Mehrdad contributed $10,000 to an RRSP ten years ago. On May 1, 2020 the fair market value of the fund is $15,000 due solely to eligible dividends reinvested by the fund. On May 2, 2020 Mehrdad withdrew $2,000 from his RRSP. Which of the following statements is correct?
A) His tax payable will be reduced by the dividend tax credit on $2,000 of eligible dividends.
B) His taxable income will be increased by the sum of the $2,000 received plus the gross up on $2,000 of eligible dividends.
C) His tax payable will be reduced by the pension income credit on $2,000 of pension income.
D) His taxable income will be increased by $2,000.
Correct Answer:
Verified
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