Business and Personal Finance Dictionary

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• REALIZED GAIN
  
  When you sell an investment for more than you paid, you have a realized gain. For example, if you buy a stock for $20 a share and sell it for $35 a share, you have a realized gain of $15 a share. But if the price of the stock increases, and you don't sell, your gain is unrealized, or a paper profit. Realizing your gains means you lock in any increase in value, which could potentially disappear if you continued to hold the investment. But it also means you owe tax on that profit unless the investment is tax-exempt or you hold it in a tax-deferred account when you sell. In the latter case, you can postpone paying the tax until you begin withdrawing from the account. However, if taxes are due and you have owned the investment for a year or more when you sell, you pay tax at the long-term capital gains rate, which is always lower than the rate at which you pay federal income tax.
  
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