This CodeProject article
All About TransactionScope[
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You also need to be aware of an issue with the class for use with SQL Server - see this article
using new TransactionScope() Considered Harmful | David Browne's Web Log[
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My gut feel would be that the new lines of code would
not inherit the isolation level, in the same way that if isolation level is set within a stored procedure in sql, the isolation level reverts back to whatever it was when the SP terminates. You can prove or disprove this by creating a new transaction (without setting isolation level) and querying the Transaction.IsolationLevel property.
If this is being used for a SQL Server connection then you can confirm or deny the behaviour by querying the Isolation Level currently on the connection (assuming you are using the same one) - This article has some C# code for doing that
Getting and setting the Transaction Isolation Level on a SQL Entity Connection[
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Try for the empirical evidence in whatever you are using TransactionScope for in your own code.
Personally I would never assume that the level is inherited and would explicitly set it myself.