KW Economics prepares transfer pricing analysis for partnership and shareholder dispute cases venued in Washington: what the loss claim consists of, the records that drive it, and a present value built to Washington damages rules and venues. Plaintiff and defense.
In an owner dispute the transfer pricing question is whether a controlling owner moved profit out of the company through purchases from, sales to, services from, or licenses from entities the owner holds separately. The economist identifies each related-party transaction from the ledger and the agreements, establishes the functions, assets, and risks on each side, measures the prices against comparable transactions or the returns of comparable independent companies, and quantifies the profit diverted year by year. The restated earnings then feed the valuation of the minority interest or the damages claim, and the report keeps the arm's length adjustment and the valuation coordinated so the same profit is counted once.
Economic analysis and expert testimony on whether the prices charged between companies under common control, for goods, services, the use of intangibles, and intercompany loans, meet the arm's length standard: the result unrelated parties would have reached in the same transaction under the same circumstances. The work delineates the transactions from the intercompany agreements and the companies' actual conduct, selects the most reliable method, documents the comparables and the arm's length range, and quantifies what the price moved, for tax examinations and appeals, Tax Court and refund litigation, state tax disputes, and commercial, shareholder, and divorce cases.
The valuation date and the standard of value control the result: a fair value standard may exclude the minority and marketability discounts that a fair market value standard applies, and the gap between the two can be substantial for a minority interest in a closely held company. Normalizing adjustments to owner compensation and related-party dealings often decide whether the business shows earnings to value at all. Where the claim includes diverted profits, the amount depends on how far back the records permit reconstruction and on whether the business's actual results can be separated from market conditions.
Washington courts ask whether the methodology behind an expert opinion is generally accepted in the relevant professional community and whether the economist is qualified by training and experience to apply it, leaving disputes over the inputs to cross-examination. The methods of forensic economics are published and long used, so the examination of a damages report usually turns on its assumptions and their support in the record.
Highest court: Washington Supreme Court. Court system: courts.wa.gov.
Federal venues: Western District of Washington, Eastern District of Washington.
Washington applies pure comparative fault in a negligence-based claim, reducing the award in proportion to the plaintiff's share. Prejudgment interest is generally limited to liquidated sums, such as an unpaid contract balance, and not awarded on unliquidated damages. Statutory limits on noneconomic damages have been held unconstitutional and economic damages are not subject to a general statutory limit, so the economist's figure enters the case at its full present value, with the liquidated components identified separately.
We issue the final report in the form the forum requires and provide deposition and trial testimony, critique of the opposing transfer pricing analysis, and updated calculations as the record develops.
In an owner dispute the transfer pricing question is whether a controlling owner moved profit out of the company through purchases from, sales to, services from, or licenses from entities the owner holds separately. The economist identifies each related-party transaction from the ledger and the agreements, establishes the functions, assets, and risks on each side, measures the prices against comparable transactions or the returns of comparable independent companies, and quantifies the profit diverted year by year. The restated earnings then feed the valuation of the minority interest or the damages claim, and the report keeps the arm's length adjustment and the valuation coordinated so the same profit is counted once.
Washington courts ask whether the methodology behind an expert opinion is generally accepted in the relevant professional community and whether the economist is qualified by training and experience to apply it, leaving disputes over the inputs to cross-examination. The methods of forensic economics are published and long used, so the examination of a damages report usually turns on its assumptions and their support in the record. Partnership and Shareholder Dispute cases venued in Washington are heard in the Superior Court (General jurisdiction; one in each of 39 counties; all civil, criminal, and domestic matters), with final appeals to the Washington Supreme Court. Matters within federal jurisdiction proceed in the Western District of Washington and Eastern District of Washington.
Washington applies pure comparative fault in a negligence-based claim, reducing the award in proportion to the plaintiff's share. Prejudgment interest is generally limited to liquidated sums, such as an unpaid contract balance, and not awarded on unliquidated damages. Statutory limits on noneconomic damages have been held unconstitutional and economic damages are not subject to a general statutory limit, so the economist's figure enters the case at its full present value, with the liquidated components identified separately. The report presents past and future amounts separately, states every rate and table with its source, and shows the result under the alternatives the other side is likely to argue, so counsel can apply the Washington rules to a documented figure.
Request a consultation on Transfer Pricing or call (201) 343-0700. Plaintiff and defense counsel.