2017 was a productive year for Foreign Earned Income Exclusion cases in the U.S. Tax Court. The Court issued opinions in six cases, several of which addressed the “tax home” or abode portion of the Foreign Earned Income Exclusion statute (recall IRC Section 911 requires two things – (1) a foreign tax home and either a (2-a) bona fide foreign residence or (2-b) physical presence in a foreign location for 330 days of the year). Although the inquiry remains fact dependent, this year’s cases offer several examples from which to model behavior to successfully claim the Foreign Earned Income Exclusion.
The cases are:
1. Acone v. IRS, T.C. Memo 2017-162, in which the taxpayer failed to establish a foreign tax home.
2. Hudson v. IRS, T.C. Memo 2017-221, in which the Tax Court affirmed the IRS’s denial of the Foreign Earned Income Exclusion for failure to establish a bona fide foreign residence and failure to meet the physical presence test. The tax home element was not analyzed.
3. Larkin v. IRS, T.C. Memo 2017-54, in which the IRS actually conceded the taxpayers had a foreign tax home and bona fide foreign residence.
4. Linde v. IRS, T.C. Memo 2017-180, in which the IRS found the taxpayer to have established a foreign tax home and bona fide foreign residence even though he was not present in the foreign country for 330 of the previous 365 days (physical presence test not met, but taxpayer still had a bona fide foreign residence).
5. Lock v. IRS, T.C. Summary Opinion 2017-10, in which a Department of State contractor failed to establish a foreign tax home.
6. Redfield v. IRS, T.C. Memo 2017-71, in which the IRS denied the Foreign Earned Income Exclusion because the taxpayer filed a late Foreign Earned Income Exclusion election.
A final note, all of these cases can be obtained directly from the Tax Court website by searching for the party's name in 2017: https://www.ustaxcourt.gov/UstcInOp/OpinionSearch.aspx
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