08. Case Studies
Case Studies
These two examples demonstrate how the Augusta Rule works in real life — one from an individual homeowner and one from a business owner using their own S-Corp.
👩 Individual: 3-Day Event Rental
Profile:
Sarah owns a 4-bedroom home near a major convention center. She occasionally rents it out but primarily lives there.
Scenario:
A local marketing firm asks to use her home for a 3-day leadership retreat. They offer $1,500/day — for a total of $4,500.
✅ Sarah agrees, but ensures:
She does not rent to anyone else that year
The rate is in line with local Airbnb venues
She documents the contract and payment via bank transfer
Result:
$4,500 earned — not reported on her tax return
🧾 No 1099-MISC was issued
No Schedule E entry required
She still deducts mortgage/property tax under Schedule A
👨💼 Business Owner: 8-Day Strategy Sessions
Profile:
Mark owns MarkCo Consulting, an S-Corp with 5 employees. He uses a co-working space downtown but prefers to host quarterly strategy meetings at his home.
Scenario:
Mark rents his home to MarkCo for four 2-day planning sessions per year. He charges $800/day based on Peerspace comps.
📝 Each rental includes:
Board approval
Rental agreement
Signed agenda and attendee log
Invoice issued and paid by MarkCo
Payment via business check
📅 Total: 4 sessions × 2 days × $800 = $6,400
Tax Result:
MarkCo deducts $6,400 as a business expense
Mark does not report the $6,400 on his personal tax return
He retains documentation for 7 years in case of audit
✅ Lessons Learned
Sarah (Homeowner)
$4,500 tax-free income
Didn’t exceed 14-day rule
Mark (S-Corp Owner)
Double benefit: business deduction + tax-free personal income
Followed documentation to avoid IRS challenge
💡 These case studies show that:
The Augusta Rule works for third-party rentals and related-party setups
The key to protection is documentation, documentation, documentation
Last updated