Case Study 3: Exchange Rates

Edward Hall worked in Dallas for Lubbock Incorporated from January until September of the tax year. On September 29, he was transferred to its Mexico City office, where he will be working for three more years.

While in the U.S., Edward earned his salary in U.S. dollars. When he moved to Mexico, he was paid in Mexican pesos.

Because Edward did not receive his salary in Mexican pesos evenly throughout the year, he cannot use the annual average exchange rate for the Mexico source income. He should use the average rates for October, November, and December.

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