Types of AppraisalsAn appraisal prepared by a professional appraiser identifies the intended user(s) of the appraiser and the intended use in order to determine the type of valuation needed for the appraisal assignment. The appraiser identifies the property using the Getty object ID and determines a work plan that will lead the appraiser to a credible conclusion of value based on accepted methods and standards as set out by the Uniform Standards of Professional Appraisal Practice. Black’s Law Dictionary defines an appraisal as "a valuation or an estimation of value of property by disinterested persons of suitable qualifications" and "the process of ascertain a value of an asset or liability that involves expert opinion rather than explicit market transactions." DEFINITIONS OF VALUES: Fair Market Value (FMV) for Charitable Contribution:
The price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.
If the contribution is made in a property that of a type which the taxpayer sells in the course of his business, the fair market value is the price which the taxpayer would have received if he had sold the contribution property in the usual market in which he commonly sells, at the time and place of the contribution and, in the case of a contribution of goods ain quantity, in the quantity contributed. The usual market of a manufacturer or other producer consists of the wholesalers or other distributors to or through whom he customarily sells, but if he sell only at retail the usual market consists of his retail customers. If the donor makes a charitable contribution of property, such as stock in trade, at a time when he could not reasonably have been expected to realize its usual selling price but is the amount for which the quantity of property contributed would have been sold by the donor at the time of its contribution. Reference IRS, 26 CFR § 1.170A - 1 (c) (2) Fair Market Value for Gift Taxes/Charitable Contributions The Fair Market Value is the price at which property would change hands between a willing buyer and a willing seller, when neither is forced to buy or sell, and when both have reasonable knowledge of all relevant facts. Fair Market Value may not be determined by a forced sale price, nor by the sale price of the item in a market other than that in which the item is most commonly sold to the public. The location of the item must be taken into account wherever appropriate. Reference IRS, 26 CFR § 25.2512 - 1 Fair Market Value for Calculating Estate Taxes The fair Market Value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. The fair market value of a particular item of property includable in the decedent's gross estate is not to be determined by a forced sale price. Nor is the fair market value of an item of property to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public, taking into account the location of the item wherever appropriate. Thus, in the case of an item of property includible in the decedent's gross estate, which is generally obtained by the public in the retail market, the fair market value of such an item of property is the price at which the item or a comparable item would be sold at retail. For example, the fair market value of an automobile (an article generally obtained by the public in the retail market) includible in the decedent's gross estate is the price for which a automobile of the same or approximately the same description, make, model, age condition, etc., could be purchased by a member of the general public and not the price for which the particular automobile of the decent would be purchased by a dealer in used automobiles. Reference IRS, 26 CFR § 20.2031-1(b) Market Value Similar to Fair Market Value except that the provisions for lack of compulsion to buy or sell is removed and the assumption of a sale within a specified frame is added. The federally accepted definition of Market Value as stated in the Definition Section of USPAP is as follows: bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition are the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1. buyer and seller are typically motivated; 2. both parties are well informed or well advised, and each acting in what he considers his own best interests; 3. a reasonable time is allowed for exposure in the open market; 4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. Marketable Cash Value Marketable Cash Value represents the anticipated net proceeds (or cash in hand) that would be yielded from the orderly sale of a property once all costs of sale were subtracted. It represents the amount not merely obtained (paid in full [including any buyer's premiums, taxes, etc.] but retained (received, net, by seller) from sale. Replacement Value - Comparable The price in terms of cash or other princely revealed terms that would be required to replace a property with another of similar age, quality, origin, appearance and condition within a reasonable length of time in an appropriate and relevant market. Intangible provenance value is additive as appropriate. Replacement Value - Cost New Cost to replace a property with an equivalent or substitute which is new, using modern materials, techniques and standards which satisfies the description or use of the replaced property. The present cost of replacing the property with one having the same quality and utility. Forced Liquidation Value The most probable price in terms of cash, or other precisely revealed terms for which the property would change hands if sold immediately, without regard to relevant market place. Orderly Liquidation Value The most probable price in terms of cash, or other precisely revealed terms, for which the property would change hands under required and limiting conditions in an orderly manner, generally advertised, with reasonable time constraints, in an appropriate and relevant market place, with knowledgeable buyers. Value in Use The value of property which reflects a value to a particular user, recognizing the extent to which the property contributes to the personal requirements of the owner. Actual Cash Value The price in terms of cash or other price revealed in terms that would be necessary to replace a property with another of similar age, quality, origin, appearance, size and condition within a reasonable length of time in an appropriate and relevant market. This definition encompasses the concept of "as is" or "with or without restoration." It is the market value of a property, plus appreciation or less all forms of depreciation. DEFINITIONS FROM : Principles, Theories and Practice Methods for the Professional Appraiser - , ASA course (thorough Pratt) binder - Edited by Patricia C. Soucy, FASA, and Janella N. Smyth, ASA Co-Editors For more information about our services, contact us today!
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