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<<<Secondly, what would you do in our situation? We are each entitled to the $70,000 overseas income exemption, so we can sock big $$'s away, but nothing we invest will have the lovely advantage of tax-free growth. We've been told we're not eligible for IRAs, either. And, we're still subject to Hong Kong income tax, which is pretty much a flat 15% on top of what's taxed by the U.S. >>>

<< I'm puzzled why your tax advisor says you are not eligible for an IRA. You file a tax return, and you have earned compensation. Thus, there's something here I don't understand because that's all that's required. Ask your advisor for details because if that indeed is true, then the IRA route I suggested above won't work for the 1999 SEP deposits. They definitely will for 1998, though, if you had W-2 or 1099 wage income of at least $4K >>

The problem is the fact that they are using the overseas income exclusion. Thus, they are not paying US income taxes on up to $70k each of the income they are earning while employed overseas. For the IRA's, this is not considered earned income since it is not subject to US income taxes. They'd need to have $4k of earned income which is not included in this $70K exclusion in order to qualify for a full IRA. (the things you can learn by hanging out with Roy on the Tax board... :) )

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