What action can Betty take to transfer her DPSP funds without incurring income tax?

To transfer her Deferred Profit Sharing Plan (DPSP) funds without incurring income tax, Betty can transfer the amount directly to a Registered Pension Plan (RPP). This method is known as a tax-deferred transfer. It allows her to maintain the tax-sheltered status of her retirement savings since both a DPSP and an RPP are registered plans under the Income Tax Act. As long as the transfer is completed directly between the plans, the funds will not be subject to immediate taxation, enabling Betty to preserve her retirement savings for future use.

When considering the other options, withdrawing the amount and paying taxes later would trigger a taxable event, resulting in immediate income tax liabilities. Transferring the funds to a Tax-Free Savings Account (TFSA) is not permissible for DPSP funds, as such transfers can lead to taxation due to the nature of the account. Lastly, depositing the funds in a high-interest savings account would also not qualify as a tax-deferred transfer, as it typically involves cashing out the funds, which would incur taxes. Thus, the direct transfer to a Registered Pension Plan is the only valid choice that allows for a tax-free transfer of DPSP funds.