The term “Fair Market Value” presupposes the existence of a hypothetical investor and is defined by the US Department of Labor in its proposed regulations as "the price at which an asset would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, and both parties are able, as well as willing, to trade and are well informed about the asset and the market for such asset." This definition follows the long-existing standard promulgated by the IRS under Revenue-Ruling 59-60.

Internal Revenue Service Revenue-Ruling 59-60
General valuation criteria have been established under Revenue Ruling 59-60, issued by the Internal Revenue Service This long-existing ruling contains a list of the nonexclusive criteria that should be applied in the valuation of a business enterprise or its shares

Department Of Labor Proposed Regulations Relating to the Definition of Adequate Consideration
In 1988 the Department of Labor (DOL) issued proposed regulations pertaining to the definition of adequate consideration and the conduct of an independent appraisal. Although the DOL is no longer working to finalize these proposed regulations, they serve as the rules under which ESOP appraisals should be performed. The proposed regulations refer to Revenue Ruling 59-60.

Uniform Standards of Professional Appraisal Practice (USPAP)
The purpose of the Uniform Standards of Professional Appraisal Practice (USPAP) is to promote and maintain a high level of public trust in appraisal practice by establishing requirements for appraisers.It is essential that appraisers develop and communicate their analyses, opinions, and conclusions to intended users of their services in a manner that is meaningful and not misleading.

The Appraisal Standards Board promulgates USPAP for both appraisers and users of appraisal services. The appraiser’s responsibility is to protect the overall public trust and it is the importance of the role of the appraiser that places ethical obligations on those who serve in this capacity. USPAP reflects the current standards of the appraisal profession.

Standards 9 (Business Appraisal, Development) and 10 (Business Appraisal, Reporting) of USPAP establish requirements for the development and communication of a business or intangible asset appraisal.

The Financial Institutions Reform, Recovery and Enforcement Act of 1989 recognizes USPAP as the generally accepted appraisal standards and requires USPAP compliance for appraisers in federally related transactions. State Appraiser Certification and Licensing Boards, federal, state, and local agencies, appraisal services, and appraisal trade associations require compliance with USPAP.