Fair market value (FMV) is the amount for which property would sell on the open market if put up for sale in the ordinary course of business. This is distinguished from "replacement value," which is the cost of repurchasing the property. Fair market value is the actual or cash value of property. Fair market value is usually determined by the purchase price of similar goods or property in the same locality. Fair market value is a price determined with the assumption that both buyer and seller are in possession of all pertinent facts, and free from market restraints or pressures.
Fair market value is important to assess for many situations. For example, generally, the basis of property you inherit is its fair market value at the date of the decedent's death. Fair market value may be used to determine the basis for recovering damages in a lawsuit.