IRS Releases PLR 202013006 & 202013007 | FTI Consulting

IRS Releases PLR 202013006 & 202013007 on Treatment of Parking Revenue

Corporate Finance & Restructuring | Real Estate

June 1, 2020

Car Parking

Executive Summary: On March 27, 2020, the IRS released two substantially similar Private Letter Rulings (“PLR”) concluding that the share of parking revenue a Real Estate Investment Trust (“REIT”) receives will qualify as rents from real property under Internal Revenue Code (“IRC”) §856(d).


In order for an entity to qualify REIT, at least 75% of a REIT’s gross income must be derived from sources that include rents from real property, gain from the sale or other disposition of real property, dividends from REIT stock, and/or abatements and refunds on taxes on real property.

At least 95% of its gross income must be derived from sources that include qualifying income from the 75% test, plus dividends, interest, and gain on sale or other disposition of stock and securities1. PLR 202013006 & PLR 202013007 appear to address the same facts for both REITs.


REIT A and REIT B (together, “Companies”) are engaged in a mixed-use development project consisting of Parcel 1 and Parcel 2.

  • Parcel 1 is intended to have an office condo (owned by REIT A) and a retail condo unit (owned by REIT B). Additionally, Parcel 1 will have an underground parking garage that is used by REIT A; however, REIT A is required to leave a certain amount of parking spaces available for public parking (included to be used by retail tenants of REIT B and their customers).

    Further, REIT A represents that the garage is expected to be used predominantly by the office condo unit’s tenants and their guests, subtenants, and customers and will be built for this purpose.


1: §856(c)(2) and §856(c)(3)

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