Thanks to the numerous experts who responded to last week’s challenge by Bruce Bingham, ASA, Trenwith Valuation, LLC (New York) to provide “a specific instance where fair market value and fair value are different.” Typical among them was the response by Dave Girbovan, ASA (Integra Tech, Los Angeles) who writes, “I must be missing something, because there is at least one clear example…when fair value and fair market value are different.” He cites the hypothetical of a 20% minority interest in XYZ Corporation, with an equity value of $1million. Under California law, in a minority shareholder dispute, the fair value would be the pro-rata share of the value of the equity, or $200,000. But in a gift tax scenario, the fair market value of the interest would be $200,000 less liquidity and minority discounts.

But here’s what may have been missing from the original challenge: Is the fair market value of the interest in the first scenario really any different than its fair value? And wouldn’t the accepted definition of fair value in the second scenario include applying the discounts? Hopefully that’s a clearer restatement of what Bingham was asking—and again, if you can meet the challenge, contact the BVWire editor, and you’ll get page one billing in Business Valuation Review as well as the BVWire™.