View source for Cash in lieu

{{infobox4
|list1=
<ul>
<li>[[Gift letter]]</li>
<li>[[Pledged asset]]</li>
<li>[[Cash Transaction]]</li>
<li>[[Customer deposits]]</li>
<li>[[Cash bond]]</li>
<li>[[Mortgage deed]]</li>
<li>[[Bills Payable]]</li>
<li>[[Advance funding]]</li>
<li>[[Vendor take-back mortgage]]</li>
</ul>
}}

[[Category:Economics]]
''Cash in Lieu'' ('''CIL''') means in the literal sense - "cash instead". It is payment made by using cash, instead of, for example, using bank transfers or securities. But, when used, it rarely means its literal sense. We can use the payment in cash in lieu in situations like (Tax Partners and Professionals of Ernst & Young LLP, 2015, page 203):
* ''Fractional share payment'',
* ''Cash in lieu of something'' (for example: in lieu of repair).

==Example of Cash in lieu==
Cash in lieu can be used in a variety of situations, including:
* '''Paying off an outstanding debt''': If a company is unable to pay its debt with goods or services, then it can use cash in lieu to settle the debt. This is a common practice in business and can help a company avoid defaulting on its debts. 
* '''Making payment for a [[service]]''': Cash in lieu can be used to pay for services rendered, such as [[consulting]] [[work]] or labor. This is often used when a company does not have the goods or services to offer in return for the service. 
* '''Compensating for a lost asset''': If a company has lost an asset, such as a piece of property, cash in lieu can be used to compensate the company for their loss. This can help to make up for the lost asset and provide some peace of mind for the company. 

Cash in lieu is a useful way for companies to settle debts or obligations without providing goods or services. It is important to note, however, that cash in lieu payments are usually taxed as income, and the recipient must report the income on their taxes.

A cash in lieu example is when a company sells a machine for $10,000, but does not have the [[money]] to pay for it. In this case, the company can offer cash in lieu of the $10,000, which is essentially a payment of cash instead of goods or services. The company can then use the cash in lieu to pay off the debt, while the buyer can use the cash to purchase the machine. 

In summary, cash in lieu is a payment of cash instead of goods or services. It is often used when a company wants to make a payment to another company but does not have the goods or services to offer in return. Cash in lieu is a simple way to settle a debt or obligation and can be used in a variety of situations, such as paying off an outstanding debt, making payment for a service, or compensating for a lost asset. It is important to note, however, that cash in lieu payments are usually taxed as income and the recipient must report the income on their taxes.

==Formula of Cash in lieu==
The formula for cash in lieu is: 

Cash in lieu = (1 – Tax Rate) × Total Amount 

This formula calculates the amount of cash in lieu that a company will receive after the applicable taxes are taken out. The total amount is the full amount of the payment that is being exchanged, and the tax rate is the rate of taxation that will be applied to the payment. This formula can be used to quickly calculate the amount of cash in lieu that a company will receive when settling a debt or obligation. 

==Definition of fractional share==
Cash in lieu [[method]] is used, when there occurs fractional share. Fractional share means that share of equity is less than one (0.5, 0.7 etc.). Fractional share can be a result of stock splits, DRIPs ([[dividend]] reinvestment plans), or actions similar to previous ones. They happen rarely, usually, fractional shares are not available to occur at the [[market]], and also they are more difficult to sell. That is why we can use payment as cash in lieu (of stocks) (Farm Credit Administration, 1940, page 117).

==Types of Cash in lieu==
There are two main types of cash in lieu payments: 
* '''Lump Sum Payments''': Lump sum payments are a one-time payment made at the end of a transaction. This is the most common type of cash in lieu payment and is often used to pay off an outstanding debt or to compensate for a lost asset. 
* '''Installment Payments''': Installment payments are a series of payments made over time. This type of payment is often used when a company does not have the resources to pay the full amount upfront. 

Cash in lieu is a useful way for companies to settle debts or obligations without providing goods or services. It is important to note, however, that cash in lieu payments are usually taxed as income, and the recipient must report the income on their taxes.

==Stocks payments in cash in lieu==
Definition of '''Cash in Lieu''' is mostly used, when there happens [[need]] of payment for '''stocks'''. In situations where you can not pay the whole sum of stock because of the stock split, and the owner of the stock owns only partial share, there is no possibility to make payment with stock itself. Cash in lieu is a payment that will pay for that partial share. For example:
There occurs a situation where one [[company]] (first one) is merged by the second company (the second one). The owner of the first company's shares has 250.56 shares. In this situation, he will receive 250 shares instead of 250.56, and the rest of it (.56 of shares) will be paid by '''cash in lieu''' (Tax Partners and Professionals of Ernst & Young LLP, 2015, page 203).

==Meaning of the phrase "In Lieu"==
"In lieu" means itself "instead". In the context of cash in lieu, we might understand as well payments made by cash in lieu instead of prepaid cash cards. It is well known, more and more popular these days that people are using debit and prepaid cash cards in lieu of cash. We can not mistake the term of '''in lieu of cash''' with '''cash in lieu''' (Friedberg B., 2015, page 36).

