U.S. – INHERITED INDIVIDUAL RETIREMENT ACCOUNT (IRA)

Issue 446, October 2018

receipts from an Individual Retirement Account are taxable in Canada

In a May 9, 2018 Tax Court of Canada case (Owen vs. H.M.Q., 2016-2903(IT)I), the Court ruled that the distribution from an IRA to a Canadian resident upon the death of the original plan holder would be a taxable amount (Clause 56(1)(a)(i)(C.1)). An IRA is a U.S. tax sheltered savings plan. While it was noted that the receipt of an inheritance from an estate would not generally trigger tax, this payment came directly from the IRA and not the estate.

U.S. taxes withheld on the payment were allowed as a foreign tax credit.

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