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day” to include partial days of travel in or on international
airspace, land, or waters from one foreign location to another
foreign location. Therefore, a day involving travel in
international waters between foreign locations in increments of
less than 24 hours is treated as a full day in a foreign country.
Sec. 1.911-2(d)(2) and (3), Income Tax Regs.
If the second alternate requirement of section 911(d)(1) is
relied on (330 days of foreign physical presence) and if the
applicable period selected by a taxpayer to satisfy the 330 days
of foreign physical presence does not correspond to the
taxpayer’s taxable year, the taxpayer may only exclude the lesser
of actual foreign income earned during the taxable year or a pro
rata portion of the maximum exclusion amount that corresponds to
the number of days of the applicable period that falls within the
taxpayer’s taxable year. Sec. 1.911-3(d)(2) and (3), Income Tax
Regs.
Because we have found that petitioners were physically
present in foreign countries for 330 days for 2001 (using an
applicable period of January 7, 2001, to January 6, 20027), and
7For 2001, petitioners have not specifically requested an
applicable period of Jan. 7, 2001, to Jan. 6, 2002. However,
petitioners have requested that the Court determine the
applicable period that will maximize petitioners’ exclusion. We
agree with petitioners that generally we are not precluded from
identifying and utilizing an applicable period that allows a
taxpayer the maximum foreign earned income exclusion under the
physical presence requirement.
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Last modified: May 25, 2011