Crystallization

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DEFINITION of 'Crystallization'

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.

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