Fair Market Value Rules

In certain circumstances, assets are considered to have been acquired or disposed of at their fair market value.

Fair market value rules apply when you:

Changing the Use of Your Inventory

Inventory is property, excluding land, that has a cost or value that is relevant to calculating your income.

If you start or stop using inventory for liquefaction activities at an LNG facility, you are considered to have acquired or disposed of that inventory at its fair market value at that date.

Changing the Use of Your Property

If you acquired property for one purpose and you later change how you use that property, you are considered to have acquired or disposed of the property at its fair market value at that date.

A change in use can include:

  • Using capital investment property acquired for liquefaction activities at an LNG facility for some other purpose and vice versa
  • Using a parcel of land acquired for liquefaction activities at an LNG facility for some other purpose and vice versa
  • Changing the proportional use of capital investment property acquired for liquefaction activities at an LNG facility

Closing Your LNG Facility

If you have capital investment property for your LNG facility immediately before the facility closure date, you are considered to have disposed of that property at its fair market value at that date.