Determining the FMV of publicly traded stocks and bonds is relatively straightforward as stocks and bonds are fungible, and the market prices of similar investments sold on the same day as the transfer are readily available. Determining the FMV of illiquid assets, such as privately held companies, real estate and tangible property is more difficult. This is especially true when determining the FMV of artwork and other collectibles, where the asset is often not only illiquid but may also be unique, making it hard to find comparable sales in contract to publicly traded investments.
To determine the FMV of any illiquid assets, you will need an appraisal which complies with the Uniform Standards of Professional Appraisal Practice (USPAP). For artwork and collectibles specifically, the appraisal also needs to meet the standards of the Art Advisory Panel of the Internal Revenue Service. Often times, especially in an estate, this appraisal process is done in haste since there is a requirement to file an estate tax return within nine to twelve months of the date of death. To avoid the mistakes that come from hasty actions, we encourage all owners of art and collectibles to begin an inventory during their lifetime that complies with USPAP and the Art Advisory Panel standards at a minimum.
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By Matthew Erskine – Contributor at Forbes
Published April 7, 2022