When is a transfer considered for less than fair value?
One obvious situation is when the debtor merely gifts his assets. However, proving a sale was made for less than fair value can sometimes be difficult. Courts define 'fair' consideration subjectively. 'Fair' consideration is the price for which a reasonably prudent seller would sell his property in a commercially reasonable manner. 'Fair value' depends largely on the type of property. For example, public stocks or bonds have an ascertainable fair value and a debtor who transfers public shares for less than its daily quoted price would create a fraudulent transfer equal to the difference in value. Conversely, real estate sold for 70 percent of appraised value has been held to satisfy the fair value test. Other difficult-to-value items include jewelry and the closely-owned business. Courts must then consider the relevant facts to determine 'reasonable value'.
