A company ("CVI") operated a program through which it sold groups of limited edition prints to individuals, arranged for appraisal and located registered charities to whom the prints could be donated on behalf of the individuals.
The Court found that the Tax Court Judge had committed two errors: in accepting valuation evidence based on the retail market for individual prints when there was a normal market (that through which CVI actually purchased the prints) for the groups of prints the valuator was required to value; and in finding that the fair market value of the property was approximately three times the amount paid for the property by CVI with no credible explanation for the apparent three-fold increase.
Rothstein J.A. stated (at pp. 19-20, 24-25):
It is wrong to assume … that the fair market value of a group of items is necessarily the aggregate of the price that could be obtained for individual items in the group. …
For example, if items are sold in large volumes in a wholesale market, the fair market value of the volumes sold in that market will be less than the aggregate of the values of the items considered individually that make up those volumes. …
When a court is required to determine the fair market value of an asset for which there is no market that permits a direct comparison, it may be necessary to consider the transactions in some other market, subject to such adjustments as may be appropriate to the case, such as a blockage or volume discount. But where there is a market in which assets of the description of the asset being valued are traded, there is no need for the use of a proxy.
In this case, there was a market in which the specific groups of prints were traded.