David, age 75, recently withdrew $10,000 from his Registered Retirement Income Fund (RRIF). His minimum withdrawal for the year was $8,000. How will this withdrawal be taxed?

Question: David, age 75, recently withdrew $10,000 from his Registered Retirement Income Fund (RRIF). His minimum withdrawal for the year was $8,000. How will this withdrawal be taxed?

Answer options:

• The entire $10,000 will be subject to withholding tax at source and added to his taxable income.
• Only the $2,000 above the minimum withdrawal will be subject to withholding tax at source and added to his taxable income. ✅ The entire $10,000 will be added to his taxable income, but only the $2,000 above the minimum withdrawal is subject to withholding tax at source.
• The entire $10,000 is tax-free because it is a retirement account withdrawal.

Correct answer: The entire $10,000 will be added to his taxable income, but only the $2,000 above the minimum withdrawal is subject to withholding tax at source.

Explanation: All RRIF withdrawals are added to the annuitant's taxable income for the year. However, only amounts exceeding the RRIF minimum withdrawal for the year are subject to withholding tax at source. This is a key distinction in RRIF taxation.