Unrealized Gain (Loss): A Comprehensive Guide to Its Legal Meaning
Definition & Meaning
An unrealized gain (loss) refers to the increase (or decrease) in the value of an asset, such as securities, that has not yet been sold. This means that while the asset's market value has changed, the owner has not yet realized any profit or loss through a sale. The unrealized gain (loss) is calculated by taking the total unrealized appreciation and unrealized depreciation of a licensee's loans and investments, while also accounting for estimated future income tax expenses or potential realizable tax benefits.
Legal Use & context
Unrealized gains and losses are commonly used in financial reporting and investment analysis. In legal contexts, they may be relevant in cases involving business valuations, tax assessments, or disputes over investment performance. Understanding unrealized gains (losses) can help users manage their financial portfolios and prepare for potential tax implications. Users can find templates and resources through US Legal Forms to assist with related documentation.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A company holds stocks valued at $100,000 that were purchased for $70,000. The unrealized gain is $30,000, as the stocks have not yet been sold.
Example 2: A real estate investor owns a property that has decreased in value from $500,000 to $400,000. The unrealized loss is $100,000, as the property has not been sold yet. (hypothetical example)