UNREALIZED AND REALIZED GAINS
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There are two different ways your capital asset can increase in value.?These are called unrealized and realized gains.
If an asset increases in value while you are still holding onto it, the increase is called an unrealized gain. Stocks in a portfolio may go up and down in
value, but their gains or losses go unrealized until you sell the stock. For
example, if you buy a stock for $100 and a month later the stock is valued at
$150, you have an unrealized gain of $50. Realized gains happen when you sell an asset.? The realized gain is the difference in the price of the
asset at the time you sell it versus the original price you paid for it.? When
a security such as a stock is traded, its gain or loss is said to be ?realized.??
Only realized gains and losses are reported on you tax returns.
The IRS wants to be your investment partner. Whenever you
realize a gain in your assets, you may owe Uncle Sam a part of it.