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7. Section 911
At the election of a qualified individual, section 911(a)(1)
provides a limited exclusion for foreign earned income. Such
exclusion is limited to $70,000 annually. Sec. 911(b)(2). A
qualified individual is a U.S. citizen whose tax home is a
foreign country and who meets the bona fide residence test, or
resides in a foreign country for a qualifying period. Sec.
911(d)(1). The parties agree that petitioner was a U.S. citizen
and was a qualifying individual during the years in issue.
Foreign earned income includes amounts received from sources
within a foreign country as earned income for services performed,
but does not include amounts "paid by the United States or an
agency thereof to an employee of the United States or an agency
thereof". Sec. 911(b)(1)(A) and (B)(ii).
a. Petitioner's Employment Status
Respondent essentially contends that although petitioner was
transferred to NATO in accordance with the hiring procedures of
the London Agreement, he remained a U.S. employee for purposes of
section 911, regardless of common law principles of employment;
additionally, that amendments to section 911 made pursuant to the
Economic Recovery Tax Act of 1981 (ERTA), Pub. L. 97-34, sec.
111(a), 95 Stat. 172, 190, do not alter this result.
Article 19 of the Ottawa Agreement allowed member states to
conclude an arrangement with NATO whereby a member state would
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