The Foreign Service Journal, February 2012

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 31 American Foreign Service Association • February 2012 T 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 (yorkej@state.gov), wh o 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- 2011 TAX GUIDE Federal and State Tax Provisions for the Foreign Service The William R. Rivkin Dissent Award: Making an Indispensable Contribution BY AMBASSADOR CHARLES H. RIVKIN A 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 JOSH AFSA NEWS Continued on page 52 Continued on page 33