A realized gain or loss is the financial outcome derived from selling an asset. If the selling price exceeds the initial purchase cost of the asset, a realized gain occurs, representing a profit. Conversely, if the selling price is lower than the purchase cost, a realized loss results, indicating a financial loss. The realization of gain or loss happens only upon the actual sale. For example, if an individual purchases stock for $50 and later sells it for $70, they recognize a realized gain of $20. On the other hand, selling the same stock for $40 would result in a realized loss of $10. Realized gains or losses are typically distinguished from unrealized gains or losses, the latter representing the change in value of assets still held by the owner. To further clarify, an unrealized gain turns into a realized gain upon the actual selling of the asset.