January 30, 2014
Qualifying for the Foreign Earned Income Exclusion Physical Presence - When You Have Foreign Residence or Tax Domicile
The IRS can cause you problems if you claim a foreign residence for the Physical Present Test when attempting to use the foreign earned income exclusion on your tax return. Factors that are looked at to determine if you have a foreign residence are:
In Sochurek v. CIR, the Court of Appeals for the Seventh Circuit listed some of the factors to be weighed in determining a taxpayer's residence:
a. The taxpayer's intention.
b. Establishment of a home temporarily in the foreign country for an indefinite period.
c. Participation in the activities of the community on social and cultural levels, identification with the daily lives of the people, and, in general, assimilation into the foreign environment.
d. Physical presence in the foreign country consistent with the taxpayer's employment.
e. The nature, extent, and reasons for temporary absences from the foreign home.
f. Assumption of economic burdens and payment of taxes to the foreign country.
g. Status of a resident of the foreign country as contrasted to that of a transient or sojourner.
h. The taxpayer's employer's classification of the taxpayer's income tax status.
i. Marital status and residence of the taxpayer's family.
j. Nature and duration of his employment; whether his assignment abroad could be promptly accomplished within a definite or specified time.
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