Pennsylvania Sale or Exchange or Property Acquired Prior to June 1, 1971

Sale or Exchange or Property Acquired Prior to June 1, 1971
PA Schedule D-71 - Sale or Exchange or Property Acquired Prior to June 1, 1971 (Form and Instructions) (REV-1742)
2302310053

PA SCHEDULE D-71

Sale or Exchange of Property
Acquired Prior to June 1, 1971

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REV-1742 (EX) 09-23 (FI)
PA Department of Revenue

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OFFICIAL USE ONLY

Name of owner as shown on PA tax return:

Owner’s
Social Security Number

You must use Pennsylvania Schedule D-71 if you are claiming an alternative basis.
A.
Kind of property and description
(Example: 100 Shares of “Z” Co.)

B.
Cost
method
code

C.
Month/day/year
(Date sold above
dotted line.
Date acquired below
dotted line).

D.
Gross sales price,
less expense of sale

E.
Cost or other basis
Cost of subsequent
improvements (if not purchased, attach explanation)

F.
Gain or loss
(d minus e)

ADJ.

1.

2.

ALT.

Total net gain or loss. If a loss, fill in the oval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

COST METHOD CODES:

S. Listed Security

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A. Appraisal

P. Proration

LOSS

X. Deemed

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Instructions for REV-1742

REV-1742 IN (EX) 09-23

PA Schedule D-71 – Gain or Loss on Property Acquired Prior to June 1, 1971

GENERAL INFORMATION
Generally, gain or loss on sales or other dispositions of
property is calculated by subtracting the adjusted basis of a
property from the value of cash and property realized on its
sale or disposition. Special tax provisions, however, apply
with respect to the calculation of gain on property acquired
before June 1, 1971. Gain on property acquired before
June 1, 1971, is calculated by subtracting the adjusted
basis of the property or the alternative basis of the property, whichever is greater, from the value of cash or property
received. Also, no gain or loss is realized on the sale or disposition of property acquired prior to June 1, 1971, if the
value of the cash or property received is greater than the
property’s adjusted basis, but less than its alternative basis.
These special rules also apply if you acquired the property
you sold or disposed of by gift, and the donor acquired the
property before June 1, 1971.
For each asset you must also report straight-line depreciation, unless not using an optional accelerated depreciation
method. You need the amount of straight-line depreciation
to take advantage of Pennsylvania’s Tax Benefit Rule when
you sell the asset. See the PA PIT Guide for the Tax Benefit
Rule.
ADJUSTED BASIS
It is the cost basis of the purchased property plus allowable
expenses of acquisition adjusted as follows:
1. Upward by the cost of capital improvements to the
property, contributions of capital and gain incurred,
made, or recognized during your entire holding period; and
2. Downward by the annual deductions for depreciation,
amortization, obsolescence, or cost depletion (but
not percentage depletion) allowed or allowable and
recoveries of capital (such as property damage
awards, casualty insurance proceeds, and corporate
“return of capital” distributions) received during your
entire holding period.
ALTERNATIVE BASIS
Your alternative basis for property is calculated in the same
manner as you calculate its adjusted basis, except for the
following differences:
● You use the property’s fair market value as of June 1,
1971, as the original (unadjusted) basis of the property rather than its original cost or other original basis
used to calculate your adjusted basis for the property.

● You adjust upward only for the cost of capital improvements to the property, contributions of capital and gain
incurred, made, or recognized after May 31, 1971.
● You adjust downward only for the annual deductions
for depreciation, amortization, obsolescence, or cost
depletion (but not percentage depletion) allowed or
allowable and recoveries of capital received after May
31, 1971.

DETERMINATION OF FAIR MARKET
VALUE AS OF JUNE 1, 1971
The starting point for calculating the alternative basis for
property is its fair market value as of June 1, 1971. There
are four ways to determine fair market value as of June 1,
1971:
1. The listed security method.
2. The appraisal method.
3. The proration method.
4. The deemed value method.
An explanation of each of these methods follows.

LISTED SECURITY
If you acquired the property prior to June 1, 1971, and it
was listed on an established market or exchange on June
1, 1971, or the week preceding June 1, 1971, you must use
the listed security method. If the property was listed, its fair
market value on June 1, 1971 is:
● The opening price on Tuesday, June 1, 1971;
● The price of the last sale during the preceding week, if
not traded on Tuesday, June 1, 1971; or
● The average of the high and low price or the average
of the bid and asked quotations on Tuesday, June 1,
1971, whichever is appropriate, if not traded on June
1, 1971, and during the week preceding June 1, 1971.

APPRAISAL
You may use an appraisal of current fair market value made
on or about June 1, 1971, or a subsequent appraiscal of fair
market value as of June 1, 1971, if the following conditions
are met:
● A copy of the appraisal is attached to your return.

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● The appraisal specifically excludes the value of any
improvements made after May 31, 1971.
● The appraisal is bona fide, independent, and written by a
competent appraiser of recognized standing and ability.

