A USCitizen Worked in a Foreign Country for the Period July

question 30

Multiple Choice

A U.S.citizen worked in a foreign country for the period July 1, 2011 through August 1, 2012.Her salary was $10,000 per month.Also, in 2011 she received $5,000 in dividends from foreign corporations (not qualified dividends) .No dividends were received in 2012.Which of the following is correct?

• A)The taxpayer can exclude $60,000 from U.S.gross income for 2011 because the total salary earned in the foreign country in 2011 was less than the annual foreign earned income exclusion, but the dividends of $5,000 must be included in gross income.
• B)The taxpayer can exclude a portion of the compensation income from U.S.gross income in 2011 and 2012, but must include the dividend income of $5,000 in gross income.
• C)The taxpayer can exclude from U.S.gross income $60,000 salary in 2011, but in 2011 the taxpayer will exceed the twelve month limitation and, therefore, all of the 2012 compensation must be included in gross income.All of the dividends must be included in 2011 gross income.
• D)The taxpayer can exclude a portion of the salary from U.S.gross income in 2011 and 2012, and all of the dividend income.
• E)None of the above.

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Definitions:

Discount on Bonds Payable

An amount by which a bond is sold below its face value, reflecting the difference between the market rate of interest and the bond's coupon rate.

Market Volatile

A description of how significantly and frequently the price of assets, securities, or commodities can change in a market.

Bonds Mature

The point in time when a bond's principal amount is due to be paid back to bondholders, ending the bond's life.

Straight-Line Method

The straight-line method is a depreciation technique that allocates an even amount of depreciation expense over the useful life of an asset.