Pilot Based in U.S. Couldn’t Exclude Income

The foreign earned income exclusion allows an individual living abroad who meets a foreign residency or physical presence test to exclude earned income up to a set limit ($107,600 in 2020; $108,700 in 2021). However, an individual whose tax home is in the U.S. cannot claim the exclusion; such person is not a “qualified individual.”

That’s what the Tax Court told a pilot who lived in Thailand (Cutting, TC Memo 2020-158). Under his employment contract, he was required to have a “home base,” and he used San Jose, California for this purpose. He used his parents’ address (near San Jose) as his home base and San Jose Airport as his duty station. The court rejected his argument that since he had no regular place of business—he flew all over the world—his tax home should be determined by reference to his place of abode in Thailand. The court reaffirmed that a pilot’s principal place of business, and thus tax home, is his or her duty station.