CRA treats a distribution by a non-resident trust to a Canadian beneficiary, of IRA proceeds previously received by it, as income under s. 104(13)

CRA considers that proceeds from an IRA of a deceased U.S. resident which were distributed by her estate to a U.S.-resident trust, and by it to Canadian-resident beneficiaries, were income to them under s. 104(13)(a). The brief reasons cite s. 56(1)(a)(i)(C.1) (which requires the recognition by Canadian residents of IRA distributions as income). Although CRA did not cite s. 250.1(b) (stating that "a person for whom income for a taxation year is determined in accordance with this Act includes a non-resident person"), the logic may be that if the IRA proceeds instead are received by a non-resident trust, their distribution by that trust is income to the Canadian resident under s. 104(13)(a) – notwithstanding that the operation of the Canadian rules for trust taxation have no relevance to that trust (see also 2012-0448021E5).

As the distribution to the Canadian beneficiary is income to it, the U.S. withholding tax thereon of 15% (which CRA indicated would qualify as a non-business income tax) presumably would qualify for a foreign tax credit.

Summary of 2015 Ruling 2015-0570291R3 under s. 104(13).