An RESP beneficiary decides not to pursue post-secondary education. After 35 years, the subscriber has contributed $30,000, and the plan has grown to $50,000, including $10,000 in CESG. What are the tax implications upon plan termination?

Question: An RESP beneficiary decides not to pursue post-secondary education. After 35 years, the subscriber has contributed $30,000, and the plan has grown to $50,000, including $10,000 in CESG. What are the tax implications upon plan termination?

Answer options: ✅ The original $30,000 contributions are returned tax-free; the $10,000 CESG is returned to the government; the $10,000 growth is taxable as an Accumulated Income Payment (AIP).

• The entire $50,000 is returned to the subscriber tax-free.
• The entire $50,000 is taxable as an AIP.
• Only the CESG is taxable to the subscriber.

Correct answer: The original $30,000 contributions are returned tax-free; the $10,000 CESG is returned to the government; the $10,000 growth is taxable as an Accumulated Income Payment (AIP).

Explanation: If an RESP is terminated and no beneficiary attends post-secondary education, the original contributions are returned tax-free, the CESG component is returned to the government, and the investment growth (Accumulated Income Payment - AIP) is taxable to the subscriber at their marginal tax rate plus an additional 20% tax.