They Logged 932 Hours and Still Lost REPS. Here's Why.

Most investors who lose a REPS claim in Tax Court lose it because they didn't keep a log. Hairston v. Commissioner is different. The Hairstons kept a log. Two calendars, 360 entries, 932 hours of rental work documented across the year. On paper, they did everything right.

They still lost. The IRS disallowed nearly $55,000 of rental losses over three years, and the Tax Court backed the IRS.

If you're chasing Real Estate Professional Status or the STR loophole, this is the case to understand. Not because it's obscure, but because it's the pattern. Having a log isn't enough. The log has to survive scrutiny. And the Hairstons' didn't.

Here's exactly what the Tax Court tore apart in Hairston v. Commissioner (T.C. Memo 2019-104), and what it means for how you document your hours.

What Happened in Hairston v. Commissioner?

Short answer: Mr. Hairston, a retired investor, claimed he worked 782 hours on two rental properties in 2014 to qualify as a real estate professional under IRC Section 469(c)(7). The Tax Court found his log inflated by at least 150 hours, dropping him below the 750-hour threshold. The court disallowed rental losses totaling nearly $55,000 across three years and imposed a 20% accuracy-related penalty.

Mr. Hairston was retired. His wife worked part-time. Together they owned two rental properties and claimed he qualified as a real estate professional for 2013 and 2014, which would let them deduct rental losses against their other income instead of having those losses trapped as passive.

For REPS, one spouse has to separately hit both tests:

• More than 750 hours in real property trades or businesses where they materially participate.
• More than half of all their personal services in real property trades or businesses.

Mr. Hairston being retired made the second test easy. The 750-hour test is where it fell apart.

The Hairstons produced two calendars, one per property, with a total of 360 entries covering 932 claimed hours of real estate work. They broke it down by property. That's more structure than most investors have.

The IRS said 669 hours were Mr. Hairston's, 170 were his wife's, and 93 were unclear. Even giving him every unclear hour put him at 762, barely past the 750-hour minimum. The Hairstons' own math put him at 782.

Either way, any inflation at all would blow the test. And the Tax Court found the hours were inflated by at least 150.

Why Wasn't the Hairston Log Considered Contemporaneous?

Short answer: Most entries were written at the end of the week (or later), not on the date the work was performed. The handwriting was also uniform across both calendars, which suggested the entries weren't made at the time of the activity.

The first thing the court noticed wasn't the content. It was the handwriting.

The calendars for both properties had identical handwriting throughout. And when the court looked at when entries were actually written down, the answer was: not when the work happened. Some entries were recorded on the day of the activity. Most were written at the end of the week. Some came later than that.

Treas. Reg. Section 1.469-5T(f)(4) says hours can be proven by "any reasonable means" and explicitly says contemporaneous daily logs are not required. It also says "a post-event ballpark guesstimate" won't work. Writing down Monday's work on Friday isn't technically post-event, but it's closer to a weekly reconstruction than a contemporaneous record. Combine that with the uniform handwriting, and the court had reason to question whether the log reflected what actually happened or what the taxpayer remembered later.

This is the part no spreadsheet or paper calendar can solve. The act of writing everything down at the end of the week leaves no forensic trail showing you were actually working on Monday. An app that timestamps your entry when you make it does.

Why Did One-Hour Minimums Sink the Log?

Short answer: The Hairstons logged 60 separate one-hour entries for tasks that take minutes in real life (receiving rent, paying the mortgage, reminding tenants about rent). The Tax Court treated this rounding pattern as evidence the hours were inflated.

Here's the breakdown:

• 36 one-hour entries for receiving a rent payment, issuing a receipt, or depositing a check at the bank.
• 13 one-hour entries for paying the mortgage.
• 11 one-hour entries for reminding tenants to pay rent.

That's 60 hours, roughly 8% of Mr. Hairston's total, spent on tasks that take minutes in real life. You don't need an hour to deposit a rent check. You don't need an hour to pay your mortgage online. You don't need an hour to send a tenant a "hey, rent's late" text.

The court called this out as a credibility problem. And here's the thing: this pattern is everywhere in rejected REPS logs. People round to the nearest hour or half-hour because that's what feels like "logging." What actually happens is you turn 5-minute tasks into 60-minute entries and the log inflates on its own.

