Rebuttal analysis applied to tax and transfer pricing dispute litigation: methodology, deliverables, and case-specific considerations.
An opposing transfer pricing report is tested on the choices that drive its result: whether the delineation of the transactions matches the agreements and the companies' conduct, the functional analysis, the method selected and the reasons the alternatives were rejected, the tested party and the profit level indicator, the comparables screens and the companies they admitted or excluded, the adjustments, the years of data, and the point in the range. The economist rebuilds each step from the report's own workpapers and data where they are produced, recalculates the result under corrected choices one at a time and together, and ranks each finding by its effect, so counsel can see which choices carry the number and the tribunal can weigh the two analyses on the record.
Critique of an opposing economic damages, valuation, or forensic accounting report for plaintiff or defense counsel. The review tests the assumptions, data sources, discount rates, worklife and life expectancy inputs, growth rates, mitigation treatment, and arithmetic behind the opposing number, identifies the errors that matter, and quantifies how the conclusion changes when they are corrected. The result supports cross-examination, a rebuttal report, or a motion directed at the reliability of the opinion.
The analysis consists of the delineation of each controlled transaction at issue, whether a sale of goods, a service, a license of patents, trademarks, software, or know-how, or an intercompany loan or guarantee; the functional analysis of what each company did, owned, and risked; the arm's length range under the method that gives the most reliable measure; and the adjustment, or the restated profit, that follows from comparing the controlled result with that range, by year and by entity. Where a tax dispute concerns the value of property rather than a recurring price, such as intangibles transferred to a foreign affiliate or a closely held interest transferred by gift or at death, the analysis is a valuation under the standard the tax framework applies. The drivers are the intercompany agreements and their amendments, the transfer pricing policy and documentation for each year, legal-entity and segmented financial statements, the general ledger detail of the intercompany accounts and any year-end adjustments, the tax returns and information returns that report related-party transactions, and any advance pricing agreement.
We issue a rebuttal report where one is disclosed and provide deposition and trial testimony, cross-examination outlines, and support for motions directed at the opinion.
Each state page adds the courts, the expert standard, and the tax and legal framework the report is built around in that venue.
Whether the tested party really is the simpler participant and whether the comparables perform the functions it performs, because those two choices move the result more than most others. The review then checks the screens, the rejected companies, the profit level indicator, the years averaged, and the adjustments, and recalculates the range with each correction.
In the Tax Court the opposing report is received as that expert's direct testimony, so the review shapes the cross-examination and any rebuttal testimony the court permits, choice by choice and with the effect of each correction stated. The same review can be used earlier, at the examination or appeals stage, to show where an opposing economic position does not hold.
Request a consultation on Rebuttal or call (201) 343-0700. Plaintiff and defense counsel.