What does fair market value mean on the CPA exam?
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Fair market value. The price at which property would change hands between a willing buyer and a willing seller, neither under compulsion and both reasonably informed.
Defined against Treas. Reg. 20.2031-1(b).
Other names for fair market value
fair value
Related terms
- acquisition-date fair value: What something was worth on the day control changed hands.
- net realizable value: Estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation.
- step-up in basis: Resetting inherited property's basis to its fair market value at the date of death, which erases the unrealized gain of the decedent's lifetime.
- present value: What a future amount is worth today, once a discount rate has been applied for the waiting.
- loss contingency: An existing condition involving uncertainty that may produce a loss, resolved by a future event.
- adjusted basis: What the taxpayer has invested in property for tax purposes: cost, plus improvements, less depreciation taken.