①If an action taken or calculation made by one of the following corporations would, if tolerated, unreasonably reduce the burden of income taxes on a Resident that is a Shareholder, Member, or Other Investor in the corporation or on a Resident that is uniquely related to such a Shareholder, Member, or Other Investor as provided for by Cabinet Order (including a Resident uniquely related to a Nonresident that is a Shareholder, Member, or Other Investor in the corporation; the same applies in paragraph (4)), the district director, when making a Reassessment or determination on the Resident's income taxes, may exercise the discretion thereof in calculating an amount as set forth in Article 120, paragraph (1), item (i) or items (iii) through (v) (Filing Income Tax Returns), Article 122, paragraph (1), items (i) through (iii) (Filing a Return to Receive a Refund), or Article 123, paragraph (2), item (i), item (iii), item (v), or item (vii) (Filing Tax Returns Showing Losses) as regards the Resident for each year, notwithstanding that action or calculation:

②In a case as referred to in the preceding paragraph, the determination as to whether a corporation falls under the category of a corporation as set forth in the items of that paragraph is to be based on the circumstances as of the time that the action prescribed in that paragraph was actually taken or that the calculation prescribed in that paragraph was actually made.

③The provisions of paragraph (1) apply mutatis mutandis to Reassessments and Tax-Office Decisions involving a Resident's income taxes as set forth in paragraph (1) if the provisions of Article 132, paragraph (1) (Negation of Actions or Calculations by a Family Company) of the Corporation Tax Act, Article 64, paragraph (1) (Negation of Actions or Calculations by a Family Company) of the Inheritance Tax Act, or Article 32, paragraph (1) (Negation of Actions or Calculations by a Family Company) of the Land Value Tax Act are applied to the action taken or calculation made by a corporation as set forth in the items of paragraph (1).

④If it is found that an action taken or calculation made by a corporation that has carried out a merger (including a consolidation of trusts in connection with a Trust Subject to Corporate Taxation), company split (including a trust split in connection with a Trust Subject to Corporate Taxation), capital contribution in kind, distribution in kind as prescribed in Article 2, item (xii)-5-2 of the Corporation Tax Act, share exchange or similar transaction as prescribed in item (xii)-16 of that Article, or share transfer (hereinafter referred to as a "merger or similar process" in this paragraph), or by a corporation that has received a transfer of assets and liabilities through a merger or similar process (such corporations include a corporation issuing shares or capital contributions that are delivered through the merger or similar process; hereinafter the same applies in this paragraph), would, if tolerated, unreasonably reduce the burden of income taxes on a Resident that is a Shareholder, Member, or Other Investor in the corporation that carried out the merger or similar process or in the corporation that received the transfer of assets and liabilities through the merger or similar process, or on a Resident that is uniquely related to such a Shareholder, Member, or Other Investor as prescribed in paragraph (1), the district director, when making a Reassessment or determination on the Resident's income taxes, may exercise the discretion thereof in calculating an amount as set forth in Article 120, paragraph (1), item (i) or items (iii) through (v), Article 122, paragraph (1), items (i) through (iii), or Article 123, paragraph (2), item (i), item (iii), item (v), or item (vii) as regards the Resident for each year, notwithstanding that action or calculation.