valuation

market value

Market value is the most probable price a property should bring in a competitive, open market under normal conditions, with a knowledgeable, willing buyer and seller, neither under pressure, and reasonable exposure time. It is an estimate made by appraisers, not the actual sale price. Market value assumes typical financing and payment in cash or its equivalent. Appraisals for mortgage lending generally estimate market value.

Exam tip: Market value is an estimate of probable price; market price is what was actually paid. They can differ because of pressure, special financing, or related parties.
Example: An appraiser estimates a home's market value at $410,000, but a seller under job-transfer pressure accepts $395,000.

1. A father gives his son a rental property with an adjusted basis of $120,000 and a fair market value of $300,000. If the son later sells it for $320,000, what is the son's basis for computing gain?

Answer & explanation

Answer: D. Gifted property generally takes the donor's adjusted basis, a carryover basis, for computing gain. The fair market value at the date of the gift matters only for computing a loss when value is below the donor's basis. The stepped-up basis is for inherited property.

Related terms & state variants

appraisal assessed value market price value in use

Sources

Source verification pending. Confirm current requirements with your state regulator.

Last verified: 2026-10-23