There are lots of foreign countries in the world, but Antarctica is not one of them. It is a continent. The question arose last year on whether you can take the Foreign Earned Income Exclusion (§911 of the Tax Code) if you happen to be working in Antarctica; today, the issue reappeared at the Tax Court.
The Foreign Earned Income Exclusion allows a taxpayer who is working abroad to exclude a portion of their earned income. But there are caveats–the income excluded must be earned, and it must be earned in a foreign country (there are other restrictions, too). Last year, in Arnett v. Commissioner (126 T.C. No. 5), the Tax Court ruled that §911 doesn’t apply. Earlier this year, the 7th Circuit Court of Appeals upheld that decision. Unsurprisingly, the Tax Court tersely noted, “We follow our analysis and holding in Arnett I and the analysis and holding of the Court of Appeals in Arnett II.”
Deductions and exclusions are narrowly constructed; that’s a basic rule of the US Tax Code. Unfortunately, for today’s petitioner, Antarctica doesn’t fall within the scope of Section 911.
Case: Kunze v. Commissioner, T.C. Memo 2007-179
Tags: LarryHarvey