non-arm's length transaction

Definition

A transaction involving a party that is controlled by another entity and does not act on its own behalf. The party sets aside independent interest in order to focus on the wishes of the controlling party. Non-arm's length transactions must involve at least one interested party that is concerned about the possible consequences of the transaction. Transactions involving family members, and parent companies and subsidiaries would not be considered non-arm's length transactions because the parties are acting independently. Opposite of arm's length transaction.

Use this term in a sentence

The Internal Revenue Service disallowed the loss claimed by the taxpayer as it deemed the loss resulted from a non-arm's length transaction.

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John was asked to be the representative on the non-arm's length transaction between the two companies since he was familiar with both of them.

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Peter took part in a non-arm's length transaction for the small architectural firm since his established firm was the majority stakeholder in the business.

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nonagent nonassessable stock