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 ?
(CSE: SNA) (OTCQB: SNAVF) has announced it has entered into an arm's length agreement to acquire a majority position in Finances Gestation & Developpement SAS (FGD) subsidiary Solutions Isoneo, Inc., the company said.
("Stakeholder") is very pleased to announce that it has entered into an arm's length agreement with a syndicate of local prospectors (the "Vendors") whereby it may earn a 100% interest in the 23-claim Sourdough Hill property located in the Keno Hill Silver Camp of central Yukon approximately 330 km north of Whitehorse.
In other words, it arrogates to the tax authorities the right to disregard a genuine arm's length agreement where such agreements are "uncertain" for one of the participants, a situation generally not observed in unrelated party dealings.
The deal is pursuant to an arm's length agreement with Shoal Point Energy Ltd.
He said it is important to use the applicable federal rates for repayment agreements to further substantiate an arm's length agreement. "Good documentation will support the deduction as long as it is not a casual loan, like a series of loans over a number of years that are not used to buy a house or business," said Person.