①When gross income, retirement income, or timber income is calculated, if real property income, business income, timber income, or capital gains are calculated to be a loss, that loss is offset against other Income in Each Class, in the order prescribed by Cabinet Order.

②In the case referred to in the preceding paragraph, if part of the loss prescribed in that paragraph is a loss that arises when the amount of income from assets as prescribed in Article 62, paragraph (1) (Loss of Assets Not Ordinarily Necessary in Everyday Life, Due to Disaster) is calculated (hereinafter such an amount of income is referred to as "income from assets not ordinarily necessary in everyday life" in this paragraph), the part of that loss that Cabinet Order prescribes is to be offset against other income from assets not ordinarily necessary in everyday life pursuant to Cabinet Order, and any part of that loss other than what Cabinet Order prescribes as well as any amount that is not fully offset is deemed to have never existed.

①If a Resident filing a Tax Return has had a Net Loss in any of the three years prior to the relevant year (but only one in which the Resident filed a Blue Return for the year's income taxes) (this Net Loss excludes any amount deducted in or before the previous year pursuant to the provisions of this paragraph and any amount used as the basis for calculating the amount to be refunded pursuant to the provisions of Article 142, paragraph (2) (Issuance of Refunds Based on Carryback of Net Loss)), the equivalent of the Net Loss is applied as a deduction pursuant to Cabinet Order when the amount of gross income, retirement income, or timber income for the year of the Tax Return is calculated.

②If part of the Net Loss of a Resident filing a Tax Return in any of the three years prior to the relevant year (such a Net Loss excludes any amount that is subject to the provisions of the preceding paragraph and any amount used as the basis for calculating the amount to be refunded pursuant to the provisions of Article 142, paragraph (2)) is an amount of loss incurred in any of those years which is as follows and which is as prescribed by Cabinet Order, the amount that Cabinet Order prescribes as the equivalent of the Net Loss is applied as a deduction pursuant to Cabinet Order when the amount of gross income, retirement income, or timber income for the year of the Tax Return is calculated.

③The amount of a disaster-related loss on business assets as set forth in item (ii) of the preceding paragraph means the amount of a loss of Inventory or assets as prescribed in Article 51, paragraph (1) or paragraph (3) (Inclusion of Losses on Assets in Necessary Expenses) (including the amount of any unavoidable Disaster-related expenses prescribed by Cabinet Order and other than any part of the loss covered by insurance benefits, compensation for damage, or anything similar to these) due to Disaster which does not fall under the category of an amount of loss set forth in item (i) of the preceding paragraph.

④The provisions of paragraph (1) and paragraph (2) apply only if the Resident prescribed therein files a Tax Return for income taxes in the year in which the Net Loss arises and if the Resident continues to file a Tax Return thereafter.

⑤A deduction under paragraph (1) or paragraph (2) is referred to as a deduction for carryover of net loss.

①If a Resident filing a Tax Return who satisfies either of the following requirements (limited to a person who files a Blue Return with regard to income tax for the year that includes the date of occurrence of a specified extraordinary Disaster referred to in Article 2, paragraph (1) of the Act on Special Measures concerning Preservation of Rights and Interests of Victims of Specified Extraordinary Disaster (Act No. 85 of 1996) for an extraordinary Disaster designated as a specified extraordinary Disaster pursuant to the provisions of Article 2, paragraph (1) (Designation of Specified Extraordinary Disasters and Measures to Be Applied to Them) of that Act (referred to as a "specified extraordinary Disaster" in paragraph (4) and Article 71-2, paragraph (2) (Special Provisions on Deduction for Carryover of Casualty Loss Related to a Specified Extraordinary Disaster)) (that year is hereinafter referred to as the "year of the specified extraordinary Disaster" in this paragraph, the following paragraph, and paragraph (4))) has a Net Loss in the year of a specified extraordinary Disaster (meaning a Net Loss that arose for that person in the year of the specified extraordinary Disaster) or a Net Loss from Disaster damage to business assets (excluding one that arose in the year of the specified extraordinary Disaster; hereinafter the same applies in this paragraph), then, for the purpose of applying the provisions of the preceding Article for each year within the five years following the year in which the Net Loss in the year of a specified extraordinary Disaster or the Net Loss from Disaster damage to business assets arose, the phrase "Net Loss (" in paragraph (1) of that Article is deemed to be replaced with "Net Loss other than a Net Loss in the year of a specified extraordinary Disaster (meaning a Net Loss in the year of a specified extraordinary Disaster prescribed in paragraph (1) of the following Article; hereinafter the same applies in this paragraph) and a Net Loss from Disaster damage to business assets (meaning a Net Loss from Disaster damage to business assets prescribed in paragraph (1) of that Article; the same applies in the following paragraph) ("; the phrase "there is" in that paragraph with "there is, and there is a Net Loss in the year of a specified extraordinary Disaster that arose for the Resident in the five years prior to the relevant year (excluding any amount deducted in or before the previous year pursuant to the provisions of this paragraph and any amount used as the basis for calculating the amount to be refunded pursuant to the provisions of paragraph (2) of that Article)"; the phrase "the Net Loss" in that paragraph with "the Net Loss and the Net Loss in the year of a specified extraordinary Disaster"; the phrase "Net Loss (" in paragraph (2) of that Article with "Net Loss other than a Net Loss from Disaster damage to business assets ("; the phrase "among which," in that paragraph with "among which"; the phrase "prescribed by Cabinet Order" in that paragraph with "prescribed by Cabinet Order and a Net Loss from Disaster damage to business assets that arose for the Resident in the five years prior to the relevant year (excluding any amount deducted in or before the previous year pursuant to the provisions of this paragraph and any amount used as the basis for calculating the amount to be refunded pursuant to the provisions of paragraph (2) of that Article)"; and the phrase "equivalent to the Net Loss" in that paragraph with "equivalent to the Net Loss and the Net Loss from Disaster damage to business assets".

