IQR – Exclusive or Inclusive, that is the question

I have spoken a lot about the arm’s length range and when we should use a statistical tool such as the interquartile range (IQR) to derive an arm’s length range. But how do we calculate the IQR practically?

The easy answer is, Microsoft Excel or Numbers (for Mac) will do it for you, you just have to use the right formula. For Numbers this is a little easier as there is only one formula (=quartile) but for Excel users this can become a little more confusing as there are two formulas. Originally, Excel also only had one formula but now you have the option of either using =quartile.inc or =quartile.exc. The previous formula within Excel was equivalent to =quartile.inc, in case you were wondering.

So the questions are: Which formula should I use? Does it make a difference in the range? Will the tax authorities care?

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