Even when the value of the asset has decreased the loss is not realized until the asset has been sold.

For example, if an investor bought a house for $300,000 and then sold it five years later for $250,000, upon sale the investor would have incurred a capital loss of $50,000.

Taxation of capital losses is offset by capital gains and a distinction is made between the short term and the long term.

• capital asset
• capital gains tax
• capital loss carryover