An unrealized holding loss is a decline in the value of an asset, where the loss has not yet been recognized. The loss would be realized once the asset is sold or disposed of in some other way. The owner of such an asset might elect to continue owning it, hoping that its value will eventually increase, thereby erasing the unrealized loss.
Only a realized holding loss can be used to offset a taxable gain for the purpose of reducing one's income tax liability.
For example, Orange Corporation owns a security that cost $10,000, but which now has a market value of $8,000. Orange therefore has an unrealized holding loss of $2,000.