Types of Value

  • Fair Market Value (FMV) 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. This type of value includes the buyer’s premium, and is not to be determined by a forced sale price. Essentially this is an ¡§all-in¡¨ price equivalent to what you¡¦d pay for it at auction. This is most commonly used for tax purposes.The full definition according to the U.S. Internal Revenue Service in their Section 1.170 and 20.2031 (b) 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.” (According to Technical Advisory Memorandum [TAM] 9235005 [May 27, 1992], fair market value should include the buyer’s premium.) 20.2031 (b) continues “the fair market value of an item of property includible 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 that item in a market other than that in which such item is 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.” (Treasury Regulation Section 1.170A-13(c)(3)(1988)
  • Marketable Cash Value (MCV) is the probable proceeds of a property less expenses under the same conditions. This is essentially what you¡¦d receive if you sell a given property. I normally assume it in wine valuations to be equivalent to recent auction hammer across all houses adjusted for market trends less 2% for expenses (i.e. assuming shipping and insurance but no vendor¡¦s commission), with futher adjustment in exceptional cases for poor condition. For a large collection (i.e. > USD 1,000,000) it is possible to assume that one could get the auction house to absorb all costs, and thus it could be simply equivalent to the hammer price. This is most commonly used when an owner is looking to sell.The full Appraisers Association definition is as follows: ¡§Probable proceeds of a property less expenses, such as dealer commissions, auction house fees, advertising, insurance, travel and shipping expenses, assuming a willing buyer and seller, both being reasonably knowledgeable of all relevant facts, and neither being under constraint to sell or buy, with the sale taking place in the best competitive and open market within an agreed upon time period with a specific method of payment and sufficient time to market the wines effectively.¡¨
  • Retail Replacement Value (RRV) is defined as the highest amount that would be required to replace a property with another of similar age, quality, origin, appearance, provenance, and condition within a reasonable length of time in an appropriate and relevant market. When applicable, sales and/or import tax, commissions and/or premiums are included in this amount. This is used for insurance coverage.