The Section 1231 look-back rules change the character of capital losses incurred in the
previous 5 years.

Name: The Section 1231 look-back rules change the character of capital losses incurred in the previous 5 years.
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Question

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The Section 1231 look-back rules apply to net Section 1231 gains, not losses. They require that net Section 1231 gains be treated as ordinary income to the extent of nonrecaptured Section 1231 losses from the previous five years.

The Section 1231 Look-Back Rules Change the Character of Capital