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Crystallization
What does it mean?
The act of selling and buying stocks almost instantaneously in order to increase or decrease book value.
In Other Words...
This is a routine method used by many investors and companies to change book values without changing beneficial ownership. An example of this occurs when an investor needs to take a capital loss for a particular stock, but still believes the stock will rise. Thus, he/she would crystallize the paper loss by selling the stock and buying it back right away.
Most tax agencies have regulations (such as the wash sale rule) to prevent taking a capital loss in this fashion.
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Related Terms
Book Value | Paper Profit (or Loss) | Wash Sale | Wash Sale Rule
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