This topic comes up quite a bit in this forum. My question pertains in particular to a scenario very similar to the following Misc.Taxes.Moderated thread from 2008, which I provide a link to here just to help you warm up. ;-)
- US citizen, unmarried and no dependents, does not own any real estate, privately employed in foreign country as a translator for US military for periods of, say, 6-9 months at a stretch.
- Between periods of overseas employment, lives in US (without any significant earned income), anywhere from a few months to a year or more.
- The above pattern is established for, say, at least 3-4 years. Has been a resident of three different US states during this time.
- Taxpayer is in Iraq for Jan-Aug of 2011 when work is expected to end.
QUESTION:
If he prolongs his stay overseas by traveling/vacationing long enough to meet the 330-day physical presence test, will he also meet the foreign tax home requirement and qualify for the foreign earned income exclusion (FIE)?
Two schools of thought:
- He has a tax home overseas even while traveling/vacationing, because he does not re-establish his US abode until he returns.
- He does *not* have a tax home overseas because his extended stays in the US mean he has an abode here (although he does not appear to have strong ties to any particular place in the US, given the multi-state relocations and lack of immediate family).
I've checked the IRS pubs (463, 54), I've checked all the links from RIA research that I could find, including Reg §1.911-2 and TCMemo 2007-42, which includes the following (see quote below).
TC Memo 2007-42 excerpt:
"The last sentence of section 911(d)(3) provides that a taxpayer who has an abode in the United States will not be treated as having a tax home in a foreign country. Neither section 911 nor the regulations thereunder define ?abode?. 5 Court cases that have done so involve taxpayers who have alternated long blocks of time working abroad with long blocks of time at home in the United States where their families lived. Because the taxpayers had domestic ties (such as family) in the United States and only transitory ties in the foreign country where the taxpayers worked, the taxpayers were held to have a U.S. abode. "