In Mirch v. Commissioner (T.C. Memo 2025-128, filed December 11, 2025), the owner of a short-term rental presented a log showing 944.5 hours of work for the year and the Tax Court counted 7.4 of them. The rest were rejected as a post-event ballpark estimate: seven hours of cleaning assigned to every stay regardless of length, and eight hours of "on call" site management for every rented day. The property was agreed to be a short-term rental, so the seven-day test was never in doubt. The loss was passive anyway, because material participation was not proven. The case is the clearest recent illustration of how a large hours number can be worth almost nothing.
The facts in five lines
- The tax year was 2006; the opinion came nineteen years later in a collection due process case where the underlying liability was still open to review.
- The taxpayers were both attorneys. One held an LL.M. in taxation and was a CPA.
- The rental was a single-family home next door to their residence in Reno, Nevada, rented as a short-term vacation rental approximately 23 times for a total of 93 days.
- Guests were charged a cleaning fee, $85 on most invoices, and the owners hired cleaning and landscaping services.
- The wife's log claimed 944.5 hours. The court found she had not established even 100.
The full opinion is on the Tax Court's docket system at ustaxcourt.gov, docket 16277-16L.
What the log looked like
The log was undated and in summary form. Instead of entries, it listed three tasks and assigned a standard time to each:
| Task | Standard time | Total claimed |
|---|---|---|
| Emails | 12 minutes to read each, 12 minutes to send each | 7.4 hours |
| Cleaning | 7 hours after every stay, whether the stay was 1 night or 14 | 168 hours |
| Site management | 8 hours for each of the 93 rented days, defined as "on call for guests, repairs, supplies, Wi-Fi, cable, snow removal" | 744.5 hours |
Only the first line survived. The owner produced substantiation for the number of emails sent and received, and the court found 7.4 hours reasonable for that task. It is worth pausing on why: the email category was the one with a record behind it, and it was the smallest.
Why "8 hours per rental day" is not participation
The court's treatment of the site-management block is the part of the opinion most relevant to owners today. The 744.5 hours were counted "simply because Mrs. Mirch was available if a tenant needed her." The court held that only actual time spent on the rental activity counts, citing Pohoski v. Commissioner (T.C. Memo 1998-17), and did not count any of the block.
It also acknowledged that she likely did perform some tasks during guests' stays. The problem was that nothing in the record allowed the court to estimate how many hours those tasks took. The opinion notes that she would have needed close to one hour per rental day to reach 100, and that the record did not support even that. Being reachable is not work. Answering the call is, and it has to be written down as the thing it was.
The contradiction in the owner's own records
On cleaning, the court did not need outside evidence. The owners' own return deducted nearly $10,000 of professional cleaning and maintenance for the year. Their invoices charged guests a separate cleaning fee. Their testimony was that the owner cleaned after every stay herself, for seven hours each time. The court found that testimony not credible, concluded she likely performed minimal hours of cleaning, and called the 168 hours "nothing more than a postevent ballpark estimate."
The lesson is broader than cleaning. A log is read alongside Schedule E, the bank statements and the booking invoices. Where they disagree, the log loses. An owner who pays a cleaner and logs coordination and inspection time is consistent with the return. An owner who pays a cleaner and logs the cleaning is not.
Undated summary versus contemporaneous entries
The court restated the standard from Treas. Reg. §1.469-5T(f)(4): participation may be established by any reasonable means, including appointment books, calendars or narrative summaries, and contemporaneous daily time reports are not required. Then it applied the limit from Moss v. Commissioner (135 T.C. 365): a "ballpark guesstimate" is not enough.
The log failed that limit on its face. It was undated. It appeared not to be a contemporaneous record. The court found it was likely created to reach the 750 hours needed for real estate professional status, which the owner also did not have. And its method, standardized hours multiplied by counts, was described as "far from reasonable." See the guide on reconstructed versus contemporaneous logs for why the distinction decides so many of these cases.
A detail from the footnotes deserves attention. The court noted that the owners had not addressed the second half of the 100-hour test at all, whether her participation was at least as much as any other individual's. With a cleaning service on the payroll, that comparison was live, and the record contained nothing to make it.
What a passing log for the same property would have looked like
Twenty-three stays and 93 rented days is a realistic small operation, and 100 genuine hours is within reach for an owner next door who does the work. The difference is entirely in the record:
- Dated entries, written at the time. "March 14: met plumber about water heater, 1h 10m," not "8 hours per day, 93 days."
- Actual durations per task. A turnover after one night and a turnover after two weeks logged as what each took.
- Cleaning logged as what she did, coordination and inspection, with the cleaner's invoices and hours kept alongside for the comparison the 100-hour test requires.
- Guest communication with evidence, which is the one category that worked in the actual case.
- No availability time. If a guest called at 11 p.m. about the Wi-Fi, the entry is the twenty minutes on the phone, not the evening.
Logged that way, the same year might have supported well over 100 hours. Logged as it was, it supported 7.4. The STR audit documentation guide lists what to keep next to the log so it can be corroborated.
Three habits the case teaches
- Write it the day it happens. An undated summary invites the finding that it was assembled for the return. STR Tracker records the creation timestamp of every entry separately from the activity date, so a log kept through the year carries its own evidence that it was, and a backfilled entry is visibly backfilled.
- Log work, not availability. "On call" is a state, not a task. The court gave it zero hours.
- Make the log agree with the return. Before filing, put the hours next to the expenses. A cleaning line on Schedule E and a cleaning block in the log cannot both be fully true.
Mirch was decided on a 2006 return under regulations that have not changed since. The reasonable-means standard is generous, the court said so, and the owner still lost, because a number multiplied by a count is not a record of anything. If you keep a spreadsheet, the free log template has the columns that make the difference. Whatever you use, the entry that survives is the one that says what you did, when, for how long, with something behind it.