PRORATION METHOD
PROPERTY FORMULA
If no adjustment to original basis is required to determine
the property’s adjusted basis for Pennsylvania income tax
purposes, the fair market value of an asset as of June 1,
1971, may be determined in accordance with the following
property value formula:
Property’s Value as of 6/1/71 =
Current Fair Market Value of Property x A +
Historic Cost of Property x B
1. A is a fraction. The numerator is the number of full
calendar months the property was held prior to June
1, 1971. The denominator is the number of full calendar months in the taxpayer’s entire holding period
for the property.
2. B is a fraction. The numerator is the number of full
calendar months the property was held after May 31,
1971. The denominator is the number of full calendar
months in the taxpayer’s entire holding period for the
property; and
3. The Historic Cost of Property is its purchase price if
acquired by purchase or its fair market value on the
date of death of the decedent if acquired by inheritance.
NOTE: For all calculations involving any proration
method, observe the following rules:
● Round all decimals to four digits.
● For purposes of determining holding periods, a calendar month begins on the first day of the month and
ends on the last day of the month. If purchase or
acquisition occurs on any day other than the first day
of the month, the holding period begins on the first day
of the following month. If disposition occurs on any
day other than the last day of the month, the holding
period ends on the last day of the preceding month.
EXAMPLE: Allen purchased land for $1,000 on April 1,
1964. On December 31, 1987, Allen sold the land for
$15,000. Allen held the land for 285 full calendar
months. 86 months were before June 1, 1971, and
199 months were after May 31, 1971. Using the formula above, the June 1, 1971 Property Value is
$5,224, calculated as follows:
($15,000 x

86 mos. = $4,526) +
285 mos.

($1,000

x

199 mos. = $698)
285 mos.

$4,526

+

2

$698 = $5,224

PROPERTY FORMULA ADJUSTMENTS
If adjustments to original basis are required to determine
the property’s adjusted basis for PA purposes, you may
also be required to make additional computations to adjust
your current fair market value and historic cost data before
using the property value formula:
CAPITAL IMPROVEMENTS
If the only required adjustment to original basis to determine the property’s adjusted basis for PA purposes is for
the cost of capital improvements to the property, you will
need to adjust your current fair market value data before
using it in the property value formula. You also need to
compute the June 1, 1971 value of improvements made
before June 1, 1971, using the improvement value formula.
Use the following steps to make the adjustments and computations:
Step 1. The historic cost, holding period and current fair
market value of each improvement to property
made during your holding period must be separately determined.
Step 2. For each improvement to property made before
June 1, 1971, use the following improvement value
formula to compute its fair market value as of June
1, 1971.
Improvement’s Value as of June 1, 1971 =
Current Fair Market Value of Improvement x C +
Historic Cost of Improvement x D
● C is a fraction. The numerator is the number of full calendar months from the date of the improvement to
June 1, 1971. The denominator is the number of full
calendar months in the taxpayer’s entire holding period for the improvement.
● D is a fraction. The numerator is the number of full calendar months the improvement was held after May
31, 1971. The denominator is the number of full calendar months in the taxpayer’s entire holding period
for the improvement.
Step 3. Subtract the total fair market value of all improvements to property (including improvements made
after May 31, 1971) from the current fair market
value of the property to determine its fair market
value (less improvements) before computing its
June 1, 1971 value using the property value formula.
Step 4. Total the amounts calculated in Steps 2 and 3. This
total is the property’s fair market value as of June
1, 1971.
EXAMPLE: Karen purchased land for $1,000 on April 1,
1964. Karen built storage facilities on the land on July 1,
1968, at a cost of $12,000. On September 1, 1983, Karen
built additional storage facilities at a cost of $36,000. On
Dec. 31, 1987, Karen sold the entire property (land and
buildings) for $160,000. The current fair market value of the
pre-1971 storage facilities is $58,000; the other storage
facilities, $60,000. The June 1, 1971 value of the pre-1971
improvements is $18,800, calculated as follows:

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($58,000 x 35 mos. = $8,675) +
234 mos.
($12,000 x 199 mos. = $10,205)
234 mos.
$8,675 + $10,205 = $18,880
The June 1, 1971 value of the land is $13,372, calculated
as follows:
A. Current fair market share of land =
$160,000 - ($58, 000 + 60,000) = $42,000
B. ($42,000 x 86 mos. = $12,674) +
285 mos.
($1,000 x 199 mos. = $698)
285 mos.
$12,674 + $698 = $13,372
The June 1, 1971 value of the land and improvements is
$32,252, calculated as follows:
$18,880 + $13,372 = $32,252.
CONTRIBUTIONS OF CAPITAL AND RECOVERIES OF
CAPITAL
If adjustments to original basis are required to determine
the property’s adjusted basis for Pennsylvania income tax
purposes because of contributions of capital or recoveries
of capital made or received after you acquired the property, you may need to adjust your historic cost data before
using it in the property value formula. Use the following
steps to determine the amount of the adjustment:
Step 1. Determine the date and amount of each contribution of capital and recovery of capital.
Step 2. Multiply each contribution of capital by a fraction,
the numerator of which is the number of full calendar months in the taxpayer’s entire holding period,
and the denominator of which is the number of full
calendar months between the date of the contribution and the date of disposition of the property.
Step 3. Total the amounts computed in Step 2.
Step 4. Multiply the amount of each recovery of capital by
a fraction, the numerator of which is the number of
full calendar months in the taxpayer’s entire
holding period, and the denominator of which is the
number of full calendar months between the date
of the recovery and the date of disposition of the
property.
Step 5. Total the amounts computed in Step 4.
Step 6. Subtract the total computed in Step 5 from the total
computed in Step 3.
Step 7. If the amount computed in Step 6 is greater than
zero, you must increase your historic cost by the
amount computed in Step 6. If less than zero, you
must reduce your historic cost by subtracting the
amount computed in Step 6. If zero, no adjustment
to historic cost is necessary.
EXAMPLE: Bill purchased a 30 percent interest in PVB
Partnership for $12,000 on Aug. 1, 1968. On Sept. 1, 1969,

