itonewbie, thank you for your very thoughtful reply. I reread Pub 915, pages 5 and 6, with your comments in mind. I think you missed something, though.

On page 6, column 1, How to Report Your Benefits, very last line "Benefits Not Taxable" which runs to the top of the next column, "If you are filing Form 1040..., report your net benefits on line 20a... Enter -0- on line 20b." This to me is VERY clear and VERY explicit guidance. Since none of the benefits are taxable (due to the treaty), this is what I would do.

The next section you cite "How Much is Taxable" starts, "If PART of your benefits are taxable" (again, my emphasis). Since NONE is taxable, I believe the entire following set of instructions does not apply.

I might, as a precaution, attach a statement to the tax return, explaining why I put -0- on line 20b.

Please do reply. As I stated at the outset, I appreciate your thoughts. Incidentally, have you ever come across this situation with any of your clients? This is obviously my first time, and I do want to get it right.
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