IFIC Mutual Funds Licensing Practice Exam · Question
Which of the following statements regarding the tax implications of an RRSP is correct?
RRSPs follow a tax-deferred model: contributions reduce taxable income, investments grow tax-free within the plan, but all withdrawals are considered taxable in
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Question: Which of the following statements regarding the tax implications of an RRSP is correct?
Answer options:
- Contributions to an RRSP are tax-deductible, and withdrawals are tax-free.
- Contributions to an RRSP are not tax-deductible, but investment growth is tax-deferred. ✅ Contributions to an RRSP are tax-deductible, investment growth is tax-deferred, and withdrawals are fully taxable.
- Contributions to an RRSP are tax-deductible, and only the investment growth is taxable upon withdrawal.
Correct answer: Contributions to an RRSP are tax-deductible, investment growth is tax-deferred, and withdrawals are fully taxable.
Explanation: RRSPs follow a tax-deferred model: contributions reduce taxable income, investments grow tax-free within the plan, but all withdrawals are considered taxable income.
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