Arm's length price determines income and expense treatment for related party transactions, subject to a non application carve out. Income and expense allowances arising from international or specified domestic transactions must be determined with regard to the arm's length price, and allocations or contributions of costs among associated enterprises for benefits, services or facilities must reflect the arm's length price; the rule is inapplicable if applying it would reduce taxable income or increase a book loss for the tax year of the transaction.