Tax and accounting standards rely on different definitions of value. Tax regulations and the American Society of Appraisers define fair market value as
The amount at which the property would change hands between a willing buyer and a willing seller, when the former is not under compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of the relevant facts.
The accounting standards define fair value as
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Appraisers may debate how the definitions differ, but the similarities are more apparent than the differences. Both definitions rely on the notion of a transfer price, and each assumes the transaction is completed in an orderly fashion. A rock-bottom price accepted in a desperation sale may not be fair value or fair market value. The price a buyer pays when he doesn’t know what he’s getting may not meet either definition.
The accounting profession settled on its definition of fair value long after the definition of fair market value had been thoroughly argued in the tax courts. Since fair value is a separate standard, determinations of fair value for financial reporting purposes are not subject to tax court rulings. Likewise, tax opinions need not follow the guidance of SFAS No. 157. When presenting an opinion of value, it is important to know which body of knowledge applies.