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to the same markup earned by uncontrolled (i.e., third-party) distributors performing substantially similar functions. Berry's key insight in the case was that distributors should earn a return proportionate to the distribution services performed. The value of the products being distributed, in other
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generated by intangibles is the main contributor to corporate earnings, and after taxes, to corporate profit the Berry ratio does not provide an adequate metric for the party that owns intangibles, but does show what routine functions captured in operating expenses should earn.
26:. He is well known for his derivation of the Berry Ratio, an analytical tool used extensively by tax and transfer pricing analysts over the world. Berry consulted with numerous government agencies, corporations, and law firms on antitrust and regulatory issues,
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in order to compensate them for their value-adding services, the costs of which are accounted for, almost entirely, in their operating expenses. The IRS defines the ratio now, awkwardly, as the "Ratio of Gross
Profits to Operating Costs".
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To reflect the reality of distributors' economic significance and to provide an arm's length return to DuPont's Swiss subsidiary, Berry utilized a ratio that has since been named in his honor:
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In his analysis, Berry determined that the best method for determining an arm's length result was to compare the Swiss distributor's markup on
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Marc M. Levey and Steven C. Wrappe: Transfer
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The Berry Ratio remains, to this day, a mainstay of transfer pricing analysis where a distributor serves as the tested party.
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from 1975 to 1978, and again as associate dean of the school from 1980 to 1985. In addition, he was the master of
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faculty in 1966 as an associate professor of economics and public affairs. He was promoted to professor in 1971.
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22:(1930 – September 2, 2007) was an American economist and specialist in industrial organization and applied
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case"), Berry served as an expert witness on behalf of the U.S. government. At issue was the "proper,"
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words, was irrelevant. Accordingly, distributors must achieve a particular
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Berry served as associate dean and director of the graduate program in the
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Code of
Federal Regulations, Title 26, Chapter 1, §482–5 (b)(4)(ii)(B)
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184:"Charles Berry, economist and 'dedicated University citizen,' dies"
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Berry died
September 2, 2007, due to complications from cancer.
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Like most metrics that are based on data available in
90:E.I. DuPont de Nemours & Co. v. United States
124:Berry Ratio = Gross Profit/Operating Expenses
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50:in 1956. He was an assistant professor at
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92:, 608 F.2d 445 (Ct. Cl. 1979) ("the
182:Stevens, Ruth (16 September 2007).
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54:and a senior staff member at the
232:University of Connecticut alumni
222:20th-century American economists
46:in 1953, and his Ph.D. from the
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247:Brookings Institution people
242:Princeton University faculty
237:University of Chicago alumni
139:of a corporation. Since the
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30:, and corporate taxation.
188:Princeton Weekly Bulletin
44:University of Connecticut
227:McGill University alumni
84:Case and the Berry Ratio
190:. Princeton University
56:Brookings Institution
48:University of Chicago
20:Charles Horace Berry
137:intangible property
73:from 1986 to 1990.
71:Rockefeller College
58:before joining the
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133:corporate accounts
109:operating expenses
16:American economist
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192:. Retrieved
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217:2007 deaths
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194:23 January
148:References
60:Princeton
34:Biography
102:DuPont
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196:2018
80:The
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