I'm a US citizen residing in canada and have inherited a $50,000 IRA. It will be rolled over to a beneficiary IRA and I will claim it spread out over the next 5 years to reduce the tax burden (I'm assuming no automatic %10/30 withdrawl and I'll have to claim each years inheritance as part of my canadian income)... Easy... I think. The hard bit is that my two children are also beneficiaries ($10000 each) and they are non-us persons. I we want to cash out the IRA to put into RESPs, I think that they will have to automatically pay 30% withholding and that I will have to file a special 1040NR to get the taxes back (I assume they will get it all back since they will eseentially be in a 0% tax bracket in canada). Does all this sound right?

You are U.S. citizen so you will always file resident return even if you do not live in U.S.
If you inherit a traditional IRA, you are called a beneficiary. Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. All income in a traditional IRA is taxed as ordinary income. Any capital gains within the IRA receive no special treatment that is it is treated as an ordinary gain.

If YOU are a U.S. resident and must file Form 1040, your children will also file Form 1040 if you claim them on your tax return as dependents.

If not, then they will file Form 1040NR and probably can avoid taxation in the U.S.

I would have to research the U.S.-Canadian Tax Treaty to be sre, but that kind of research takes quite bit of time and will NOT be done without compensation. Email me at [email protected] if you want to hire me to do the research.