Form REV-1742 Schedule D-71 "Sale or Exchange or Property Acquired Prior to June 1, 1971" - Pennsylvania

What Is Form REV-1742 Schedule D-71?

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Form Details:

  • Released on September 1, 2019;
  • The latest edition provided by the Pennsylvania Department of Revenue;
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1902310059
PA SCHEDULE D-71
Sale or Exchange of Property
Acquired Prior to June 1, 1971
START
REV-1742 (EX) 09-19 (FI)
20___
PA Department of Revenue
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.
C.
E.
B.
Month/day/year
D.
A.
F.
Cost or other basis
Cost
(Date sold above
Kind of property and description
Gross sales price,
Cost of subsequent
Gain or loss
dotted line.
method
less expense of sale
improvements (if not pur-
(Example: 100 Shares of “Z” Co.)
(d minus e)
Date acquired below
code
chased, attach explanation)
dotted line).
ADJ.
1.
ALT.
LOSS
Total net gain or loss. If a loss, fill in the oval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.
COST METHOD CODES:
S. Listed Security
A. Appraisal
P. Proration
X. Deemed
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1902310059
PA SCHEDULE D-71
Sale or Exchange of Property
Acquired Prior to June 1, 1971
START
REV-1742 (EX) 09-19 (FI)
20___
PA Department of Revenue
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.
C.
E.
B.
Month/day/year
D.
A.
F.
Cost or other basis
Cost
(Date sold above
Kind of property and description
Gross sales price,
Cost of subsequent
Gain or loss
dotted line.
method
less expense of sale
improvements (if not pur-
(Example: 100 Shares of “Z” Co.)
(d minus e)
Date acquired below
code
chased, attach explanation)
dotted line).
ADJ.
1.
ALT.
LOSS
Total net gain or loss. If a loss, fill in the oval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.
COST METHOD CODES:
S. Listed Security
A. Appraisal
P. Proration
X. Deemed
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Pennsylvania Department of Revenue
Instructions for REV-1742
PA Schedule D-71 – Gain or Loss on Property Acquired Prior to June 1, 1971
REV-1742 IN (EX) 09-19
ALTERNATIVE BASIS
GENERAL INFORMATION
Your alternative basis for property is calculated in the same
manner as you calculate its adjusted basis, except for the
Generally, gain or loss on sales or other dispositions of
following differences:
property is calculated by subtracting the adjusted basis of a
property from the value of cash and property realized on its
● You use the property’s fair market value as of June 1,
sale or disposition. Special tax provisions, however, apply
1971, as the original (unadjusted) basis of the proper-
with respect to the calculation of gain on property acquired
ty rather than its original cost or other original basis
before June 1, 1971. Gain on property acquired before
used to calculate your adjusted basis for the property.
June 1, 1971, is calculated by subtracting the adjusted
basis of the property or the alternative basis of the proper-
● You adjust upward only for the cost of capital improve-
ty, whichever is greater, from the value of cash or property
ments to the property, contributions of capital and gain
received. Also, no gain or loss is realized on the sale or dis-
incurred, made or recognized after May 31, 1971.
position of property acquired prior to June 1, 1971, if the
value of the cash or property received is greater than the
● You adjust downward only for the annual deductions
property’s adjusted basis, but less than its alternative basis.
for depreciation, amortization, obsolescence or cost
depletion (but not percentage depletion) allowed or
These special rules also apply if you acquired the property
allowable and recoveries of capital received after May
you sold or disposed of by gift, and the donor acquired the
property before June 1, 1971.
31, 1971.
For each asset you must also report straight-line deprecia-
DETERMINATION OF FAIR MARKET
tion, unless not using an optional accelerated depreciation
VALUE AS OF JUNE 1, 1971
method. You need the amount of straight-line depreciation
to take advantage of Pennsylvania’s Tax Benefit Rule when
The starting point for calculating the alternative basis for
you sell the asset. See the PA PIT Guide for the Tax Benefit
property is its fair market value as of June 1, 1971. There
Rule.
are four ways to determine fair market value as of June 1,
ADJUSTED BASIS
1971:
IMPORTANT: PA PIT law does not permit the bonus
1. The listed security method.
depreciation elections added to the Internal Revenue
2. The appraisal method.
Code in 2002 and 2003 and limits IRC section 179 current
expensing to the expensing allowed at the time you placed
3. The proration method.
the asset into service or the expensing in effect under the
4. The deemed value method.
IRC of 1986 as amended Jan. 1, 1997.
An explanation of each of these methods follows.
