Energy group Exelon Corp is fighting the U.S. Internal Revenue Service in court over a $517 million tax bill in a case that tax lawyers said could lead to new restrictions on businesses' ability to do tax-free property exchange deals.

Such exchanges are common legal strategies for avoiding capital gains tax. Thousands are carried out annually, though the Exelon deal at issue was unusually large.

If Exelon loses its case against the IRS in U.S. Tax Court, tax-free property exchange deals, even smaller ones, could be at risk of more often being labeled "abusive tax shelters," by the agency, tax lawyers said this week.

"People are already on edge ... it is going to put a crimp on this type of transaction," said Stefan Tucker, a lawyer with Venable LLP, who is not involved in the case. He said he thinks the case will likely be appealed regardless of the Tax Court's decision.

'Like-Kind' Deals

Exelon is defending two tax-free property exchanges worth more than $1 billion combined. They were carried out by one of its units in 1999, according to a Tax Court filing.

The IRS contends that the exchanges were "a potentially abusive tax shelter," said Exelon, the largest U.S. nuclear power plant operator, in a November 2013 regulatory filing.

A spokesman for Chicago-based Exelon declined to comment and referred questions to the company's regulatory filings.

The IRS, which also declined to comment, has not yet filed a response to Exelon's Tax Court petition challenging the tax bill. The company does not have to pay the bill while litigation is ongoing. A trial has not yet been scheduled.

The dispute centers on a tax break that lets an individual or business sell an asset - often real estate - and pay no capital gains tax on any profit if the asset is replaced within a certain time period with a similar, or "like-kind," asset.