Intent Tells All – “Bona Fide Resident” for FEIE

Just a few months back, in Hudson v. Commissioner, T.C. Memo. 2017-221, the US Tax Court held that a pilot working for Korean Air and living in a hotel in South Korea while there for his work could not claim the Section 911 foreign earned income exclusion (“FEIE”) because he was not a “bona fide resident” (BFR) of South Korea for purposes of the exclusion. Americans working abroad are usually aware that under the FEIE rules they may be eligible to exclude certain foreign earned income (wages, compensation for services) from US taxable income.  The FEIE amount, adjusted annually for inflation, is worth $104,100 in 2018. If a couple is married, each spouse can claim the full FEIE amount (e.g., for 2018, each spouse can exclude up to $104,100 of his or her earned income). You don’t have to be a pilot to benefit from the lessons taught in the Hudson case. Let’s learn what the Tax Court looked at and how you can structure your work abroad to…

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