①The expenses set forth as follows which a Resident expends or pays to the government are not included in the necessary expenses that are used to calculate the Resident's real property income, business income, timber income, or miscellaneous income:

②A bribe as prescribed in Article 198 (Bribes) of the Penal Code (Act No. 45 of 1907), monies as prescribed in Article 18, paragraph (1) (Prohibition on Supplying Foreign Public Officials with Illicit Gains) of the Unfair Competition Prevention Act (Act No. 47 of 1993), or other monies in the nature of a gain paid by a Resident, and the value of any article other than monies or of any right or economic benefit that a Resident supplies (and any additional expenses needed to provide them), is not included in the necessary expenses that are used to calculate the Resident's real property income, business income, timber income, or miscellaneous income.

③If a Resident who in the year conducts an operation that is meant to generate real property income, business income, or timber income, or a Resident who in the year conducts an operation that is meant to generate miscellaneous income and whose revenue relating to that operation for the year before the previous year exceeds 3,000,000 yen, has filed a Tax Return (other than a return filed after the deadline that was filed in anticipation that a determination would be made regarding the income taxes as a result of an investigation of the income taxes pertaining to the return; hereinafter the same applies in this paragraph) based on an act of concealment or disguise (meaning concealing or disguising all or part of the facts that should form the basis for calculating the amount of income or the amount of income tax), or has not filed a Tax Return, the cost of sales relating to the gross revenue of such income for the year to which the Tax Return relates and other expenses directly required to obtain that gross revenue (other than the amounts specified by Cabinet Order as the amounts directly required to acquire assets in the sale or transfer of those assets and as the amounts directly required to acquire assets in the provision of services requiring the delivery of those assets; hereinafter referred to as the "cost of sales" in this paragraph), and the selling expenses, general administrative expenses, and other expenses incurred in the year in connection with the operation that is meant to generate such income (if the Resident has filed a Tax Return for the year, other than the part of those amounts that formed the basis for calculating the amount set forth in Article 120, paragraph (1), item (i) (Filing an Income Tax Return) stated in that Tax Return, or the tax base or other amounts set forth in Article 19, paragraph (4), item (i) (Amended Return) of the Act on General Rules for National Taxes stated in an Amended Return relating to that Tax Return (other than an Amended Return filed after the Resident came to anticipate that a Reassessment would be made regarding the income taxes as a result of an investigation of the income taxes pertaining to the return)), are not included in the necessary expenses that are used to calculate the Resident's real property income, business income, timber income, and miscellaneous income for each year; provided, however, that this does not apply to the cost of sales or expenses that fall under any of the following cases:

④An outlay as set forth in items (ii) through (viii) of paragraph (1), any monies prescribed in paragraph (2), and the value of any article other than monies or of any right or other economic benefit prescribed in that paragraph is not included in the amounts expended that are used to calculate the occasional income of a Resident as referred to in paragraph (1) or paragraph (2).

If a Resident has recourse to the application of the provisions of Article 95, paragraph (1) (Foreign Tax Credit) or Article 138, paragraph (1) (Refunding Tax Withheld) as regards credit-eligible foreign income taxes as prescribed in Article 95, paragraph (1), the credit-eligible foreign income taxes are not included in the necessary expenses or amounts expended that are used to calculate the Resident's real property income, business income, timber income, miscellaneous income, or occasional income.

①In the calculation of the amount that, pursuant to the provisions of Article 37, paragraph (1) (Necessary Expenses), is included, in association with the Inventory of a Resident, in the necessary expenses that are used to calculate the Resident's business income, the value of Inventory held by the Resident on December 31 of the relevant year (or at the time of the Resident's death or Absence From Japan, if the Resident dies or the Resident's Absence From Japan occurs partway through the year; the same applies in this Article through Article 50) which is used as the basis for that calculation (hereinafter referred to as "closing Inventory" in this paragraph) is the amount of money assessed based on the valuation method that the Resident has selected for the closing Inventory from among the method of taking the average acquisition cost of Inventory as the assessed value of the Inventory held on December 31 of that year and the other valuation methods prescribed by Cabinet Order (or based on the valuation method prescribed by Cabinet Order, if the Resident does not select a valuation method or if the value is not assessed based on the selected valuation method).

