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. Recognized Gain

    When an investment or asset is sold for an amount that is greater ...
  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. Tax Gain/Loss Harvesting

    Selling securities at a loss to offset a capital gains tax liability. ...
  5. Section 1031

    A section of the U.S. Internal Revenue Service Code that allows ...
  6. Recognized Loss

    When an investment or asset is sold for less than its purchase ...
RELATED FAQS
  1. How are realized profits different from unrealized or so-called "paper" profits?

    When buying and selling assets for profit, it is important for investors to differentiate between realized profits and gains, ... Read Full Answer >>
  2. What are unrealized gains and losses?

    An unrealized loss occurs when a stock decreases after an investor buys it, but he or she has yet to sell it. If a large ... Read Full Answer >>
  3. What is an IRS letter audit / audit by correspondence?

    Every year, the Internal Revenue Service (IRS) sends numerous notices to taxpayers. Letter audit, or audit by correspondence, ... Read Full Answer >>
  4. When might an abatement be granted by the IRS?

    The Internal Revenue Service (IRS) frequently imposes interest and penalties due to the late filing of a tax return, underpayment ... Read Full Answer >>
  5. How can I lower my effective tax rate without lowering my income?

    There are lots of ways to lower your effective tax rate, although your individual circumstances determine whether you can ... Read Full Answer >>
  6. Do I need to file an income tax return every year?

    Contrary to popular belief, there are indeed situations where a person does not need to file a tax return every year. For ... Read Full Answer >>
Related Articles
  1. Active Trading

    Trade Properties To Keep The Taxman At Bay

    Like-kind exchanges can mean a much lower tax bill on real estate for savvy investors.
  2. Taxes

    Avoid Capital Gains Tax On Your Home Sale

    If you have property to sell and want to avoid capital gains tax, a Section 1031 exchange may be the answer.
  3. Taxes

    IRS Refund Lost? Here's What to Do

    Don't panic. There are a number of reasons your refund might be delayed – and solutions for each.
  4. Economics

    What's a Deductible?

    With insurance, a deductible is the amount of money the insured pays out-of-pocket before the insurance company pays for the loss.
  5. Taxes

    Explaining Taxable Income

    Taxable income is the net of gross income and allowable deductions.
  6. Taxes

    Why People Renounce Their U.S Citizenship

    It's an irrevocable act but, surprisingly, a growing number of Americans are giving up their citizenship, largely for tax reasons.
  7. Taxes

    OK, So I'll Be Smarter Next Tax Time

    5 tax resolutions to start on right now for a smoother tax return next April 15.
  8. Taxes

    What To Do If You Lost Your W-2

    There's no need to panic if you don't have your Form W-2 to file taxes, there are easy ways to gain access to the missing form or file without it.
  9. Taxes

    Will Itemized Deductions Get You A Bigger Refund?

    April and taxes are due soon. If you need to file your return, you might have to decide if itemizing your deductions this year will net you a better deal.
  10. Taxes

    The First Thing You Should Do With Your Tax Refund

    Nobody likes to pay taxes, but everyone loves to get a tax refund. When the check arrives in the mail, it's hard to resist spending it on some indulgence.

You May Also Like

Hot Definitions
  1. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!