Foreign Exchange Student

[Dave T]

Clients had young woman from China stay with them while she attended high scholl in US. Upon graduation she stayed in US to attend Univ. of Wisconsin in fall of 2013.

The sponsoring agency provided clients with 1099-Misc. with box 7 filled in, Non-Employee Compensation for $ 3,300.

I've added this to line 21 as " Other Income". Clients don't track incremental food costs or other items so I'm wondering if there is any type of offset ( per deim allowance ) to this income and if so how would it be shown?

Thanks very much.

- Dave T

[mcb39]

I had one last year where expenses were deducted under charitable contributions. I don't recall, however, that they every received a 1099 or any income for housing the foreign student. Wish I had time to look up those rules for you.

[mircpa]

I think correct form is 1040NR for her since she is student and I believe she is in US on F1 visa. F visa holders are exempted from SS & medicare taxes.

[jasdlm]

Not sure what MIR is talking about. The 1099-Misc came to your clients, not the student, correct?

I think you have to report the income and then deduct the expenses you can account for (unless the expenses were actually reimbursements under an accountable plan, but then one assumes a 1099 would not have been issued).

I don't know of any 'per diem' for exchange students. Can you assign a percentage of utilities, etc., based on the square footage of the student's room?

You didn't ask, but I believe this negates the monthly charitable donation amount allowed for hosting an exchange student.

[Dave T]

Yes - that is correct. The 1099 came to my client as a stipend for housing the exchange student.

It was mentioned, and I admit I didn't know this, that a charitable contribution can be taken for this as well. Am I understanding this correctly?

Thanks to those that responded to this as I know I have another client coming later who did the same thing.

- Dave T

[jasdlm]

Given that the individuals were reimbursed for expenses, I would say that in this case, you can NOT take the charitable deduction.

[kcjenkins]

From Pub 526

Expenses Paid for Student Living With You

You may be able to deduct some expenses of having a student live with you. You can deduct
qualifying expenses for a foreign or American student who:

1. Lives in your home under a written agree­ment between you and a qualified organi­zation (defined

later) as part of a program of the organization to provide educational opportunities for the student,

2. Is not your relative (defined later) or de­pendent (also defined later), and

3. Is a full­time student in the twelfth or any lower grade at a school in the United States.

You can deduct up to $50 a month for each full calendar month the student
lives with you. Any month when condi­tions (1) through (3) above are met for 15 or

more days counts as a full month.

Qualifying expenses. You may be able to de­duct the cost of books, tuition, food, clothing,
transportation, medical and dental care, enter­tainment, and other amounts you actually
spend for the well­being of the student.

Expenses that do not qualify. You cannot deduct depreciation on your home, the fair

market value of lodging, and similar items not considered amounts actually spent by you. Nor can
you deduct general household expenses, such as taxes, insurance, and repairs.

Reimbursed expenses. In most cases, you cannot claim a charitable contribution deduction

if you are compensated or reimbursed for any part of the costs of having a student live
with you. However, you may be able to claim a charitable contribution deduction for the

unreim­bursed portion of your expenses if you are reim­bursed only for an extraordinary

or one­time item, such as a hospital bill or vacation trip, you paid in advance at the request

of the student's parents or the sponsoring organization.

Based on that I'd think you could not take a deduction on Sch A, but should be able to offset some of the 1099 income by any expenses that would have been deductible if not reimbursed. I've never researched it tho, so would like to hear other thoughts on this.

[mcb39]

The one I had last year was reported on the 8283 Noncash Charitable Contributions at $50 per month in accordance to the directions they received in a letter from AMS. They also had enough other Noncash Charitable to force the 8283.

[jasdlm]

Agree with Marilyn IF no reimbursement for expenses had been made. However, given the reimbursement for expenses, I agree with KC in this particular situation.

[Dave T]

Thanks for the responses on this.

There was no reimbursement from the agency on this it was just a monthly stipend without the requirement of how the funds were spent.

The client didn't track expenses and so it isn't possbile to determine if they exceeded the stipend so I agree the $3,300 is all income and there is no charitable contribution.

Thanks again,

Dave T