Two tax planning opportunities to avoid the foreign earned income exclusion limitation include: ...
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Accounting
Two tax planning opportunities to avoid the foreign earned income exclusion limitation include:
- Specify in the partnership agreement that the partners distributive share is based on the partnerships foreign income (which, if earned, will give rise to foreign earned income).
- The partnership can pay partners for services performed via guaranteed payments, which, to the degree received for services rendered in a foreign country, will constitute foreign earned income. Guaranteed payments will need to be specified in the partnership agreement.
Which of these two opportunities is preferable, and why?
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