Flying Over International Waters And In U.S.? Flight Attendant Denied Exclusion

Charming Stewardess Holding Airplane In Hand.

Recently in Rogers case, the DC court affirmed the Tax Court’s decision that a flight attendant who performed some duties in and over the U.S. and international waters could not exclude all of her wages under IRC 911 as foreign earned income.

The taxpayer worked as an international flight attendant based in Hong Kong. She performed in-flight duties and some pre-departure and post-arrival work and was generally paid according to her flight time. She received vacation time and benefits, and could receive guarantee pay for work that she would have performed on flights that were canceled. When she received guarantee pay, she was required to remain in Hong Kong awaiting reassignment to another flight. The airline provided the taxpayer with an apportionment of her estimated duty time between minutes spent in or over foreign countries, in or over the U.S., and over international waters. The taxpayer and her husband filed a joint return and excluded all of the taxpayer’s earnings as foreign earned income under IRC 911.

IRS and later Tax Court disallowed the foreign earned income exclusion for the portion of income allocated to her time within U.S. and allowed exclusion only for the flight time that the taxpayer was outside the U.S.

Foreign earned income exclusion is claimed on Form 2555 and the taxpayer must meet either bona fide residence test or physical presence test. There are several exceptions and rules as well as planning opportunities. CPA Global Tax professionals can help you navigate this.

Original Post By:  Pallav Acharya

Certified Public Accountant, Chartered Accountant and Chartered Global Management Accountant with a niche in international tax area since 1985. Specialties include cross border tax consultation and compliance for business and individual clients. Frequent speaker, author of articles on international tax topics. Founder- owner of boutique firm specializing in international tax planning and compliance.

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