IFIC Mutual Funds Licensing Practice Exam · Question
Scenario 8: Which type of registered plan allows contributions to be withdrawn tax-free, including any investment growth, provided certain conditions are met?
The Tax-Free Savings Account (TFSA) allows investment income, including capital gains and dividends, to grow tax-free and withdrawals to be made tax-free. RRSP
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Question: Scenario 8: Which type of registered plan allows contributions to be withdrawn tax-free, including any investment growth, provided certain conditions are met?
Answer options:
- Registered Retirement Savings Plan (RRSP)
- Registered Education Savings Plan (RESP) ✅ Tax-Free Savings Account (TFSA)
- Registered Disability Savings Plan (RDSP)
Correct answer: Tax-Free Savings Account (TFSA)
Explanation: The Tax-Free Savings Account (TFSA) allows investment income, including capital gains and dividends, to grow tax-free and withdrawals to be made tax-free. RRSP withdrawals are taxable, and RESP withdrawals for educational purposes have a grant component (EAP) that is taxable to the student. The correct answer is "Tax-Free Savings Account (TFSA)". This capacity-fill scenario 8 reinforces the same competency for the ific bank and follows the certified explanation standard.
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