How Is the Fair Market Value of Stock Determined?
The fair market value of a stock depends on whether it is publicly traded or privately held. Fair market value is often different from fair value. The market often does not price stocks based on their fundamental fair value.Tax DefinitionAccording to tax professionals, the fair market value of stock is the price at which a willing buyer and a willing seller trade the stock, with neither being under any compulsion and both having equal knowledge of relevant facts.Public Stock ValueFor a stock that is actively traded on a stock exchange, its fair market value is the market price at which anyone can buy or sell the stock. Sometimes, fair market value is taken as the average of the high and low prices for the day.DeterminationEach company’s stock is available in limited quantities, and its fair market value depends on supply and demand. If a stock has high demand, its price too will be high. Conversely, if a stock has low demand, its price may be low.IRS GuidelinesThe Internal Revenue Serv
