Washington, D.C. (February 25, 2011)
By Michael Cohn
The Internal Revenue Service is allowing U.S. citizens and residents who also live in Haiti and the Ivory Coast to exclude their foreign earned income and housing costs from their 2010 gross income even if they don’t meet the normal eligibility requirements.
Revenue Procedure 2011-20 provides information to any individuals who failed to meet the eligibility requirements of Section 911(d)(1) of the Tax Code because adverse conditions in a foreign country precluded them from meeting those requirements for tax year 2010. The Tax Code allows a “qualified individual” to exclude foreign earned income and housing cost amounts from gross income.
The “qualified individual” can be someone whose tax home is in a foreign country and who is either a citizen of the United States and establishes that he or she has been a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire taxable year, or a citizen or resident of the U.S. who, during any period of 12 consecutive months, is present in a foreign country or countries for at least 330 full days.
The Tax Code, however, provides an exception to the eligibility requirements of Section 911(d)(1). A person will be treated as a qualified individual if he or she left the country during a period in which individuals were required to leave because of war, civil unrest, or similar adverse conditions that precluded the normal conduct of business. The individual must establish that, but for those conditions, he or she could reasonably have been expected to meet the eligibility requirements.
For 2010, the Treasury Department, in consultation with the State Department, has determined that war, civil unrest, or similar adverse conditions precluded the normal conduct of business in Cote D’Ivoire on or after Dec. 19, 2010, and Haiti on or after Jan. 13, 2010. The Ivory Coast has been the site of civil unrest and violence following disputed presidential elections late last year. Haiti suffered from a devastating earthquake on Jan. 12, 2010, forcing mass evacuations and leading to a cholera epidemic.