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 ?
The case considers transfer pricing rules (Subdivision 815-A) the object of which is to ensure related Australian and non-resident entities are taxed consistent with the arms length principle.
In doing so the court found that the terms operating between the Australian copper mine and its Swiss trader parent to calculate the price at which the mine sold its entire copper concentrate production were within an arms length range.
AT ARMS LENGTH: Rangers Shota Arveladze keeps Derek Adams of Aberdeen at arm's length at Pittodrie last night
The report notes that the not-for-profit sector includes thousands of social agencies which operate at arms length from the state, but are funded and supported by governments to help meet social needs.
However, transfers between related parties are assumed not to be at arms length. Regs.