40) 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.