Fair Market Value?

[Snaggletooth]

The tax code is full of references to fair market value. Literally dozens of them, such as FMV vs acquisition cost, FMV of collateral for cancelled debt, FMV for measurement of a gift, etc. etc. etc.

Many properties today (especially real estate) have FMVs in the six-or-seven digits.

I have never heard any mention in the code, instructions, reference books, etc. of lowering the FMV for selling expense. And appraisers always give their appraisal based on contract value rather than "net" value to the seller after paying real estate agent fees, closing costs, or other selling costs. Some instruction books present elaborate examples of how FMV affects a particular calculation, but realtor's commissions, selling expenses etc are NEVER mentioned.

Should FMV be lowered to compensate for expenses which sellers can be expected to incur??

[erchess]

I don't think it should.

For example, if I go on a tv game show and win a house, I am going to pay tax on the contract sales price of the house when the show bought it, am I not? Then if I sell it that value is my basis and if I have a gain that's taxable and if I have a loss it's personal and therefore nondeductible. And isn't it a little worse if I win a car? The show buys a lot of cars so it probably gets a volume discount but I'm probably stuck paying tax on the list price of the vehicle even though identical cars may be sold by the dealer for considerably less? And if I sell it won't I inevitably get less than my basis and have a nondeductible loss?

[thomtax]

Just to play "devil's advocate" - If you win a car that the tv show says is worth $30,000, but that same car actually is selling for $25,000 on the dealer's lot, would not an appraisal by the dealer that it is worth $25,00 make that the fmv?

LT

[taxea]

See IRS Pub 561 it defines FMV and gives detail on various different items

[erchess]

You have a valid point but

Just to play "devil's advocate" - If you win a car that the tv show says is worth $30,000, but that same car actually is selling for $25,000 on the dealer's lot, would not an appraisal by the dealer that it is worth $25,00 make that the fmv?

LT

remember it isn't enough to document that the same car with the same features has a certain sticker price or is actually sold for a certain sum. You need a written opinion which will normally to me cost more in time and money than the tax savings is likely to be worth. That goes double if the taxpayer needs a tax pro to hold their hand through the process because of course the tax pro will have to be paid by the hour.