Physical Presence Test

[dtlee]

Generally, I rely on TheTaxBook as my first point of reference, but then check further if the question is at the fringes....I have another such situation and am wondering if I am misinterpreting or if there is some change that I am unaware of. On page 14-16 of TheTaxBook 1040 edition is the following phrase

The taxpayer must be physically present in a foreign country or countries for at least 330 full (24-hour) days during a period of 12 consecutive months. The 12-month period can start on any day of the month and ends with the same calendar day a year later.

This seems to state that a 12 month period goes from, say 3/15/11 to 3/15/12 (367 days since February 2012 has 29 days).

The regulations state in §1.911-2(d)(1)

A period of twelve consecutive months may begin with any day but must end on the day before the corresponding day in the twelfth succeeding month.

This seems to make more sense and would make the above year from 3/15/11 to 3/14/12 and result in 366 total days rather than 367.

However, the regulations have not been updated in a while, so I am wondering if anyone knows of anything which would have changed the way we define a year for the Physical Presence Test.

I believe I am simply misinterpreting the wording in TheTaxBook, but I wanted other opinions.

Thanks.

[clr]

24 Hours

The taxpayer must be physically present in a foreign country or countries for at least 330 full (24-hour) days during a period of 12 consecutive months. The 12-month period can start on any day of the month and ends with the same calendar day a year later.

This states to me that if you arrive at 3:00PM on 03/15/11 the year would not be up until 2:59 PM on 03\15\12, 24 hours. You would be there for 367 dates.

[FEDUKE404]

Two considerations, not one

There are two separate issues here:

1 - Definition of a "year" - basically from one calendar date to just before the same date in the succeeding year

2 - The physical presence rule is for 330 days - and has zip to do with the length of the calendar year due to leap year considerations. Whether you interpret the "year" as 365 or 366 or 367 days has little relevance to the underlying 330-day physical presence requirement.

I guess if you have the unlikely situation of someone who is right on the edge of the physical presence test, starting late February, and it is a leap year, then a ouija board could be of some use.

FE

[dtlee]

There are two separate issues here:

1 - Definition of a "year" - basically from one calendar date to just before the same date in the succeeding year

2 - The physical presence rule is for 330 days - and has zip to do with the length of the calendar year due to leap year considerations. Whether you interpret the "year" as 365 or 366 or 367 days has little relevance to the underlying 330-day physical presence requirement.

I guess if you have the unlikely situation of someone who is right on the edge of the physical presence test, starting late February, and it is a leap year, then a ouija board could be of some use.

FE

Actually, if you read the regulations the definition of a year is very key if you are close to the 330 day rule. In fact, I do not see how you can ignore the definition of a year if you need to count days that are included in that timeframe.

A person who arrives in the UK on 12/31/11 and returns for home on 7/1/12 will have spent 182 days in the foreign country (the regulations do not count the partial travel days of 12/31 and 7/1). If that person returns to the UK on August 6, that person will have 25 days in the UK in August and will never be able to achieve 330 days in a "calendar year" until 7/2/13 (for the year beginning on 7/3/12 if you follow the regulations).

However, if the year that begins on 1/1/12 is allowed to end on 1/1/13 (and thus has 367 days), then this individual would have 182 days from 1/1/12 to 6/30/12 and 148 days to 1/1/13 if January 1 is allowed to be counted (25 + 30 + 31 + 30 + 31 + 1) if the year truly "ends with the same calendar day a year later." Thus, this person would meet the 330 day rule in a year for the entire periof of 2012 (and as long as the taxpayer maintains 330 days within a calendar year thereafter).

In other words, if the year ends on 12/31/12 ("the day before the corresponding day in the twelfth succeeding month." as stated in the regulations), this taxpayer would have 329 days in the UK during that period (and any other year definitions which include the full time outsid the UK).

I believe that the regulations remain correct and that in this scenario, in order to meet the physical presence test, a taxpayer must return to the foreign land before August 6 so that they are able to claim at least 26 days in August and that the year will end on 12/31/12, not on 1/1/13.

