Final answer:
Social security from Canada to a U.S. resident is treated as pension income for U.S. tax purposes. This follows the tax treaty between the U.S. and Canada, and the taxation aligns with the U.S. progressive tax system. It is part of the current account balance's income payments in the financial capital market trade.
Step-by-step explanation:
If a resident of the United States receives social security from Canada, it will only be taxable in the United States as if it were c. Pension income. This is because social security benefits from Canada are similar to retirement benefits, which in the U.S. are treated as pension income. The taxation of these benefits follows the tax treaty between the U.S. and Canada, but for U.S. tax purposes, they are generally reported on a U.S. tax return as pension income.
The U.S. imposes taxes on various types of income. This includes not only domestic income but also, in many cases, income from abroad. The current account balance includes income payments which are money U.S. financial investors receive from their foreign investments and vice versa. It is essential to recognize these income payments as part of the financial capital market trade.
It's also important to note that the United States has a graduated progressive tax system, which means that as an individual's income increases, so does their tax rate. This system is intended to ensure that individuals with higher incomes contribute a larger share of their earnings in taxes. Therefore, social security from a foreign country will be taxed accordingly as pension income, and the rate will depend on the recipient's total income.