①In the case where a domestic corporation has effected a share exchange, etc. or share transfer, with itself as a wholly owned subsidiary corporation in a share exchange or similar act or a wholly owned subsidiary corporation in a share transfer (excluding a qualified share exchange, etc. and a qualified share transfer, and a share exchange and share transfer in the case where there was a full controlling interest between the domestic corporation and the wholly owning parent corporation in a share exchange involved in the share exchange or another wholly owned subsidiary corporation in a share transfer involved in the share transfer immediately prior to the share exchange or share transfer; hereinafter referred to as a "non-qualified share exchange, etc." in this paragraph), the amount of a valuation gain (meaning the difference between the value as of immediately prior to the non-qualified share exchange, etc. and the book value at that time, when the former exceeds the latter) or the amount of a valuation loss (meaning the difference between the value as of immediately prior to the non-qualified share exchange, etc. and the book value at that time, when the latter exceeds the former) arising from the assets evaluated by fair value that the domestic corporation holds as of immediately prior to the non-qualified share exchange, etc. (such assets mean Fixed Assets, land (including any right on land and excluding land that falls under the category of Fixed Assets), securities, monetary claims, and deferred assets other than those specified by Cabinet Order) is included in gross profits or deductible expenses, when calculating the amount of income for the business year containing the date of the non-qualified share exchange, etc.

②Necessary matters concerning the application of the provisions of the preceding paragraph are specified by Cabinet Order.