What is a tax gross-up clause?

Also known as grossing-up. Under a gross-up clause, a payor must pay an additional amount to a payee to ensure that the payee receives and retains the same amount that it would have received had no tax been withheld from, or otherwise due as a result of, the payment.

How do you gross-up withholding tax?

How to Gross-Up a Payment

  1. Determine total tax rate by adding the federal and state tax percentages.
  2. Subtract the total tax percentage from 100 percent to get the net percentage.
  3. Divide desired net by the net tax percentage to get grossed up amount.

What is cross default provision?

A cross-default provision makes an event of default under one loan by a lender, or its affiliate (“Lender Parties”), to a borrower, guarantor, or their respective affiliates (“Borrower Parties”), an event of default under another loan by a Lender Party to a Borrower Party.

What is yank the bank?

Yank the bank – a clause used in more complex financing agreements to allow the borrower to get rid of a bank in a group of lenders.

What does it mean when something is grossed up?

A gross-up is an additional amount of money added to a payment to cover the income taxes the recipient will owe on the payment. Grossing up is most often done for one-time payments, such as reimbursements for relocation expenses or bonuses.

How do you gross-up taxable fringe benefits?

The IRS has approved a procedure commonly known as “grossing-up” to calculate the gross payment the employee must receive when the employer pays the employee’s taxes. The formula is based on the supplemental rates: Grossed-up amount of earnings = Desired payment amount divided by 100% minus total tax %.

How does gross up clause work?

Many commercial leases, especially office leases, include a provision that allows landlords to “gross up” operating expenses. That is, if the building is not fully occupied, the landlord is empowered to gross up or overstate the expenses as if the building is fully occupied (or nearly full).

What is the gross up rule?

The first is § 2035(b), the “gross-up rule,” which requires that a gross estate be increased by the amount of gift taxes paid by the decedent or her estate within three years of her death. Section 2035 states, in relevant part: § 2035. Adjustments for certain gifts made within 3 years of decedent’s death.

What is a cross collateralization agreement?

Cross collateralization agreements are a form of security that can be used as collateral for many different loans. They also allow for the use of one property as collateral on more than one loan.

What is negative pledge clause?

A negative pledge clause is a type of negative covenant that prevents a borrower from pledging any assets if doing so would jeopardize the lender’s security. This type of clause may be part of bond indentures and traditional loan structures.

What does gross-up mean in accounting?

Gross-up is additional money an employer pays an employee to offset any additional income taxes (Social Security, Medicare, etc.) an employee would owe the IRS when that employee receives a company-provided cash benefit, such as relocation expenses. Gross-up is optional and is usually used for one-time payments.

Why are dividends grossed up?

If you receive a dividend from Bell Canada for $100, the actual dividend is $100. The taxable amount of dividends is a gross-up of the actual dividend. The purpose of the gross-up is to bring the dividend amount back up to the dividend the corporation could have paid you if it had not had to pay corporate income tax.

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