Taxpayer may reelect the foreign earned income exclusion after moving countries

Plain-English summary

A taxpayer working abroad revoked the section 911 foreign earned income exclusion and instead claimed a credit for taxes paid in a high-tax country. Within five years, the taxpayer’s employer moved him to another country with a significantly lower individual income tax rate. Because a taxpayer who revoked the election needs IRS consent to reelect within five taxable years, he requested a ruling for the new year and later years. The regulations permit the IRS to consider a move between countries with different tax rates. Based on the submitted facts, the IRS allowed the reelection, while expressing no opinion on whether the taxpayer otherwise met section 911’s requirements.

Ruling snapshot

• Question: Could the taxpayer reelect the section 911 foreign earned income exclusion within five years after revoking it?
• Outcome: Approved
• Key authorities: IRC § 911; Treas. Reg. § 1.911-7(b)

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201511017
Third Party Communication: None
Release Date: 3/13/2015
Date of Communication: Not Applicable
Index Number: 911.11-03
Person To Contact:
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Refer Reply To:
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CC:INTL:B02
PLR-128530-14
Date:
October 16, 2014

TY: -------

Legend
Taxpayer = -------------------------
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Year 1 = -------
Year 2 = -------

Country A = -----------------------
Country B = ----------------

Dear -------------------:

This is in response to a letter dated June 23, 2014, submitted on your behalf by your authorized representative, requesting permission to reelect the provisions of section 911 of the Internal Revenue Code (Code) for Year 2 and subsequent tax years. Additional information was submitted on October 10, 2014.

The rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. While this office has not verified any of the material submitted in support of the request for rulings, it is subject to verification on examination.

Taxpayer lived and worked in Country A in Year 1. Due to the high rate of tax in Country A in comparison to the U.S. income tax rate, Taxpayer revoked his section 911 foreign earned income election on his Year 1 income tax return by taking a credit for the amount of the foreign taxes he paid to Country A. In Year 2, Taxpayer’s employer relocated him to Country B. Country A’s income tax rate for individuals is significantly higher than Country B’s income tax rate for individuals. Taxpayer seeks permission to reelect for Year 2. Year 2 is within 5 years of Year 1.
PLR-128530-14
2

Treas. Reg. §1.911-7(b) provides that if an individual revoked an election to exclude foreign earned income under section 911(a) and within five taxable years the individual wishes to reelect the exclusion, then the individual may apply for consent to the reelection by requesting a ruling from the Associate Chief Counsel (International). In determining whether to consent to a reelection, the Associate Chief Counsel (International) or his delegate may consider any facts and circumstances relevant to the determination. Relevant facts and circumstances may include a move from one foreign country to another foreign country with differing tax rates.

Accordingly, based solely on the information and representations set forth above, it is held that Taxpayer may reelect the section 911 foreign earned income exclusion for Year 2 and subsequent tax years. No opinion is expressed as to whether Taxpayer satisfied the requirements for the exclusion provided under section 911(a) of the Code.

A copy of this ruling letter should be attached to Taxpayer’s federal income tax return for the relevant tax year.

This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

In accordance with the Power of Attorney on file with this office, a copy of this letter is being sent to your authorized representative.

Sincerely,

Jeffery G. Mitchell
Branch Chief, Branch 2
(International)