Unrealized vs realized gain

A holding bought at one price and marked at a higher one carries an unrealized gain, also called a paper gain: current value minus cost basis. The figure is recomputed at each new price and can shrink to nothing or turn into a loss without a single share changing hands. An unrealized loss is the same figure with the sign reversed.

A sale converts the gain on the shares sold into a realized gain: proceeds minus the basis of those shares. From that moment the figure is fixed. The shares still held keep an unrealized gain of their own, which goes on moving.

The IRS taxes a capital gain in the year it is realized. A gain on shares still owned is not reported, and a loss on shares still owned reduces no tax. Which shares a sale is matched to, and so how much gain it realizes, is set by the lot.

200 shares are bought at $50, a basis of $10,000. With the price at $65 the holding is worth $13,000, so the unrealized gain is $3,000. Nothing has been sold and nothing is reported.

100 of the shares are sold at $65. The proceeds are $6,500 against a basis of $5,000, so $1,500 is realized, and the 100 shares still held carry the other $1,500 unrealized. The total is still $3,000; half of it is now fixed.

The price then falls to $60. The held shares' unrealized gain is now $1,000. The $1,500 realized on the sold shares is unchanged, because the sale price does not move.

Basis, 200 sh × $50

$10,000

Marked, 200 sh × $65

$13,000

Unrealized gain, nothing sold

$3,000

Sold, 100 sh × ($65 − $50)

$1,500 realized

Held, 100 sh × ($65 − $50)

$1,500 unrealized

Held after a fall to $60, 100 sh × ($60 − $50)

$1,000 unrealized

Realized gain, unchanged by the fall

$1,500

The two figures answer different questions. The unrealized gain says what a holding has done since it was bought; the realized gain says what a sale produced, and it is the one that appears on a tax return.

A portfolio's value already includes its unrealized gains, so a rise in the value is not money that has been received. In the example, the $3,000 was part of the $13,000 the whole time, and only $1,500 of it became proceeds.

Because the realized figure depends on the basis of the shares matched to the sale, two sales of the same number of shares at the same price can realize different gains, depending on which lots they come from.

In Taiga Finance the gain on a brokerage holding is unrealized. A holding's drawer in Investments opens on its market value with “{N} shares · ${X} / share”, and its Lots table gives each lot a Value at the current price and a “Gain $”: the lot's shares at that price minus the same shares at cost, signed, with a Term of LT or ST. A new price from the brokerage changes the figure; nothing on the row is locked in. The ledger's rows show value and weight only, so the gain is read in the drawer.

Taiga Finance shows no realized gain for a brokerage holding. A sale in a synced or imported account shrinks or closes the position, and the ledger's Position filter lists a closed one under “Closed (zero)”, but no figure for what the sale produced is kept. A realized figure appears in two other places: in Equity Comp, where a sale recorded on a grant prints its capital part on the row as “LT gain” or “ST gain”, and on the crypto page, which opens on “Total value”, “Unrealized P&L” and “Realized P&L (YTD)” from an imported exchange history.