Amount Recognized

AAA

DEFINITION of 'Amount Recognized'

The amount of capital gain/loss that must be reported on the taxpayer's tax return in any given year. The amount recognized refers to the tax implications of the sale of an asset or investment and will take into account any selling or brokerage fees.

The amount recognized may differ from the amount realized, since the amount realized is not typically used in a taxable situation.

INVESTOPEDIA EXPLAINS 'Amount Recognized'

In some types of like-kind exchanges of property, capital gains that are realized are often not recognized until a later tax year. Usually these gains are deferred until the property that they were exchanged for is finally sold.

For example, say a taxpayer buys a tract of land as an investment for $20,000, then exchanges it for another similar type of investment ten years later in a qualified 1031 exchange. In a Section 1031 exchange, the amount recognized for tax purposes will not be included in the personal tax return until there are no more Section 1031 exchanges related to the land investment.

RELATED TERMS
  1. Section 1031

    A section of the U.S. Internal Revenue Service Code that allows ...
  2. Capital Asset

    A type of asset that is not easily sold in the regular course ...
  3. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
  4. Recognized Gain

    When an investment or asset is sold for an amount that is greater ...
  5. Recognized Loss

    When an investment or asset is sold for less than its purchase ...
  6. Tax Gain/Loss Harvesting

    Selling securities at a loss to offset a capital gains tax liability. ...
Related Articles
  1. Active Trading

    Trade Properties To Keep The Taxman ...

  2. Taxes

    Avoid Capital Gains Tax On Your Home ...

  3. Investing

    What are unrealized gains and losses?

  4. Investing

    How are realized profits different from ...

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center