Share Buyback vs. Dividend Tax Comparator

A straight dividend taxes every dollar you receive. A share redemption lets you recover what you actually paid for the shares first.

Reading This Tool

How To Use This Calculator

Enter the redemption amount, the paid-up capital of the shares, and what you originally paid for them.

A redemption splits into a deemed dividend, the excess of proceeds over paid-up capital, and a capital gain or loss based on your actual cost. A straight dividend of the same dollar amount skips that split entirely, the whole thing is taxed as a dividend with no recovery of your original cost at all.

Your Inputs

Redemption Proceeds (Amount Received) $400,000

Paid-Up Capital Of Shares Redeemed $50,000

Your Adjusted Cost Base In These Shares $180,000

Effective Personal Dividend Tax Rate 39.0%

Marginal Tax Rate On Capital Gains 45.0%

Paid-up capital is a tax concept, not the price you paid, it's typically the amount originally contributed to the corporation for the shares, tracked separately from your own adjusted cost base if the shares were later acquired secondhand.

Tax Comparison

Tax If Structured As A Share Redemption

Tax If Paid As A Straight Dividend

Difference

Tax Owing: Redemption vs. Straight Dividend

A capital loss on redemption may be subject to the stop-loss rules if shares were recently acquired from a related party, and a capital loss can only offset capital gains, not other income, directly. This models the mechanical split only, not every anti-avoidance rule that could apply.

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