Megan accepts an assignment working in Germany for the first 9 months of 2019 from Ferguson Corporation.Ferguson Corporation paid Megan's salary of $78,000 plus an additional $7,000 bonus.Megan paid $5,000 to the German government in taxes on this income.During 2019, Megan also earned $9,000 of interest income from corporate bonds and $4,000 of dividend income from U.S.corporations.The maximum foreign earned income exclusion for 2019 is $105,900.How much should Megan include in her gross income on her U.S.tax return for 2019?
A)$98,000
B)$20,000
C)$13,000
D)zero

Question

Quizplus · Accepted Answer

Megan's gross income on her U.S. tax return should include the interest and dividend income ($9,000 + $4,000 = $13,000) because these are U.S. sources and not eligible for the foreign earned income exclusion. Her salary and bonus from working in Germany ($78,000 + $7,000 = $85,000) can be excluded up to the limit of $105,900. Therefore, her total gross income reported would be $13,000 from interest and dividends, as the salary and bonus are excluded under the foreign earned income exclusion. However, the question asks for the total amount to be included, which considers all her income sources, leading to a total of $98,000 ($85,000 salary and bonus + $13,000 interest and dividends) before applying the exclusion.

Megan Accepts an Assignment Working in Germany for the First