Recognized Loss

Recognized Loss

In accounting, the sale of an investment or asset for less than the purchase price. Individuals and companies may use recognized losses to offset taxable income from other gains. For example, if a company has $5,000 in capital gains in a given year and $2,500 in recognized losses, its taxable income on the capital gains is only $2,500. Recognized losses can also be applied to future years. For example, if a company has no taxable income in a given year, recognized losses may offset taxes on profits for up to a certain number of years. See also: Future income taxes.