Definition: Fair market value is the price at which you could have sold a piece of property. Fair market value is used to determine the dollar value of charitable donations, assets converted to business use, and various other tax-related matters.
The Internal Revenue Service defines fair market value as:
Fair market value (FMV) is the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. If you put a restriction on the use of property you donate, the FMV must reflect that restriction." IRS Publication 561