Amends subsection (f) of 26 U.S.C. 1202 by redesignating existing paragraphs (1) and (2) as subparagraphs (A) and (B), replacing the text of the paragraph titled 'Other stock', and adding a new paragraph establishing rules that stock received upon conversion of a 'qualified convertible debt instrument' is treated as qualified small business stock and that the holding period of the stock includes the holding period of the debt instrument; also defines 'qualified convertible debt instrument'.

Amends subsection (c) of 26 U.S.C. 1202 by striking specified text in paragraph (1) and inserting the word "corporation", and by striking paragraph (2)(A).

Strikes specified text from 26 U.S.C. 1202(d)(1).

Adds new subparagraph (C) to 26 U.S.C. 1202(d)(3) clarifying that, when determining members of a controlled group of corporations under this paragraph, any stock ownership in an S corporation must be taken into account.

Adds a new paragraph (9) to 26 U.S.C. 1202(e) providing that, for an S corporation, the requirements of the subsection are applied at the corporate level.

Amends 26 U.S.C. 469(g)(1) by adding a new subparagraph (D) specifying that subparagraph (A) shall not apply in the case of a disposition any gain from which is excluded from gross income under section 1202.

Narrows the treatment in section 57(a)(7) by making the 'not an item of tax preference' language applicable specifically to stock acquired on or before the enactment date of the Creating Small Business Jobs Act of 2010.