Save time with our cheat sheets, fact sheets, checklists & books!

February 23, 2009

Fair Market Value (FMV)

Your Guide

Share on print
Print
Share on facebook
Share on twitter
Share on pinterest
Share on linkedin

Definition

The market value of a retirement account as of a particular date.

In general,  the fair market value of a plan’s assets is the price at which the assets in the retirement account ( or plan)  would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy nor sell and both having reasonable knowledge of relevant facts.

For the purpose of reporting distributions of non-cash assets, the FMV is the value of the property on the date the assets are distributed from the retirement account. For instance, if an IRA owner takes a distribution of 100 shares of a certain stock, the value of the distribution will be the value of the 100 shares as of the close of business, on the day the assets leave the IRA. That is, the FMV of the assets on the day the assets leave the IRA

The year-end FMV of a retirement account is used to calculate required minimum distribution (RMD) amounts

Referring Cite

Treas Reg § 1.412(c)(2)-1(b)(8), Revenue Procedure 89-52, Instructions for Filing IRS Form 5498, News Release 87-70

Additional Helpful Information

  • FMV is used to report distributions,  report rollover contributions , to meet the FMV statement requirements for IRAs, and to determine a  participant’s balance under a qualified plan.
  • IRA custodians must provide IRA owners with a FMV report for the December 31 value of the account ( for each IRA ) by January 31 of the following year
  • Revenue Procedure 89-52 includes information on FMV reporting when an IRA owner dies
  • Generally, the FMV for December 31 of the previous year must be used when calculating the RMD that is due from a retirement account for a year. Any outstanding rollovers , transfer and recharacterizations that occur after the end of the year must be added to the December 31 FMV for RMD calculation purposes.

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

Share on facebook
Share on twitter
Share on pinterest
Share on linkedin
Share on print
More

Keep Learning

SIMPLE 401(k) Plan

Definition A SIMPLE 401(k) plan is a 401(k) plan  established by a small business for it’s employees. Earnings accrue on a tax-deferred basis and distributions

Salary Deferral Contribution

Definition A contribution made pursuant to a participant’s election to have a portion of his/her salary/wages  contributed to his/ her employer sponsored plan  rather than

Annual Addition Limit

Definition The annual Addition limit is the maximum amount that may be added to a defined contribution plan on behalf of a participant for any

Deduction

Definition A deduction is a Tax write-off which is allowed for contributions to traditional IRAs or employer sponsored plans. Individuals who are active participants are

Be among the first to know when

IRA Rules
Change