SERVICE LISTS COUNTRIES UNDER 'ADVERSE CONDITIONS' FOR PURPOSES OF FOREIGN RESIDENCY REQUIREMENTS

Rev. Proc. 86-39

SECTION 1. PURPOSE

01 This revenue procedure provides information to individuals who fail to meet the foreign residency requirements of section 911(d)(1) of the Internal Revenue Code for eligibility for the exclusion from gross income under section 911(a) of the foreign earned income and housing cost amounts because adverse conditions in a foreign country precluded the individual from meeting the foreign residency requirements of section 911(d)(1).

02 Rev. Proc. 81-23, 1981-1 C.B. 693, lists countries in which the foreign residency requirements of section 911(d)(1) of the Code are waived under section 911(d)(4) because of adverse conditions present in those countries during the time periods indicated. This revenue procedure updates that list by relisting countries where the periods of adverse conditions are still in effect, by adding countries where periods of adverse conditions occurred after the publication of the list, and by removing countries where the period of adverse conditions ended prior to the publication of Rev. Proc. 81-23.

SEC. 2. BACKGROUND

01 Section 911(a) of the Code allows foreign earned income and housing cost amounts to be excluded from the gross income of a "qualified individual" as defined in section 911(d)(1).

02 Section 911(d)(1) of the Code defines the term "qualified individual" to mean an individual whose tax home is in a foreign country and who is (A) a citizen of the United States and establishes to the satisfaction of the Secretary that the individual has been a bona fide resident of a foreign country or countries for an uninterrupted period which includes an entire taxable year, or (B) a citizen or resident of the United States and who, during any period of 12 consecutive months, is present in a foreign country or countries during at least 330 full days in such period.

03 Section 911(d)(4) of the Code provides an exception to the residency requirements of section 911(d)(1). An individual who for any period is a bona fide resident of, or is present in, a foreign country, and who leaves that foreign country after August 31, 1978, will be treated as a qualified individual with respect to the period such individual was a bona fide resident of, or was present in the foreign country if during such period the Secretary, after consultation with the Secretary of State, determines that individuals were required to leave the foreign country because of war, civil unrest, or similar adverse conditions in that foreign country which precluded the normal conduct of business by such individuals. An individual must establish that but for those conditions he or she could reasonably have been expected to meet the residency requirements.

04 The following list of countries and time periods qualify for the exception to the residency requirements of section 911(d)(1) of the Code. An individual who left one of the following countries during the specified period shall be treated as a qualified individual, for purposes of section 911, with respect to the period during which that individual was a bona fide resident of, or present in, that foreign country, if such individual establishes that he or she could reasonably have been expected to meet the requirements of section 911(d) but for those conditions.

 COUNTRY                ON OR AFTER                ON OR BEFORE

If a taxpayer needs assistance on how to claim this exclusion, or on how to file an amended return, if applicable, the taxpayer should contact his or her local IRS Office or, for a taxpayer residing or traveling outside the United States, the nearest overseas IRS office.

SEC. 4. EFFECT ON OTHER REVENUE PROCEDURES

Rev. Proc. 81-23 is updated.