fair market value

Primary tabs


The fair market value (FMV) is the value of property as determined by the marketplace (or objective purchasers) rather than as determined by a subjective individual.  This is what an informed and unpressured buyer would pay to an informed, unpressured seller in an arm's length transaction (the price is based solely on the value of the property, as opposed to if you were selling the property to a family member and giving them a special deal).

In the United States v. Cartwright, 411 US 546,  fair market value (FMV) is defined as “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 FMV is used in many laws and regulations, like the Internal Revenue Code and bankruptcy law. In the U.S., the FMV is commonly determined by the judge in a hearing, yet in some jurisdictions, the courts are required to hold fair market hearings though the two parties waived their rights to such a hearing. In Canada, according to the Canada Revenue Agency, the FMV means “the highest price” of the subject matter.

[Last updated in February of 2022 by the Wex Definitions Team