Example. (a) Facts. X is a domestic corperation organized on January 1, 1975, and uses the calendar year as its taxable year. I chooses to claim a credit under section 90: for each of the taxable years set forth below. For 1975, X elects the overall limits tion. X has FOGEI and FORI in each of these taxable years. For purposes of simplic ity, the United States corporate tax rate and the limitation percentage for year other than 1975 and 1976 are each assumed to be 48 percent. Based upon the foreign taxes paid with respect to both these classes of income, and the additional facts assumed in the table below, the unused FOGEI tax deemed paid under section 907(f), and the unused FORI tax deemed paid under section 904(c) in each of the appropriate years are as follows:

(b) 1975. None of the unused FOGEI tax ine 6(c)) for 1976 can be carried back to 75 because there is no excess extraction mitation (line 7(d)) for 1975. The limitaon level under section 907(a) for unused x (line 3(a)) is different than the level for he excess extraction limitation (line 3(b)) or 1975 because the limitation percentage or unused tax is 52.8 percent (§ 1.907(a)– c)(2)) while the percentage for the excess xtraction limitation is 48 percent pararaph (f) of this section. Therefore 1975 is ot an excess extraction limitation year beause the limitation level for determining he excess limitation ($48.00) is less than he FOGEI taxes paid ($49.00). 1975 could ot be a year of origin under section 907(f) ecause that section does not apply to OGEI taxes paid or accrued in that year. he unused FORI tax for 1976 (line 12) nat is absorbed by the excess FORI limitaon for 1975 (line 17(e)) is computed in acordance with the general rule of § 1.907(b)(c).

(c) 1976. 1976 is a year of origin under secons 907(f) and 904(c) (see paragraph (g) of his section). The unused FOGEI tax would ot be reduced to 2 percent of FOGEI if the xcess limitation year was 1977 or 1975 (see aragraph (b)(2) of this section. For 1976, he limitation percentages for unused tax nd for excess extraction limitation are 50.4 ercent and 48 percent, respectively, for the easons given in paragraph (b) of this examle. The unused FORI tax (line 12) for 1976 hat is absorbed by the excess FORI limitaion for 1975 (line 17(e)) is determined in acordance with the explanation in paragraph b) of this example.

(d) 1977. The unused FOGEI tax for 1976 line 6(c)) that is absorbed as taxes deemed aid in 1977 (line 14) is limited to $20.00 beause the excess extraction limitation for 977 (line 7(d)) is less than the excess oil reated limitation (line 13(e)) for that year see paragraph (c) of this section). The comutations of the unused FOGEI tax (line (c)) and unused FORI tax (line 12) are not lecessary because 1977 is an excess limitaion for both FOGEI and FORI tax. The computation of the excess FORI limitation line 17(e)) reflects the FOGEI taxes leemed paid (line 14) under section 907(f) in Iccordance with § 1.907(b)-2(d)(1)(ii). The Computation of unused 1976 FOGEI tax Available as a carryover for future years line 16(a)) is in accordance with paragraph b)(2) of this section. The limitation level line 3) for unused tax and excess limitation is the same for years 1977 through 1981.

(e) 1978. The computations of the excess extraction limitation (line 7(d)), excess oil related limitation (line 13(e)), and excess FORI limitation (line 17(e)) are not necessary because 1978 is a year of origin. The unused FOGEI tax is limited to 2 percent of FOGEI in accordance with paragraph (b)(2)

of this section. (However, the 2-percent limitation would not apply if the unused FOGEI tax were carried back to 1976 or 1977.)

(f) 1979. 1979 is an excess limitation year with respect to the extraction and oil related limitations (lines 7(d) and 13(e), respectively). The chart provides three columns for 1979 to reflect the order in which unused taxes are deemed paid under section 907(f) and section 904(c). For any particular year of origin, unused FOGEI taxes are deemed paid under section 907(f) in a particular excess limitation year before unused FORI taxes from the same year of origin are deemed paid under section 904(c) in that year.

(g) 1979(a). The excess FORI limitation (line 17(e)) reflects the FOGEI taxes deemed paid (line 14) under section 907(f) in accordance with § 1.907(b)-2(d)(1)(ii).

(h) 1979(b). In computing both the excess extraction (line 7(d)) and oil related (line 13(e)) limitations, the FOGEI taxes deemed paid under section 907(f) for prior years of origin (line 5) are included in accordance with paragraph (d)(2) and (e)(3) of this section, respectively. Line 11 only has application to 1979. In computing the excess FORI limitation (line 17(e)), the aggregate of the FOGEI taxes deemed paid under section 907(f) (line 14) in 1979(a) and 1979(b) is used in accordance with § 1.907(b)2(d)(1)(ii).

