“The price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm’s length in an open and unrestricted market, when neither is under any compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.” 3 Implied in both of these definitions is that the value be stated in cash or on a cash equivalent basis (in other words, its relative liquidity) and that the subject property would have been available in the open market long enough such that the natural economic and related forces of the marketplace could establish a value – the fair market value. There are two standard premises of value that need to be considered (1) as ab bgoing concern and (2) as if the company was in liquidation. This approach is consistent with various other appraisal disciplines in that the subject of the valuation (or appraisal) should be valued based on its highest and best use, given the market conditions at the time of the valuation. Furthermore, fair market value is also defined by two primary Treasury Regulations designed to provide guidance for estate planning and valuation purposes. The following definition is consistent with the definitions cited above The fair market value (of the property being valued) is the price at which the property would change hands between a willing buyer and a willing seller, neither 2 Appendix B 3 Treasury Regulation 25.2512‐1 (Estate Planning) and Treasury Regulation b) (Estate Valuation.
Page 18 of 141 being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.
