Which term describes the value defined as the price in an arm's-length sale?

• A. Fair market value
• B. Gross value
• C. Skip person
• D. Annuity

Answer: (A)

Fair market value is the price that would be agreed upon in an open, arm's-length transaction between a willing seller and a willing buyer, both informed and not under pressure. This standard ensures the asset’s value reflects true market conditions rather than any special relationship or forced deal, which is essential in estate planning for valuing property for taxes, transfers, and distributions. The other terms don’t describe this market-based price: gross value is total value before deductions, a skip person relates to beneficiaries in generation-skipping transfer planning, and an annuity is a stream of payments, not a single sale price.