If you apply the US law literally to the foreign income, there will be no any items exempted from the tax because you cannot find an item named "401K" in a foreign payroll system. Just as in translation, I am wondering if the US law could be applied in spirit, otherwise there would be a disparity between US income and foreign income.

As an analogy, marriage in a foreign country is recognized in the US even the registration processes are different. A university degree in a foreign country is recognized even the courses taken are not exactly the same. The local law could be recognized in certain areas.

I provided 4 choices for discussion and the 4th one is open ended. I do not insist that it has to be one way or the other. I do not know and that is why I ask questions. I prefer that technical questions be addressed technically. I was excited to see that you answered my question, however the first and last paragraphs of your answer deviate from what I expect from a technical forum and I became disheartened.