Recognized loss

A recognized loss occurs when an asset is sold for an amount less than its purchase price. This situation most commonly arises when an entity sells either a security or property. Depending on the nature of the asset and the circumstances of the sale, a recognized loss may qualify for capital gains treatment, which means that the loss can be deducted from any capital gains reported for tax purposes. Capital gains treatment is usually available if the underlying asset was retained for at least one year.