Realized gain (or loss)
The gain or loss actually locked in when you sell an investment — the moment the tax consequence arrives.
A realized gain or loss is what an unrealized one becomes at the moment of sale. Sale proceeds minus cost basis is the number, and it is the number reported to the IRS on Form 1099-B.
US tax law splits realized gains by holding period. A position held one year or less is short-term, taxed at ordinary income rates. A position held longer than a year is long-term, generally taxed at lower long-term capital gains rates. The clock starts the day after the purchase and runs to the sale date.
Realized losses can offset realized gains within the same tax year; excess losses can offset up to $3,000 of ordinary income annually, with the remainder carried forward. Wash-sale rules disallow a loss if a substantially identical security is repurchased within 30 days on either side of the sale. Inside retirement accounts, realized gains and losses do not trigger current tax at all.
Plumb is financial education, not financial, investment, tax, or legal advice.