how realized loss works for businesses
a realized loss occurs when the sale price of an asset is lower than its carrying amount although the asset may have been held on the balance sheet at a fair value level below cost the loss only becomes realized once the asset is off the books an asset is removed from the books when it is sold scrapped or donated by the company one upside to a realized loss is the possible tax advantage in most instances a portion of the realized loss may be applied against a capital gain or realized profit to reduce taxes 2 this may be quite desirable for a company looking to limit its tax burden and firms may actually go out of their way to realize losses in periods where their tax bill is expected to be higher than wished in effect a business may choose to realize losses on as many assets as possible when it would otherwise have to pay taxes on realized profits or capital gains 