Recognized gain refers to the profit made when an investment or asset is sold for more than its original purchase price. This gain is considered "recognized" because it is realized through the sale transaction. Depending on the laws of your state, this gain may be subject to taxation. To determine the recognized gain, subtract the purchase price from the selling price.
Recognized gain is primarily used in tax law and financial regulations. It is relevant in various legal contexts, including:
Individuals can manage their recognized gain calculations and reporting through legal forms, such as tax returns, often available through platforms like US Legal Forms, which provide templates drafted by attorneys.
Here are a couple of examples of abatement:
Example 1: A person buys shares of stock for $1,000 and later sells them for $1,500. The recognized gain is $500.
Example 2: A homeowner purchases a property for $200,000 and sells it for $300,000. The recognized gain is $100,000. (hypothetical example)
Examples of state differences (not exhaustive):
| State | Tax Rate on Recognized Gain |
|---|---|
| California | Up to 13.3% based on income |
| Texas | No state income tax |
| New York | Up to 8.82% based on income |
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
| Term | Definition | Key Difference |
|---|---|---|
| Realized Gain | Profit from the sale of an asset. | Recognized gain is reported for tax purposes; realized gain may not be. |
| Unrealized Gain | Increase in the value of an asset not yet sold. | Unrealized gains are not taxable until recognized. |
If you have sold an asset and believe you have a recognized gain, follow these steps:
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