Arm's Length Transaction | Propertylogy

Arm’s Length Transaction

By on October 12, 2018

An arm’s length transaction describes a real estate transaction that occurs between two unrelated parties.

This implies that both buyer and seller are negotiating for a deal while acting on their own best interest.

The buyer wants to get the lowest price at the best value while the seller wants to get the highest possible price as close to market value as possible.

If the two parties are related in some way, it comes into question whether an agreed transaction was an arm’s length transaction.

The IRS is particularly interested in this classification as a deal between related parties way below market price can be deemed as gift related, and therefore subject to gift taxes.

Relationships that are often deemed to not be at arm’s length are:

  • Siblings
  • Parents and children
  • Parent company and subsidiary
  • etc

When conducting such deals it is best to consult the advice of a qualified accountant for more clarity.

Support us on Patreon

You May Also Like...

hair1 eye1 abs1
View the latest and lowest Singapore Home Loan rates
Why friends look forward to your FAILURE
Hiring a competent agent
Best EVER excuses for being late to work

Investors and homeowners receive our newsletters. Subscribe to our list.

Get More Real Estate Knowledge & Insights From Our Newsletters

Enter your email below

Send this to a friend