COVID-19 Update: Beaird Harris has shifted a significant number of our team members to work remotely.
We continue to serve and care for our clients, just as we always have, and are available by phone, video or email.
Beaird Harris is closed on Thursday, February 24th due to inclement weather.
During this time our team will be fully available via phone or email should you need assistance.
Beaird Harris will be closed on Friday, July 3rd in observance of the Independence Day holiday.
Fair market value (“FMV”) is the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts.
Source: IRS Publication 561
This is the standard the IRS uses to determine if an item sold or donated by you is valued correctly for income tax purposes. It is a definition that is open to interpretation and if the IRS decides your opinion is wrong, you are not only subject to more taxes, but also penalties to boot.
Here are some tips to help defend your fair market value in case of an audit.
Understand When it is Used
FMV is used whenever there may be potential tax consequences when an item is bought, sold, or donated. The most common examples are:
Ideas to Defend Your Determination
To help defend your valuation, consider the following:
With proper planning, establishing the fair market value of an item sold or donated can be done in a way that can be defended against a challenge from the IRS.
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