Fair Market Value Reporting to the IRS

Real estate must be valued at open-market prices.

The U.S. Internal Revenue Service requires citizens to use fair market value when reporting the worth of real estate or belongings. Offering false information to the IRS is a crime that carries possible fines and incarceration.

Fair Market Value

Fair market value is the price a piece of real estate would bring on the local market. Licensed real estate appraisers determine market value by following state-mandated standards and reviewing comparable properties that have sold in the past year. Home and land owners must estimate the value of real estate to the best of their ability if not using the services of an appraiser or real estate brokerage.

Estimating Value

There is no set formula for determining fair market value. Real estate markets fluctuate, and the value of identical houses would not necessarily bring the same price in two different locations. The price of replacing a piece of real property factors into fair market value. The original purchase price matters very little when estimating real estate value.

Donated Items

The IRS requires fair market value be used when tax payers estimate the value of items donated to charity. You must establish what the value of the used items are worth. It is illegal to give a full-priced value on used items.

References

• IRS: Determing Fair Market Value
• IRS: Valuation of Household Goods
• IRS: Property Appraisals
• IRS: Penalties