Spreadsheet or app for a material participation log

By Max Medvedev · 6 Aug 2026

A spreadsheet can hold a defensible participation log. Birdsong v. Commissioner was won on detailed spreadsheets, and the regulation prescribes no format at all. What separates the records that survive from the ones that fail is not the file type. It is when each entry was written, and whether it points at anything independent.

The case for the spreadsheet is a real one

Reg. §1.469-5T(f)(4) says participation may be established "by any reasonable means," that "contemporaneous daily time reports … are not required," and that appointment books, calendars or narrative summaries can carry it. In Birdsong v. Commissioner, T.C. Memo 2018-148, detailed spreadsheets supported by credible testimony met that standard and the taxpayer won.

So when a CPA tells a client a spreadsheet is enough, they are stating the law correctly. They are usually right about the client, too — most owners with one property, a day job and a cleaner do not have a software problem. They have a habit problem, and no purchase fixes a habit.

What actually decides it

Two records can be identical in format and land on opposite sides.

When it was written. Sezonov v. Commissioner, T.C. Memo 2022-40, is the short-term rental case that turned on this and nothing else. Nothing was kept during the year; the hours were assembled afterward; the court dismissed them as "ballpark guesstimates" and the participation claim failed. The order of events was visible before anyone read a single entry.

Whether the entries are testable. In Penley v. Commissioner, T.C. Memo 2017-65, roughly 2,520 hours were claimed on a log with no start or stop times. The court did not trim the total down to something it believed — it found the number implausible and discarded the log. Without endpoints there are no small arguments available, only one large one, and the large one failed.

Whether anything independent backs it up. Every entry that names a guest message thread, a cleaner invoice, a supply receipt or a calendar item invites the examiner to check it and find it holds. An entry reading "management, 7 hours" ends the inquiry early.

Whether the other side of the race is in there. The 100-hour test compares your hours against the single highest other individual, per person, never combined. That number belongs to a cleaner or manager who has no reason to reconstruct their year for you in 2029.

Notice what is missing from that list: software. Every one of those properties can live in a spreadsheet, and every one can be absent from an app.

The honest decision rule

Use a spreadsheet if you will genuinely open it the same day the work happens, hours are the only thing you need to record, you will type start and stop times rather than round blocks, and you will paste in a pointer to the message or invoice each entry came from. That record costs nothing and beats a paid app you fill in quarterly.

Buy an app if any of the following is true:

The tools built for this are covered in the software comparison hub, with prices checked on each vendor's own site on 6 August 2026 — confirm before buying, since they move.

The middle path

Most people who ask this question do not need to choose yet. They need to find out whether the habit sticks, which costs nothing to test.

Our participation log template is a spreadsheet with the columns the case law asks for: date, activity, start and stop times, duration, who did it, and the evidence the entry points at. No email wall, no account. It is also a specification — if you are evaluating an app, check that it captures those same fields, because that is the resolution Birdsong accepted and Penley lacked.

Two free things go with it. The material participation checker runs your hours through all seven tests in Reg. §1.469-5T(a), including the comparison against the highest other individual, so you are logging toward the right threshold. The estimator models the whole year and shows whether the hours are even the binding constraint — plenty of owners discover the average-stay test or a loss limit decides their result before participation ever gets a vote.

Run the spreadsheet for one month. If it is current on the last day of that month, you have your answer and it is free. If it is empty, you have learned something more valuable than a feature comparison would have told you, and you now know exactly what you are buying an app to fix.