From the above two replies, it seems that the concensus is that the regulations are wrong and TheTaxBook is correct. Does anyone have a cite for this?

[taxea]

Generally, I rely on TheTaxBook as my first point of reference, but then check further if the question is at the fringes....I have another such situation and am wondering if I am misinterpreting or if there is some change that I am unaware of. On page 14-16 of TheTaxBook 1040 edition is the following phrase This seems to state that a 12 month period goes from, say 3/15/11 to 3/15/12 (367 days since February 2012 has 29 days).

The regulations state in §1.911-2(d)(1)This seems to make more sense and would make the above year from 3/15/11 to 3/14/12 and result in 366 total days rather than 367.

However, the regulations have not been updated in a while, so I am wondering if anyone knows of anything which would have changed the way we define a year for the Physical Presence Test.

I believe I am simply misinterpreting the wording in TheTaxBook, but I wanted other opinions.

Thanks.

I'm sure they did this (day prior to) so as to take into account not every year has a 2/29 date

[FEDUKE404]

Why so complicated?

This all seems reasonably clear to me. What exactly IS the question here??

How To Figure The 12-month Period

There are four rules you should know when figuring the 12-month period:

1 - Your 12-month period can begin with any day of the month. It ends the day before the same calendar day, 12 months later
2 - Your 12-month period must be made up of consecutive months. Any 12-month period can be used if the 330 days in a foreign country fall within that period
3 - You do not have to begin your 12-month period with your first full day in a foreign country or to end it with the day you leave. You can choose the 12-month period that gives you the greatest exclusion
4 - In determining whether the 12-month period falls within a longer stay in the foreign country, 12-month periods can overlap one another

330 Full Days

Generally, to meet the physical presence test, you must be physically present in a foreign country or countries for at least 330 full days during the 12-month period. You can count days you spent abroad for any reason. You do not have to be in a foreign country only for employment purposes. You can be on vacation time.


I seriously doubt if there are too many people working abroad who count to the day their employment time periods and/or get too stressed whenever a leap year rolls around.


"Work abroad for at least 330 days in any given one-year period" summarizes the basic qualifications quite well.


FE

[dtlee]

What exactly IS the question here??

FE

The question is why TheTaxBook seems to say that the one year period ends with the same calendar day a year later while the regulations, my prior experience and references, and whatever source you are quoting say it ends the day before.

I specifically asked if anyone knew of anything that would have changed the definition of a year for the Physical Presence Test.

I am quite familiar with the information you posted. Was that also taken from TheTaxBook? If so, then it confirms that I am misinterpreting what I quoted from page 14-16.

Thanks.

[FEDUKE404]

Details

The question is why TheTaxBook seems to say that the one year period ends with the same calendar day a year later while the regulations, my prior experience and references, and whatever source you are quoting say it ends the day before.

I specifically asked if anyone knew of anything that would have changed the definition of a year for the Physical Presence Test.

I am quite familiar with the information you posted. Was that also taken from TheTaxBook? If so, then it confirms that I am misinterpreting what I quoted from page 14-16.

Thanks.

The source of my previous explanation was the following:

http://www.irs.gov/businesses/small/international/article/0,,id=96968,00.html

This link references (2011) IRS Publication 54:

http://www.irs.gov/pub/irs-pdf/p54.pdf

(I assume that both sites should contain essentially the same information.)

The 330-day Physical Presence Test is described on page 15.

On the right column of the same page is an explanation of "How to Figure the 12-Month Period."

My copy of TTB is not currently available, so I have no knowledge of their exact verbiage regarding the "last day." I generally use TTB as a VERY useful reference source for explanations, but normally I will search the applicable IRS publications/rules FIRST. Such an approach in no way diminishes my respect for TTB - it's just my way of approaching things...especially when exact verbiage is of importance.

Suggest you contact the TTB editors if further explanation/possible correction is deemed necessary. From the details of your original post, it appears there may be an error.

FE