Question

6 naomi wants to transfer funds from her registered retirement savings plan (rrsp) to purchase a registered life annuity with a 10 - year guarantee term. which of the following is a consequence of such a transfer?
a) only the interest portion of the annuity payments will be taxable.
b) the annuity payments made to naomi will be fully taxable.
c) thirty - five percent of the payments made to naomi will be taxable.
d) naomi cannot convert an rrsp to an annuity with a guarantee term, 35 as prescribed income.

Explanation:

To solve this, we analyze each option:

• Option a: When transferring RRSP funds to a registered life annuity with a guarantee term, only the interest portion of annuity payments (from the RRSP transfer) is taxable. This aligns with tax rules for RRSP to annuity transfers (guaranteed term).
• Option b: Saying "thirty - five percent" is incorrect as there's no such fixed taxable percentage rule for this transfer.
• Option c: The payments aren't fully taxable; only the interest portion (from the RRSP's growth) is, so this is wrong.
• Option d: You can convert an RRSP to an annuity with a guarantee term, so this is incorrect.

Answer:

a. Only the interest portion of the annuity payments made to Naomi will be taxable.