IRS issues favorable PLR on qualifying REIT income

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September 2020

Overview

In PLR 202035008, the IRS ruled that income from the use of certain telecommunications infrastructure assets under a use agreement constituted rents from real property for purposes of the real estate investment trust (REIT) 75% and 95% gross income tests. The IRS also ruled that a Section 481(a) adjustment required to be included in gross income was not included as gross income for purposes of the REIT 75% and 95% gross income tests.

The takeaway

In this PLR, the IRS further continued its practice of ruling that income attributable to the receipt of income from the use of a non-traditional real estate asset (here, certain telecommunications infrastructure assets under a use agreement) was considered rents from real property for purposes of the REIT 75% and 95% income tests. This ruling provides insight on how the IRS may treat types of income not specifically listed in the Code as rents from real property for purposes of the REIT 75% and 95% income tests.

Although a PLR may not be used by other taxpayers as precedent, this ruling indicates that the IRS may be willing to rule favorably in cases involving REITs owning similar types of assets and generating similar types of income.

Contact us

Adam Feuerstein

Principal, National Real Estate Tax Technical Leader, PwC US

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