RRSP gross-up or gross down?

I always wonder when in an equalization situation do you gross up or down the R.R.S.P by 25% because of taxes? We all know that when a person cashes the R.R.S.P. they get dinged with the withholding taxes.

I recently read a case called Baranowski v. Baranowski, 2007 CanLII 43897 (S.C.J.) reported at http://www.canlii.org/en/on/onsc/doc/2007/2007canlii43897/2007canlii43897.html

The case deals with parties aged 67 (husband) and 59 (wife) where upon equalization the Honourable Justice J.F. McCartney ordered a roll over on a tax free basis (the spousal roll over) the straight sum of $69,807.56 being owed to the wife from the husband.

Interesting that the case does not deal with what evidence the presiding justice heard with regard to whether the wife needed the money, because if she was going to cash the R.R.S.P. right away, she would be hit with the 25% tax and the roll over would in effect be less than the $69k being ordered; this is especially important when as in this case the wife was transferring the matrimonial home to the husband and presumably would be purchasing or possible renting other accommodations. If she was going to keep the money and roll it over into a RRIF at the appropriate age then it would be worth the straight transfer because the growth until the transfer age would hopefully outpace the tax loss and present value loss associated with the transfer.

In my experience, I have had the transferring party either top up the amount to take into consideration the tax consequences or in the alternative reduce the value being in transferred for the tax consequences.

Any comments on this point would be helpful since it appears to be an area not cut and dry one way or the other.