§ 11-39 Fair Market Value.

   (a)   The fair market value of any asset owned by the taxpayer is the price at which a willing seller, not compelled to sell, will sell and a willing purchaser, not compelled to buy, will buy. For determination of the fair market value of real property rented to the taxpayer, see 19 RCNY § 11-64(b), infra.

   (b)   The fair market value, on any date, of stocks, bonds and other securities regularly dealt in on an exchange, or in the over-the-counter market, is the mean between the highest and lowest selling prices on that date. If there were no sales on the valuation date, such value is the mean between the highest and the lowest selling prices on the nearest date, within a reasonable time, on which there were sales. If actual sales within a reasonable time are not available, the fair market value is the mean between the bona fide bid and asked prices on the valuation date or the nearest date within a reasonable time.

   (c)   If actual sales prices or bona fide bid and asked prices within a reasonable time are not available or if by reason of the character or extent of the taxpayer's investments or for any other reason such prices are not truly indicative of value, the fair market value is ascertained

      (1)   in the case of shares of stock, on the basis of the issuing corporation's net worth, earning power, book value, dividends paid, and all other relevant factors, and

      (2)   in the case of bonds and other securities, by giving consideration to various factors including the soundness of the security, the interest yield, and the date of maturity.

   (d)   If a taxpayer consistently values its stocks, bonds and other securities on some other basis, such as the last selling price on the valuation date, such method of valuation may be accepted by the Commissioner of Finance. In all such cases, a complete explanation of the method of valuation must be included in the report.

§ 11-40 Average Fair Market Value.

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.

§ 11-41 Adjustment of Capital to Period Covered by Report.

(§ 11-604(2), Administrative Code.)

If the period covered by the report is other than 12 calendar months, the amount of business capital and investment capital each is determined by multiplying the average fair market value thereof (19 RCNY § 11-37, supra) by the number of calendar months or major parts thereof included in such period, and dividing the product thus obtained by 12.

Example: A corporation previously organized under the laws of a State other than New York, begins to do business in New York City on June 10, 1966, and reports on a calendar year basis. The average fair market value of its total investment capital for such year is $60,000 and the average fair market value of its total business capital is $240,000. The amount of each class of capital, for purposes of the tax computed on the basis of the calendar year 1966 is determined by multiplying each of the above amounts by 7 (the months of June to December, inclusive) and dividing the product by 12, resulting in investment capital of $35,000 and business capital of $140,000.

§ 11-42 Computation of Business and Investment Capital on Combined Reports.

In the case of combined reports, there are eliminated, in computing combined business and investment capital, intercorporate stockholdings and intercorporate bills, notes and accounts receivable and payable and other intercorporate indebtedness. As to when combined reports will be permitted or required, see 19 RCNY § 11-91, infra.

§ 11-43 Adjustments to Correct Distortions.

For adjustment of business and investment capital in order to correct distortions, see 19 RCNY § 11-25, supra.