An unrealized gain is the increase in the value of an asset that an investor owns, but has not yet sold. It is also known as a paper gain and is not subject to taxation until the asset is sold and the gain is realized.

Key Concepts of Unrealized Gains

Asset Appreciation

The increase in the value of an asset over time.

Paper Gain

Another term for an unrealized gain, as it exists only on paper until the asset is sold.

No Taxation

Unrealized gains are not subject to taxation until the asset is sold and the gain is realized.

How Unrealized Gains Work

Asset Value Increases

The value of an asset, such as a stock, bond, or real estate, increases over time.

Investor Holds Asset

The investor continues to hold the asset, without selling it.

Gain Remains Unrealized

The gain remains unrealized and is not subject to taxation.

Benefits of Unrealized Gains

• Tax Deferral
• Potential for Further Growth

Risks of Unrealized Gains

• Market Volatility
• Potential for Losses

Example of Unrealized Gain

Suppose an investor buys a stock for $100 per share. Over time, the stock price increases to $150 per share. The investor has an unrealized gain of $50 per share.

Unrealized Gains vs. Realized Gains

Feature	Unrealized Gain	Realized Gain
Asset Sold	No	Yes
Taxation	No	Yes
Liquidity	Illiquid	Liquid