Act on Special Measures Concerning Taxation

The provisions of the preceding paragraph apply mutatis mutandis where an individual who has transferred a transferred asset expects to acquire an asset listed in the right-hand column of any item of the table in that paragraph within the designated acquisition period (meaning the period from January 1 to December 31 of the year following the year that includes the date of the transfer (where, due to unavoidable circumstances specified by Cabinet Order, it is difficult to acquire an asset listed in the right-hand column of any item of the table in that paragraph by that date, and the individual has obtained the approval of the district director pursuant to the provisions of Cabinet Order, the period up to the date, within two years after that date, that the district director has recognized as the date by which the asset can be acquired)), and expects to use the asset so acquired for the individual's business or residence prescribed in that paragraph within one year from the date of the acquisition. In this case, the term "acquisition price" in that paragraph is deemed to be replaced with "estimated amount of the acquisition price".

Where, for a person who has received the application of the provisions of paragraph (1) (excluding a person who is no longer allowed the special provisions under paragraph (1) because the person has filed an amended return form under Article 37-2, paragraph (1) or paragraph (2) as applied mutatis mutandis pursuant to the preceding paragraph or has received a reassessment under paragraph (3) of that Article as applied mutatis mutandis pursuant to the preceding paragraph), the amount of depreciation allowance under Article 49, paragraph (1) of the Income Tax Act pertaining to the replacement asset is calculated, or, where there is a transfer (including lending of real property, etc. giving rise to capital gains), inheritance, bequest or gift of the replacement asset on or after the date of its acquisition, the amount of capital gains is calculated, the acquisition price of the replacement asset is, pursuant to the provisions of Cabinet Order, the amount specified in the following items according to the category of cases listed in those items (where there are expenses incurred for the transfer referred to in paragraph (1), the amount obtained by adding the amount of those expenses calculated pursuant to the provisions of Cabinet Order):

where the revenue from the transfer referred to in paragraph (1) exceeds the acquisition price of the replacement asset: the amount calculated pursuant to the provisions of Cabinet Order as the amount of the portion of the acquisition price, etc. of the asset so transferred other than the portion corresponding to the excess amount;

where the revenue from the transfer referred to in paragraph (1) is equal to the acquisition price of the replacement asset: the amount equivalent to the acquisition price, etc. of the asset so transferred;

where the revenue from the transfer referred to in paragraph (1) is less than the acquisition price of the replacement asset: the amount equivalent to the amount obtained by adding the shortfall to the acquisition price, etc. of the asset so transferred.

Where an individual exchanges an asset held by the individual that falls under a transferred asset (hereinafter referred to as an "asset transferred by exchange" in this paragraph) for an asset that falls under a replacement asset (hereinafter referred to as an "asset acquired by exchange" in this paragraph) (excluding an exchange specified by Cabinet Order; hereinafter the same applies in this paragraph) (including the case where the individual receives or pays an exchange balancing payment), or exchanges an asset transferred by exchange for an asset other than an asset acquired by exchange and receives an exchange balancing payment (hereinafter referred to as the "case of an exchange for other assets" in this paragraph), the following applies for the purpose of applying the provisions of paragraph (1) (including as applied mutatis mutandis pursuant to paragraph (2)) and the preceding paragraph and the provisions of Article 37, paragraphs (6), (7) and (9), Article 37-2 and Article 37-3, paragraph (4) as applied mutatis mutandis pursuant to paragraph (3):

the asset transferred by exchange (in the case of an exchange for other assets, limited to the portion specified by Cabinet Order as corresponding to the exchange balancing payment) is deemed to have been transferred as referred to in paragraph (1) by the individual on the date of the exchange for an amount equivalent to the value of the asset as of that date;

the asset acquired by exchange is deemed to have been acquired as referred to in paragraph (1) by the individual on the date of the exchange for an amount equivalent to the value of the asset as of that date.

Where an individual has transferred an asset held by the individual that is listed in the left-hand column of item (i) of the table in paragraph (1), and the case falls under the case specified by Cabinet Order as one where there are special circumstances that make it difficult for the individual to acquire, out of the assets listed in the right-hand column of that item, the medium- and high-rise fireproof building referred to in that item or a structure pertaining to that medium- and high-rise fireproof building, if the asset so transferred is one whose holding period prescribed in Article 31, paragraph (2) is 10 years or less as of January 1 of that year and that falls under residential property prescribed in Article 31-3, paragraph (2), the capital gains from the transfer are deemed to fall under the capital gains prescribed in paragraph (1) of that Article, and the provisions of that Article apply.

The particulars to be stated in the tax return in the case where the individual referred to in the preceding paragraph receives the application of the provisions of Article 31-3 pursuant to the provisions of that paragraph, and other necessary matters concerning the application of the provisions of that Article are specified by Cabinet Order.