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Income Tax Planning
Chapter 12: Business Assets/5-YEAR LOOKBACK RULE
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Chapter Study Session

Chapter 12: Business Assets

5-YEAR LOOKBACK RULE

01.Core Concepts

Section 1231 Netting Process • Gains and losses for the year are netted. Tax Planning • Would be better to recognize Section 1231 gains in one year, and Section 1231 losses in another year. 5-Year Lookback Rule • Net Section 1231 gain in current year is taxed at ordinary rates to extent of unrecaptured Section 1231 losses in the last 5 years.