But this is a contrived example where each person agrees to buy the hot dog for purposes of this experiment. Fair market value is typically defined as the valu

But this is a contrived example where each person agrees to buy the hot dog for purposes of this experiment. Fair market value is typically defined as the value you'd get on the market, selling to someone you don't know and without coercion. So, like if I arrange with a rich guy to sell my house (worth about $700k) to him for $2million, so that he can 'donate' it back to me and take the charitable giving write-off for $2million, this would not fly, because by the definition of fair market value used by the IRS (and other agencies), my arrangement with the guy is not the fair market value. In order to determine that, I'd need to put the house up for sale to general availability and see what others offer 'me'. So to 'fix' your example, you'd need to sit in a circle with your friends. Say the hot dog you are about to eat is for sale, and see if any of your friends want it from you.