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 these.

Question

Quizplus · Accepted Answer

The §1231 look-back rule applies only when there is a §1231 gain and there is a nonrecaptured §1231 loss in the prior five years. This rule requires the taxpayer to reclassify any current §1231 gain as ordinary income up to the amount of any prior nonrecaptured §1231 losses.

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