Which of the following is true regarding the §1231 look-back rule?
A)It only applies when a §1231 loss occurs.
B)It only applies when a §1231 gain occurs.
C)It only applies when a §1231 gain occurs and there is a nonrecaptured §1231 loss in the prior five years.
D)It only applies when a §1231 gain occurs and there is a nonrecaptured §1231 gain in the prior five years.
E)None of the choices are correct.

Question

Quizplus · Accepted Answer

The §1231 look-back rule applies when a §1231 gain occurs and there is a nonrecaptured §1231 loss in the prior five years. The rule allows the taxpayer to treat the gain as long-term capital gain rather than ordinary income, up to the amount of any prior nonrecaptured losses. Therefore, choice C is the correct answer.

Which of the Following Is True Regarding the §1231 Look-Back