The Augusta Rule—also known as the Masters Exemption—comes from Internal Revenue Code §280A(g), titled “Special rule for certain rental use.” It allows a homeowner to rent a dwelling unit they use as a residence for fewer than 15 days in a year and completely exclude that rental income from federal gross income, while also disallowing related rental deductions on that property. :contentReference[oaicite:0]{index=0}

The rule has very real origins. In the 1970s, residents of Augusta, Georgia were renting their homes during the Masters Tournament for just a few days each year. Congress ultimately enacted §280A(g) around 1976 to give relief for those short-term event rentals, and the provision has applied nationwide ever since. :contentReference[oaicite:1]{index=1}

Today, business owners often pair the Augusta Rule with entities such as S corporations, C corporations, or partnerships: the company rents the owner’s home for legitimate meetings, deducts the rent, and the owner receives tax-free income under §280A(g). On paper, that can be a powerful “win-win.” In practice, the IRS and the Tax Court have made it clear that documentation, reasonableness, and business purpose decide who keeps the benefit—and who gets hit with back taxes and penalties.

What Is the Augusta Rule Under IRC §280A(g)?

IRC §280A(g) says, in substance, that if:

• You use a dwelling unit as a residence during the year, and
• That same dwelling is rented for less than 15 days during the year,

then:

• No rental deductions are allowed for that dwelling, and
• All rental income for those days is excluded from your gross income.

In other words, you can earn rental income for up to 14 days and not report a penny of that rent on your federal tax return, as long as you stay within the rules. :contentReference[oaicite:2]{index=2}

Original Purpose: Masters Tournament Rentals in Augusta

The Augusta Rule did not start as a social-media “tax hack.” It was a response to a very local problem:

• Each year, the Masters Tournament brought a surge of visitors to Augusta, Georgia.
• Hotel capacity was limited, so residents rented their homes for a few days at premium rates.
• Those short-term rentals created reporting and enforcement headaches for the IRS and taxpayers.
• Augusta homeowners successfully lobbied Congress for relief, which became §280A(g). :contentReference[oaicite:3]{index=3}

What began as a narrow accommodation for Masters-week rentals is now available to any eligible homeowner in the United States, regardless of the event or location.

How Business Owners Commonly Use It

Many closely held businesses use the Augusta Rule as part of a broader tax plan:

• The S corporation or C corporation rents the shareholder’s home for board meetings, strategy retreats, investor presentations, or staff training.
• The corporation pays a documented fair-market daily rate and deducts that rent as a business expense (subject to the “ordinary and necessary” and reasonableness standards under IRC §162). :contentReference[oaicite:4]{index=4}
• The owner excludes that rent from personal income under §280A(g), as long as total rental days for the property remain under 15.

Why Documentation Is Non-Negotiable

The Augusta Rule is simple in statute but unforgiving in practice. The IRS and the Tax Court focus on three things: fair-market rate, genuine business purpose, and credible documentation. When those are missing, the strategy collapses.

1. Fair-Market Rental Rate

The rent your business pays to use your home must be in line with what an unrelated party would pay for similar space, for a similar purpose, in your market. To support that, you should maintain:

• Comparable rental listings for similar homes or meeting spaces in your area.
• Airbnb/VRBO screenshots or printouts near the time of the events.
• Quotes or rate sheets from hotels or conference centers for comparable meeting space.
• Any appraisals or broker opinions you obtained.

Inflated daily rates are one of the fastest ways to turn an Augusta plan into an IRS exam.

2. Written Rental Agreement

A written rental agreement between you (as homeowner) and your entity is essential. At a minimum it should spell out:

• Specific dates and times of the rental.
• Daily rental rate and how it was determined.
• Business purpose and type of activities planned.
• Payment terms, deposit, cleaning responsibilities, and liability for damage.
• Signatures from both sides (you as homeowner, you or another officer on behalf of the business).

Just as important: this agreement should be executed before the first rental day, not thrown together years later when an audit notice arrives.

3. Legitimate Business Purpose

The Augusta Rule is not a license to write off vacations. The rental days must have a bona fide business purpose, such as:

• Board or shareholder meetings.
• Annual strategic planning sessions.
• Employee training or compliance meetings.
• Investor updates or due-diligence sessions.

Your file should include:

• Agendas and meeting outlines for each day.
• Minutes showing issues discussed, decisions made, and action items.
• Sign-in sheets or attendee lists.
• Copies of slide decks, handouts, and work product.
• Photos of the business activities (not family barbecues).

