Which of the following statements regarding income tax and RESPs is true?

The statement that Lindsay must pay income tax on the educational assistance payments when she attends college is accurate because educational assistance payments (EAPs) from a Registered Education Savings Plan (RESP) are considered taxable income to the recipient. When a beneficiary, like Lindsay, attends post-secondary education and receives these payments, they are subject to income tax as they are intended to cover educational expenses.

The other statements do not hold true in the context of RESPs. For example, while John can withdraw his contributions tax-free at any time, he must ensure that he follows the guidelines set for treating earnings and government grants that would be subject to tax and potential penalties if not used correctly. Contributions to an RESP are not tax-deductible for the subscriber, which is a key difference from accounts such as RRSPs. Lastly, payments received while still in high school are primarily classified as contributions or earnings rather than educational assistance payments, which become taxable only when used during post-secondary education.