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 functional and economic analyses required to determine both the services that qualify for SCM--including whether the service contributes "significantly to fundamental risks of business success or failure"--and the arm's-length price for other services cannot be properly done by January 1, 2007.
Mr Hain's document Better Government for Northern Ireland, which was published on Tuesday, states, 'Executive, advisory and tribunal Non-Departmental Public Bodies or quangos operate at arm's-length from government .
Another difficulty is that reforms aimed at setting up arm's-length relationships don't work as flawlessly as Osborne and Plastrik suggest.
A written 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.
Although the court agreed that unrelated parties would not share such costs, it concluded that the more specific cost-sharing provision in the regulations (which required parties to share "all costs") trumped the general arm's-length requirement.
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.
While the acquisition is a connected transaction, it has been negotiated at arm's-length and at prevailing commercial terms.
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.