Tax insight

Airline payments for common space and interest on deemed loans are qualifying income in REIT PLRs

Insight
5 minute read
August 22, 2025

What happened?

In Private Letter Rulings 202510011 and 202510012 (PLRs), the IRS ruled that (1) payments made by airlines for the use of airport terminal space based on the number of passengers per terminal and (2) interest payments on a deemed Section 467 loan are qualifying income for purposes of the 75% REIT gross income test.

Why is it relevant?

These are the first PLRs addressing income earned by a REIT for common space and shared personal property at an airport terminal, and interest payments on deemed Section 467 loans. The income for the use of the common space and shared personal property was based on a calculation that is similar to other types of calculations in other PLRs but has some novel concepts.

Action items to consider

Although the PLRs apply only to the taxpayers to which they were issued, taxpayers contemplating leasing arrangements like those in the PLRs may want to consider the facts and the IRS’s analysis of these rulings. Furthermore, REITs that have deemed Section 467 loans may want to consider obtaining their own rulings because the IRS analysis in the PLRs suggests that interest income on prepaid loans received by REITs may not qualify for purposes of the 75% income test unless the IRS uses its discretionary authority to determine that the income is qualifying under that test.