The Augusta Rule Isn’t Dead—But Sinopoli and Jadhav Just Changed How You Use It In Tax Planning

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The so-called Augusta Rule (IRC §280A(g)) — rent your home to your business for up to 14 days a year, keep the rental income tax-free, and let the business deduct the expense — is a perfectly legitimate tax tool. But two 2023 Tax Court memoranda, Sinopoli v. Commissioner (T.C. Memo 2023-105) and Jadhav v. Commissioner (T.C. Memo 2023-140), made clear that the Tax Court will scrutinize how taxpayers implement the rule. Those decisions didn’t eliminate the rule, but they raise the bar on documentation, business purpose, and arm’s-length pricing. Below I summarize the holdings and give plain-English planning takeaways you can use today.

Quick legal background — what the Augusta Rule actually does

Section 280A(g) allows a homeowner to exclude rental income from their gross income for up to 14 days of rental use in a year. The idea: short, infrequent rentals (made famous by homeowners renting for the Masters tournament in Augusta) are excluded from income, while the payer (the business) may deduct the expense if it’s an ordinary and necessary business expense. That interdependence — tax-free income to the owner and a deductible expense to the business — creates the planning opportunity. Molen & Associates

What happened in Sinopoli (T.C. Memo 2023-105)

In Sinopoli, shareholders’ S corporations reported large “rental” expenses for meetings held at shareholders’ homes over multiple years. The Tax Court accepted that the code allows short-term home rentals in principle, but it dramatically limited the S-corporations’ deductions because the taxpayers failed to prove the facts needed to support the claimed amounts:

• The court focused on business purpose and substantiation: were meetings real, were they documented, was the time and scope consistent with what was claimed, and did the rent reflect an arm’s-length rate?

• The Tax Court found the record insufficient to allow the full deductions (and disallowed significant amounts). The decision signals aggressive fact-based review when a business pays large recurring “rents” to owners. Tax Reduction Letter+1

What happened in Jadhav (T.C. Memo 2023-140)

Jadhav is another cautionary tale. There, taxpayers attempted a tax plan built around short-term self-rentals and related entity payments. The Tax Court again emphasized that a taxpayer must prove the use, the business purpose, and the reasonableness of the rent. In Jadhav the plan “backfired” because the court found the arrangement lacked the necessary substance and documentation. Beyond disallowing the claimed benefits, the case also highlights how aggressive structures can invite additional scrutiny and potential penalties. Ed Zollars CPA's Blog+1

Big picture: the rulings don’t kill the Augusta Rule — they reframe it

Sinopoli and Jadhav together mean: you can still use §280A(g), but you can’t treat it as a rubber stamp or a bookkeeping trick. The Tax Court is looking for real meetings or events with real business purposes, contemporaneous documentation, reasonable market rent, and arm’s-length terms — especially when the payer is a closely held entity and the payee is an owner. Bloomberg Tax and other commentators flagged that the Court’s approach raises compliance risks for aggressive, recurring use of the rule. Bloomberg Tax+1

Practical planning checklist (how to use the Augusta Rule safely)

1. Limit use to true short-term events — §280A(g) applies only for up to 14 days per year. Don’t make a habit of monthly “meetings” that effectively turn your home into a retreat center. Molen & Associates

2. Document contemporaneously — keep meeting agendas, sign-in sheets, invitations, minutes, presentations, and photos dated the same day as the meeting. The Tax Court wants contemporaneous proof. Tax Reduction Letter

3. Create written rental agreements — have a dated, signed short-term rental agreement between the business and the homeowner setting the date, purpose, and price. Treat it like a real lease for that day. Corvee

4. Support an arm’s-length daily rate — document how you set the rent (comparable local venues, rates for comparable short-term rentals, or a professional appraisal). Don’t pick a number out of thin air or use formulaic inflated rates. Current Federal Tax Developments+1

5. Show a genuine business purpose — the meeting should serve an identifiable business need (strategy retreat, client seminar, staff training) and the business should be able to explain why the home was chosen over ordinary office space. Tax Reduction Letter

6. Avoid disguised compensation — excessive “rent” paid to an owner can look like disguised salary or dividend. Make sure pieces of the arrangement (timing, amount, beneficiaries) aren’t inconsistent with that risk. Bloomberg Tax

7. Be cautious with repeated or routine self-rentals by S corporations — Sinopoli shows courts scrutinize S-corp payments to shareholders carefully. If the pattern looks like routine compensation, the court may disallow deductions. Tax Reduction Letter

8. Consult your advisor about entity issues and state law — some state tax or corporate rules may treat these payments differently; get written advice if you plan repeated use. Vance Wealth

Draft documentation template (quick starter)

• Signed short-term rental agreement: date(s), purpose, hourly/daily rate, location, signer names.

• Agenda and meeting materials (dated).

• Attendance roster with signatures and titles.

• Proof of payment (business check/ACH) and deposit of payment to owner’s account.

• Contemporaneous memo explaining business reason for choosing the home vs. other venues.
  (Collectively these items materially improves the chance the deduction stands up in an audit.) Corvee+1

Final thoughts — use it, but use it like a normal business transaction

Sinopoli and Jadhav are not the end of the Augusta Rule, but they are a strong reminder: tax-planning strategies that rely on related-party transactions will be tested on substance, contemporaneous documentation, and reasonableness. If you plan to use §280A(g):

• Treat the transaction like any other arm’s-length venue rental.

• Keep contemporaneous evidence.

• Don’t use the rule as a recurring compensation substitute.

• When in doubt, get a written opinion or at least documented tax-adviser input before you run the numbers on a large, repeating program.

If you’d like, I can draft a short, fill-in-the-blanks rental agreement and a meeting documentation checklist you can use to implement this safely — or review an example set of documents (agenda, agreement, invoice) and tell you whether they look audit-ready based on Sinopoli and Jadhav.

Sources / further reading

• Sinopoli v. Commissioner, T.C. Memo. 2023-105 (full memo). Tax Reduction Letter

• Sinopoli case text on Leagle. Leagle

• Jadhav v. Commissioner, T.C. Memo. 2023-140 — case commentary and analysis. Ed Zollars CPA's Blog+1

• Practical guides to §280A(g) planning (Augusta Rule overview). Molen & Associates+1

• Bloomberg Tax analysis: “Masters Rule Is Shakier After Tax Court’s Home Rental Ruling.” Bloomberg Tax

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