Prepare your responses on the given post

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Reference no: EM132217547

Question: Prepare your responses assuming that you are working on the 2017 tax year.

Anders is 26 years old and single. He accepted a position with a global non-governmental organization (NGO) to work on a health project in Uganda for a one year period from June 1, 2017 to May 31, 2018. He is paid $550 per month while in Uganda and is provided with a small house to live in which would normally rent for approximately $200 per month. He was given training in the U.S. during the first two weeks of June, 2017, and the NGO flew him to his site in Uganda. He is responsible for any out of pocket expenses, including food, personal items, and any travel during the year. The NGO will fly him back to his home city at the end of the contract. He flew home for Christmas, 2017, leaving Uganda Dec. 19, 2017 to return to the U.S., and he left the U.S. on Jan 6, 2018 to return to Uganda.

Before he accepted the position with the NGO, he worked at a government agency related to public health in IL and earned $21,000 through May 31. He has a bachelor's degree in social psych. He was born in the U.S. and is a U.S. citizen.

Anders would like to go to grad school when he returns in 2018. In his field, a graduate degree is needed to be able to obtain a good position with growth and the ability to make decisions and run programs, such as the one that he is working in with the NGO. In fact, he views the position with the NGO as an internship or fellowship that will provide him with the training and experience that is expected of “good” applicants to grad schools in his field. It would be extremely difficult to obtain this experience and working knowledge of global health program operations without working in a program like this for at least one year. This type of knowledge and experience cannot be obtained in classroom settings, but is crucial in his field.

Please respond to the following four questions regarding Anders and the taxability of his one year overseas “gig”. The points for this problem are not assigned to any of the four questions, but the grading will be based on your overall response to the case, along with support for your files as a tax preparer. You may have to look into other chapters in the text, and you will probably want to use federal publications and instructions to forms. Do not worry about state taxes here.

1) Does Anders have to include the income from the NGO in his U.S. income tax return for 2017? Is there any way to exclude this from taxable income? Anders thought that since the income was not earned in the U.S. he does not have to pay tax on it, but this was just something that he heard someone say in a conversation once. Be specific â€" remember the definition of gross income in Section 61(a) and the way that AGI is determined.

2) The NGO did not report his income on a W-2 form, but instead reported it on a 1099-Misc form as non-employee compensation. Anders is concerned that he will owe self-employment tax on this income.

3) Does he have to include the value of the housing that is provided to him in AGI?

4) Can he deduct the cost of the airfare for his trip home at Christmas as a business expense?

Reference no: EM132217547

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