Look-back rule

Choose which one is FALSE and explain why:

1. The taxpayer must begin its look-back period in year t-5 (so if the current year "year 1" is 2018, it must start by looking back to 2013).
2. The look-back rule requires that the taxpayer consider prior net Sec 1231. Unrecaptured losses when determining the character of a current year net Sec. 1231 gain.
3. The look-back reduces the total amount of gain or income the taxpayer must recognize related to the disposition of Sec. 1231 assets for the year.
4. When going through the steps to determine the character of the gain or loss on the sale of a Sec. 1231 asset, the look-back rule is appliedafterrather thanbeforedepreciation recapture.