[tsing]

I am a US citizen and my spouse came to the USA on a K-1 visa in early September, 2008. She has been living here ever since. For the 2008 tax year, we plan to file a joint tax return and make her a "Nonresident Alien Treated as a Resident" for tax purposes. To do that, we have to report her worldwide income she earned before she came to the USA.

My question is do we have to send some kind of proof of her foreign income she earned prior to her coming to the USA - similar to a W-2 form? In her country, they do not have such forms. Or do we just enter her income as part of the "Wages, salaries, tips, etc." without any supporting documentation? Thanks for any help you can give.

[AtlantaTaxExpert]

You submit the Form 1040 and claim her income on Line #7 of the Form 1040 (wages, salaries, tips, etc.).

You would then EXCLUDE her income using Form 2555 (this assumes she was located outside the U.S. for a full year prior to her September 2008 arrival.

There is no need for supporting documentation be submitted with the original tax return. Since you claim the income on Line #7, then exclude the income on Line #21 as a negative figure, substantiating the income seems to be rather moot.

[The Texas Tax Expert]

She cannot exclude the income under the foreign earned income exclusion as that would require her to have been a resident during the full 330 days. If she does not meet that test, then she is not eligible for the exclusion.

[MukatA]

She can exclude her income by filing Form 2555. She must meet one of the two requirements:
1. She is bona fide resident of the country, or
2. She live continuously for 330 days in the country. These 330 can even start in 2007 and end in 2008.

[The Texas Tax Expert]

As I noted in my earlier post, the law requires that a person be a resident (or citizen) to claim the foreign earned income exclusion. Although the regulations permit an individual who makes the election to become a resident to be counted as a resident for the 911 test, this residency election would need to apply to both years in which the foreign physical presence test is met. In the case of the OP then, this does not seem to be an option.

See Reg. 1.911-2(e)

"... For purposes or paragraph (a)(2)(ii) of this section, the term “resident of the United States” includes an individual for whom a valid election is in effect under section 6013(g) or (h) for the taxable year or years during which the physical presence requirement is satisfied. "

[AtlantaTaxExpert]

After reviewing the pertnent regulations, I must agree with TTE's interpretation of the said regulation.

In order to claim the Foeign Income Exclusion, the taxpayer must be a U.S. citizen or resident alien for the entire period of the exclusion. In OP's case, his wife clearly was NOT a resident alien for 2007. This being the case, I amend my orignal posting. The Foreign Income Exclusion is NOT an option; she will have to claim the Foreign Tax Credit for the taxes paid on her home country income.

[IntlTax]

TTE, do you think that nondiscrimination rules under a treaty could allow a 911 exclusion in this circumstance? For instance, see Rev. Rul. 91-58. While this ruling seemed to contemplate a green card holder, it would seem discriminatory to not allow the exclusion here. On the other hand, an individual would not be a U.S. resident under the treaty in the prior year and therefore perhaps the treaty wouldn't apply to the earlier year?

[The Texas Tax Expert]

IntlTax,

I don't believe that the non-discrimination article would apply here. In the ruling, the problem was that a US citizen would have access to 2 paths to the exclusion but a resident only had one path. This is discriminatory.

In the current case, the resident still has access to both paths to the exclusion (as long as they meet the conditions). I don't see that the resident is being treated differently to a citizen by being required to meet the test during the residency period. In the non-residency period, residents and non-residents can be treated differently.

I guess the ultimate question would be this:

- if a person became a citizen on June 1, 2008 (but had not previously lived in the US), would that person be able to use days in 2007 to qualify them for the PPT?

I've never looked into that question but if the answer is no as I would expect it to be, then there is no discrimination.