Unrealized Gains

Unrealized gains refer to the increase in the value of an asset that an investor holds but has not yet sold. These gains are "unrealized" because they exist only on paper and have not been converted into actual profit through a sale. For example, if you own stocks, and their market value increases, the difference between the purchase price and the current market price represents an unrealized gain. These gains are important for investors to track as they reflect the potential profitability of their investments, but they do not impact taxable income until the assets are sold. # What are Unrealized Gains? Unrealized gains are the increases in the value of an asset that an investor holds but has not yet sold. These gains are considered "unrealized" because they are theoretical profits that exist only on paper. They become "realized" gains only when the asset is sold for a profit. Unrealized gains are crucial for assessing the performance of an investment portfolio, but they do not affect taxable income until the asset is actually sold. # How to Calculate Unrealized Gains To calculate unrealized gains, follow these steps: 1. **Determine the Purchase Price**: Identify the original purchase price of the asset. 2. **Find the Current Market Value**: Check the current market value of the asset. 3. **Subtract the Purchase Price from the Current Market Value**: The difference between these two values is the unrealized gain. ### Example Calculation Suppose you bought 100 shares of a stock at $50 per share. The current market price of the stock is $70 per share. The unrealized gain would be calculated as follows: 1. **Purchase Price**: 100 shares * $50 = $5000 2. **Current Market Value**: 100 shares * $70 = $7000 3. **Unrealized Gain**: $7000 - $5000 = $2000 Therefore, the unrealized gain is $2000.