26 USC § 1243 - Loss of small business investment company

---
identifier: "/us/usc/t26/s1243"
source: "usc"
legal_status: "official_prima_facie"
title: "26 USC § 1243 - Loss of small business investment company"
title_number: 26
title_name: "INTERNAL REVENUE CODE"
section_number: "1243"
section_name: "Loss of small business investment company"
chapter_number: 1
chapter_name: "NORMAL TAXES AND SURTAXES"
subchapter_number: "P"
subchapter_name: "Capital Gains and Losses"
part_number: "IV"
part_name: "SPECIAL RULES FOR DETERMINING CAPITAL GAINS AND LOSSES"
positive_law: false
currency: "119-84"
last_updated: "2026-04-17"
format_version: "1.1.0"
generator: "[email protected]"
source_credit: "(Added Pub. L. 85–866, title I, § 57(a), Sept. 2, 1958, 72 Stat. 1645; 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.)"
---


# § 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 debentures 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.

---

**Source Credit**: (Added Pub. L. 85–866, title I, § 57(a), Sept. 2, 1958, 72 Stat. 1645; 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.)

## Editorial Notes

### References in Text

The Small Business Investment Act of 1958, referred to in text, is , , , 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 . For complete classification of this Act to the Code, see Short Title note set out under  and Tables.

### Amendments

1976— substituted “an ordinary loss” for “a loss from the sale or exchange of property which is not a capital asset”.

1969—Par. (1).  substituted “stock received pursuant to the conversion privilege of convertible debentures” for “convertible debentures (including stock received pursuant to the conversion privilege)”.

## Statutory Notes and Related Subsidiaries

### Effective Date of 1976 Amendment

Amendment by  applicable with respect to taxable years beginning after , see , set out as a note under .

### Effective Date of 1969 Amendment

Amendment by  applicable to taxable years beginning after , see , set out as a note under .

### Effective Date

Section applicable with respect to taxable years beginning after , see , set out as an Effective Date of 1958 Amendment note under .