Canadian recieves US tax inheritance

[Panda123]

I am a canadian citizen. My brother moved to the USA 45 years ago and died recenly leaving me his estate. I received a 1042-S tax slip from Bank of America (trustee of estate) with withholding taxes. According to bank of america executor, the money was a cash capital distribution from my brother's estate.

My canadian accountant include this amount in my income as other pension income which it thought absurd.

I thought there was no estate or inheritance taxes in ccanda. so why should a payment from a US estate to a canadian citizen be taxable to me.

[DaveM]

It was an American estate presumably accumulated in the U.S. Canadian estate tax law doesn't apply.

[nelsona]

The only thing that would have been taxable in your hands would be the small amount of interest or gain accrued after his death and before disbursement.
Amend you return to take this income off, it this was not the case.

[Panda123]

thanks for the response.

[ND]

It could have been a pension or IRA treated as a pension from your brother's estate. That's taxable in Canada and subject to US withholding tax reportable on Form 1042-S, like the one you received. So, before jumping to conclusions, be aware that there is a common scenario, if applicable to your facts, in which your accountant can be spot on correct on how he reported.

Under the treaty pension arising in one country (the IRA account in the U.S.) and paid to a resident of another country (the owner is in Canada) is taxable in the country of residence. Therefore, the distributions received from the IRA account to an account owner in Canada would be added to the account owners’ Canadian income for tax purposes.

[nelsona]

Could be. But, T
this is not what his accountant said it was. If it came from the estate, there would be no tax owing in Canada, even if it was the proceeds from a US pension.

Did the acct also include the withholding tax as a credit on your return? What percentage was the withholding rate?

What was the income code on the 1042-s.

[nelsona]

But just so we are clear, ND's comment that one should not be dismissive of the possibility that it is indeed taxable income in canada (which my initial comment certainly was), is absolutely correct.