4. Actual Payment and Accounting Trail

The corporation has to actually pay the rent. The IRS is not impressed by journal entries with no movement of cash. Best practice includes:

• Corporate checks or ACH transfers from the business bank account.
• Clear memo lines (e.g., “Home rental – board meeting – 03/15/2026”).
• Bank statements showing the payment leaving the business and arriving in the homeowner’s account.
• An invoice from the homeowner to the business.
• Proper rent expense coding in the general ledger.

5. Day-Count Proof

Remember: crossing the 14-day line is fatal to the exemption. If you hit day 15, all rental income is taxable, and the property is treated under normal rental rules, not the Augusta Rule. You should maintain:

• A calendar or log of every rental day with the business.
• Files grouped by event, not just by year.
• Evidence that you did not rent the property more than 14 days in total to any party.

When the Augusta Rule Goes Wrong: Sinopoli v. Commissioner

The 2023 Tax Court case Sinopoli v. Commissioner, T.C. Memo. 2023-105, is the clearest recent warning about abusing Augusta-style strategies.

What Happened in Sinopoli

In Sinopoli:

• Three owners of an S corporation operating fitness centers caused the company to pay rent to each of their homes for “monthly meetings.”
• Over three years, the corporation deducted roughly $290,000 of rent and the owners attempted to exclude that rent from income using the Augusta Rule under §280A(g). :contentReference[oaicite:7]{index=7}
• The IRS audited, challenged the rental deductions, and argued that the arrangement was primarily a scheme to distribute earnings tax-free.

Why the Tax Court Slashed the Deductions

The Tax Court did not strike down §280A(g). Instead, it applied long-standing principles:

• Business expenses must be “ordinary and necessary” under IRC §162 and reasonable in amount, especially in related-party transactions. :contentReference[oaicite:8]{index=8}
• Taxpayers must substantiate expenses with credible records under IRC §6001.

The court found major problems:

• No credible written documentation of regular meetings (few agendas, minutes, or calendars).
• Inconsistent and not-credible testimony about how often meetings occurred. :contentReference[oaicite:9]{index=9}
• No appraisal or independent support for the high rental rates.
• Local comparable meeting space was available for about $500 per day—far below what the S corporation was paying. :contentReference[oaicite:10]{index=10}

Of nearly $290,000 of rent deductions claimed, the court allowed only a small fraction (approximately $16,500 total across three years), accepting the IRS’s $500-per-meeting figure as generous and disallowing the rest. :contentReference[oaicite:11]{index=11}

The Lesson from Sinopoli

Sinopoli actually reinforces an important point: the Augusta Rule is still valid law, but courts will dismantle abusive or poorly documented implementations. Reasonable rent, real business purpose, and contemporaneous records are what separate legitimate planning from a costly “scheme.”

IRS Audit Red Flags for Augusta Rule Claims

Based on IRS guidance, case law, and audit patterns, these factors tend to draw attention:

• Very large Augusta rent deductions relative to your company’s revenue.
• Round numbers (e.g., $50,000 even every year, same daily rate with no variation).
• Sole shareholder “meetings” with no other attendees or minutes.
• Vacation homes or luxury properties used for “retreats” with weak documentation.
• No third-party comparables to support the daily rate.
• Social-media evidence of personal vacations during the same dates you reported business meetings. :contentReference[oaicite:12]{index=12}

How Tax Help Guy Approaches Augusta Rule Compliance

The goal isn’t to “push the envelope.” It’s to use the law as written, supported by case law like Sinopoli, and build a file that would make an IRS agent quietly close the exam.

1. Fair-Market Rate Analysis

• Identify realistic comparables (homes, event spaces, hotel meeting rooms).
• Document how your daily rate was selected and why it is reasonable.
• Adjust rates when the market changes instead of using the same number every year.

2. Documentation Framework

• Rental agreement templates tailored to your entity and property.
• Standard agenda, minutes, and sign-in templates for each meeting.
• Checklists for pre-rental, during-rental, and post-rental documentation.

3. Business Purpose Validation

• Align Augusta rental days with real board, shareholder, investor, or training needs.
• Make sure meetings at your home are not duplicative of meetings already held elsewhere.

4. Payment Trail Setup

• Help you design a clean payment and accounting workflow.
• Ensure your books clearly reflect rent, not disguised distributions.

