Realized Gain

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DEFINITION of 'Realized Gain'

A gain resulting from selling an asset at a price higher than the original purchase price. Realized gain occurs when an asset is disbursed at a level that exceeds its cost of book value. While an asset may be carried on a balance sheet at a level far above cost, any gains while the asset is still being held would be considered unrealized, as the asset is only being valued at a fair market value.

BREAKING DOWN 'Realized Gain'

Once an asset that is being held on the books at an unrealized gain is sold for a realized profit, a firm will predictably see an increase in its current assets and a gain from sale. Such a gain may lead to an increased tax burden, since realized gains from sales are typically taxable income. This is one drawback of turning an unrealized "paper" gain into a realized gain.

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RELATED FAQS
  1. What are the differences between gains & losses and revenue & expenses?

    Most companies include revenues, gains, expenses and losses in their income statements. Though some of the terms sound similar, ... Read Full Answer >>
  2. 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 >>
  3. 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 >>
  4. Are dividends considered passive or ordinary income?

    Despite the fact that earning dividends requires no active participation on the part of the shareholder, they do not meet ... Read Full Answer >>
  5. Is dividend income taxable?

    Dividend income is taxable but it is taxed in different ways depending on whether the dividends are qualified or nonqualified. ... Read Full Answer >>
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