Realized Loss

A realized loss is the difference between the purchase price of an asset and its selling price. It is considered a realized loss when the asset is sold, even if the sale price is less than the purchase price.

Realized losses can occur in a variety of situations, such as when an investment loses value, or when a business asset is sold for less than its book value. Realized losses can also occur when an asset is sold at a loss in order to claim a tax deduction.

Realized losses are important to track because they can affect a taxpayer's tax liability. For example, realized losses can be used to offset realized gains, which can reduce a taxpayer's taxable income.

It is important to note that unrealized losses are not considered realized losses until the asset is sold. Unrealized losses occur when the value of an asset decreases, but the asset is not sold. Unrealized losses can be used to offset future realized gains, but they cannot be used to reduce taxable income in the current year.

Realized losses can have a significant impact on a taxpayer's financial situation. It is important to understand how realized losses are calculated and how they can affect a taxpayer's tax liability.