Gross up expenses for tax withdrawal, different, adjusted, payments, question

Carson

Under what circumstances do you gross up expenses for tax payments? I typically gross up for tax on an IPS question at the end when i have calculated the total return and adjusted for inflation.

In the 2009 exam both the income and a liquidity requirement was grossed up for tax before calculating the total return calculation. In this case it was due to tax being charged on withdrawal, but i'm unsure why this requires a different method of return calc.

Can someone shed some light on this?

dyga

Isn;t it always grossed up before calcuting the total return?

Pre-tax nominal return = r/(1-t) + i

After tax nominal return = r + i

That's what I have been using.