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Petitioners’ other expert, an economist, analyzed the
transfer price between DHL and DHLI. Although DHL and DHLI
applied their cost-plus 1987 approach for imbalances and
transfers on a per-shipment basis times a weighted average
delivery cost and percentage markup, petitioners’ expert analyzed
the cost for all reciprocal shipments and arrived at a different
result from DHL and DHLI and from respondent’s approach. By
estimating a substantial cost differential between DHLI and DHL
(larger for DHLI), petitioners’ expert concluded that any
adjustment for the imbalance, whether computed at cost plus 2, 4,
or 15 percent markup, would result in a substantial adjustment in
DHLI’s favor for all years under consideration.
Respondent’s expert used or accepted the same methodology as
DHL and DHLI had used to compute the imbalance, but he used a 4-
percent as opposed to the 2-percent markup that was used by DHL
and DHLI. Respondent’s expert concluded that there should be an
imbalance adjustment for pre-1987 years and an increase in DHL’s
and DHLI’s adjustment for the years where a 2-percent markup was
used. Because respondent’s expert used the same approach or
methodology called for in the agreements between DHL and DHLI, we
consider his report first, and then we will contrast and consider
petitioners’ expert’s approach.
Although the taxable years before the Court are 1990, 1991,
and 1992, respondent is able to determine section 482
adjustments to earlier years because of the existence of net
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