Pohoski v. Commissioner: the manager's hours decide yours

By Max Medvedev · 6 Aug 2026

One owner, two condos, two outcomes

The owner of two condominium units claimed material participation in both. He won on the one where he could show his hours beat the manager's, and lost on the one where he could not. The rule that decided it is the second half of the 100-hour test: your hours are measured against someone else's.

That is the half almost nobody records. Pohoski v. Commissioner, T.C. Memo 1998-17, is older than the short-term rental boom and still the most useful case in this library for anyone who pays a manager, a cleaner, or a co-host.

What happened

Two properties, one owner, and evidence that was not equally good across them.

On one condo, the owner could establish what the management side had done and show that his own participation exceeded it. On the other, he could not, and the claim failed there. The court reached opposite conclusions on the two properties.

That split is a rare and clean natural experiment. The variable was not effort, sincerity, or the type of property. It was whether the record answered the question the test actually asks.

What the court held

Material participation under Reg. §1.469-5T(a)(3) — the workhorse test for a single-property owner — has two legs, and both have to hold:

1. You participated for more than 100 hours during the year, and
2. your participation was not less than that of any other single individual, owner or not, employee or contractor.

Clearing 100 hours proves nothing on its own. The second leg is comparative, and the burden of proof sits with the taxpayer on both halves. Where the owner carried it, the deduction stood. Where he did not, the hours could have been real and the test still failed, because an unproven comparison is a lost comparison.

The doctrine repeats across the manager cases. Barniskis v. Commissioner, T.C. Memo 1999-258, failed against a management company. Lucero v. Commissioner, T.C. Memo 2020-136, failed on a distant, manager-run property. Eger v. United States, decided by the Ninth Circuit in 2020, closed the creative route out of it: a management contract is not a lease, so the manager cannot be recharacterised as your tenant.

The tell

The behaviour that decided both properties was record-keeping about a third party.

"Any other individual" is measured per person, never as a combined total. Three vendors at 90 hours each lose to your 120, even though they add to 270. One cleaner at 150 beats your 120, and you are over the floor and still passive. So the only number that matters on the other side of the race is the single highest one — and it belongs to someone who does not work for you at tax time and has no reason to reconstruct their year on request.

That is what makes this a documentation problem rather than an effort problem. An owner can work hard all year, log every hour honestly, and still be unable to win the comparison in 2028 because nobody wrote down what the cleaner did in 2026. Pohoski is the case where you can watch that happen and not happen to the same person at once.

One margin runs the other way and is worth knowing: a spouse's hours count as the owner's under IRC §469(h)(5), even with no ownership interest. Twenty spouse hours of restocking and guest messages are often what turns a lost comparison into a won one.

What this means for your records

The rule that falls out is short: a participation file is not finished until it contains the other runner's time.

In practice that means the vendor side is captured as it happens, from documents that exist anyway — invoices that state hours or visits, cleaning schedules, maintenance tickets, the manager's monthly statements, and the booking calendar those visits hang from. Vendor paperwork does double duty here, since the same W-9s and 1099-NECs collected for the reporting rules also establish who worked and how much.

A log built this way answers the comparison directly: owner hours plus spouse hours on one side, the single highest other individual on the other, each side backed by its own evidence. It also surfaces the problem while it can still be fixed — a cleaner drawing level in September is a live decision about who does the next few turnovers, not a discovery made in April.

Two habits follow from the same place. Log the other side even when you are winning comfortably, because the margin is only credible if it was measured. And do not build a record designed to tie: the regulation's literal words are "not less than," and on the letter a tie qualifies, but a log engineered to land on one is a log built for an argument.

The hub for this cluster, how to prove your short-term rental hours, covers the seven tests and where this one sits among them. The 100-hour test in detail works through the race itself.

Check the race you are actually in

Run your hours and your vendors' hours through the estimator — it scores the comparison person by person, applies all seven tests in Reg. §1.469-5T(a), and cites the rule behind each result.