DEFINITION of 'Realized Loss'

A loss is recognized when assets are sold for a price lower than the original purchase price. Realized loss occurs when an asset which was purchased at a level referred to as cost or book value is then disbursed for a value below its book value. Although the asset may have been held on the balance sheet at a fair value level below cost, the loss only becomes realized once the asset is off the books.

BREAKING DOWN 'Realized Loss'

One upside to a realized loss is the possible tax advantage. In most instances a portion of the realized loss may be applied against a capital gain or realized profit to reduce taxes. This may be quite desirable for a company looking to limit its tax burden, and firms may actually go out of their way to realize losses in periods where their tax bill is expected to be higher than wished.

  1. Amount Realized

    Amount realized is the amount received from the sale of an asset. ...
  2. Tax Selling

    A type of sale whereby an investor sells an asset with a capital ...
  3. Tax Loss Carryforward

    A tax loss carryforward takes place where a business or individual ...
  4. Paper Profit (Paper Loss)

    Unrealized capital gain (or capital loss) in an investment. It ...
  5. Short-Term Loss

    A capital loss realized on the sale or exchange of a capital ...
  6. Liquidation Value

    The total worth of a company's physical assets when it goes out ...
Related Articles
  1. Investing

    Using The Price-To-Book Ratio To Evaluate Companies

    The Price-To-Book (P/B) ratio can be an easy way to determine a company's value, but it isn't magic!
  2. Taxes

    Capital Gains Tax 101

    Find out how taxes are applied to your investment returns and how you can reduce your capital gain tax burden.
  3. Taxes

    '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.
  4. Investing

    Is Main Street Capital Overvalued?

    Financial companies are often valued based on multiples of book value. On this metric alone, Main Street Capital (NYSE: MAIN) is relatively expensive, trading for a significant premium to the ...
  5. Investing

    7 Year-End Tax Planning Strategies

    Do you have a capital loss that could be booked and used to offset future tax liabilities? If so, it may be time to sell.
  6. Personal Finance

    Top 5 Books to Become a Professional Trader

    For people who want to learn how to trade and invest for themselves, there are a wealth of excellent books on trading available to learn from.
  7. Financial Advisor

    How to Avoid Violating Wash Sale Rules When Realizing Tax Losses

    How to avoid violating the IRS wash sale rules when realizing capital losses in your taxable investment account.
  8. Investing

    What's Fair Value?

    Fair value has three different meanings depending on the context.
  9. Investing

    Book Value Per Share for Banks: Is It a Good Measure? (WFC, BAC)

    Find out why bank stocks usually trade below book value per share, and understand how trading activities increase banks' risk exposures and affect valuation.
  1. What is the difference between carrying value and fair value?

    Learn about the carrying value and fair value of assets and liabilities, what the carrying and fair value measure and the ... Read Answer >>
  2. How do you write off impaired assets from the financial statement?

    Learn what an impaired asset is and how it effects a company's financial statements. Understand how an accountant writes ... Read Answer >>
Hot Definitions
  1. Entrepreneur

    An Entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture. ...
  2. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  3. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  4. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  5. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  6. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
Trading Center