Ordinarily,
your
adjusted
basis
for
property
for
Pennsylvania income tax purposes is the same as your
LISTED SECURITY
adjusted basis for federal income tax purposes. It is the
original (unadjusted) basis (original/historical cost) for the
If you acquired the property prior to June 1, 1971, and it
property (plus allowable expenses of acquisition):
was listed on an established market or exchange on June
1. Adjusted upward by the cost of capital improvements
1, 1971, or the week preceding June 1, 1971, you must use
to the property, contributions of capital and gain
the listed security method. If the property was listed, its fair
incurred, made or recognized during your entire hold-
market value on June 1, 1971 is:
ing period; and
● The opening price on Tuesday, June 1, 1971;
2. Adjusted downward by the annual deductions for
● The price of the last sale during the preceding week, if
depreciation, amortization, obsolescence or cost
not traded on Tuesday, June 1, 1971; or
depletion (but not percentage depletion) allowed or
allowable and recoveries of capital (such as property
● The average of the high and low price or the average
damage awards, casualty insurance proceeds and
of the bid and asked quotations on Tuesday, June 1,
corporate “return of capital” distributions) received
1971, whichever is appropriate, if not traded on June
during your entire holding period.
1, 1971, and during the week preceding June 1, 1971.
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EXAMPLE: Allen purchased land for $1,000 on April 1,
APPRAISAL
1964. On December 31, 1987, Allen sold the land for
$15,000. Allen held the land for 285 full calendar months.
You may use an appraisal of current fair market value
86 months were before June 1, 1971, and 199 months
made on or about June 1, 1971, or a subsequent apprais-
were after May 31, 1971. Using the formula above, the
cal of fair market value as of June 1, 1971, if the following
June 1, 1971 Property Value is $5,224, calculated as fol-
conditions are met:
lows:
● A copy of the appraisal is attached to your return.
($15,000 x
86 mos. = $4,526) +
285 mos.
● The appraisal specifically excludes the value of any
($1,000
x
199 mos. = $698)
improvements made after May 31, 1971.
285 mos.
● The appraisal is bona fide, independent and written by
$4,526
+
$698 = $5,224
a competent appraiser of recognized standing and
PROPERTY FORMULA ADJUSTMENTS
ability.
If adjustments to original basis are required to determine
the property’s adjusted basis for PA purposes, you may
PRORATION METHOD
also be required to make additional computations to adjust
your current fair market value and historic cost data before
PROPERTY FORMULA
using the property value formula:
If no adjustment to original basis is required to determine
CAPITAL IMPROVEMENTS
the property’s adjusted basis for Pennsylvania income tax
If the only required adjustment to original basis to deter-
purposes, the fair market value of an asset as of June 1,
mine the property’s adjusted basis for PA purposes is for
1971, may be determined in accordance with the following
the cost of capital improvements to the property, you will
property value formula:
need to adjust your current fair market value data before
using it in the property value formula. You also need to
Property’s Value as of 6/1/71 =
compute the June 1, 1971 value of improvements made
Current Fair Market Value of Property x A +
before June 1, 1971, using the improvement value formula.
Historic Cost of Property x B
Use the following steps to make the adjustments and com-
putations:
1. A is a fraction. The numerator is the number of full
calendar months the property was held prior to June
Step 1. The historic cost, holding period and current fair
1, 1971. The denominator is the number of full cal-
market value of each improvement to property
made during your holding period must be sepa-
endar months in the taxpayer’s entire holding period
rately determined.
for the property.
Step 2. For each improvement to property made before
2. B is a fraction. The numerator is the number of full
June 1, 1971, use the following improvement value
calendar months the property was held after May 31,
formula to compute its fair market value as of June
1971. The denominator is the number of full calendar
1, 1971.
months in the taxpayer’s entire holding period for the
Improvement’s Value as of June 1, 1971 =
property; and
Current Fair Market Value of Improvement x C +
3. The Historic Cost of Property is its purchase price if
Historic Cost of Improvement x D
acquired by purchase or its fair market value on the
● C is a fraction. The numerator is the number of full cal-
date of death of the decedent if acquired by inheri-
endar months from the date of the improvement to
tance.
June 1, 1971. The denominator is the number of full
NOTE: For all calculations involving any proration
calendar months in the taxpayer’s entire holding peri-
method, observe the following rules:
od for the improvement.
● Round all decimals to four digits.
● D is a fraction. The numerator is the number of full cal-
endar months the improvement was held after May
● For purposes of determining holding periods, a calen-
31, 1971. The denominator is the number of full cal-
dar month begins on the first day of the month and
endar months in the taxpayer’s entire holding period
ends on the last day of the month. If purchase or
for the improvement.
acquisition occurs on any day other than the first day
Step 3. Subtract the total fair market value of all improve-
of the month, the holding period begins on the first day
ments to property (including improvements made
of the following month. If disposition occurs on any
after May 31, 1971) from the current fair market
day other than the last day of the month, the holding
value of the property to determine its fair market
period ends on the last day of the preceding month.
value (less improvements) before computing its
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REV-1742
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June 1, 1971 value using the property value for-
number of full calendar months between the date
mula.
of the recovery and the date of disposition of the
property.
