What is the general implication of fair market value?

The concept of fair market value is rooted in the idea of a price that is mutually acceptable to both the buyer and the seller in an open and unrestricted market. This implies that the price reflects the true willingness of both parties to engage in the transaction at that specific moment in time. Fair market value essentially serves as an objective measure, derived from actual market conditions, that recognizes the voluntary nature of the transaction.

In this context, fair market value is not about a fixed price set by external authorities, nor does it represent a simple average of prices or the minimum amount a seller would accept. Instead, it indicates a dynamic agreement shaped by the negotiations and perceptions of the involved parties, accounting for factors such as market demand, supply conditions, and the individual circumstances surrounding the transaction. Thus, the most accurate definition aligns with the idea of an agreed price between buyers and sellers.