5. Day-Count Monitoring

• Implement simple ways to track the 14-day limit across all uses of the property.
• Review other uses (e.g., Airbnb) to make sure you don’t accidentally blow the exemption.

Augusta Rule Compliance Checklist

Pre-Rental

• ✅ Written rental agreement executed before the first rental day.
• ✅ Fair-market rate support (comparables, quotes, or appraisal).
• ✅ Board or shareholder resolution authorizing the rental arrangement.
• ✅ Clear business purpose for each day.

During Rental

• ✅ Agendas and meeting packets prepared in advance.
• ✅ Sign-in sheets and detailed minutes kept for each day.
• ✅ Photos that support business use (and avoid personal-use optics).

Post-Rental

• ✅ Invoice from homeowner to entity.
• ✅ Payment from corporate account and deposit to personal account.
• ✅ General ledger entries clearly labeled as rent.
• ✅ All documents filed together in corporate records and personal tax files.

Annual

• ✅ Confirm total rental days for the property are under 15 for the year.
• ✅ Refresh comparables to keep rates current.
• ✅ Retain all Augusta files for at least the length of the IRS statute of limitations, plus a comfort margin.

Frequently Asked Questions

Can I use the Augusta Rule every year?

Yes. There’s no limit on the number of years, as long as you meet the §280A(g) requirements each year: under 15 rental days, proper use as a residence, and compliance with normal business-expense rules for the entity.

Can my corporation rent my vacation home?

Possibly, but vacation homes draw extra scrutiny. You must avoid personal use during the rental period and be prepared with strong evidence of business purpose and rate support. :contentReference[oaicite:13]{index=13}

Does the Augusta Rule work with LLCs and partnerships?

Yes. The rule applies at the homeowner level. As long as the entity can legitimately deduct rent (S corporation, C corporation, partnership, or certain LLCs) and the homeowner qualifies under §280A(g), the structure can work.

What happens if I accidentally hit day 15?

If the property is rented for 15 or more days in a year, the Augusta Rule no longer applies. All rental income becomes reportable, and you move into the normal rental property regime, with deductions limited by rental rules rather than a full exclusion. :contentReference[oaicite:14]{index=14}

Can I still claim a home office deduction?

In many cases, yes. The home office rules and §280A(g) apply to different types of use. You can have a qualified home office for regular business days and a separate set of properly documented Augusta rental days, but the analysis is fact-specific.

How detailed do the minutes need to be?

Very. Minutes should show the date, attendees, topics, decisions, and action items. Vague notes like “discussed business issues” will not impress an auditor, especially after Sinopoli. :contentReference[oaicite:15]{index=15}

Legal References

• Internal Revenue Code §280A(g) – “Special rule for certain rental use,” the statutory basis for the Augusta/Masters Rule allowing exclusion of income from a dwelling used as a residence when rented fewer than 15 days during the year. :contentReference[oaicite:16]{index=16}
• Legislative history and origin – Enacted in the 1970s after Augusta, Georgia homeowners renting during the Masters Tournament pushed for relief from tax on short-term event rentals; now applied nationwide. :contentReference[oaicite:17]{index=17}
• Sinopoli v. Commissioner, T.C. Memo. 2023-105 – Recent Tax Court decision sharply limiting rent deductions under an Augusta-style arrangement due to inadequate documentation, unreasonable rental amounts, and related-party concerns, while leaving §280A(g) itself intact. :contentReference[oaicite:18]{index=18}
• IRC §162 and related authority – Business expenses must be ordinary, necessary, and reasonable in amount, with reasonableness taking on special importance in related-party transactions. :contentReference[oaicite:19]{index=19}

Final Thoughts: Use the Augusta Rule, Don’t Abuse It

The Augusta Rule under §280A(g) is not a loophole Congress forgot about. It’s a deliberate provision with roots in the Masters Tournament era in Augusta, designed for short-term, limited-use rentals. When business owners layer it onto their entity structure thoughtfully, it can be a powerful, legitimate planning tool.

When taxpayers treat it as “free money” and ignore the documentation, reasonableness, and business-purpose requirements, they end up like the taxpayers in Sinopoli: keeping a sliver of the deductions and paying tax, penalties, and interest on the rest.

If you’re serious about using the Augusta Rule, approach it like a serious tax strategy—not a meme. Build your file as if you knew from day one that an IRS agent and a Tax Court judge would eventually read every word.