Unrealized Loss


DEFINITION of 'Unrealized Loss'

A loss that results from holding onto an asset after it has decreased in price, rather than selling it and realizing the loss. An investor may prefer to let a loss go unrealized in the hope that the asset will eventually recover in price, thereby at least breaking even or posting a marginal profit. For tax purposes, a loss needs to be realized before it can be used to offset capital gains.

BREAKING DOWN 'Unrealized Loss'

For example, assume an investor purchased 1,000 shares of Widget Co. at $10, and it subsequently traded down to a low of $6. The investor would have an unrealized loss of $4,000 at this point. If the stock subsequently rallies to $8, at which point the investor sells it, the realized loss would be $2,000. For tax purposes, the unrealized loss of $4,000 is of little significance, since it is merely a "paper" or theoretical loss; what matters is the realized loss of $2,000.

  1. Capital Loss

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

    A profit that exists on paper, resulting from any type of investment. ...
  3. Tax Gain/Loss Harvesting

    Selling securities at a loss to offset a capital gains tax liability. ...
  4. Realized Loss

    A loss is recognized when assets are sold for a price lower than ...
  5. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
  6. Taxes

    An involuntary fee levied on corporations or individuals that ...
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