==Advantages of Cash in lieu==
Cash in lieu has several advantages, including:
* '''Simplicity''': Cash in lieu is a simple and straightforward way to make payments. Instead of providing goods or services, cash in lieu payments are made with money. This eliminates the need for complicated negotiations or paperwork. 
* '''Flexibility''': Cash in lieu payments offer more flexibility than other forms of payment. The amount of the payment can be easily adjusted to match the amount of the debt or obligation. 
* '''Tax Benefits''': Cash in lieu payments are usually taxed as income, which can provide some tax benefits for the recipient.
Cash in lieu is a convenient and flexible way to make payments without providing goods or services. It is important to note, however, that cash in lieu payments are usually taxed as income, and the recipient must report the income on their taxes.

==Limitations of Cash in lieu==
Cash in lieu also has some limitations which should be taken into consideration. These limitations include: 
* '''Limited applicability''': Cash in lieu is not always applicable in all situations. For example, it is not possible to pay off a mortgage with cash in lieu.
* '''Tax implications''': As mentioned above, cash in lieu payments are usually taxed as income, and the recipient must report the income on their taxes. 
* '''Cannot be used to replace goods or services''': Cash in lieu cannot be used to replace goods or services that are not available.
Overall, cash in lieu is a useful way for companies to settle debts or obligations without providing goods or services. However, there are some limitations which should be taken into consideration, including limited applicability, tax implications, and the inability to replace goods or services.

==Other approaches related to Cash in lieu==
In addition to cash in lieu, there are a few other approaches companies can take to settle debts or obligations: 
* '''Barter''': Bartering is an exchange of goods or services between two parties. This can be used to settle a debt or obligation if the company has the goods or services to offer in return for what is being asked for. 
* '''Credit''': Credit is the offering of goods or services without immediate payment. The recipient will then have to make payments to the company at a later date. This can be a useful way to settle a debt or obligation if the company does not have the money to make a cash in lieu payment. 
* '''Debt restructuring''': Debt restructuring is the [[process]] of negotiating with creditors to modify the terms of a loan or debt. This can help to reduce the amount of debt owed, as well as the [[interest]] rate and payment schedule. 

These are all approaches companies can take to settle debts or obligations. Cash in lieu is often the easiest and most straightforward [[option]], but other approaches may be more beneficial in certain situations.

==References==
* Administrative committee of the federal register, (1949), [https://books.google.pl/books?id=UTuNNI7cswEC&pg=PA716&dq=cash+in+lieu&hl=pl&sa=X&ved=0ahUKEwjx1_rZ_frlAhUuxaYKHSgBBJoQ6AEITjAE#v=onepage&q=cash%20in%20lieu&f=false ''Code of Federal Regulations''], New York City
* Farm Credit Administration, Circular No. 24, (1940), [https://books.google.pl/books?id=yn5KAQAAMAAJ&pg=PA117&dq=fractional+share&hl=pl&sa=X&ved=0ahUKEwip-M2O6PvlAhX18KYKHa4tAbkQ6AEIPDAC#v=onepage&q=fractional%20share&f=false ''Rules and Regulations of the Farm Credit Administration''], United States [[Government]] Printing Office, United States of America
* Friedberg B., (2015), [https://books.google.pl/books?id=yllaBwAAQBAJ&pg=PA36&dq=cash+in+lieu&hl=pl&sa=X&ved=0ahUKEwjx1_rZ_frlAhUuxaYKHSgBBJoQ6AEIYDAG#v=onepage&q=cash%20in%20lieu&f=false ''Personal Finance - An Encyclopedia of Modern Money Management''], Greenwood, United States of America
* Graham L., Carmichael D.R., (2012), [https://books.google.pl/books?id=C35-ColEmr8C&pg=PA30&dq=cash+in+lieu&hl=pl&sa=X&ved=0ahUKEwjp89Ku2vvlAhUxw8QBHZ63DFk4FBDoAQhbMAU#v=onepage&q=cash%20in%20lieu&f=false ''Accountant's Handbook, Volume two: Special Industries and Special Topics''], John Wiley & Sons, INC., Canada
* Labor and [[employment]] law section - California lawyers association, (2018), [https://books.google.pl/books?id=fsPxgOESYHgC&pg=PT286&dq=cash+in+lieu&hl=pl&sa=X&ved=0ahUKEwjy9rbg_vrlAhUV5aYKHYA2DrE4ChDoAQhPMAQ#v=onepage&q=cash%20in%20lieu&f=false ''California Public Sector Employment Law''], California
* Tax Partners and Professionals of Ernst & Young LLP, (2015), [https://books.google.pl/books?id=0raTBQAAQBAJ&pg=PA203&dq=cash+in+lieu&hl=pl&sa=X&ved=0ahUKEwjp89Ku2vvlAhUxw8QBHZ63DFk4FBDoAQgxMAE#v=onepage&q=cash%20in%20lieu&f=false ''The EY Tax Guide''], Wiley, United States of America
{{a|Mateusz Paduch}}