Disposition of life insurance policies is governed by §72.  You may not, however, rely on the cost basis furnished for Canadian tax purposes and use that for US tax reporting.  For US tax purposes, you'd need to consider not only premiums paid over the years but also amount borrowed from the policy, cost of benefit for insurance coverage, as well as cash surrender value.

Premiums paid to date reduced by the cost of benefits for insurance coverage would be the adjusted cost basis.  The difference between the sales proceed and adjusted cost basis is the gain, which may not be treated as capital gain entirely because the IRS' position is that surrender of such policy, to the extent there is a surrender value, would only produce ordinary gain as policy surrender is not a capital gain transaction.  The result is that the portion that would otherwise be deemed ordinary income would remain as such and the balance may be treated as capital gain.

In terms of double taxation, you should be able to claim a credit on the US return for taxes paid to Canada.  But you should refer to the US-Canada income tax treaty, depending on where your client reside, and determine whether there is a provision for this type of income, how the treaty assigns taxing right, as well as how and whether the saving clause would apply.

There are more you'd need to worry about because foreign life insurance policy is a mine field for US persons.  You should review whether F.720 was filed each year to report the foreign insurance and the excise tax paid.  Many of these foreign life insurance policy, especially whole life, may include an investment component that may trigger PFIC reporting and failure to report the related earnings/appreciation, which could affect cost basis, could place your client in a punitive tax regime.  Lastly, foreign insurance policies with cash value are subject to both FBAR and FATCA reporting.- question is whether your client had filed these correctly, where required, or at all.