I had not actually read the treaty, but if you are reading it correctly it seems to be taxable only in Italy. I would fill out the 1099R as received, then back it out on schedule 1 with a negative amount, and type "Italy treaty". I would also fill out form 8833 (you will have to attach it as a pdf). But be sure an IRA qualifies, as @qbteachmt said an IRA is not a pension