude 104100 under the foreign earned income exclusion Hence Fred will report gross income of 23100 127200104100 from the salary earned Since Fred meets the requirements for the foreignearned income exclusion he may also exclude the employerprovided housing    See Answer
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