Unrealized loss definition
/An unrealized loss is a decline in the value of an asset that has not yet been sold. You might continue to hold such an asset in the expectation that it will gain in value, perhaps offsetting the amount of the current unrealized loss. However, the more prudent option might be to sell the asset right away, if there is no reasonable expectation for it to increase in value.
When an asset is sold, it becomes a realized loss. Only a realized loss can be used to offset a taxable gain for the purpose of reducing your income tax liability.
Example of an Unrealized Loss
ABC Company owns an investment that cost $100,000, but which now has a market value of $80,000. ABC therefore has an unrealized loss of $20,000. If it were to sell the investment at the current market value, the company would then have a realized loss of $20,000.
Terms Similar to Unrealized Loss
An unrealized loss is also known as a paper loss.