Regulated investment companies

(A) In general If a regulated investment company has a net capital loss for any taxable year— (i) paragraph (1) shall not apply to such loss, (ii) the excess of the net short-term capital loss over the net long-term capital gain for such year shall be a short-term capital loss arising on the first day of the next taxable year, and (iii) the excess of the net long-term capital loss over the net short-term capital gain for such year shall be a long-term capital loss arising on the first day of the next taxable year.

(B) Coordination with general rule If a net capital loss to which paragraph (1) applies is carried over to a taxable year of a regulated investment company— (i) Losses to which this paragraph applies Clauses (ii) and (iii) of subparagraph (A) shall be applied without regard to any amount treated as a short-term capital loss under paragraph (1). (ii) Losses to which general rule applies Paragraph (1) shall be applied by substituting “net capital loss for the loss year or any taxable year thereafter (other than a net capital loss to which paragraph (3)(A) applies)” for “net capital loss for the loss year or any taxable year thereafter”.