
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC1242]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
                 Subchapter P--Capital Gains and Losses
 
     PART IV--SPECIAL RULES FOR DETERMINING CAPITAL GAINS AND LOSSES
 
Sec. 1242. Losses on small business investment company stock

    If--
        (1) a loss is on stock in a small business investment company 
    operating under the Small Business Investment Act of 1958, and
        (2) such loss would (but for this section) be a loss from the 
    sale or exchange of a capital asset,

then such loss shall be treated as an ordinary loss. For purposes of 
section 172 (relating to the net operating loss deduction) any amount of 
loss treated by reason of this section as an ordinary loss shall be 
treated as attributable to a trade or business of the taxpayer.

(Added Pub. L. 85-866, title I, Sec. 57(a), Sept. 2, 1958, 72 Stat. 
1645; amended Pub. L. 94-455, title XIX, Sec. 1901(b)(3)(F), Oct. 4, 
1976, 90 Stat. 1793.)

                       References in Text

    The Small Business Investment Act of 1958, referred to in cl. (1), 
is Pub. L. 85-699, Aug. 21, 1958, 72 Stat. 689, as amended, which is 
classified principally to chapter 14B (Sec. 661 et seq.) of Title 15, 
Commerce and Trade. For complete classification of this Act to the Code, 
see Short Title note set out under section 661 of Title 15 and Tables.


                               Amendments

    1976--Pub. L. 94-455 substituted ``an ordinary loss'' for ``a loss 
from the sale or exchange of property which is not a capital asset'', 
each time appearing.


                    Effective Date of 1976 Amendment

    Amendment by Pub. L. 94-455 applicable with respect to taxable years 
beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, 
set out as a note under section 2 of this title.


                             Effective Date

    Section applicable with respect to taxable years beginning after 
Sept. 2, 1958, see section 57(d) of Pub. L. 85-866, set out as an 
Effective Date of 1958 Amendment note under section 243 of this title.
