Fair market value (FMV) can be defined as being the "price that a property would sell for on the open market."
Generally speaking, it is the price that would be agreed on between a willing buyer and a willing seller both parties, without restrictions and with both parties having reasonable knowledge of the relevant facts.
With respect to donated property, such as making a donation of used articles of clothing to a charitable organization, the IRS has specifically stated that the FMV would be determined by the price that buyers would pay for these used articles of clothing with consideration given to the age and condition of these items.
Several factors are suggested by the IRS that should also be taken into consideration when arriving at FMV of the articles or items that are donated such as the following:
- The cost or selling price of the item,
- Sales of comparable properties,
- Replacement cost, and
- Opinions of experts.