Foreign Activities and Taxpayers-US Citizens

[mattw]

The following quote is from the 1997 U.S. Master Tax Guide. Granted it is old, but its the only source I have. Unless the spirit of the Code has changed, perhaps only the percent has changed. Any posters with a more recent issue please contribute.

Pg 549, paragaraph 2405. "Earned Income. The term ""earned income"" means wages, salaries, or professional fees, and other amounts received as compensation for personal services actually rendered during the period in which the bona fide residence test or physical presence test is met. If a taxpayer is engaged in a trade or business in which both personal services and capital are materaial income-producing factors, a reasonable allowance as compensation for the personal services, not in excess of 30% of his share of the net profits of such trade or business, is considered as earned income (Code Sec. 911(d)(2)(B); Reg 1.9113-3)."

This seems to imply that only 30% of a poker pro's income is taxable while abroad.

Disclaimer: The above is only meant for discussion. Consult a professional for legal/accounting advise.

Discuss.