Which statement would indicate the sale is not arms-length?

• A. Both parties acted independently
• B. The sale occurred with standard closing costs
• C. Related parties involved in the sale
• D. Price represents market value

Answer: (C)

Arms-length deals are those where the buyer and seller act independently and the price is driven by current market conditions, with no undue influence from relationships or concessions.

Having related parties involved in the sale is the clearest sign that the transaction may not be arms-length, because relationships can influence terms, financing, or disclosures in ways that don’t reflect independent market behavior. This can lead to prices or arrangements that wouldn’t occur between truly unrelated parties.

The other statements align with arms-length characteristics: independent parties suggest genuine market interaction; standard closing costs are normal and don’t imply favoritism; and a price that represents market value indicates the deal was evaluated as a market transaction.