(i) 1979(c). The principles that apply to 1979(c) were discussed in paragraph (h) of this example. The taxes deemed paid in 1979(c) are those carried back from 1980. In computing both the excess oil related (line 13(e)) and the excess FORI (line 17(e)) limitations, the FORI taxes deemed paid under section 904(c) for prior years of origin (line 11) are included in accordance with paragraph (e)(2) of this section and § 1.907(b)2(d)(1)(iii) respectively.

(j) 1980. The unused FOGEI tax is computed in accordance with paragraph (b)(1) of this section. 1980 is a year of origin under sections 907(f) and 904(c) (see paragraph (g) of this section).

(k) 1981. The unused FORI tax for 1980 (line 12) that was not absorbed in 1979 (line 20(c)) cannot be carried to 1981 because of the priority rule in paragraph (g) of this section (see line 17(c)). This rule reduces the excess FORI limitation to zero (see line 17(e)).

[T.D. 7961, 49 FR 26223, June 27, 1984; 49 FR 29594, July 23, 1984]

§ 1.911-1 Partial exclusion for earned income from sources within a foreign country and foreign housing costs.

(a) In general. Section 911 provides that a qualified individual may elect to

exclude the individual's foreign earned income and the housing cost amount from the individual's gross income for the taxable year. Foreign earned income is excludable to the extent of the applicable limitation for the taxable year. The housing cost amount for the taxable year is excludable to the extent attributable to employer provided amounts. If a portion of the housing cost amount for the taxable year is attributable to non-employer provided amounts, such amount may be deductible by the qualified individual subject to a limitation. The amounts excluded under section 911(a) and the amount deducted under section 911(c)(3)(A) for the taxable year shall not exceed the individual's foreign earned income for such taxable year. Foreign earned income must be earned during a period for which the individual qualifies to make an election under section 911(d)(1). A housing cost amount that would be deductible except for the application of this limitation may be carried over to the next taxable year and is deductible to the extent of the limitation for that year. Except as otherwise provided, §§ 1.911-1 through 1.911-7 apply to taxable years beginning after December 31, 1981. These sections do not apply to any item of income, expense, deduction, or credit arising before January 1, 1982, even if such item is attributable to services performed after December 31, 1981.

(b) Scope. Section 1.911-2 provides rules for determining whether an individual qualifies to make an election under section 911. Section 1.911-3 provides rules for determining the amount of foreign earned income that is excludable under section 911(a)(1). Section 1.911-4 provides rules for determining the housing cost amount and the portions excludable under section 911(a)(2) or deductible under section 911(c)(3). Section 1.911-5 provides special rules applicable to married couples. Section 1.911-6 provides for the disallowance of deductions, exclusions, and credits attributable to amounts excluded under section 911. Section 1.911-7 provides procedural rules for making or revoking an election under section 911.

Section 1.911-8 provides a reference to rules applicable to taxable years be ginning before January 1, 1982.

(Sec. 911 (95 Stat. 194; 26 U.S.C. 911) and sec. 7805 (68A Stat. 917; 26 U.S.C. 7805) of the Internal Revenue Code of 1954)

[T.D. 8006, 50 FR 2964, Jan. 23, 1985]

§ 1.911-2 Qualified individuals.

(a) In general. An individual is a qualified individual if:

(1) The individual's tax home is in a foreign country or countries throughout

(i) The period of bona fide residence described in paragraph (a)(2)(i) of this section, or

(ii) The 330 full days of presence described in paragraph (a)(2)(ii) of this section, and

(2) The individual is either

(i) A citizen of the United States who establishes to the satisfaction of the Commissioner or his delegate that the individual has been a bona fide resident of a foreign country or countries for an uninterrupted period which includes an entire taxable year,

or

(ii) A citizen or resident of the United States who has been physically present in a foreign country or countries for at least 330 full days during any period of twelve consecutive months.

(b) Tax home. For purposes of paragraph (a)(i) of this section, the term "tax home" has the same meaning which it has for purposes of section 162(a)(2) (relating to travel expenses away from home). Thus, under section 911, an individual's tax home is considered to be located at his regular or principal (if more than one regular) place of business or, if the individual has no regular or principal place of business because of the nature of the business, then at his regular place of abode in a real and substantial sense. An individual shall not, however, be considered to have a tax home in a foreign country for any period for which the individual's abode is in the United States. Temporary presence of the individual in the United States does not necessarily mean that the individual's abode is in the United States during that time. Maintenance of a