Tag: fair market value

Fair Market Value

Posted on by Dave Maloney

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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Market Value vs. Fair Market Value: What’s the Difference?

Posted on by Dave Maloney

Market Value vs. Fair Market Value: What’s the Difference? 

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

(by David Maloney) There seems to always have been confusion regarding the term “market value” and how it relates to “fair market value.” Given the inconsistent manner in which terms are used within the appraisal profession, it is not surprising that such confusion exists. There is “market value” itself, but there are also various “types” of market value such as “fair market value” and “orderly liquidation value.” But there are also types of value that are NOT market value types such as “replacement value” and “forced liquidation value.” 

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Bankruptcy Appraisals

Posted on by Dave Maloney

Bankruptcy Appraisals

(by David Maloney) Bankruptcy is a legal procedure designed both to protect an individual or business that can’t meet its financial obligations and to protect the creditors involved. The process of bankruptcy requires the debtor to create an expense report illustrating the “value” of their assets. In order to get a true reading of the value of the individual or business personal property involved, an appraisal is at times, but not always, necessary.

All bankruptcies are governed by Title 11 of the U.S. Code (Bankruptcy Code) and are processed through Bankruptcy Courts — part of the system of Federal courts. The Bankruptcy Courts of the 94 Federal judicial districts were created by Congress just to hear bankruptcy cases and make decisions about disputes between debtors and creditors.

The debtor begins the process by filing a bankruptcy petition with the Clerk of the Bankruptcy Court in the Federal District where the debtor has lived or has had a principal place of business. The various types of bankruptcy are referred to by their respective Bankruptcy Code chapter numbers.

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IRS Appraisal Symposium: FMV Requires Use of “Most Common” Market

Posted on by Dave Maloney

IRS Appraisal Symposium: FMV Requires Use of “Most Common” Market 

(by William Novotny Sept. 2008) The Los Angeles Chapter of the ASA recently sponsored an IRS symposium entitled Practicing Before the IRS – A Guide for Personal Property Appraisers at the Atrium Hotel in Irvine, CA. 

The symposium was well-attended and featured four key IRS speakers and Joy Berus, an attorney specializing in art law. From the IRS were Brenda Woolbert, CPA, CVA (Team Manager for the IRS Engineers and Appraisers office in Laguna Niguel, CA); Michael Zarefsky, Esq., CPA, IRS Attorney – Advisor; Susan Kassell, Esq. (Senior Counsel in the IRS Office of the Associate Chief Counsel, Income Tax & Accounting, Washington, DC) and Karen Carolan (Chief, Art Appraisal Services, Chair, Commissioner’s Art Advisory Panel Department of the Treasury, IRS, Washington, DC). Topics included the appraiser’s responsibilities, the requirements for estate and charitable contribution appraisals, IRS proposed changes and appraiser qualifications. 

Though familiar with the complexity of IRS regulations, participants were surprised to learn that there are 243 sections of the IRS Code regarding the use of fair market value. There are over 15 million tax returns filed annually in which taxpayers have valuation issues. As might be expected, abuses and disputes regarding valuations occur. 

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