Foreign Earned Income Exclusion - 45 days in US between Jobs

[BulldogTom]

Can someone check me on this.   Taxpayer is out of country for last 7 years.  Has qualified for physical presence test every year.   He is transitioning from his job in Country A, coming to the US and staying for approximately 2 months, then leaving to Country B to start his new, permanent job. 

I believe he is qualified for the FEIE for the wages earned in both countries (assuming he actually stays in Country B for the required 330 days).   This would be subject to the maximum exclusion amount of course.

Any income paid to him from Country A employer while he is in the US is not eligible - Correct?  The income has to be paid to him while overseas - Correct?

Example - During Jan-July of 2021, Taxpayer is paid $60K while in country A, $20K while in the US from Aug-Sep of 2021 (severance and final pay), and then earns 20K from Oct-Dec while working in Country B.   The exclusion would be $80K and there is no exclusion for the $20K he was paid while present in the US.   Do I have this correct?

Thanks

Tom
Sparks, NV

Edited July 13, 2021 by jklcpa
OP requested wording change

[Margaret CPA in OH]

You have some good questions here and made me think about my Aussie clients.  They are both paid on salary so earn money when visiting in the US.  I've never allocated foreign salary earned while in the US as the visits were in the range of a couple of weeks not months.  Technically, though, I suppose the money was earned while in the US.  I will look this up later, can't now.  It would seem to me that both A and B income would be excluded by the 330 day rule  but now I wonder if the 2 months income from A in the US would be different.  I would think not, but not sure.  I hope others chime in.

[BulldogTom]

Another Wrinkle.   TP has qualified under physical presence test, but looks like he will qualify under bona fide residence in country B.   Getting married (US citizen), buying a house in country B and planning to stay for the long haul.   Never had a change in status like this before.   I am starting to get lost in the publications.    I am sure this has happened before and the IRS knows what to expect, but now I am thinking that the return needs to be extended until the TP lives in Country B for a full tax year, which means we would file the return for 2021 in 2023, and he would have to pay the interest on the amount due, or he could file the 2021 return by the due date, pay the taxes on the foreign income from 2021, and then amend in 2023 when he qualifies as a bona fide resident.

I hope someone chimes in as well.   My eyes are glazing over reading the pubs and regulations.

Tom
Sparks, NV

[joanmcq]

He will file under 330 day rule for 2021 but then can file under Bona fide resident. He probably would have qualified under bona fide resident in country A as well. You don’t have to buy a house/ get married etc to qualify as a bona fide resident. The return doesn’t have to be filed in 2023 at all. 

[DANRVAN]

On 7/11/2021 at 7:10 PM, BulldogTom said:

Any income paid to him from Country A employer while he is in the US is not eligible - Correct?  The income has to be paid to him while overseas - Correct?

That does not sound correct if the income was earned outside of the USA.

The code or regs should clarify.

[DANRVAN]

per reg 1.911-3(a)

 Earned income is from sources within a foreign country if it is attributable to services performed by an individual in a foreign country or countries. The place of receipt of earned income is immaterial in determining whether earned income is attributable to services performed in a foreign country or countries.