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

question 51

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.

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Definitions:

Listed Call Options

Financial derivatives traded on exchanges that give the buyer the right, but not the obligation, to buy a stock at a specified price within a certain time frame.

Convertible Bond

A type of bond that can be converted into a predetermined amount of the issuer's equity at certain times during its life, usually at the discretion of the bondholder.

Call Option

An option contract giving the owner the right, albeit without obligation, to purchase a specific asset at a set price within a defined timeframe.

Expiration Date

The date on which a derivative contract such as an option or futures expires, and is no longer valid.