FTC category for life insurance CSV

[bwafusion]

We are dual CDN/US citizens residing in the US and are non-residents of Canada for tax purposes. My wife has just cancelled her CDN whole life insurance policy and received the CSV less withholding tax. My question is whether the CSV should be allocated in the Passive Income category on Form 1116 vs. some other category eg. lump sum distribution? Thank you

[nelsona]

This is considered a taxable capital gain, so it is passive. You need to determine the actual cap gain and report that in both countries.

While there may have been NR tax withheld in Canada, that might not be the final tax in Canada. You would need to determine the gain and report that on a Cdn non-resident return. If it was a flat tax you will probably getting some refund.