1. Code Sec. 1231 is a gain/loss characterization provision which provides the taxpayer with the best of both tax worlds. This is because:

a. net Section 1231 gains and losses are taxed as capital gains, and are not subject recapture.

b. net Section 1231 gains and losses are taxed as ordinary income, but are subject to recapture.

c. net Section 1231 gains are taxed as capital gains, and net losses are taxed as ordinary losses, but gains are not subject to recapture.

d. net Section 1231 gains are taxed as capital gains, and net losses are taxed as ordinary losses, but are subject to recapture.

2. The major contribution of the Miller model is that it demonstrates that

a. personal taxes decrease the value of using corporate debt.

b. financial distress and agency costs reduce the value of using corporate debt.

c. equity costs increase with financial leverage.

d. debt costs increase with financial leverage.

e. personal taxes increase the value of using corporate debt.