This is one of the reasons REPS Time was built to require start and end times rather than duration estimates. If you actually timed the task, you can't accidentally round it up by 11x.

Why Were 93 Hours of Snow Removal Rejected?

Short answer: The snow removal was for a garage the tenants had no right to use. It was personal property maintenance, not rental work. The lease didn't make the landlord responsible for snow removal at all.

This problem is wild.

Mr. Hairston logged between 93 and 105 hours of snow removal for 2014. That alone is a quarter of his 750-hour target. The lease didn't say the landlord was responsible for snow removal. One-third of those hours were listed as "preparing for" and "deciding" about a single snowstorm.

Then at trial it came out that the snow removal wasn't even for a tenant area. The garage being cleared was one the tenants had no right to use. The Hairstons stored their own vehicles and tools there.

That's not REPS work. That's personal property maintenance.

The lesson isn't "don't log fraudulent hours." Nobody reading this article needs to be told that. The lesson is more subtle: when you log vague activity categories like "property maintenance," you lose the ability to tell later whether the hours were actually for the rental business or for something adjacent to it. A log that forces you to specify what you did, on which property, and why (at the time you did it) makes this kind of category drift much harder.

Does "Watching" Contractors Count as Material Participation?

Short answer: No. Passive observation of contractor work doesn't count as material participation under IRC Section 469. Being "on-call" to answer questions also doesn't qualify. The Tax Court specifically rejected 73 hours Mr. Hairston logged watching contractors install carpet and paint interiors.

Mr. Hairston logged 33 hours watching carpet being installed and cleaned at one property. He logged another 40 hours supervising contractors painting the interior.

That's nearly 10% of his claimed hours sitting in a room while someone else did the work.

The court's line on this was pointed: "we do not believe that petitioner spent an entire week watching paint dry." And even if he had been there the whole time, those hours don't count as material participation. At best, the court said, he was "on-call" to answer questions, and on-call time doesn't qualify.

This is a critical REPS concept most investors miss. Material participation under IRC Section 469 requires actually doing the work that affects day-to-day operations. Observing someone else do it does not count. If your contractor can complete the job whether you're there or not, your presence isn't participation.

The structured categorization matters here too. "Oversaw contractor painting at 123 Main" sounds legitimate. "Spent 40 hours watching contractors paint" does not. Forcing yourself (or your tracking app) to describe what you were actually doing during those hours exposes when an activity doesn't belong in the log in the first place.

How Did the Tax Court Calculate the 150-Hour Haircut?

Short answer: The court identified roughly 226 hours of problematic entries and found Mr. Hairston's hours were inflated by at least 150. Removing those 150 hours dropped him below the 750-hour threshold required for REPS qualification.

Put it all together:

• 60 hours of inflated routine-task entries (rent receipts, mortgage payments, tenant reminders).
• 93+ hours of personal-use snow removal.
• 73 hours of watching contractors work.

That's 226 hours the court wouldn't count. Even if the court had only disallowed the 150 most problematic hours, Mr. Hairston dropped from 782 to 632. Not 750. Not REPS.

The Hairstons lost deductions on three years of rental losses and got hit with a 20% accuracy-related penalty on top.

What Makes a REPS Log Defensible in an IRS Audit?

Short answer: A defensible REPS log has five characteristics. Entries made at the time of the activity, start and end times (not estimated durations), specific descriptions of what was actually done, property tags on every entry, and exclusion of observer/investor time.

Most articles about REPS audits end with "keep a contemporaneous log." That's not enough. The Hairstons had a log. What they didn't have was a log that could survive a smell test.

Here's what the Hairston case shows you about what actually works:

Log entries at the time of the activity, not at the end of the week. The forensic trail matters. An app that timestamps your entry when you make it is proof you logged when you worked. A paper calendar where everything is written in the same pen on Friday night isn't.

Use start and end times, not estimated durations. Rounding to the nearest hour or half-hour isn't just sloppy. It's the single most common inflation pattern in rejected logs. "10:15am to 10:32am, paid mortgage for 123 Oak from checking account" is credible. "1 hour, paid mortgage" is the Hairston pattern.

Be specific about what the activity was. "Worked on rental" is useless. "Snow removal" is ambiguous. "Shoveled walkway and driveway at 123 Oak tenant entry, 15 min" is defensible and also physically impossible to inflate.

