Here’s a hypothetical that’s come up, and may be of interest to some of our academic readers.
Professor X is a professor at the University of Wyoming. She has accepted an offer to undertake research at Tel Aviv University for calendar year 2013-2014. As a twenty-year veteran of UW, X is eligible to take two semesters of paid sabbatical leave. She does so for the two semesters of calendar year 2013, and receives her full salary from the University. (She will take an unpaid leave for 2014). X stays in Tel Aviv for the entire year, except for a one-week trip to NYC for her cousin’s wedding.
Tax time comes for 2013 around, and Professor X claims that the first 92K or so of her UW salary is exempt from federal income tax because it is foreign earned income, which is defined as “income you receive for services you perform during a period in which you meet both of the following requirements. Your tax home is in a foreign country. You meet either the bona fide residence test or the physical presence test.” X meets the physical presence test because she lived outside the U.S. for more than 330 days in 2013.
Is there any reason that X couldn’t take advantage of the exemption? (If so, the lesson would be to take a calendar year, not academic year, sabbatical abroad, right?)