KW Economics prepares transfer pricing analysis for tax and transfer pricing dispute matters involving businesses in American Samoa: the controlled transactions and prices at issue, the records and comparables that test them, and a report written for the forum that decides the dispute. Either side.
In a tax dispute the transfer pricing analysis answers the question the examination or the petition raises: whether the results of the controlled transactions are consistent with what unrelated parties would have realized in the same transactions under the same circumstances, and if not, how much income should be reallocated and between which companies. The economist rebuilds the delineation and the functional analysis from the agreements, the ledger, and the companies' conduct rather than from the group's documentation alone, evaluates the methods under the best method rule, assembles and screens the comparables, computes the range, and states the adjustment or its absence by year. The report is written for the forum: as direct testimony in the Tax Court, as a disclosed report in a refund suit, or as the economic position put to an appeals officer or a competent authority.
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 result usually turns on a few choices: the method, and whether a comparable price or a profit-based method is the more reliable on the facts; the tested party, and whether it is truly the simpler participant; the comparables and the screens that admitted or excluded them; the profit level indicator; the years of data; and the point within the range the forum uses. For intangibles, who owns them, who performed the functions that created their value, and whether the royalty base and terms match the comparables move the result most. Penalty exposure in a federal case depends on whether the documentation that existed when the return was filed supported a reasonable method, a separate question from whether the price was arm's length, and in commercial, shareholder, and divorce cases the restated profit carries into a damages claim or a valuation, where the governing contract or duty decides how it is used.
Federal tax forums test expert testimony under the federal rules of evidence, which the Tax Court applies by statute: whether the expert is qualified, whether the testimony rests on sufficient facts or data and on reliable methods, and whether those methods were reliably applied to the facts of the case. The commercial, shareholder, and matrimonial claims heard in American Samoa's courts are tested under its own standard, and a state tax appeal follows the rules of the forum that hears it. The High Court of American Samoa applies rules of evidence modeled on the federal rules, so expert testimony is examined for the witness's qualification, the reliability of the method, and its application to the facts of the case, with the details of the inquiry for counsel to confirm. A transfer pricing report meets each of these inquiries by stating every method choice and naming the data behind every comparable.
Highest court: High Court of American Samoa, Appellate Division.
American Samoa has no separate supreme court and no local U.S. district court; the High Court exercises limited federal jurisdiction, and other federal matters are generally heard in the U.S. District Courts for the District of Hawaii or the District of Columbia.
A federal transfer pricing dispute applies the same statute and regulations wherever the business is based, but where it is based decides which appellate decisions govern: an appeal from the Tax Court ordinarily goes to the federal court of appeals for the circuit where a corporation has its principal place of business, whose precedent the Tax Court follows, and a refund suit is filed in the federal district where the business is based or in the Court of Federal Claims. Whether American Samoa reallocates income between related companies under its own tax, requires royalties or interest paid to an affiliate to be added back, or combines affiliates in one return, and whether a commercial, shareholder, or matrimonial claim in American Samoa adopts an arm's length benchmark, are questions counsel confirms; the report presents the analysis so it can be applied under either party's position.
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 a tax dispute the transfer pricing analysis answers the question the examination or the petition raises: whether the results of the controlled transactions are consistent with what unrelated parties would have realized in the same transactions under the same circumstances, and if not, how much income should be reallocated and between which companies. The economist rebuilds the delineation and the functional analysis from the agreements, the ledger, and the companies' conduct rather than from the group's documentation alone, evaluates the methods under the best method rule, assembles and screens the comparables, computes the range, and states the adjustment or its absence by year. The report is written for the forum: as direct testimony in the Tax Court, as a disclosed report in a refund suit, or as the economic position put to an appeals officer or a competent authority.
Federal tax forums test expert testimony under the federal rules of evidence, which the Tax Court applies by statute: whether the expert is qualified, whether the testimony rests on sufficient facts or data and on reliable methods, and whether those methods were reliably applied to the facts of the case. The commercial, shareholder, and matrimonial claims heard in American Samoa's courts are tested under its own standard, and a state tax appeal follows the rules of the forum that hears it. The High Court of American Samoa applies rules of evidence modeled on the federal rules, so expert testimony is examined for the witness's qualification, the reliability of the method, and its application to the facts of the case, with the details of the inquiry for counsel to confirm. A transfer pricing report meets each of these inquiries by stating every method choice and naming the data behind every comparable. Federal income tax disputes over related-party prices are heard in the United States Tax Court or, on a refund claim, in a federal district court or the Court of Federal Claims; appeals from the Tax Court and the district courts ordinarily go to the federal court of appeals for the circuit where the business is based, and appeals from the Court of Federal Claims to the Federal Circuit. A dispute over American Samoa's own tax follows its administrative and appeal process. Commercial and shareholder claims in American Samoa that turn on an intercompany price are heard in the High Court of American Samoa (Trial Division) (Principal general jurisdiction trial court for local civil and criminal matters), with final appeals to the High Court of American Samoa, Appellate Division, and a divorce in which one bears on income or the value of a business is heard in the court that hears divorce in American Samoa.
A federal transfer pricing dispute applies the same statute and regulations wherever the business is based, but where it is based decides which appellate decisions govern: an appeal from the Tax Court ordinarily goes to the federal court of appeals for the circuit where a corporation has its principal place of business, whose precedent the Tax Court follows, and a refund suit is filed in the federal district where the business is based or in the Court of Federal Claims. Whether American Samoa reallocates income between related companies under its own tax, requires royalties or interest paid to an affiliate to be added back, or combines affiliates in one return, and whether a commercial, shareholder, or matrimonial claim in American Samoa adopts an arm's length benchmark, are questions counsel confirms; the report presents the analysis so it can be applied under either party's position. The report states each transaction, method choice, and comparable screen with its source and shows the result under the opposing method, tested party, and comparables, so counsel can apply the rule of decision of the forum that hears the dispute to a documented result.
Request a consultation on Transfer Pricing or call (201) 343-0700. Plaintiff and defense counsel.