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TITLE 26-INTERNAL REVENUE CODE EYFEcTvE DATE OF 1976 AMENDMENT Amendment by Pub. L. 94-455 applicable with re- spect to taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as an Ef- fective Date of 1976 Amendment note under section 2 of this title. EFrEcTIvE DATE Section applicable with respect to taxable years be- ginning after Sept. 2, 1958, see section 57 (d) of Pub. L. 85-866, set out as an Effective Date of 1958 Amend- ment note under section 243 of this title. § 1243. Loss of small business investment company In the case of a small business investment company operating under the Small Business Investment Act of 1958, if- (1) a loss is on stock received pursuant to the conversion privilege of convertible deben- tures acquired pursuant to section 304 of 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. (Added Pub. L. 85-866, title I, § 57(a), Sept. 2, 1958, 72 Stat. 1645, and amended Pub. L. 91- 172, title IV, § 433(b), Dec. 30, 1969, 83 Stat. 624; Pub. L. 94-455, title XIX, § 1901(b)(3)(F), Oct. 4, 1976, 90 Stat. 1793.) REFERENCES IN TEXT The Small Business Investment Act of 1958, referred to in text, is Pub. L. 85-699, Aug. 21, 1958, 72 Stat. 689, as amended, which is classified principally to chapter 14B (§ 661 et seq.) of Title 15, Commerce and Trade. Section 304 of the Small Business Investment Act of 1958, is classified to section 684 of Title 15. For com- plete classification of this Act to the Code, see Short Title note set out under section 661 of Title 15 and Tables volume. 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". 1969-Par. (1). Pub. L. 91-172 substituted "stock re- ceived pursuant to the conversion privilege of convert- ible debentures" for "convertible debentures (includ- ing stock received pursuant to the conversion privi- lege)". EFFEcTIvE DATE OF 1976 AMENDmENT Amendment by Pub. L. 94-455 applicable with re- spect to taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as an Ef- fective Date of 1976 Amendment note under section 2 of this title. EFFEcTIvE DATE OF 1969 AmEmMErr Amendment by Pub. L. 91-172 applicable to taxable years beginning after July 11, 1969, see section 433(d) of Pub. L. 91-172, set out as an Effective Date of 1969 Amendment note under section 582 of this title. EFFECTIVE DATE Section applicable with respect to taxable years be- ginning after Sept. 2, 1958, see section 57(d) of Pub. L. 85-866, set out as an Effective Date of 1958 Amend- ment note under section 243 of this title. § 1244. Losses on small business stock (a) General rule In the case of an individual, a loss on section 1244 stock issued to such individual or to a partnership which would (but for this section) be treated as a loss from the sale or exchange of a capital asset shall, to the extent provided in this section, be treated as an ordinary loss. (b) Maximum amount for any taxable year For any taxable year the aggregate amount treated by the taxpayer by reason of this sec- tion as an ordinary loss shall not exceed- (1) $25,000, or (2) $50,000, in the case of a husband and wife filing a Joint return for such year under section 6013. (c) Section 1244 stock defined (1) In general For purposes of this section, the term "sec- tion 1244 stock" means common stock in a do- mestic corporation if- (A) such corporation adopted a plan after June 30, 1958, to offer such stock for a period (ending not later than two years after the date such plan was adopted) speci- fied in the plan, (B) at the time such plan was adopted, such corporation was a small business cor- poration, (C) at the time such plan was adopted, no portion of a prior offering was outstanding, (D) such stock was issued by such corpo- ration, pursuant to such plan, for money or other property (other than stock and secu- rities), and (E) such corporation, during the period of its 5 most recent taxable years ending before the date the loss on such stock is sus- tained (or if such corporation has not been in existence for 5 taxable years ending before such date, during the period of its taxable years ending before such date, or if such corporation has not been in existence for one taxable year ending before such date, during the period such corporation has been in existence before such date), de- rived more than 50 percent of its aggregate gross receipts from sources other than roy- alties, rents, dividends, interest, annuities, and sales or exchanges of stock or securities (gross receipts from such sales or exchanges being taken into account for purposes of this subparagraph only to the extent of gains therefrom); except that this subpara- graph shall not apply with respect to any corporation if, for the period referred to, the amount of the deductions allowed by this chapter (other than by sections 172, 243, 244, and 245) exceed the amount of gross income. Such term does not include stock if issued (pursuant to the plan referred to in subpara- graph (A)) after a subsequent offering of stock has been made by the corporation. (2) Small business corporation defined For purposes of this section, a corporation shall be treated as a small business corpora- tion if at the time of the adoption of the plan- Page 694 § 1243