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  1. @Phil if you could clarify the following,

    I. In an e-mail response, The IRS tax-law service basically said that IRAs are ECI income and taxable at graduated rates. I don’t know how correct they are, but the 1040NR has a place for IRA distributions in the ECI section on page one, and the instructions suggest it goes there. It also suggests that a 1099-R should be issued and not a 1042-S should be sent to you. I would think this requires a W-8ECI instead of a W-8BEN. Specifically, they quoted from the maual “Generally, you can receive effectively connected income only if you are a nonresident alien engaged in a trade or business in the United States during the tax year. However, income you receive in another tax year from the sale or exchange of property, the performance of services, or any other transaction is treated as effectively connected in that year, if it would have been effectively connected in the year the transaction took place or you performed the services.” I’d assume they figure it ECI since it was linked former year contributions related to working.

    2. I saw a post by an international tax firm suggesting that 401(k) distributions are taxed as a mix of ECI and FDAP(Non-ECI) income saying the tax-deferred contributions during employment are ECI and the gains on the account from market activity are FDAP. They also suggested if you can’t determine which part is contribution and which part is FDAP, (no paperwork, previous partial withdrawals, etc.) you should treat the entire amount as FDAP. Would a W-8ben and a W-8ECI be required? I don’t see how a custodian could get the forms right. Whether these 401(k) type dual type income rule would apply to IRAs are completely unclear vis-a-vis #1 above.

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