Douglas and Sue, related parties, are landlord and tenant as to certain business property. If the IRS questions the amount of rent Sue is paying to Douglas, this is an illustration of the:

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The Arm's length concept requires that transactions between related parties should be conducted as if they were unrelated, with each party acting in its own best interests. If the IRS questions the amount of rent Sue is paying to Douglas, it suggests that the rental payments may not be at arm's length and may therefore be subject to adjustment by the IRS.

Douglas and Sue, Related Parties, Are Landlord and Tenant as to Certain