if you believe.
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In this story we are asked to accept the fact that Rip Van Winkle, through magic, sleeps through twenty years of his life. He becomes an ant-hero of sorts by missing all his working years, ditching his nagging wife and finally living in relative comfort with his kindly daughter. I can't recall any textual evidence to support that this is merely a dream, which Rip Van Winkle trudges back down the mountain back to his nagging wife.
I think it is reality because when he returns to his town he learns of what happened while he was gone and he cant dream into the future
Rip Van Winkle by Washington Irving