Journal
Retail replacement value vs fair market value
Insurance uses retail replacement value. Estates and donations use fair market value. They are different numbers.
Retail replacement value is the cost to replace a work with a comparable one in the appropriate retail market, in a reasonable time. Fair market value is the price a willing buyer would pay a willing seller, both informed, neither under compulsion. Insurance uses the first. Estate, donation, and most court divisions use the second.
Fair market value
Fair market value is the estate-tax, estate-planning, equitable-distribution, and charitable-donation standard. IRS Publication 561 is the reference donors use. A donation appraisal written on replacement value is the wrong document for Form 8283.
Retail replacement value
Retail replacement value is what a carrier needs when fine art is scheduled on a policy. Auction hammer prices are not automatically replacement. USPAP insurance reports state RRV as of the inspection date, with cataloging, photographs, condition, market analysis, and a signed certification.
Why the gap exists
Replacement is usually higher than fair market value because it assumes a retail purchase under time pressure. Using FMV on a policy leaves a collection under-insured. Using RRV on an estate or gift overstates what the Code asked for.