Final answer:
Canadian Social Security benefits in the United States are treated as if they are U.S. Social Security benefits for tax purposes, and this treatment is guided by the U.S.-Canada tax treaty to avoid double taxation. Therefore, the correct option is D.
Step-by-step explanation:
The tax treatment of Canadian Social Security benefits in the United States is that they are taxed as if they are U.S. social security benefits for a U.S. resident. This means that Canadian social security benefits are included in the U.S. tax return and taxed according to U.S. law. However, the U.S.-Canada tax treaty provides relief from potential double taxation, where Canadian social security benefits could be taxable in both countries.
Under this treaty, a U.S. resident is taxed in the U.S. but may be eligible for a foreign tax credit or deduction for taxes paid to Canada. Therefore, the correct answer to the question is: d. the benefits are treated as paid under the social security legislation of the United States and reported as if they were United States social security benefits for a United States resident.