Safe Income Calculator

An inter-corporate dividend paid beyond what the shares actually earned while you held them can get recharacterized as a capital gain instead. Safe income on hand is the ceiling.

Reading This Tool

How To Use This Calculator

Enter the after-tax income the corporation has earned since these shares were acquired, and any dividends already paid.

Safe income on hand is, roughly, the cumulative after-tax retained earnings attributable to the shares during the holding period, less dividends already paid out of it. A dividend within that number is protected from Section 55(2), a dividend beyond it is exactly the kind of transaction that provision was written to catch.

Your Inputs

Years Shares Have Been Held 6 yrs

Average Annual After-Tax Income $180,000

Dividends Already Paid During This Period $200,000

Proposed Dividend Amount $700,000

Real safe income calculations also adjust for items like non-deductible expenses, dividends received, and specific asset-level attribution when only some assets are being sold. This models the core cumulative-earnings concept only.

Dividend Safety Check

Safe Income On Hand

Safe Portion Of Proposed Dividend

At-Risk Portion

Proposed Dividend: Safe vs. At-Risk

Within Safe Income Exceeds Safe Income

Safe income calculations are technical and fact-specific, involving detailed tracing of income, tax adjustments, and sometimes valuation of specific assets. Get an actual safe income calculation from your accountant before relying on a number for a real dividend, especially ahead of a sale.

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