②If a Resident filing a Tax Return who satisfies either of the requirements set forth in the items of the preceding paragraph (excluding a person to whom the provisions of that paragraph apply) has a specified Net Loss in the year of a specified extraordinary Disaster or a Net Loss from Disaster damage to business assets (excluding one that arose in the year of the specified extraordinary Disaster; hereinafter the same applies in this paragraph), then, for the purpose of applying the provisions of the preceding Article for each year within the five years following the year in which the specified Net Loss in the year of a specified extraordinary Disaster or the Net Loss from Disaster damage to business assets arose, the phrase "Net Loss (" in paragraph (1) of that Article is deemed to be replaced with "Net Loss other than a Net Loss from Disaster damage to business assets (meaning a Net Loss from Disaster damage to business assets prescribed in paragraph (2) of the following Article; the same applies in the following paragraph) ("; the phrase "Net Loss (" in paragraph (2) of that Article with "Net Loss other than a specified Net Loss in the year of a specified extraordinary Disaster (meaning a specified Net Loss in the year of a specified extraordinary Disaster prescribed in paragraph (2) of the following Article; hereinafter the same applies in this paragraph) and a Net Loss from Disaster damage to business assets ("; the phrase "among which," in that paragraph with "among which"; the phrase "prescribed by Cabinet Order" in that paragraph with "prescribed by Cabinet Order, and a specified Net Loss in the year of a specified extraordinary Disaster (excluding any amount deducted in or before the previous year pursuant to the provisions of this paragraph) and a Net Loss from Disaster damage to business assets (excluding any amount deducted in or before the previous year pursuant to the provisions of this paragraph and any amount used as the basis for calculating the amount to be refunded pursuant to the provisions of paragraph (2) of that Article) that arose for the Resident in the five years prior to the relevant year"; and the phrase "equivalent to the Net Loss" in that paragraph with "equivalent to the Net Loss, the specified Net Loss in the year of a specified extraordinary Disaster, and the Net Loss from Disaster damage to business assets".

③If a Resident filing a Tax Return (excluding a person to whom the provisions of the preceding two paragraphs apply) has a Net Loss from Disaster damage to business assets, then, for the purpose of applying the provisions of the preceding Article for each year within the five years following the year in which the Net Loss from Disaster damage to business assets arose, the phrase "Net Loss (" in paragraph (1) of that Article is deemed to be replaced with "Net Loss other than a Net Loss from Disaster damage to business assets (meaning a Net Loss from Disaster damage to business assets prescribed in paragraph (3) of the following Article; the same applies in the following paragraph) ("; the phrase "Net Loss (" in paragraph (2) of that Article with "Net Loss other than a Net Loss from Disaster damage to business assets ("; the phrase "among which," in that paragraph with "among which"; the phrase "prescribed by Cabinet Order" in that paragraph with "prescribed by Cabinet Order and a Net Loss from Disaster damage to business assets that arose for the Resident in the five years prior to the relevant year (excluding any amount deducted in or before the previous year pursuant to the provisions of this paragraph and any amount used as the basis for calculating the amount to be refunded pursuant to the provisions of paragraph (2) of that Article)"; and the phrase "equivalent to the Net Loss" in that paragraph with "equivalent to the Net Loss and the Net Loss from Disaster damage to business assets".

④In this Article, the meanings of the terms set forth in the following items are as prescribed in those items:

①The Casualty Loss that a Resident filing a Tax Return has incurred in any of the three years prior to the relevant year (other than an amount deducted in or before the previous year pursuant to the provisions of this paragraph or Article 72, paragraph (1) (Casualty Loss Deduction)) is applied as a deduction pursuant to Cabinet Order when the amount of gross income, retirement income, or timber income for the year of the return is calculated.

②The provisions of the preceding paragraph apply only if the Resident referred to in that paragraph files a Tax Return for income taxes in the year in which the Casualty Loss arises and if the Resident continues to file a Tax Return thereafter.

③A deduction under paragraph (1) is referred to as a deduction for carryover of casualty loss.

①If a Resident filing a Tax Return has a specified Casualty Loss, then, for the purpose of applying the provisions of the preceding Article for each year within the five years following the year in which the specified Casualty Loss arose, the phrase "Casualty Loss (" in paragraph (1) of that Article is deemed to be replaced with "Casualty Loss other than a specified Casualty Loss (meaning a specified Casualty Loss prescribed in paragraph (1) of the following Article; hereinafter the same applies in this paragraph) (", and the phrase "(Casualty Loss Deduction)) is" in that paragraph with "(Casualty Loss Deduction)) and a specified Casualty Loss that arose for the Resident in the five years prior to the relevant year (other than an amount deducted in or before the previous year pursuant to the provisions of this paragraph or paragraph (1) of that Article) is".

②The specified Casualty Loss prescribed in the preceding paragraph means the portion of the Casualty Loss relating to the amount of loss arising from a specified extraordinary Disaster on the assets prescribed in paragraph (1) of the following Article that are held by the Resident or by the Resident's spouse or any other relative whose living expenses are paid from the same resources as the Resident and who is prescribed by Cabinet Order (including the amount of any unavoidable expense paid by the Resident in connection with the specified extraordinary Disaster that is prescribed by Cabinet Order, and excluding any part covered by insurance benefits, compensation for damage, or anything similar to these).