Bill contributed another $6,000. On July 1, 1970, PVB distributed partnership property worth $8,000 to Bill. On Feb.
28, 1987, Bill sold his partnership interest for $47,000. Bill
held his partnership interest for 223 months. From Sept. 1,
1969, the date of the contribution, to the date of sale is 210
months. The number of months from the July 1, 1970 distribution to Bill to the date of sale is 200 months. The
adjustment to historic cost is calculated using the steps
below:
Step 1. Value of contribution 9/1/69 - $6,000
Value of distribution 7/1/70 - $8,000
Step 2. Historic value of contribution to the partnership
$6,000 x 223 = $6,371
210
Step 3. Total historic value of contribution - $6,371
Step 4. Historic value of distribution from the partnership
$8,000 x 223 = $8,920
200
Step 5. Total historic value of distribution - $8,920
Step 6. Net adjustment to historic cost
$6,371 - $8,920 = ($2,549)
Step 7. Historic cost as adjusted
$12,000 - $2,549 = $9,451
The adjusted historic cost would then be used to calculate
the June 1, 1971 value as in Example 1.
IMPORTANT: The proration method may not be used
if you suffered a loss from fire, storm, or other
casualty; incurred demolition costs or losses during your
holding period; or if you acquired the property by gift after
May 31, 1971. It also may not be used if the entity in which
you hold a property interest was a party to a reorganization,
consolidation, or merger or if other events have transpired
during your holding period which would contraindicate its
use.

DEEMED VALUE
If you cannot determine the value of a property as of June
1, 1971, using the listed security, appraisal or proration
method, the value of the property as of June 1, 1971, shall
be deemed to be its adjusted basis as of June 1, 1971, if
determinable, or zero, if not determinable.
CAUTION: See the instructions for Column F to
determine which basis (adjusted or alternative) to
use when calculating your gain or loss.

LINE INSTRUCTIONS
LINE 1
COLUMN A
List and describe the property sold or otherwise converted
into cash or other property. For example, name of company and number of shares, address of property, etc.

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COLUMN B
List the method used for computing your alternative basis
(Listed Security “S”; Appraisal “A”; Proration “P”; or
Deemed “X”).

COLUMN C
Above the dotted line, enter the month, day, and year the
property was sold. Below the dotted line, enter the month,
day, and year the property was acquired.

COLUMN D
List the gross sales price or fair market value of cash and
property received less applicable expenses of sale.

COLUMN E
Below the dotted line, enter alternative basis of the property, if acquired before June 1, 1971. The basis as determined here may also be used on PA Schedule 19, Sale of
a Principal Residence, and PA Schedule D-1, Computation
of Installment Sale Income (REV-1689).

COLUMN F
If the property is income-producing property acquired as an
investment (for example, capital stock, interest in a partnership or other business organization, rental property,
patent, copyright, etc.), or if you held the property in connection with a business, profession, or occupation when
you disposed of it (and the property would not be includable
in inventory), use the following instructions to compute your
gain or loss.

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● For property acquired before June 1, 1971. If your
adjusted basis is greater than Column D, you have a
loss. Subtract Column D from your adjusted basis to
compute your loss and enter it in Column F.
● For property acquired before June 1, 1971. If both the
adjusted basis and alternative basis are less than
Column D, you have a gain. Subtract the larger of the
adjusted basis or alternative basis from Column D to
compute your gain and enter it in Column F.
● For property acquired before June 1, 1971. If your
adjusted basis is not greater than Column D, and your
alternative basis is not less than Column D, you do not
have a gain or a loss. Enter a zero in Column F.
If the property was other than income-producing property, use the following instructions.
● For property acquired before June 1, 1971. If both the
adjusted basis and alternative basis are less than
Column D, subtract the larger of the adjusted basis or
the alternative basis from Column D to compute your
gain. Enter your gain in Column F.
● If the adjusted basis is not less than Column D, you do
not have either a gain or loss. Enter a zero in column
F.

LINE 2
Subtotal Column F
If a gain, enter the amount on the appropriate line of the
Pennsylvania income tax return you are filing.

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