IRS Issues Additional Guidance On REIT Parking Facility Income

In the recently released Private Letter Ruling 201628020, the IRS considered a situation where affiliated entities owned various properties in an office park; the IRS determined that the entities' income from leasing space in a parking garage in the office park constituted rent from real property for purposes of the REIT qualification rules.

Taxpayer indirectly owned interests in a building and parking garage in an office park. The office park also included a second building owned by an unrelated entity ("Building 2 Owner"). The parties entered into a number of related agreements:

• Parking Lease: Building 2 Owner entered into a long-term lease with LLC 2 pursuant to which LLC 2 was required to lease a number of parking spaces to Building 2 Owner.