$******$

Scenario $1$: Foreign Earned Income Exclusion

Wages $($earned while living abroad$)$: $$110,000$

Qualifies for the Foreign Earned Income Exclusion

Interest and Dividend Income $($US$-$based$)$: $$2,000$

Itemized Deductions: $$14,000$

Allowable deduction for self$-$employment tax: None

Qualifying Children: None

Calculate:

AGI, Taxable Income, and Total Tax Liability $($consider the impact of the exclusion$).$

Scenario $2$: Tax Impact of Stock Options

Wages: Michael $($$$85,000)$

Exercised Non$-$Qualified Stock Options $($NQs$)$:

Fair Market Value of the stock at exercise: $$30,000$

Exercise Price: $$15,000$

Later sells the stock for $$38,000$

Interest and Dividend Income: $$600$

Itemized Deductions: $$23,000$

Allowable deduction for self$-$employment tax: None

Calculate:

AGI, Taxable Income, and Total Tax Liability in the year of option exercise.

AGI, Taxable Income, and Total Tax Liability in the year the stock is sold.