There are times when getting a valuation becomes necessary, especially to estimate the cost of transactions that are not arm’s-length or when no actual cash changes hands.
A common example of this is in respect of property, and especially for transactions when a valuation is necessary for tax purposes.
For example, let’s say that Humbert transfers his rental property to his daughter Dolores for no consideration. The tax law, specifically the CGT rules, requires that the transfer be made at “market value”. If Humbert has held the property for a lengthy period of time and the property has increased significantly in value at the time of transfer, then he could be up for quite a hefty CGT bill, even with the general discount. This is so even though he has not received a single cent by gifting his property.