Loss on Paper

Loss on Paper: A term used in finance and Investing that refers to a decrease in the value of an Asset that has not yet been realized through a sale. This means that the Asset has lost value on paper, but the loss is not recognized until the Asset is sold.

Examples:

• Stock Investment: An investor buys Shares of a company for $100 per Share. If the market price drops to $70 per Share, the investor has a loss on paper of $30 per Share. However, this loss only becomes actual if the investor sells the Shares.
• Real Estate: A homeowner purchases a property for $300,000. Due to market fluctuations, the property’s estimated value falls to $250,000. The homeowner experiences a loss on paper of $50,000 until they sell the property at that lower price.

Cases:

• Market Downturn: During a significant market downturn, many investors may hold Stocks that are valued less than their purchase price, resulting in widespread losses on paper.
• Tax Implications: Investors may choose to sell Assets to realize losses on paper for tax benefits, using Capital losses to offset gains.