Zarrinnegar v. Commissioner: a full-time job is not a bar

By Max Medvedev · 6 Aug 2026

Zarrinnegar v. Commissioner, T.C. Memo 2017-34, is a taxpayer win. A full-time dentist met the material participation standard on a detailed log kept as the work happened. It is the case that answers the most common objection a high-earning owner raises about this whole strategy: a demanding job does not disqualify you. It only makes the record carry more weight.

What happened

The taxpayer was a dentist working full time. Participation was the contested question, and the record offered to prove it was a detailed log kept in real time rather than assembled afterward. The court accepted it, and the taxpayer won.

The reported lesson is that pairing — a full-time profession on one side, a detailed real-time log on the other, and a win. Nothing in §469 or in Reg. §1.469-5T(a) makes a second occupation disqualifying. The seven material participation tests count hours in the activity; they do not ask what else fills the week.

What the court held

The holding is about the credibility of hours, not about an exception for busy people.

An examiner's standard move runs the other way. The IRS Passive Activity Loss Audit Technique Guide instructs examiners to establish the taxpayer's time on all activities in the initial interview — deliberately capturing the W-2 job's hours — and then to ask whether the claimed participation is "reasonable in light of other obligations." The governing phrase for participation itself is "regular, continuous, and substantial." A busy taxpayer with a large loss is exactly the shape that invites the feasibility attack.

Zarrinnegar is the answer to it. Detail defeats implausibility, because a log written while the work happened produces hours the size of the tasks that generated them, spread across the days those tasks actually fell on. That is what a schedule looks like when it is real.

The tell

The tell is what the log did with the arithmetic of a full week.

Compare the failures. In Penley, T.C. Memo 2017-65, roughly 2,520 hours were claimed — more than a full-time job's 2,000-hour year, on a rental — with no start and stop times recorded, and the court discarded the total as implausible. In Mirch, T.C. Memo 2025-128, about 920 claimed hours collapsed to credible participation under 100, sunk by a flat seven hours per turnover regardless of a 1-day or 14-day stay and by 744.5 hours of on-call and site management time that was never work performed.

Those records failed a test that has nothing to do with tax law. They described a life nobody lives. A real-time log fails that test only if the year itself was impossible, because the entries were written against a calendar that also held the job, the commute, and everything else.

The second half of the tell is the comparison. The 100-hour route is not a threshold, it is a race: more than 100 hours and more than any other single individual — the cleaner, the co-host, the handyman. A full-time job squeezes the owner's side of that comparison, which is why the Pohoski rule matters most to exactly this taxpayer. Hours that go to a full-service manager are hours you now have to beat.

What this means for your records

The practical rule: claimed hours have to survive being added up next to the rest of the year. Three things follow from that.

Entries sized to the task, not rounded to the hour. A 12-minute message reply and a 40-minute supply run are more believable than four flat hours, and they are also what actually happened.

The other job's hours documented too. It is the denominator in the examiner's feasibility question, and volunteering it is stronger than having it reconstructed for you.

A margin that does not need the doubtful hours. Travel time is fragile — the Audit Technique Guide says it "generally should not be considered," and Lucero, T.C. Memo 2020-136, disallowed it for a distant, manager-run rental. Being on call counts for nothing at all. A win that depends on those categories is not a win.

A log kept as the work happens does this without anyone thinking about it. Entries are dated the day the work occurred and are treated as evidence-backed only when they cite an outside record — a guest message thread, an invoice, a receipt. The plausibility check runs as arithmetic rather than as an argument: more than 16 hours of countable owner and spouse time on one work date is blocked before export, and a 30-day stretch averaging over 12 hours a day draws a warning. Both numbers exist because Penley and Mirch lost on exactly that math.

Two more figures worth having: a spouse's hours count as the owner's under IRC §469(h)(5), which is often what clears the floor when the day job is real, and there is no proration of the hour tests in a short first year — Gregg v. United States, 186 F. Supp. 2d 1123 (D. Or. 2000). An October closing still needs the full count.

Where this fits

Zarrinnegar removes the excuse and replaces it with a requirement. The job is not the problem; a log written in April is. The mechanics of the hour race are in the hub guide on how to prove short-term rental hours.

For the arithmetic on a specific year, run your hours and reservation mix through the estimator — it applies all seven tests in Reg. §1.469-5T(a), shows which one carries the year and by what margin, and cites the rule behind every number.