What defines the term 'fair market value'?

The term 'fair market value' is defined as the price that would be agreed upon by a willing seller and a willing buyer, both of whom are knowledgeable about the relevant facts and are not under any undue pressure to buy or sell. This concept assumes that both parties are acting in their own self-interest in a competitive market, thus reflecting the true market conditions.

A maximum legal price set by a court does not take into account the voluntary negotiation between buyers and sellers and does not reflect fair market conditions. Similarly, the lowest price a seller can accept indicates a one-sided perspective on pricing and does not involve mutual agreement. A fixed price listed in legal documents pertains to specific contractual agreements and may not represent the dynamic nature of a typical market transaction. The fair market value is, therefore, best illustrated as the price that emerges from the interactions of sellers and buyers in an unrestricted marketplace.