Venture Capital Tax Reform Act

Venture Capital Tax Reform Act - Amends the Internal Revenue Code to provide for the nonrecognition of gain from the sale of qualified venture capital stock (if within two years after the sale of such stock the taxpayer purchases replacement property) except to the extent that the taxpayer's sales price exceeds the cost of such replacement property. Defines "qualified venture capital stock" as the first $5,000,000 of stock issued by a newly formed, domestic, unaffiliated corporation engaged in manufacturing, research, or extraction. Applies such nonrecognition only to the sale of stock held by the taxpayer for ten years or more. Reduces the basis of replacement property (any qualified venture capital stock) by the amount of gain not recognized solely by reason of the application of this Act.

Treats as an ordinary loss (the aggregate amount of which may not exceed $100,000 annually) a loss on the sale of qualified venture capital stock which would otherwise be treated as a capital loss.

Applies the current tax treatment of qualified stock options to stock options for venture capital.

Requires, for the first ten years of existence of any newly established, unaffiliated business, a net operating loss carryover to each of the ten taxable years following the taxable year of such loss beginning after December 31, 1979.

Eliminates the limitation on the deduction for interest on investment indebtedness.