Do you rent out a vacation home or second property? If so, there’s a real-life tax case you should know about—one that cost a homeowner over $20,000 in lost deductions.
The $20,000 Lesson: A Real-Life Example
Charles M. Akers owned a cabin in Alpine, California, which he rented through a property management company. On his tax return, he deducted more than $20,000 in expenses. The problem? The IRS and the Tax Court denied every dollar.
Why? Mr. Akers couldn’t prove he materially participated in the rental activity or that his use of the cabin was primarily for rental—not personal—purposes.
Here’s what went wrong:
He had no logs, receipts, or documentation to show time spent on rental-related activities.
He claimed maintenance visits, but couldn’t prove they were business-related—so the court counted them as personal use.
The cabin was reclassified as a personal residence.
Because it was only rented for 12 days, the 15-day rental rule kicked in, and the IRS deemed it a non-taxable event.
Result: No rental activity = no deductions.
How to Avoid the Same Mistake
If you rent out a vacation home, even part-time, protect your deductions by:
Keeping detailed records of every maintenance task, rental day, and business-related visit.
Documenting time spent by others—cleaners, repair pros, contractors.
Knowing key IRS thresholds (like the 14-day/10% personal use rule and the 15-day rental rule).
Planning ahead—not trying to reclassify after the fact.
Plan Now, Benefit Later
This case highlights a simple truth: the IRS doesn’t accept assumptions—it wants proof. If your goal is to deduct legitimate expenses, reduce your tax burden, or stay in compliance, the time to plan is now, not after the year ends.
Next Steps
If you're thinking of renting your vacation home (or already doing so), let's talk now—before year-end—to ensure your property qualifies for the deductions you deserve. Reach out to the team at TrueBlaze Advisors with your questions. We're here to help.