Nancy Teaches School in a Chinese University

Nancy teaches school in a Chinese university. She is a U.S. citizen and has been teaching in China for 5 years. In the current year she will earn $100,000. What are some of Nancy's options for reporting U.S. gross income?
I.She may include the foreign earned income in her gross income, calculate her U.S. income tax, and take a tax credit for foreign taxes paid.
II.She may exclude up to $104,100 in foreign earned income for the current year.
III.She may exclude all of her income because it is earned outside of the U.S.
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A) Only I is correct.
B) Only II is correct.
C) Only III is correct.
D) I and II are correct.
E) II and III are correct.

Correct Answer:

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