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Taxpayer has met and utilized the physical presence test for…

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Taxpayer has met and utilized...
Taxpayer has met and utilized the physical presence test for Form 2555 the last 3 years.
Qualifying period Jan1-Dec31 for 2017 and 2018.
Taxpayer was out of the country for 344 days starting on 6/29/2017 to 07/02/2018. So, 1 full year but only half in 2017. He came back permanently on 07/3/17.
I know we can start a new qualifying period at any time, but does that include days already used for a different qualifying period in the previous year's return?
what I am actually trying to determine is if he qualifies for the entire $102K exclusion for 2017 or only partial from Jan - July 2nd when he came home.
Submitted: 4 months ago.Category: Tax
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3/17/2018
Tax Professional: Barbara, Enrolled Agent replied 4 months ago
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 6,372
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

Per the IRS,

You meet the physical presence test if you are physically present in a foreign country or countries 330 full days during a period of 12 consecutive months. The 330 qualifying days do not have to be consecutive. It's not the calendar year.

I'm guessing the taxpayer was out of the country from 6/29/16 to 7/2/2017 NOT as you have listed as "6/29/17 to 7/2/2018." Correct?

Thank you.

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Tax Professional: Barbara, Enrolled Agent replied 4 months ago

Just following up with you to see if you have any other questions. If so, please let me know so I can continue to assist you.

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Customer reply replied 3 months ago
correct. 07/02/17 and I know the rule about 330 full days.
My question is can you use the same days for two different tax years?
Customer reply replied 3 months ago
I think you can, just wanted to confirm.
Tax Professional: Barbara, Enrolled Agent replied 3 months ago

You are correct.

You can use overlapping dates for different tax years, for purposes of meeting the necessary 330 days required in the "Physical Presence Test."

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Tax Professional: Barbara, Enrolled Agent replied 3 months ago

Just following up with you to see if you have any other questions. If so, please let me know so I can continue to assist you.

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Customer reply replied 3 months ago
I don't believe your answer is correct based on what I found in publication 54 and copied for you below. Please review and advise if you agree that I have to prorate the exclusion because he returned home on July 4, 2017 and only had 184 days in the current year.Part-year exclusion. If the period for which you qualify for the foreign earned income exclusion includes only part of the year, you must adjust the maximum limit based on the number of qualifying days in the year. The number of qualifying days is the number of days in the year within the period on which you both:Have your tax home in a foreign country,
Meet either the bona fide residence test or the physical presence test.For this purpose, you can count as qualifying days all days within a period of 12 consecutive months once you are physically present and have your tax home in a foreign country for 330 full days. To figure your maximum exclusion, multiply the maximum excludable amount for the year by the number of your qualifying days in the year, and then divide the result by the number of days in the year.Physical presence test. Under the physical presence test, a 12-month period can be any period of 12 consecutive months that includes 330 full days. If you qualify for the foreign earned income exclusion under the physical presence test for part of a year, it is important to carefully choose the 12-month period that will allow the maximum exclusion for that year.
Note. See How to figure the 12-month period under Physical Presence Test, earlier, for the rules on figuring the 12-month period.
Example. You are physically present and have your tax home in a foreign country for a 16-month period from June 1, 2016, through September 30, 2017, except for 16 days in De-cember 2016 when you were on vacation in the United States. You figure the maximum exclusion for 2016 as follows.
Beginning with June 1, 2016, count forward 330 full days. Do not count the 16 days you spent in the United States. The 330th day, May 12, 2017, is the last day of a 12-month period.Count backward 12 months from May 11, 2017, to find the first day of this 12-month period, May 12, 2016. This 12-month period runs from May 12, 2016, through May 11, 2017.Count the total days during 2016 that fall within this 12-month period. This is 234 days (May 12, 2016 – December 31, 2016).Multiply $101,300 (the maximum exclusion for 2016) by the fraction 234/366 to find your maximum exclusion for 2016 ($64,766).You figure the maximum exclusion for 2017 in the opposite manner.Beginning with your last full day, September 30, 2017, count backward 330 full days. Do not count the 16 days you spent in the United States. That day, October 20, 2016, is the first day of a 12-month period.Count forward 12 months from October 20, 2016, to find the last day of this 12-month period, October 19, 2017. This 12-month period runs from October 20, 2016, through October 19, 2017.Count the total days during 2017 that fall within this 12-month period. This is 292 days (January 1, 2017 – October 19, 2017).Multiply $102,100, the maximum limit, by the fraction 292/365 to find your maximum exclusion for 2017 ($81,680).
Tax Professional: Barbara, Enrolled Agent replied 3 months ago

See Figure 4-B in Publication 54.

In your client's case,

The first 12-month period started on June 29, 2016.

The second 12-month period started on July 4, 2016.

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