①In the case where a domestic corporation (excluding a domestic corporation in liquidation; hereinafter the same applies in this Article) has, in each business year, exchanged any of the following Fixed Assets that it had owned for one year or more (including Fixed Assets that the domestic corporation had received from an acquired corporation, splitting corporation, corporation making a capital contribution in kind, or corporation making a distribution in kind (hereinafter referred to as an "acquired corporation, etc." in this paragraph and paragraph (7)) as a result of a qualified merger, qualified company split, qualified capital contribution in kind, or qualified in-kind distribution (hereinafter referred to as a "qualified organizational restructuring" in this paragraph and paragraph (7)) and that had been owned by the acquired corporation, etc. and the domestic corporation for one year or more in total) with the relevant Fixed Assets listed as follows that other persons had owned for one year or more (including Fixed Assets that the other persons had received from an acquired corporation, etc. as a result of qualified organizational restructuring and that had been owned by the acquired corporation, etc. and the other persons for one year or more in total) (such Fixed Assets exclude those deemed to have been acquired for the purpose of exchanging them with other assets), and has used the following assets that it acquired through the exchange (hereinafter referred to as the "acquired assets" in this Article) for the same usage as that of the relevant assets listed as follows that it transferred through the exchange (hereinafter referred to as the "transferred assets" in this Article) immediately prior to the transfer, when the book value of the acquired assets has been reduced, with the reduction accounted for as a loss, within the limit of the amount calculated as specified by Cabinet Order as the amount of gain on the exchange, the amount equivalent to the amount reduced as above is included in deductible expenses, when calculating the amount of income for the business year:

②The provisions of the preceding paragraph and paragraph (5) do not apply in the case where the difference between the value of the acquired assets and that of the transferred assets at the time of an exchange set forth in these provisions exceeds 20 percent of the larger value of either of these.

③The provisions of paragraph (1) apply only in the case where a tax return contains a detailed statement concerning the inclusion in deductible expenses of the amount reduced as prescribed in the paragraph.

④Even in the case where a tax return without entries for the matters set forth in the preceding paragraph has been filed, the district director of the tax office may apply the provisions of paragraph (1), when they find any unavoidable grounds for the person's failure to make entries for such matters.

⑤In the case where a domestic corporation transfers, as a result of a qualified company split, qualified capital contribution in kind, or qualified in-kind distribution (hereinafter referred to as a "qualified company split, etc." in this paragraph and the following paragraph), any acquired assets (limited to assets that had been acquired through an exchange as prescribed in paragraph (1) during the period from the beginning of the business year containing the date of the qualified company split, etc. to immediately prior to the qualified company split, etc. and used for the same usage as that of the transferred assets immediately prior to the transfer) to a succeeding corporation in a company split, corporation receiving a capital contribution in kind, or corporation receiving a distribution in kind, when the book value of the acquired assets has been reduced to within the amount equivalent to the calculated amount prescribed in paragraph (1), the amount equivalent to the amount reduced as above is included in deductible expenses, when calculating the amount of income for the business year.

⑥The provisions of the preceding paragraph apply only in the case where the domestic corporation set forth in the paragraph has submitted documents stating the amount equivalent to the reduced amount prescribed in the paragraph and other matters specified by Ministry of Finance Order to the competent district director with jurisdiction over the place for tax payment, within two months on or after the date of the qualified company split, etc.

⑦In the case where an acquiring corporation, succeeding corporation in a company split, corporation receiving a capital contribution in kind, or corporation receiving a distribution in kind has received the transfer of any of the Fixed Assets to which the provisions of paragraph (1) or paragraph (5) had been applied under an acquired corporation, etc. as a result of a qualified organizational restructuring, the acquisition cost of the Fixed Assets and other necessary matters concerning the application of the provisions of the preceding paragraphs are specified by Cabinet Order.