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F E B R U A R Y 2 0 1 2 / F O R E I G N S E R V I C E J O U R N A L
American Foreign Service Association • February 2012
he annual AFSA Tax Guide is de-
signed as an informational and ref-
erence tool. Although we try to be
accurate, many of the new provisions of
the tax code and the implications of Inter-
nal Revenue Service regulations have not
been fully tested. Therefore, use caution
and consult with a tax adviser as soon as
possible if you have specific questions or an
unusual or complex situation.
Foreign Service employees most fre-
quently ask AFSA about home ownership,
tax liability upon sale of a residence and
state of domicile. We have devoted special
sections to these issues.
James Yorke
(, wh
compiles the tax guide, would like to thank
M. Bruce Hirshorn, Foreign Service tax
counsel, for his help in its preparation.
Federal Tax Provisions
The Military Families Tax Relief Act
of 2003 continues to provide a signifi-
cant benefit for Foreign Service families
who sell their homes at a
profit, but would have been
unable to avail themselves of
the capital gains exclusion (up
to $250,000 for an individ-
ual/$500,000 for a couple)
from the sale of a principal
residence because they did not
meet the Internal Revenue
Service’s“two-year occupancy
within the five years preceding
the date of sale” requirement due to
postings outside the U.S. In relation to
the sale of a principal residence afterMay
6, 1997, the 2003 law provides that the
calculation of the five-year period for
measuring ownership is suspended dur-
ing any period that the eligible individ-
ual or his or her spouse is
serving away from the area
on qualified official ex-
tended duty as a member
of the uniformed services,
the Foreign Service or the
intelligence community.
The five-year period
cannot be extended by
more than 10 years. In
other words, Foreign Serv-
ice employees who are overseas on as-
signment can extend the five-year period
up to 15 years, depending on the num-
ber of years they are posted away from
their home. Note that the provision is
retroactive, so that anyone who has al-
ready paid the tax on the sale of a resi-
dence that would have qualified under
the new lawmay file an amended return
to get the benefit of the new rule. There
is, however, a three-year statute of limi-
tations on this provision, after which one
cannot obtain a refund.
For 2011, the six tax rates for individ-
uals remain at 10, 15, 25, 28, 33 and 35
percent. The 10-percent rate is for tax-
Federal and State Tax Provisions for the Foreign Service
The William R. Rivkin Dissent Award:
Making an Indispensable Contribution
s soon as I was confirmed by the U.S. Senate in 2009 as ambassador to France and
Monaco, I paid a visit to my father’s grave at Arlington National Cemetery. Am-
bassador William R. Rivkin died suddenly at the age of 47 while serving as chief
of mission in Senegal. Although I barely knew him, he left my brother, Robert S. Rivkin,
general counsel for the U.S. Department of Transportation, and me a set of core val-
ues that have guided our lives ever since.
One of those values is having the courage to bring our convictions to the service of
our country. For more than 40 years, my family and I have chosen to honor our father
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