Article 61-11

①In the case where a domestic corporation (limited to an ordinary corporation or a cooperative, etc.) has transferred its transfer gain or loss adjustment assets (meaning fixed assets, land (including any right on land and excluding land falling under fixed assets), securities, monetary claims and deferred assets, other than those specified by Cabinet Order; hereinafter the same applies in this Article) to another domestic corporation (limited to an ordinary corporation or a cooperative, etc. that has a full controlling interest with the domestic corporation), the amount equivalent to the amount of gain on transfer (meaning, in the case where the amount of proceeds from the transfer exceeds the amount of cost, the amount of the excess; hereinafter the same applies in this Article) or the amount of loss on transfer (meaning, in the case where the amount of cost of the transfer exceeds the amount of proceeds, the amount of the excess; hereinafter the same applies in this Article) pertaining to the transfer gain or loss adjustment assets is included in deductible expenses or gross profits, when calculating the amount of income for the business year in which the transfer was made (in the case where the transfer is a transfer to an acquiring corporation through a merger that does not fall under the category of a qualified merger, the final business year prescribed in paragraph (2) of the following Article).

③In the case where a domestic corporation has been subject to the provisions of paragraph (1) with regard to the amount of gain on transfer or amount of loss on transfer pertaining to a transfer gain or loss adjustment asset (excluding the case where it has been subject to the provisions of that paragraph due to the transfer of the transfer gain or loss adjustment asset to the acquiring corporation as a result of a merger that does not fall under a qualified merger), when the domestic corporation has ceased to have a full controlling interest with the transferee corporation pertaining to the transfer gain or loss adjustment asset (excluding the case where it has ceased to have a full controlling interest due to any of the following grounds), the amount equivalent to the amount of gain on transfer or amount of loss on transfer pertaining to the transfer gain or loss adjustment asset (excluding the amount included in gross profits or deductible expenses when calculating the amount of income for each business year prior to the business year containing the day preceding the day on which it ceased to have that interest) is included in gross profits or deductible expenses, when calculating the amount of income of the domestic corporation for the business year containing that preceding day:

④In the case where a domestic corporation prescribed in Article 64-11, paragraph (1) (Gains or Losses on the Fair Valuation of Assets upon the Start of the Group Tax Sharing System), another domestic corporation prescribed in Article 64-12, paragraph (1) (Gains or Losses on the Fair Valuation of Assets upon Joining the Group Tax Sharing System) or a group tax sharing corporation prescribed in Article 64-13, paragraph (1) (Gains or Losses on the Fair Valuation of Assets upon Withdrawal from the Group Tax Sharing System, etc.) is a corporation that has been subject to the provisions of paragraph (1) with regard to the amount of gain on transfer or amount of loss on transfer pertaining to a transfer gain or loss adjustment asset in any business year on or before the business year of fair valuation (meaning the business year immediately before the start of group tax sharing prescribed in Article 64-11, paragraph (1), the business year immediately before joining group tax sharing prescribed in Article 64-12, paragraph (1) or the business year immediately before the end of group tax sharing prescribed in Article 64-13, paragraph (1); hereinafter the same applies in this paragraph), the amount equivalent to the amount of gain on transfer or amount of loss on transfer pertaining to the transfer gain or loss adjustment asset (excluding the amount included in gross profits or deductible expenses when calculating the amount of income for each business year prior to the business year of fair valuation; hereinafter referred to as the "transfer gain or loss adjustment amount" in this paragraph) is included in gross profits or deductible expenses, when calculating the amount of income for the business year of fair valuation, excluding the transfer gain or loss adjustment amount pertaining to transfer gain or loss adjustment assets whose transfer gain or loss adjustment amount is small or any other transfer gain or loss adjustment assets specified by Cabinet Order (or, for a group tax sharing corporation prescribed in Article 64-13, paragraph (1) that meets the requirement listed in item (ii) of that paragraph, the transfer gain or loss adjustment amount pertaining to the assets so specified by Cabinet Order and any transfer gain or loss adjustment amount that does not meet any of the following requirements).

⑤In the case where a domestic corporation has been subject to the provisions of paragraph (1) with regard to the amount of gain on transfer or amount of loss on transfer pertaining to a transfer gain or loss adjustment asset, when the domestic corporation has dissolved as a result of a qualified merger (limited to one in which the acquiring corporation (or, for a qualified merger that establishes a corporation, all of the other acquired corporations) is a domestic corporation that has a full controlling interest with the domestic corporation), the provisions of this Article apply in each business year of the acquiring corporation involved in the qualified merger on or after the business year containing the date of the qualified merger, by deeming that the acquiring corporation is the corporation that has been subject to the provisions of that paragraph with regard to the amount of gain on transfer or amount of loss on transfer.

⑥In the case where a domestic corporation has been subject to the provisions of paragraph (1) with regard to the amount of gain on transfer or amount of loss on transfer pertaining to a transfer gain or loss adjustment asset, when the transferee corporation pertaining to the transfer gain or loss adjustment asset has transferred the transfer gain or loss adjustment asset to an acquiring corporation, succeeding corporation in a company split, corporation receiving a capital contribution in kind or corporation receiving a distribution in kind (hereinafter referred to as an "acquiring corporation, etc." in this paragraph) as a result of a qualified merger, qualified company split, qualified capital contribution in kind or qualified in-kind distribution (limited to one in which the acquiring corporation, succeeding corporation in a company split, corporation receiving a capital contribution in kind or corporation receiving a distribution in kind (or, for a qualified merger, qualified company split or qualified capital contribution in kind that establishes a corporation, all of the other acquired corporations, other splitting corporations or other corporations making a capital contribution in kind) is a domestic corporation that has a full controlling interest with the transferee corporation), the provisions of this Article apply in each business year of the domestic corporation ending on or after the day of the transfer, by deeming that the acquiring corporation, etc. is the transferee corporation pertaining to the transfer gain or loss adjustment asset.

⑦In the case where an acquired corporation involved in a merger that does not fall under a qualified merger has been subject to the provisions of paragraph (1) with regard to the transfer of a transfer gain or loss adjustment asset as a result of the merger, the amount equivalent to the amount of gain on transfer pertaining to the transfer gain or loss adjustment asset is not to be included in the acquisition cost of the transfer gain or loss adjustment asset of the acquiring corporation involved in the merger, and the amount equivalent to the amount of loss on transfer pertaining to the transfer gain or loss adjustment asset is to be included in the acquisition cost of the transfer gain or loss adjustment asset of that acquiring corporation.

⑧In the case where a group tax sharing corporation has been subject to the provisions of paragraph (1) with regard to the amount of gain on transfer or amount of loss on transfer pertaining to a transfer gain or loss adjustment asset, when the transfer of the transfer gain or loss adjustment asset is a transfer of shares of or capital contributions to another group tax sharing corporation (excluding a corporation specified by Cabinet Order as a corporation not subject to the provisions of Article 64-5 (Aggregation of Profits and Losses) and a group tax sharing parent corporation) to a group tax sharing corporation other than that other group tax sharing corporation, the provisions of paragraph (2) through the preceding paragraph do not apply to the transfer gain or loss adjustment asset.

⑨Necessary matters concerning the application of the provisions of the preceding paragraphs are specified by Cabinet Order.