It is one of the three principles for defining income under the seminal case in this area of tax law, Commissioner v. Glenshaw Glass Co.[1] In that case, the Supreme Court interpreted a statute under the tax code and determined that income generally means "undeniable accessions to wealth, clearly realized, and over which the taxpayers have complete dominion."
It is also discussed in Helvering v. Bruun, in which the court explained that "the realization of gain need not be in cash derived from the sale of an asset.
Gain may occur as a result of exchange of property, payment of the taxpayer's indebtedness, relief from a liability, or other profit realized from the completion of a transaction.
In Cottage Savings Ass'n v. Commissioner, 499 U.S. 554, 559 (1991), the Supreme Court, interpreting section 1001(a) of the tax code, stated: In order to avoid the cumbersome, abrasive, and unpredictable administrative task of valuing assets annually to determine whether their value has appreciated or depreciated, § 1001(a) of the Code defers the tax consequences of a gain or loss in property until it is realized through the "sale or disposition of [the] property."
One example of a tricky realization situation that has given rise to substantial debate is the 62nd home run ball hit by Mark McGwire.