The cost and fair market value of an asset ?

Question

are the same at the time of acquisition and in all subsequent periods.

Answer 1

Assuming you purchased the asset at an arm's length transaction between a willing buyer and a willing seller, FMV is the same as the cost of the asset at time of purchase.  Google or Yahoo search IRS Revenue Ruling 59-60.

However, as time goes by, the asset may grow or decline in value (e.g., Microsoft in the early 1980s vs. now; Enron in the early 1980s vs. now).

Also, you may improve the asset (e.g., a house and you put an addition on it) and its FMV has increased because of the addition.  Your adjusted basis is the price you paid for the house (back when you bought it) and the cost of the addition.  The adjusted basis may or may not be FMV.