I thought the same thing until I discovered that the 2555 exclusion only excludes Schedule C net income from income tax....but not from S/E tax.  Hence, the S/E tax that is still owed despite the FEIE.  Then comes the question, is it a business or nonbusiness deduction for NOL purposes.  PS dumps it into business.  It was small so I went with it for the lack of any other logical answer.