②Cabinet Order provides for special provisions on the selectable valuation methods referred to in the preceding paragraph, the way of selecting a valuation method, the acquisition cost of Inventory to be used as the basis for calculating the assessed value of Inventory, and other necessary particulars concerning the valuation of Inventory.

①In the calculation of the amount that, pursuant to the provisions of Article 37, paragraph (1) (Necessary Expenses), is included, in association with a Security that a Resident holds, in the necessary expenses that are used to calculate the Resident's business income, the value of a Security held by the Resident on December 31 of the relevant year which is used as the basis for that calculation is the amount of money assessed based on the valuation method that the Resident has selected for Securities (or based on the valuation method prescribed by Cabinet Order, if the Resident does not select a valuation method or if the value of the Security is not assessed based on the selected valuation method).

②Cabinet Order provides for the types of the selectable valuation methods referred to in the preceding paragraph, the way of selecting a valuation method, and other necessary particulars concerning the valuation of Securities.

③The amount that, pursuant to the provisions of Article 37, paragraph (1), is included, in association with a Security of the same class that the Resident acquires on two or more occasions, in the necessary expenses that are used to calculate the amount of a Resident's miscellaneous income, or that, pursuant to the provisions of Article 38, paragraph (1) (Acquisition Costs Deducted to Calculate Capital Gains) is included, in association with such a Security, in the acquisition costs that are used to calculate the Resident's capital gains, is the value assessed pursuant to Cabinet Order and in accordance with the provisions of paragraph (1), based on the amount needed to acquire the Security on each occasion.

①In the calculation of the amount that, pursuant to the provisions of Article 37, paragraph (1) (Necessary Expenses), is included, in association with the cryptoassets (meaning cryptoassets as prescribed in Article 2, paragraph (14) (Definitions) of the Payment Services Act (Act No. 59 of 2009); hereinafter the same applies in this Article) of a Resident, in the necessary expenses that are used to calculate the Resident's business income or miscellaneous income, the value of cryptoassets held by the Resident on December 31 of the relevant year which is used as the basis for that calculation is the amount of money assessed based on the valuation method that the Resident has selected for cryptoassets (or based on the valuation method prescribed by Cabinet Order, if the Resident does not select a valuation method or if the value is not assessed based on the selected valuation method).

②Cabinet Order provides for the types of selectable valuation methods referred to in the preceding paragraph, the way of selecting a valuation method, and other necessary particulars concerning the valuation of cryptoassets.

①The amount that, pursuant to the provisions of Article 37 (Necessary Expenses), is included in the necessary expenses that are used to calculate a Resident's real property income, business income, timber income, or miscellaneous income, as the depreciation allowance for a Depreciable Asset held by the Resident on December 31 of the relevant year is the amount calculated pursuant to Cabinet Order based on the depreciation method that the Resident has selected for the asset from among the method under which the depreciation allowance is the same every year, the method under which the depreciation allowance decreases every year at a fixed rate, and the other depreciation methods prescribed by Cabinet Order by date of acquisition and asset category (or based on the depreciation method prescribed by Cabinet Order, if the Resident does not select a depreciation method).

②Cabinet Order establishes special provisions on the selectable depreciation methods referred to in the preceding paragraph and provides for the way of selecting a depreciation method, the acquisition costs of Depreciable Assets that are to be used as the basis of the calculation of the depreciation allowance, special provisions under which the amount corresponding to the part of an amount expended on a Depreciable Asset that extends its usable life or similar is treated as the acquisition cost of a Depreciable Asset, and other particulars that need to be prescribed concerning the depreciation of Depreciable Assets.