Tag every entry to a property. The Hairstons had this at the calendar level but not the entry level, which is why the court could question which property got what hours. Per-entry property tagging is what the regs and case law increasingly expect.

Don't log passive observation as participation. If your contractor is doing the work and your job is to answer occasional questions, that's on-call time. On-call time doesn't count. Neither does reviewing statements your property manager sent you (that's investor work under Treas. Reg. Section 1.469-5T(f)(2)(ii), not material participation).

Keep corroborating evidence for big entries. If you logged 4 hours at a property on a specific day, a Home Depot receipt, a text to your contractor, and a photo of the repair all make that entry stronger. The Hairstons didn't have that supporting trail.

This is the system REPS Time was built around. Start and end timestamps for every entry. Required property tag. Required description. Activity category pulled from a structured list that maps to the IRS material participation categories. No ability to go back and insert entries from six months ago without it being obvious.

The Hairstons' log looked organized. It wasn't defensible. Those aren't the same thing, and the difference is the whole game.

Paper Calendar vs. REPS Time: Key Differences

Frequently Asked Questions

Does the IRS require an hour log to claim REPS? Technically no. Treas. Reg. Section 1.469-5T(f)(4) says participation can be shown by "any reasonable means" including appointment books, calendars, or narrative summaries. In practice, cases like Hairston show that without a detailed log the taxpayer has almost no chance of meeting their burden of proof in an audit or Tax Court.

Can I reconstruct my REPS log at the end of the year? The Tax Court has repeatedly rejected reconstructed logs. In Goshorn v. Commissioner and Almquist v. Commissioner, logs created after the IRS started asking questions were dismissed as "post-event ballpark guesstimates." The earlier you log, the stronger your record.

What's the minimum time I can claim for a REPS task? There's no rule. Hairston shows what happens when every task rounds up to an hour. If you paid the mortgage online in 5 minutes, log 5 minutes. An app that captures start and end times is a natural defense against inflation.

Do I need to log every little thing for REPS? The 750-hour test doesn't care if individual entries are small. It cares if the total is credible and the entries are specific. A log full of 5-minute and 15-minute entries that add up to 800 hours is more credible than a log of 40 one-hour entries that add up to 800 hours.

What if my CPA says a simpler log is fine? Tax Court decisions are binding. A CPA's opinion isn't. Hairston, Penley v. Commissioner, and Almquist all involved taxpayers who thought their records were adequate and were told otherwise by the court. The structured approach matches what the courts have actually upheld.

Does watching contractors count toward REPS hours? No. The Hairston court rejected 73 hours of "watching" contractors as material participation. Observing someone else do the work, or being "on-call" to answer questions, doesn't meet the standard in Treas. Reg. Section 1.469-5T. You have to be performing the work that affects day-to-day operations.

What's the 750-hour test for REPS? To qualify as a real estate professional under IRC Section 469(c)(7), one spouse must perform more than 750 hours of services in real property trades or businesses in which they materially participate. They must also spend more than half of all personal services during the year in those real property trades or businesses.

Can spouses combine hours for REPS? No. Under IRC Section 469(c)(7)(B), only one spouse must independently satisfy both the 750-hour test and the more-than-half test. Spouses can combine hours for the material participation test on individual properties, but not for REPS qualification itself.

Key Takeaways

• The Hairstons logged 932 hours of rental work across two properties in 2014 and still lost Real Estate Professional Status (REPS) in Tax Court.
• The Tax Court ruled their hours were inflated by at least 150, dropping Mr. Hairston below the 750-hour minimum required by IRC Section 469(c)(7).
• The log failed on four issues: entries written at the end of the week (not contemporaneously), one-hour minimums for routine tasks, 93 hours of snow removal for personal-use space, and 73 hours of "watching" contractors work.
• Result: Nearly $55,000 of rental losses disallowed over three years, plus a 20% accuracy-related penalty.
• The lesson: Keeping a log is not enough. The log has to survive a credibility test.

Keep a REPS log that actually holds up. REPS Time is built around start and end timestamps, required property tags, and structured activity categories pulled from IRS material participation guidance. No reconstructing at year-end. No one-hour minimums. No surprises in an audit.

This article is for educational purposes only and does not constitute tax or legal advice. Consult your CPA or tax attorney before making decisions based on IRS guidance or Tax Court cases.