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 ?
Several commentators raised this concern after the initial Tax Court decision (6) and questioned whether Treasury can require a result that has been shown to be inconsistent with arm's-length behavior.
He favours an arm's-length funding commission setting a four-year budget for each authority.
For example, under the new rules, certain services that are either specified in a revenue procedure or are low-margin services with an arm's-length mark-up of 7 percent or less may qualify for pricing under the Service Cost Method (SCM) and may be charged out with no mark-up.
But despite making sweeping changes, he has stuck with the principle of arm's-length funding for the arts.
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.
In both countries, large parts of the bureaucracy have been set up as agencies that work at arm's-length from elected officials.
A written recruitment agreement was entered into pursuant to arm's-length negotiations between the parties.
This arm's-length standard applies to items such as loans, rentals, services, sales, and the use of know-how, trademarks, patents and other intangibles.
Aura Gold's properties in the Inaja Greenstone Belt were acquired in nine separate arm's-length agreements with the various landowners.
The arm's-length charge to each participant is the portion of the total costs of the services otherwise determined under the SCM properly allocated to the participant.
Updated TPMs: Six other articulated transfer pricing methods for determining the arm's-length charge for intercompany services.
The OECD endorses strict application of the arm's-length principle under these circumstances, and it recommends the valuation should be treated similarly to the way independent companies commonly value intangibles under similar conditions.