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finance a la shmoop what is a realized gain or loss hey whoa whoa yes those are

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all the sounds of realization oh and golly gee willikers yes that too well [Man looking surprised]

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when you realize a gain or loss it means that you've turned an investment into

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cash if your investment has been profitable then you've realized a gain [Cash stacks landing on each other]

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and goes the other way too if you've made an unwise investment and are now [Man placing bets on roulette table]

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living in a van down by the river well then you probably realized a loss and

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you probably also realized the importance of owning real estate that [White van moving into river]

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doesn't roll why is it important to understand realized gains and losses

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rhymes with shmaxes well the government at least thus far does not tax Americans

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on the assets they have rather it taxes them only when they convert those assets

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into cash assets like stocks bonds real estate appreciated crayon drawings that

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got sold on eBay for a big price if someone pays you cash then its taxable [eBay crayon listing appears]

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the idea being that an investment in a vacuum by itself isn't all that useful

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like owning shares in a private company that's probably worth a lot more but may

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or may not be worth anything later when you go to sell it or even if that

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company's public you own a lot of shares in it well until you turn them into cash [Shares transform into cash]

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nothing is certain because even public companies can go down a whole lot in

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value so the government keeps its sticky paws off of those things things that are

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just investments and only comes a-knockin when the investments are

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converted into cash and you know that cash can be used to do stuff like buy [Investment assets transform into pile of cash]

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cars and pay tuition and rent and get the occasional multicolored water slide

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for the front entryway one big double yellow line on the highway is crossed [Car driving along highway]

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after one year that is when you've made an investment and held it for at least a

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year and then you go to sell it well you generally get a lower tax rate

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applied to you then you would have had you held that investment less than a

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year why well if you're holding it a year the government wants to reward you [Man holding stocks]

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and it makes the markets more stable when you hold the investments

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long period of time so they give you a tax break by encouraging people to marry

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investments holding them many years instead of just dating them for a few [Man at altar with investment bride]

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weeks while one goal the politicos have is to create a more stable predictable

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investment climate it makes a lot of sense all right and predictable is good

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like a pun at the end of a shmoop video oh we barely got one in there [Man sitting on a bench and bear appears]

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