What is Fair Market Valuation (FMV)?
Fair market valuation is defined by the Internal Revenue Service (IRS) in its Revenue Ruling 59-60 as:
"the price at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge or relevant facts."
In essence, FMV is the most probable price that an asset will fetch in an open and competitive market.
Purpose of Valuation
Our professional valuations serve multiple critical purposes in retirement planning and tax compliance.
Roth Conversion
Determine the fair market value of assets being converted from traditional IRA/401(k) to Roth accounts. This valuation is required by the IRS for accurate tax reporting on Form 1099-R.
- IRS-compliant conversion reporting
- Tax optimization through proper discounting
- Audit protection and documentation
Annual Reporting
Provide annual valuations for ongoing compliance and accurate financial reporting. Essential for maintaining proper account values and meeting regulatory requirements.
- Annual compliance reporting
- Accurate financial statements
- Regulatory compliance maintenance
RMD Calculation
Calculate Required Minimum Distributions (RMDs) based on accurate asset valuations. Critical for retirement planning and avoiding IRS penalties.
- Accurate RMD calculations
- Penalty avoidance
- Retirement income optimization
Merger & Acquisition
Provide independent valuations for business transactions, mergers, and acquisitions. Essential for fair deal structuring and regulatory compliance.
- Independent transaction valuations
- Due diligence support
- Regulatory compliance
Key Assumptions of FMV
Market Conditions
FMV assumes a well-functioning, open market with no external pressures influencing the transaction.
Willing Parties
Both parties are knowledgeable, not under duress, and make rational decisions.
Purpose
FMV is commonly used for taxation, legal proceedings, and general valuation.
Common Applications
Why Obtain a Third-Party Fair Market Valuation for Roth IRA / 401(k) Conversions
IRS Requirements & Compliance
- FMV is mandatory: The IRS requires Roth conversions to be reported at FMV on Form 1099-R.
- Documentation protection: IRS guidance requires considering marketability and control.
- Professional reports provide defensible evidence if IRS challenges the reported value.
Strategic Tax Advantage
- Lower taxable amount: Applying discounts reduces FMV used for conversion, lowering taxable income.
- Court precedent: Tax Court cases support discounts of 20–40%+ for certain assets.
Fiduciary & Risk Management
- Independent, unbiased support from accredited experts (ASA, CFA, CPA/ABV).
- Provides audit defense and reduces exposure to penalties or litigation.
Technical Expertise
- Analyze governing documents for transfer restrictions.
- Benchmark using IRS and court-recognized studies.
- Tailor approach to asset type (real estate, oil & gas, promissory notes, etc.).
Ready to Get Started?
Get your professional fair market valuation today. Our expert team will guide you through the entire process with personalized service and attention to detail.
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Contact Information
AFK Inc.
30 N Gould St STE R, Sheridan, WY 82801