Fair market value is the price a property would fetch if sold on the open market between a willing, informed buyer and seller acting without compulsion — the benchmark Canadian tax law uses to test whether a related-party price was really arm’s length.
Fair market value is used throughout the Income Tax Act but is never actually defined by it — the Act’s own definitions subsection, s. 248(1), runs from “absorbed capacity” to “majority-interest partner” without ever defining the term, even though dozens of other definitions in the same subsection depend on it. What the Act does instead is deploy FMV as a deeming mechanism. Under s. 69(1), where a taxpayer acquires property from a non-arm’s-length person “at an amount in excess of the fair market value thereof”, the taxpayer “shall be deemed to have acquired it at that fair market value”; a disposition to a non-arm’s-length person “for no proceeds or for proceeds less than the fair market value”, or by way of gift, is deemed to occur at FMV instead of the price actually paid.
The same undefined-but-load-bearing pattern shows up one statute over. CBCA s. 190 entitles a dissenting shareholder to be paid the “fair value” of their shares, and does not define that term either — leaving both figures to be established case by case, typically with an independent valuation. Fair value under a dissent proceeding and fair market value under the Income Tax Act answer different questions for different audiences; treating them as interchangeable in a related-party transaction is a common and costly mistake. CBV Institute’s own scope confirms the tax use is core valuator work: Chartered Business Valuators are engaged for “deemed dispositions and measurement of related capital gains” and “non-arm’s length transactions and measurement of related capital gains” (CBV Institute).
A portfolio company buys out a departing minority co-investor — a related party under its unanimous shareholder agreement — for an agreed $4.0M. Because the parties are non-arm’s length, s. 69(1)(a) caps the purchaser’s deemed cost at FMV regardless of the price paid. If an independent CBV opinion commissioned after the fact supports only $3.6M as fair market value, the fund’s adjusted cost base for the shares is deemed to be $3.6M, not the $4.0M actually paid — a $400K gap with no offsetting tax basis, which is exactly why the valuation opinion belongs in the file before closing, not after.
See also: Purchase price allocation · Section 85 rollover · Dissent and appraisal right.
A 30-minute call is enough to tell you whether AI pays for itself here.
Nobody publishes Canadian transaction data, so every valuation in this country quotes an American benchmark. We are building the Canadian one — multiples, asking-to-sale spreads and days on market, by sector and by city. Leave an email and you will see it first.
No pitch, no listings. One email when the first report lands.
