Categories: General Tax Terms
Realized Gains refer to the profits that occur when an asset is sold for more than its purchase price. These gains are recognized for tax purposes in the year the sale occurs, and they affect the taxpayer’s financial statements and tax liability. For example, if an investor buys shares for $1,000 and sells them for $1,500, the realized gain is $500.
Unrealized Gains refer to the increase in the value of an asset that has not yet been sold. These gains represent potential profit but do not affect tax liability until the asset is disposed of. For instance, if the same investor holds the shares valued at $1,500 but has not sold them, the $500 increase is considered an unrealized gain.
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