If Sarah invested $10,000 in a Tax-Free Savings Account (TFSA) 10 years ago and it now has a value of $65,000 today, what amount will Sarah pay in taxes when she withdraws the entire amount when she is in a 40% tax bracket?

Points: 1

1. Sarah will pay taxes only on the initial $10,000 investment
2. Sarah will only pay tax on the $55,000 growth
3. Sarah will pay taxes on the entire $65,000
4. Sarah will only pay tax of 40% on the $55,000 growth less the Basic Personal Amount for the non-refundable tax credit
5. Sarah will not pay any tax