Revenue Ruling 59-60

What Does Revenue Ruling 59-60 Mean?

Revenue Ruling 59-60 is a guideline issued by the Internal Revenue Service (IRS) in 1959. It pertains to the price of a property that is reasonably agreed upon by both the seller and the buyer.

This ruling is more commonly referred to as fair market value (FMV). The same FMV concept comes up routinely in property insurance claims, where insurers decide how much to pay for a damaged or lost item based on what it would sell for, including the way insurance companies value cars after an accident.

Insuranceopedia Explains Revenue Ruling 59-60

Fair market value (FMV) emphasizes that the transaction between the buyer and seller is conducted amicably. In other words, both parties engage in the transaction under fair conditions, with neither party being under any form of duress.

FMV is a widely recognized and important concept, particularly in tax calculations. On the personal side, the most common tax questions tied to insurance involve policy proceeds, like whether a life insurance payout is taxable to the beneficiary. However, its critics argue that the credibility of FMV is questionable, as it is impossible to definitively prove that a sale has truly occurred under fair market value conditions.