What is 'Crystallization'
Crystallization is the act of selling and buying stocks almost instantaneously in order to increase or decrease book value. This is a routine method used by many investors and companies to change book values without changing beneficial ownership.
BREAKING DOWN 'Crystallization'
An example of this occurs when an investor needs to take a capital loss for a particular stock, but still believes the stock will rise. Thus, he/she would crystallize the paper loss by selling the stock and buying it back right away.
Most tax agencies have regulations (such as the wash-sale rule) to prevent taking a capital loss in this fashion.