You have performed tax services for Mark Pruett, a U.S. citizen who is being transferred abroad by his employeL Mark's 2018 salary and allowances in Country M will be $210,000, which is substantially above his salary for last year. The salary differential is due to the higher cost of living in Country M and Mark's added responsibilities. Of the al lowances, $30,000 is for housing although Mark's 2018 housing costs are expected to be $40,000. The Country M income tax rate is 40%. Mark's employer conducts business at a second location in Country T, where Mark probably will be transferred in three or four years. The Country T income tax rate is 20%.

The transfer date is February 1, 2018. Mark's wife and three-year-old daughter will accompany him. Mark expects to return to the United States for one week of training each year starting in September 2018. Mark takes four weeks of vacation each year. Because Mark still has family in the United States, he may spend substantial vacation time in the United States. 

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Your tax manager has asked you to draft for her review a memorandum explaining the tax consequences of the relocation, whether Mark is entitled to the foreign earned income exclusion, and what records Mark must maintain to file his tax return for the year of transfer.