Arm's Length Transaction

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Arm's Length Transaction

A transaction in which the buyer and the seller have no significant, prior relationship. In an arm's length transaction, neither party has an incentive to act against his/her own interest. That is, the seller seeks to make the price as high as he/she can, and likewise the buyer seeks to make it as low as he/she can. The negotiations for an arm's length transaction result in the arm's length price, which is almost always close to the market value of the asset being sold. The term is often used in real estate transactions because family members often sell property to each other at something other than the arm's length price.
References in periodicals archive ?
In the structural model, firms' pass-through of foreign cost shocks is on average 29 percentage points lower in arm's-length transactions than in multinational transactions because the higher markups from a double optimization along the distribution chain create more opportunity for markup adjustment following a shock.
The personal services safe harbor requires that the aggregate compensation paid for the services be set in advance and consistent with fair market value in arm's-length transactions.
4 is flawed and should be abandoned, the overbreadth of the proposed changes can be addressed by eliminating the proposed amendments to section 68, especially in arm's-length transactions where the parties to the agreement make no initial allocation to a "restrictive covenant.
Even though section 1041 nullified Davis on the recognition of gain requirement, the fact that transfers pursuant to a divorce are arm's-length transactions still stands.
Related-party activities should generally be viewed with skepticism because they often fail to constitute arm's-length transactions,'' the newsletter said.
Although Meadow Valley management claims the terms of the related-party transactions are "at least as favorable as those which could be obtained from unrelated third parties in arm's-length transactions," the company still owes $3.
1041 nullified the Davis holding that a stock transfer between spouses was taxable, Davis still stands for the proposition that transfers pursuant to divorce are arm's-length transactions and that the properties exchanged are of equal value.
The intent is to ensure that only gains or losses on arm's-length transactions are recognized," says Meyer.
The price at which similar interests have changed hands in arm's-length transactions.
11) This represents an administrative reversal of the Bausch & Lomb decision(12)(where actual arm's-length transactions were used) and is arguably inconsistent with the Canadian interpretation of the arm's-length standard.
This provision, one of the most powerful in the code, is aimed at forcing related entities to engage in arm's-length transactions, particularly with respect to transfer-pricing policies.
Sales and exchanges of property between insiders and pension plans were designated prohibited transactions to ensure the safety of the pension plan system, by eliminating the possibility that such sales and exchanges may not be arm's-length transactions.