§ 11-40 Average Fair Market Value.
RCNY § 11-40
In determining average fair market value, due allowance must be made for variations in the amount of assets held by the taxpayer during the period covered by the report, as well as variations in market prices. Average fair market value generally is computed on a quarterly basis where the taxpayer's usual accounting practice permits of such computation. However, at the option of the taxpayer, a more frequent basis (such as a monthly, weekly or daily average) may be used. Where the taxpayer's usual accounting practice does not permit of quarterly or more frequent computation of average fair market value, a semiannual or annual computation may be used where no distortion of average fair market value will result. If, because of variations in the amount or value of any class of assets, it appears to the Commissioner of Finance that averaging on an annual, semiannual or quarterly basis does not properly reflect average fair market value, the Commissioner may require averaging on a more frequent basis. Any method of determining average fair market value which is adopted by the taxpayer on any report and accepted by the Commissioner of Finance may not be changed on any subsequent report, except with the consent of the Commissioner. Example 1: The taxpayer's holdings of X corporation's common stock, and the fair market value thereof, during the period covered by its report, on a quarterly basis, were as follows: (1) end of first quarter, 100 shares of the fair market value of $10,000; (2) end of second quarter, no shares; (3) end of third quarter, no shares; (4) end of fourth quarter, no shares. The average fair market value during the period covered by the report, on a quarterly basis, of the taxpayer's holdings of X corporation's common stock would be: $10,000 + 0 + 0 + 0 = $10,000 ÷ 4 = $2,500 Example 2: The taxpayers inventories, during the period covered by the report, on a quarterly basis, were as follows: (1) end of first quarter, 1,000 tons of the fair market value of $2 a ton – $2,000; (2) end of second quarter, 2,000 tons of the fair market value of $2 a ton – $4,000; (3) end of third quarter, 2,000 tons of the fair market value of $3 a ton – $6,000; (4) end of fourth quarter, 1,000 tons of the fair market value of $2 a ton – $2,000. The average fair market value of the taxpayer's inventories during the period covered by the report, computed on a quarterly basis, would be: $2,000 + $4,000 + $6,000 + $2,000 = $14,000 ÷ 4 = $3,500. Example 3: The taxpayer did not dispose of or acquire any part of its plant and equipment during the period covered by its report. Its plant and equipment were valued as follows: (1) beginning of year, fair market value, $800,000; (2) end of year, fair market value, $780,000. The average fair market value of the taxpayer's plant and equipment during the period covered by its report, computed on the basis of the average fair market values at the beginning and end of such period, would be: $800,000 + $780,000 = $1,580,000 ÷ 2 = $790,000.
