Which of the Following Is True Regarding the §1231 Lookback

question 51

Multiple Choice

Which of the following is true regarding the §1231 lookback 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.The lookback rule only recharacterizes a current year 1231 gain if there are 1231 losses from the prior 5 years.

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Definitions:

Arithmetic Average Return

The simple average of a series of returns over a period of time, calculated by summing the returns and dividing by the number of periods.

Jensen's Measure

A performance evaluation measure that calculates the excess return a fund generates over its expected return, given its level of risk.

Risk-Free Return

The theoretical return on an investment with no risk of financial loss, often represented by the yield on government securities such as U.S. Treasury bonds.

Beta

A measure of a security's volatility in relation to the overall market; a beta greater than 1 indicates greater volatility than the market.