Which of the following is correct?
A)The Section 1231 lookback rule converts potential long-term capital gain into ordinary income.
B)The Section 1231 lookback rule converts ordinary gain into ordinary loss.
C)The Section 1231 lookback rule converts casualty gain into long-term capital gain.
D)The Section 1231 lookback rule applies only to realty.

Question

Quizplus · Accepted Answer

The Section 1231 lookback rule is designed to recapture depreciation previously taken on Section 1231 property as ordinary income, rather than allowing it to be treated as long-term capital gain. This rule ensures that the tax benefits received from depreciation deductions are effectively reversed if the property is later sold at a gain.

Which of the Following Is Correct