What represents the fair market value of a stock at distribution for tax purposes?

The fair market value of a stock at distribution for tax purposes is defined as the value when it is received by the beneficiary. This is because the tax implications and reporting requirements are based on the value at the time the asset is transferred or distributed to the individual.

When a beneficiary receives an inheritance or any distribution of stock, the fair market value is established at that moment, reflecting the current market conditions. This value is crucial for tax calculations as it determines the basis for capital gains calculations in the future. By using the value at the time of receipt, the beneficiary can establish a fair starting point for determining any taxable gains or losses should the stock be sold later on.

Other choices illustrate different contexts but do not apply to the determination of fair market value at the time of distribution. The purchase price is irrelevant, as it does not account for any appreciation or depreciation of the asset over time. The value at the time of death is significant for estate tax purposes but does not represent the fair market value at distribution. The historical average of the stock price does not reflect the current market conditions relevant at the time of distribution and is therefore not used in determining fair market value for taxation.