Yes, you got it right. Just for clarification, I should file 2 form 1116, one for passive income, one for IRA distribution according to the tax treaty (carries to line 30 p. 2). The one for the IRA would show the distributions "re-sourced" as foreign-sourced income (first taxed in country of residence), the two would automatically be summarized on the larger one. I tried this on turbotax and it did indeed work. Thank you once again. There aren't many people that understand this form in the detail that you have.
