On her 2007 tax return, Rogers excluded 100% of her United wages on Form 2555- EZ, Foreign Earned Income Exclusion.
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Possibly with the benefit of the foreign earned income exclusion and the credit for whatever they paid Minnesota, the tab will not be overwhelming.
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Foreign earned income is defined as income received by a qualifying individual from sources within a foreign country which constitutes earned income attributable to services performed.
FORBES: Tax Court: International Airspace Is Not A Foreign Country
Given the level of her income, though, Ms. Rogers, if she were a bona-fide resident of Hong Kong, which the IRS admitted she was, would be able to exclude all of her foreign earned income.
The IRS argued that the wages earned by Rogers on flights in the U.S. and in international airspace did not constitute foreign earned income, as they were not earned in a foreign country, and thus were not eligible for exclusion.
FORBES: Tax Court: International Airspace Is Not A Foreign Country
It would require multinationals to pay tax on foreign income as it is earned, ending the practice known as deferral where overseas income is not taxed until it is brought home.
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Mitt Romney wants to expand the tax deferral for overseas operations by adopting a territorial tax system, under which U.S tax would never be imposed on income earned by Foreign Co. from non-U.S. sources.
Upon receiving the dividend, X Co. is permitted to utilize a foreign tax credit to reduce the U.S. tax applied to the dividend, preventing the same income from being taxed twice: once when earned by Foreign Co. and a second time when distributed to X Co.
Romney would seek to drop the corporate rate and cease taxing corporations on income earned overseas, which some argue would eliminate the quandary posed by foreign profits being locked up abroad.
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The U.K. Treasury has argued that athletes earn their sponsorship money through public appearances, but the system is significantly harsher than other jurisdictions around the world, where tax on foreign athletes is based on the number of days spent in country, or on the incremental income earned.
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