Is this foreign-earned income?

Question

My brother is a second mate in the Merchant Marines. His ship runs between Valparaiso, Chile and either Oakland or Houston. He'd been a Texas resident using my address since going to sea. He changed his residence to Chile in early January when he married a Chilean school teacher and bought a home outside of Valparaiso with her. He's changed his Texas driver's license, his voter's registration, and everything he could think of to his Chilean address. He rattled off a list of benefits he was going to get with this arrangement. One of them was his income is now gets the the foreign-earned income. Is this correct - he owes no federal income taxes? Lindy

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L K Williams · Accepted Answer

To qualify for the foreign exclusion, his tax home must be outside the US. Since the IRS will probably claim that his tax home is the base or home port of the ship. If it is a US flagged ship, this is probable. He could try claiming the exclusion (up to $82,400 for

2006) but would have to reduce the qualifying days by the number of days his ship was in a US port.

Lanny K. Williams, CPA Nawarat, Williams & Co., Ltd. Income Tax Services for Expatriate Americans

L K Williams · Answer

To qualify for the foreign exclusion, his tax home must be outside the US. Since the IRS will probably claim that his tax home is the base or home port of the ship. If it is a US flagged ship, this is probable. He could try claiming the exclusion (up to $82,400 for

2006) but would have to reduce the qualifying days by the number of days his ship was in a US port.

Lanny K. Williams, CPA Nawarat, Williams & Co., Ltd. Income Tax Services for Expatriate Americans

Is this foreign-earned income?

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