Tax insight

PLR addresses construction like-kind exchange involving previously owned property

Insight
5 minute read
August 01, 2025

What happened?

In Private Letter Ruling 202520001 (the PLR), the IRS ruled that a parking arrangement transaction met requirements outlined in prior guidance and qualified as a like-kind exchange. In a typical parking arrangement transaction, either the relinquished property or the replacement property of a like-kind exchange is placed with an accommodation party until the final property transfer is completed. In the PLR, property previously owned by the taxpayer was leased by an exchange accommodation titleholder (EAT) who performed construction on the leased property. The leasehold interest in the property and the constructed improvements served as the replacement property (RPL) in the like-kind exchange transaction.

Why is it relevant?

This is the first PLR addressing the IRS’s view on construction exchanges involving property that was previously owned by the taxpayer. The IRS has ruled in the past on a construction exchange involving property previously owned by an affiliate of the taxpayer. It is only the second ruling issued after the issuance of Rev. Proc. 2004-51, which prevents Rev. Proc. 2000-37 from applying to transactions where the RPL was previously owned by the taxpayer in the 180 days prior to the lease of the property to the EAT.

Actions to consider 

Although this PLR applies only to the taxpayer to which it was issued, taxpayers contemplating like-kind exchange transactions involving construction exchanges on property previously owned by a taxpayer may want to consider this ruling.