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 ?
To determine whether employees are not dealing at arm's length with their employers, the CRA considers the circumstances of their employment.
We overcome these conceptual and methodological deficiencies by examining how cultural distance influences aggregate arm's length exports, while simultaneously considering its impact on aggregate arm's length affiliate sales.
482-1 expressly requires that "the standard to be applied in every case is that of a taxpayer dealing at arm's length with an uncontrolled taxpayer.
Since the transfer was at arm's length, there were no additional tax consequences to the husband when his ex-wife later exercised the options.
Taxpayers can avoid penalties for transfer pricing adjustments by complying with the standard, reporting arm's length results on their income tax returns, contemporaneously documenting their transfer pricing using methods described in the section 482 regulations and providing that documentation to the IRS upon request.
Whatever the contract's term, it needs to be negotiated at arm's length with an unrelated party at market rates.
It generally includes other foreign affiliates, any person who does not deal at arm's length with the taxpayer, and certain trusts and partnerships.
In any case, Chelsea should keep the whole enterprise at arm's length.
The proposals also call for a new 100 percent excise tax to ensure: arm's length pricing for services provided to the REIT's tenants (to ensure that tenants are not paying the REIT higher rent in exchange for a discount on services that would be taxable income to the service subsidiary); and arm's length allocations for shared expenses between the REIT and its taxable Subsidiary.
Although the stock was sold to an unrelated corporation, the court concluded the transaction was not at arm's length because the purchaser was compelled to buy.
Prior to completion of the Acquisition Bema is not a Non Arm's Length to the Company.