Definition ∞ Loss realization is the event of acknowledging and recording a financial loss on an asset. This typically occurs when an asset is sold for less than its purchase price or when its value is deemed permanently impaired. It is a critical accounting and tax concept for investors.
Context ∞ In the cryptocurrency domain, loss realization is a frequent topic, particularly during market downturns, as investors sell assets at a deficit. Discussions often revolve around the tax implications of these realized losses, including potential capital gains offsets. The complexity arises from the volatile nature of digital assets and the evolving regulatory landscape surrounding their treatment.
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