Transfer Pricing: Economist at Deposition

By Christopher Skerritt, M.Ed., MBA, Chief of Economic Services · Published 2026-10-05

Preparing the economist for deposition and cross-examination in a tax or transfer pricing dispute centers on the choices the other side will say were made to reach a result: the delineation of the transactions, the tested party, the method, the comparables screens and the companies they admitted or rejected, the profit level indicator, the years of data, and the point in the range. In the Tax Court the expert's written report is received as direct testimony, so preparation concentrates on the report and on cross-examination at trial; in a refund suit or a commercial case the deposition tests the disclosed report line by line. The economist should be able to explain every choice from the record and show the result under the alternatives.

Checklist

Confirm the delineation of each transaction ties to the agreements, the invoices, and the ledger
Review the functional analysis against the interview notes and the operating records
Prepare the reasons each rejected method and each rejected comparable was excluded
Prepare the result under the opposing tested party, comparable set, and profit level indicator
Assemble the reliance file: agreements, documentation, financial statements, database extracts, and workpapers

Questions to ask the economist

Why is your tested party the least complex participant, and what in the record shows it owns no valuable intangibles?
Which screens removed which companies, and how does the range change if a disputed company is restored?
Why did you prefer this method over the comparable price or profit split methods?
What is the result under the opposing expert's comparable set?

Timeline

One to two preparation sessions in the two weeks before the deposition or the trial date, after the report, the workpapers, and the opposing report are final.

Required documents

The final report, the workpapers, and the comparables database extracts with the screening log
The intercompany agreements, the documentation, and the financial statements relied on
The opposing expert's report and workpapers
Interview notes and the operating records behind the functional analysis

Common pitfalls

A comparables screen that cannot be explained without the result it produced
Treating legal ownership of an intangible as decisive without addressing the functions the record shows
Defending the documentation's conclusions rather than the analysis in the report

Frequently Asked Questions

What is the most common line of attack on a transfer pricing expert's analysis?

The comparables. Opposing counsel asks why each company was included or excluded, whether the screens were set before or after the results were seen, and whether the range would hold if one company were removed. The expert's answer is a screening log that records each criterion and each decision, and a sensitivity table that shows the range under the disputed choices.

How is preparation different when the report is the expert's direct testimony?

Because the report is read as the direct testimony, it has to answer in writing the questions the other side will ask: why the method was selected, why each comparable was kept or rejected, and what the result is under the alternatives. Preparation then concentrates on cross-examination, testing each section of the report against the record and the opposing report before the expert takes the stand.

Should the expert be ready to address the group's documentation?

Yes, directly. Opposing counsel will contrast the report with the documentation the group prepared for the tax authorities, so the expert should be ready to say where the report adopts the documentation, where it departs from it, and why each departure follows from the record rather than from the litigation position.

References

Tax Ct. R. Prac. & Proc. 143(g) (expert witness reports). ustaxcourt.gov
Treas. Reg. sec. 1.482-5 (comparable profits method). ecfr.gov
Fed. R. Evid. 702. law.cornell.edu

Request a consultation on Tax and Transfer Pricing Dispute or call (201) 343-0700. Plaintiff and defense counsel.