Everyone knows that to qualify for the foreign earned income exclusion you must meet either:
– The bona fide residence test
– The physical presence test.
Wrong. You must also have established your tax home in the foreign country – which in all fairness if you meet the above tests then you likely did establish your tax home there. But few people realize the IRS could begin asking you questions like:
– Do you speak the language of the country?
– Have you assimilated the new culture? (Do you have close friends, have you joined local clubs, do you engage in local activities).
– Do you have a driver’s license in the new country.
– Are you still registered to vote in the US?
– How close ties do you have remaining with the US?
Negative answers to the above could mean that you have not established abode in the foreign country, which if you read section 911 is a pre requisite for the foreign earned income exclusion. So, in summary, in order to qualify for the foreign earned income exclusion, you must:
1. Establish your abode in the foreign country
2. Establish your tax home in the foreign country
3. Meet either the physical presence test or the bona fide residence test.
Skeptical? See Clarence R. Ritchie v. Commissioner, U.S. Tax Court, 45,939(M), T.C. Memo. 45,939(M), 57 T.C.M. 1282, T.C. Memo. 1989-426,
(Aug. 15, 1989) and attached ( Careful with defining tax home without thinking of Abode.pdf and Abode – Abrams Vs Commissioner )