①Where an individual who files blue returns has received a release from debts owed by the individual based on a plan concerning debt workout formulated for that individual that meets the requirements specified by Cabinet Order, such as having been formulated based on generally published rules concerning procedures for debt workout (referred to in the following paragraph as a "debt workout plan") (excluding the case where the provisions of Article 44-2, paragraph (1) of the Income Tax Act are applied to the value of the economic benefit received through that release), if the value of depreciable assets used for the individual's business that generates real estate income, business income, or timber income and any other assets equivalent thereto specified by Cabinet Order (referred to in this Article as "covered assets") has been assessed by the method specified in those rules, the amount specified by Cabinet Order as the amount of loss on those covered assets is included in necessary expenses in calculating the amount of real estate income, the amount of business income, or the amount of timber income for the year that includes the day on which the release was received; provided, however, that the amount to be included in necessary expenses is limited to the amount of real estate income, the amount of business income, or the amount of timber income for that year calculated without applying the provisions of this paragraph.

②The provisions of the preceding paragraph apply only if the final return contains a statement to the effect that the individual seeks the application of the provisions of that paragraph, and has attached to it a written statement stating the calculation of the amount of real estate income, the amount of business income, or the amount of timber income under the provisions of that paragraph, the type of the covered assets, and any other matters specified by Order of the Ministry of Finance, and the documents specified by Order of the Ministry of Finance as documents concerning the debt workout plan.

③Even where no final return has been filed or a final return without the statement or attachment referred to in the preceding paragraph has been filed, the district director may, when the district director finds that there was an unavoidable reason for the failure to file it or for the absence of the statement or attachment, apply the provisions of paragraph (1), only if a document containing that statement, and the written statement and the documents specified by Order of the Ministry of Finance referred to in that paragraph, are submitted.

④The calculation of the depreciation allowance prescribed in Article 49, paragraph (1) of the Income Tax Act to be made by an individual who has received the application of the provisions of paragraph (1) for the covered assets, the calculation of the amount of capital gains where that individual has transferred the covered assets, and other necessary matters concerning the application of the provisions of that Act pertaining to the covered assets are specified by Cabinet Order.