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February 23, 2009

Fair Market Value (FMV)



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.

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