Blog · 15 October 2026

Augusta Rule and IRC §280A(g): What Sinopoli v. Commissioner Means for Home Rentals to an S Corp and US CPA Firms

By Keshav Bansal, CA

Year-end planning lists often mention the Augusta Rule—the nickname for IRC §280A(g), which can exclude rental income when a taxpayer’s residence is actually rented for fewer than 15 days in the year. Cain Watters CPAs (Keith Klein, Oct. 12, 2026) flagged it again as a late-year move for practice owners who host meetings at home. For US CPA firms, the statute is simple; the hard part is the other side of the journal entry: the business’s rent deduction still has to be ordinary, necessary and reasonable. Sinopoli v. Commissioner, T.C. Memo. 2023-105, shows how quickly an aggressive “rent the house to the S corp” plan collapses when substantiation and fair-market rent are thin.

What §280A(g) actually says

Section 280A(g) is a special rule for certain rental use. If a dwelling unit is used during the taxable year by the taxpayer as a residence and is actually rented for less than 15 days during that year, then (1) no deduction otherwise allowable because of that rental use is allowed, and (2) the income from that use is not included in gross income under §61. The rule applies notwithstanding the rest of §280A and §183.

IRS Topic no. 415 and Publication 527 state the same practical result: if you use the dwelling as a home and rent it for fewer than 15 days, do not report the rental income and do not deduct expenses as rental expenses. Pub. 527 adds that the period is not treated as a rental activity and should not be reported on Schedule E. “Less than 15 days” means 14 or fewer actual rental days—a cliff, not a soft threshold.

The nickname comes from short-term home rentals during Masters Tournament week in Augusta, Georgia. The Code itself never uses “Augusta Rule.” The exclusion is owner-side: it answers whether the homeowner reports the rent. It does not, by itself, prove that a related business may deduct whatever rent it books.

Owner exclusion vs business deduction

Two questions travel together and are often blurred in marketing:

• Owner. If §280A(g) applies, qualifying rent is excluded and rental-use expenses are disallowed on the owner’s return.
• Business. A separate entity that pays rent for meeting space must still meet IRC §162: the expense must be ordinary, necessary and reasonable in amount, and the taxpayer must substantiate it.

A sole proprietor cannot create a deductible rent payment by “renting” to himself—the payer and payee are the same taxpayer. The planning version Cain Watters describes (practice deducts rent; owner excludes it) presupposes a separate taxpayer, typically an S corporation or partnership that actually pays fair-market rent for real business use. Cash-movement shortcuts that never leave the owner’s pocket are not what §162 contemplates.

That related-party framing also sits next to other pass-through issues CPAs already police—reasonable compensation before S corp distributions (see our guide to S corporation reasonable compensation and preparer penalties) and QBI planning under §199A for 2026. Inflated “rent” that functions like a distribution invites the same scrutiny as underpaid wages.

Sinopoli: $290,900 claimed, $16,500 allowed

In Sinopoli v. Commissioner, T.C. Memo. 2023-105 (filed Aug. 14, 2023; Judge Goeke), three shareholders of Planet LA, LLC—an S corporation Planet Fitness franchisee—had the company pay rent for business meetings held in their personal residences starting in 2015. They reported the rent on Schedule E and excluded it under §280A(g). Planet claimed rent of $96,400 (2015), $113,500 (2016) and $81,000 (2017)—$290,900 over less than three years. By mid-period the company was paying about $3,000 a month to each shareholder.

Revenue Agent Jacob Burgess researched local meeting-space rates and found venues that could hold 500 to 1,200 people rented for about $500 for a full or half day. He allowed $500 only for meetings substantiated with notes: none for 2015, 12 meetings in 2016 ($6,000) and nine in 2017 ($4,500).

The Tax Court agreed that the claimed rents were not shown to be reasonable. It described the arrangement as looking like a tax-savings scheme to distribute Planet’s earnings through purported rent, claim corporate deductions and exclude the receipts under §280A(g). Petitioners had not obtained an appraisal; they relied on a square-footage rate for common areas and gave vague testimony about what business was done. The court allowed $6,000 for 2015 (12 meetings × $500) and noted that respondent had already allowed $500 per month for January 2016 through September 2017—altogether $16,500 at the $500-per-meeting rate the court called “actually generous,” given that only small portions of the homes were used.

§280A(g) was not rewritten. What failed was the business deduction: frequency, purpose and price.

Not the home-office deduction

Do not confuse the Augusta Rule with the home-office rules under §280A(c). Home-office deductions turn on exclusive and regular use and principal-place-of-business tests (Form 8829 / Schedule C). §280A(g) is a short-rental income exclusion with a day count. Satisfying one does not establish the other. §280A(g) also sits beside the hobby-loss framework in §183—another facts-and-circumstances inquiry covered in our hobby vs business §183 guide—but the short-rental rule expressly operates notwithstanding §183 when its day test is met.

Year-end checklist for US CPA firms

• Count actual rental days. Stay under 15 calendar days of actual rental use for the residence for the year if the client wants §280A(g). Day 15 ends the exclusion.
• Confirm a separate payer. Entity pays owner; sole proprietors cannot deduct rent to themselves.
• Demand contemporaneous meeting files. Date, location, attendees, agenda or minutes, and business purpose—exactly the record set Keith Klein reminded clients to keep.
• Price to local meeting-space comps. Document comparable venue rates for similar capacity and duration. Square-footage guesses without support failed in Sinopoli.
• Actually pay the rent. Book the payable, move the cash, and keep the canceled payment. Exclusion on the owner’s side does not excuse a paper-only corporate deduction.
• Separate personal Schedule E noise. Qualifying §280A(g) rent generally should not land on Schedule E as reportable rental activity (Pub. 527).
• Watch related-party optics. Large “rent” that tracks available cash more than meeting calendars looks like the Sinopoli pattern.

Where Tax Brew fits

Clean books and contemporaneous workpapers make year-end entity rent and owner reporting easier to defend. Tax Brew provides bookkeeping, cleanup and tax prep support for US CPA firms—your team keeps client advice, representation and sign-off. See our services, or email info@taxbrewglobal.com.

Sources: IRC §280A(g); IRS Topic no. 415; IRS Publication 527; Sinopoli v. Commissioner, T.C. Memo. 2023-105 (Aug. 14, 2023); Keith Klein, Cain Watters CPAs (Oct. 12, 2026). General information, not tax or legal advice. Apply the statute and substantiation rules to your client’s facts.