Taxable event

The moment a tax system treats something as having happened - most commonly a sale, rather than an increase in value while you still hold the asset.

Example

A holding that doubled but was never sold has produced no taxable event in most systems; selling half of it produces one.

Important

What counts as a realisation varies by jurisdiction, and some transactions that do not feel like a sale - a swap, an exchange, a transfer in kind - can still trigger one.

Related terms

• Capital gain — The profit made by selling an asset for more than it cost, as distinct from the income the asset paid you while you held it.
• Portfolio turnover — The proportion of a portfolio bought and sold within a year. Zero means nothing was sold; one means roughly the whole portfolio changed hands.
• Tax deferral — Postponing a tax liability rather than removing it, so the money that would have gone in tax keeps compounding in the meantime.

Lessons that explain it

• The nominal safety that loses money anyway — The balance cannot fall, and that is exactly why the real risk in this class is invisible. Inflation reduces what the money buys, and the tax is levied on the nominal interest rather than on what you actually gained. (13 min)
• Nothing arrives while you wait, and the wrapper sets the tax — Large declines with no income to cushion them, a running charge on an asset that pays nothing, a roll cost that hides inside a price - and in the United States, three wrappers around the same metal taxed three different ways. (12 min)
• Total loss is an outcome here, not a tail — Four separate routes lead to zero, none of them exotic. Then the volatility arithmetic, the costs nobody totals, and a tax treatment that can leave a bill in currency against a position that has already fallen. (13 min)
• Unlimited loss on the short side, spreads on every trade, and tax rules that vary by contract — Derivatives add risks shares do not have - assignment, margin calls, unlimited short losses - plus higher trading costs and tax treatment that differs by product and country. (13 min)
• Proceeds arrive as a large, concentrated, taxable event — An exit converts an illiquid holding into money, tax obligations and a decision about what to do next. Planning before the money arrives usually produces better outcomes than reacting afterwards. (11 min)
• Leverage, gaps, the broker itself, and a tax treatment that depends on the product — The biggest forex risks are leverage and sudden gaps. Costs include spreads and overnight financing, and tax treatment varies widely by product and country. (11 min)

All 578 terms in the Investing glossary