What is non arm's length sale?

What is non arm's length sale?

A non-arm's length transaction occurs when the buyer and seller have a personal relationship. A deal between friends, family or co-workers is considered to be a non-arm's length transaction. With these home sales, self-interest may not be the motivation, for instance, when parents sell their home to an adult child.

What is an example of an arm's length transaction?

What is an Arm's Length Transaction? An arm's length transaction is a negotiation between two parties where the parties are not related. ... For example, the sale of an asset at a very low price could be considered a gift, rather than a sale transaction, which could have adverse tax effects for the buyer.