Step 4. Total the amounts calculated in Steps 2 and 3. This
total is the property’s fair market value as of June
Step 5. Total the amounts computed in Step 4.
1, 1971.
Step 6. Subtract the total computed in Step 5 from the total
computed in Step 3.
EXAMPLE: Karen purchased land for $1,000 on April 1,
1964. Karen built storage facilities on the land on July 1,
Step 7. If the amount computed in Step 6 is greater than
1968, at a cost of $12,000. On September 1, 1983, Karen
zero, you must increase your historic cost by the
built additional storage facilities at a cost of $36,000. On
amount computed in Step 6. If less than zero, you
Dec. 31, 1987, Karen sold the entire property (land and
must reduce your historic cost by subtracting the
buildings) for $160,000. The current fair market value of the
amount computed in Step 6. If zero, no adjustment
pre-1971 storage facilities is $58,000; the other storage
to historic cost is necessary.
facilities, $60,000. The June 1, 1971 value of the pre-1971
improvements is $18,800, calculated as follows:
EXAMPLE: Bill purchased a 30 percent interest in PVB
Partnership for $12,000 on Aug. 1, 1968. On Sept. 1, 1969,
($58,000 x 35 mos. = $8,675) +
Bill contributed another $6,000. On July 1, 1970, PVB dis-
234 mos.
tributed partnership property worth $8,000 to Bill. On Feb.
28, 1987, Bill sold his partnership interest for $47,000. Bill
($12,000 x 199 mos. = $10,205)
held his partnership interest for 223 months. From Sept. 1,
234 mos.
1969, the date of the contribution, to the date of sale is 210
$8,675 + $10,205 = $18,880
months. The number of months from the July 1, 1970 dis-
tribution to Bill to the date of sale is 200 months. The
The June 1, 1971 value of the land is $13,372, calculated
adjustment to historic cost is calculated using the steps
as follows:
below:
A. Current fair market share of land =
Step 1. Value of contribution 9/1/69 - $6,000
$160,000 - ($58, 000 + 60,000) = $42,000
Value of distribution 7/1/70 - $8,000
B. ($42,000 x 86 mos. = $12,674) +
Step 2. Historic value of contribution to the partnership
285 mos.
$6,000 x 223 = $6,371
210
($1,000 x 199 mos. = $698)
285 mos.
Step 3. Total historic value of contribution - $6,371
$12,674 + $698 = $13,372
Step 4. Historic value of distribution from the partnership
$8,000 x 223 = $8,920
The June 1, 1971 value of the land and improvements is
200
$32,252, calculated as follows:
Step 5. Total historic value of distribution - $8,920
$18,880 + $13,372 = $32,252.
Step 6. Net adjustment to historic cost
CONTRIBUTIONS OF CAPITAL AND RECOVERIES OF
$6,371 - $8,920 = ($2,549)
CAPITAL
If adjustments to original basis are required to determine
Step 7. Historic cost as adjusted
the property’s adjusted basis for Pennsylvania income tax
$12,000 - $2,549 = $9,451
purposes because of contributions of capital or recoveries
The adjusted historic cost would then be used to calculate
of capital made or received after you acquired the proper-
the June 1, 1971 value as in Example 1.
ty, you may need to adjust your historic cost data before
using it in the property value formula. Use the following
IMPORTANT: The proration method may not be used
steps to determine the amount of the adjustment:
if you suffered a loss from fire, storm or other casual-
ty or incurred demolition costs or losses during your hold-
Step 1. Determine the date and amount of each contribu-
ing period or if you acquired the property by gift after May
tion of capital and recovery of capital.
31, 1971. It also may not be used if the entity in which you
Step 2. Multiply each contribution of capital by a fraction,
hold a property interest was a party to a reorganization,
the numerator of which is the number of full calen-
consolidation or merger or if other events have transpired
dar months in the taxpayer’s entire holding period,
during your holding period which would contraindicate its
and the denominator of which is the number of full
use.
calendar months between the date of the contribu-
DEEMED VALUE
tion and the date of disposition of the property.
Step 3. Total the amounts computed in Step 2.
If you cannot determine the value of a property as of June
Step 4. Multiply the amount of each recovery of capital by
1, 1971, using the listed security, appraisal or proration
a fraction, the numerator of which is the number of
method, the value of the property as of June 1, 1971, shall
full calendar months in the taxpayer’s entire
be deemed to be its adjusted basis as of June 1, 1971, if
holding period, and the denominator of which is the
determinable, or zero, if not determinable.
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