If you report your RRSP distribution as $10,000 you will be taxed by the US on that amount.
To get credit for $2500 tax paid to Canada, you would need to enter this amount as a Foreign Tax Credit, which is deducted from the US tax you owe on the Total Distribution amount of $10,000.
If you enter your Taxable Amount as $7500, you will only be taxed by the US on $7500 and not need to claim the $2500 you paid to Canada as a Foreign Tax Credit.
However, most choose to report the Total Distribution and take the Foreign Tax Credit, since the 25% Canadian Tax amount is more than your US tax bracket would likely be.
Hope this helps!
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