Realized Gain

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Asset Accumulation

    The increase in the value of financial property and investments ...
  2. Capital Loss

    The loss incurred when a capital asset (investment or real estate) ...
  3. Unrealized Gain

    A profit that exists on paper, resulting from any type of investment. ...
  4. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
  5. Realized Loss

    A loss is recognized when assets are sold for a price lower than ...
  6. Liquidation

    1. When a business or firm is terminated or bankrupt, its assets ...
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. 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. 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 >>
  4. What cost basis reporting rules are set by the Internal Revenue Service (IRS)?

    In accounting and tax terms, cost basis refers to the price paid for an asset. It's an important calculation for all businesses ... Read Full Answer >>
  5. What is an adjusted cost basis and how is it calculated?

    The cost basis of an investment or asset is an important consideration in tax planning for individual investors, business ... Read Full Answer >>
  6. What are some examples of different taxable events?

    A taxable event is any event or occurrence that results in a tax liability. All investors or parties that pay taxes experience ... Read Full Answer >>
Related Articles
  1. Retirement

    To Sell Or Not To Sell

    Learn some tips on how to exit a position to the best of your advantage.
  2. Mutual Funds & ETFs

    Reinvesting Capital Gains In Leveraged Portfolios

    Don't get forced into action. Learn how to plan properly to avoid making rash decisions.
  3. Investing Basics

    Overcoming Compounding's Dark Side

    Understanding how money is made and lost over time can help you improve your returns.
  4. Taxes

    Capital Gains Tax 101

    Find out how taxes are applied to your investment returns and how you can reduce your tax burden.
  5. 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.
  6. Professionals

    'Tis The Season For Tax-Loss Harvesting

    With the end of the year upon investors are looking for ways to reduce their tax bill. One tactic that is often used is tax-loss harvesting.
  7. Investing

    Understanding Capital Gains

    Capital gain refers to the increase in value of a capital asset or an investment security upon sale. In other words, if you buy company stock, real estate or fine art and then sell it for more ...
  8. Retirement

    Rolling Over Company Stock: A Decision To Think Twice About

    It may be more beneficial for you to pay tax now than deferring it to an IRA. We show you how and why.
  9. Retirement

    Discover Master Limited Partnerships

    These unique investments provide significant tax advantages.
  10. Retirement

    Tax Tips For The Individual Investor

    We give you seven guidelines to help you keep more of your money in your pocket.

You May Also Like

Hot Definitions
  1. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  2. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  3. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  4. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  5. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  6. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
Trading Center