I take the item away as well but BEFORE I do, I give them 5 minutes to figure out a solution and if they can't figure out a way for both of them to be happy, THEN I take the toy.

That way, I feel it does give them the opportunity to manage conflicts but at the same time it isn't me telling them what is fair since in life some people are giviers and some are takers so what we would think of as equal isn't always fair in their eyes so letting them find a way to figure it out before I take it away from both of them has worked wonders over the years.