Eger v. United States: a management contract is not a lease

By Max Medvedev · 6 Aug 2026

The manager is the operator, not the tenant

Eger v. United States, decided by the Ninth Circuit in 2020, closes a tempting escape route: relabelling the property manager as your tenant. The court held that a management contract is not a lease. The arrangement stays what the paper says it is — someone else running the property — and the manager's hours still run against yours.

What happened

The taxpayers' position depended on characterizing a management contract as a lease, with the management company standing in as the property's tenant rather than as the operator running it for guests. The Ninth Circuit rejected that characterization in 2020, and the deduction went with it.

The narrow facts are worth stating plainly, because the holding is narrow too. This is not a case about a bad log or padded hours. It is a case about what a document is.

What the court held

A management contract is not a lease. You cannot recharacterize your manager as your tenant.

That single sentence lands squarely on the two questions a short-term rental position is actually tested on, which is why it matters far beyond its facts:

• Who the customer is. The average-period-of-customer-use test in Reg. §1.469-1T(e)(3)(ii)(A) is what removes the automatic passive label under §469(c)(2). It measures guests' periods of use — total nights divided by the number of reservations — and the arithmetic depends on who is renting the place and for how long.
• Who did the work. Material participation under Reg. §1.469-5T(a) is a comparison. Test 3 asks for more than 100 hours and more than any other single individual. A manager who is running the property is a person with hours, and those hours sit on the other side of that comparison whatever the contract is called.

The tell

The tell in Eger is that the position was argued from a label instead of from the paperwork. The signed document was a management contract; the tax result needed it to be a lease; the name was changed after the fact and the court declined to follow.

That is the same failure as a rebuilt hours log, one level up. In Sezonov the record was written after the year to fit the claim. Here the relationship was renamed after the fact to fit the claim. Courts test the position against what actually existed at the time, and both moves fail for that one reason.

There is a second tell, and it is the one that catches most owners: a manager is on the property at all. Case law on this gate is unforgiving, and it is consistent —

• Pohoski v. Commissioner, T.C. Memo 1998-17 — a split result across two condos. He won the one where he could show he beat the manager's hours and lost the one where he could not.
• Barniskis v. Commissioner, T.C. Memo 1999-258 — an average stay of seven days or less, but the hours claimed were investor-type bookkeeping, and they could not beat the management company's.
• Lucero v. Commissioner, T.C. Memo 2020-136 — a distant, manager-run rental. Travel time to it did not count, and material participation failed.

The hands-off owner with a full-service manager is the number one disqualifier in this whole area. The manager out-hours the owner, so test 3 fails — and no naming convention repairs it.

What this means for your records

The practical rule from Eger is that the arrangement you documented is the arrangement you have. What follows from it is a set of records, not an argument:

• The contract itself, describing what it actually describes. A management agreement, a co-hosting agreement and a lease are three different things, and the one on file is the one that counts.
• The manager's or cleaner's hours, logged. You cannot win a race without the other runner's time. Vendor invoices and schedules are the independent proof of it — the Pohoski lesson made concrete.
• Your own hours, logged as the work happens, against that comparison: guest communication, coordinating and scheduling vendors, turnovers and repairs you perform, listing and pricing work, restocking and inspections, the bookkeeping.
• The structural choice, made early. Co-hosting or self-managing keeps the comparison winnable. Splitting vendor work so no single person out-hours you does the same, because "any other individual" is measured per person. Where a full-service manager is genuinely unavoidable, the remaining route is the 500-hour test, which needs no comparison and is a steep climb next to a day job.
• Spouse hours. §469(h)(5) folds a spouse's participation into yours even without an ownership interest, and it is frequently the difference.

A real-time log does this work by design when it records who did each piece of work, not only that it was done. Running owner and spouse hours against the single highest other individual all year is what turns the manager question from a surprise at exam time into a number you were watching in July, while there was still time to take back a few turnovers.

Check the comparison

The estimator scores that race directly: run your hours and your manager's or cleaner's hours through it and it evaluates all seven participation tests, showing which one survives the comparison and citing the rule behind each. The wider evidence stack — what counts, what never does, and how to document the other side's time — is in how to prove your short-term rental hours.