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

question 24

Multiple Choice

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.

---

Definitions:

Conditional Sales Agreement Lease

A financial arrangement where the lessee acquires an asset under a lease agreement but only becomes the owner upon full payment of the lease.

Secured Loan

A loan backed by collateral, reducing the risk for the lender and often resulting in a lower interest rate for the borrower.

Leveraged Lease

A lease agreement where the lessor uses borrowed funds to purchase an asset which is then leased to the lessee, allowing for tax benefits and risk-sharing.

Nonrecourse

A type of loan where the lender’s recovery is limited to the collateral pledged for the loan, with no further claim against the borrower in case of default.