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Realized vs. Recognized Gain or Loss

Two-Step Gain and Loss Analysis

Not every economic gain becomes taxable immediately. Tax law distinguishes between realized gains or losses, which arise from a transaction, and recognized gains or losses, which must be reported for tax purposes.

Tip
Remember: every recognized gain is realized, but not every realized gain is immediately recognized.
Summary
Separating realization from recognition is a key concept throughout federal taxation.