“Fair market value” is an important concept in tax law. That phrase, FMV, is used throughout our Income Tax Act, appearing literally hundreds of times, from the rules to be used to value inventory (“lower of cost and fair market value”) to the determination of the appropriate amount that a charity should put on a donation receipt when property is donated “in-kind” to the charity.
How fair market value is actually established, however, can be the subject of some disagreement, as we learned in a decision released by the Tax Court this week concerning the appropriate value to be ascribed to wine that was donated to two Ottawa charities.
In 2005 and 2006, the taxpayer donated 21 bottles of wine, consisting of 19 different labels and vintages, for use in charity wine auctions held to benefit the Ottawa Food Bank and the Ottawa Chamber Music Society.
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