Which country to claim FTC from IRA distribtion

rafa02 · Post by **rafa02** » Sun Mar 04, 2018 7:36 pm

I was reading a thread on another tax forum and the question was how to deal with an US IRA distribution in the UK. The consensus was that the UK has first right to tax the distribution and the individual should use 1116 to claim the FTC, which was done and apparently accepted by the IRS. Another suggestion was to RE-source the distribution and claim treaty benfit and file 8833.

I have an inherited US IRA, from which I receive a small annual distribution, and thus far it has not resulted in US tax owing, but my thinking was that this would be US source income and if there was US tax owing, I would claim FTC on my Canadian return, or should I use the 1116 to claim the Canadian tax I paid and eliminate the US tax?

nelsona · Post by **nelsona** » Sun Mar 04, 2018 11:20 pm

Are you in UK?? Or did you mean US?

US has the right ALWAYS to any tax oin IRA. Always.

Then you clim the US tax on your CDn return, upto15%. Only if it is more than 15% do you need to re-source.

nelsona · Post by **nelsona** » Sun Mar 04, 2018 11:29 pm

Now, the UK (United kingdom) might have a special treaty clause with US, like they dp with Canada, that allows UK only to tax pension distributions. In such case, the IRS would allow the re-sourcing procedure to reduce the US tax to 0 for its citizens.

Canada does not have such a cluse with US. It only limits the US tax to 15%.

rafa02 · Post by **rafa02** » Mon Mar 05, 2018 12:30 pm

Thanks nelsona. I am in Canada, but after reading the comments about claiming the FTC in UK, I was wondering if I had it wrong about how to deal with IRA withdrawals in Canada. Also I read a similar scenario to the UK on Phil Hogden's website RE Switzerland.

As you previously wrote, probably just different treaty clauses. Thanks for your confirmation RE Canada.