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i live abroad, and usually take the foreign earned income exclusion. this year, it would have been to my advantage to revoke the exclusion, and take the foreign tax credit instead. however, once you revoke the exclusion, you cannot claim it again for 5 years without irs approval. the gain i would have received by revoking is not worth the danger that in the next 5 years i would lose money by not being able to take the exclusion. so i didn't revoke for 2004. now, the question:

suppose that next january i calculate that not having the exclusion for 2005 would also be to my advantage, or at least not to my disadvantage, and that in all probability i'd be ok for 2006 as well. assume further that i do the math, and find out that i wouldn't be hurt on 2002 or 2003 either. then, would the following plan work: amend 2002 to revoke the exclusion, amend 2003 and 2004 as well, then file 2005 without the exclusion? this way, i'd be taking away lots of the uncertainty regarding 5 years forward, by setting the clock back to 2002.

note: setting the clock back to 2001 would not be to my advantage, that is why i am not contemplating doing this all right now.

second question: am i right that if i do this, then i am left with only one year of uncertainty, and can claim the exclusion again in 2007? or would it only be 2008? the exact irs wording is "If you revoked a choice and within 5 tax years again wish to choose the same exclusion, you must apply for IRS approval."


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