Fair Market Value

Fair Market Value

(This is the 3rd of a 3-part article | Part 1 | Part 2)

(by David Maloney) Fair market value is often confused with market value. The stumbling block is normally in regards to the issue of title transfer. While a market value appraisal assumes the transfer of sold property to the new owner as of a specified date, fair market value assumes that the item is not sold, but rather that ownership is retained. Fair market value is used, as an example, by the IRS to substantiate tax deductions for noncash charitable contributions, or as a basis on which to levy estate taxes on property in the decedent’s estate that is bequeathed and not sold.

Fair market value is defined by a legal or regulatory jurisdiction and may vary with individual jurisdictions, i.e., from state to state. For the purposes of this book, we will make use of fair market value as defined by IRS Regulation §1.170A-1(c)(2) and as expanded on by the Treasury Regulation state §20.2031-1(b).

Definition of Fair Market Value

Treasury Regulation §1.170A-1(c)(2) defines FMV for noncash charitable contribution purposes as:

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