What is used to calculate the realized gain or loss for equity securities upon sale?

The calculation of realized gain or loss for equity securities upon sale involves comparing the selling price to the adjusted cost of the securities. The adjusted cost typically includes any acquisition costs or adjustments made since the purchase, such as stock splits, dividends that affect the basis, or impairment losses required under accounting standards.

When the equity security is sold, the difference between the selling price and this adjusted cost reflects the realized gain or loss. This approach provides a more accurate representation of the financial outcome of the sale, as it takes into account changes that may affect the carrying amount of the asset. Simply comparing the selling price to historical costs does not reflect any adjustments or changes that could influence the true economic gain or loss from the transaction. Thus, using the adjusted cost provides a clearer picture of the performance of the investment over time.