Sure, that’d work – provided the employer can document the rental payments under 280A. Even still, the owner has to report all the rental income.
Greenman72:
If it were a second home (lake house, etc.), it would be easy to set it up as an “employee vacation destination” and call it an “employee benefit”. But if you live there all year long, it’s hard to justify vacationing in it.
EDIT - and I actually LOL’d at that too, Higgy.
Greenman72:
IRS Code Section 168 (i) (8) (B)
http://www.law.cornell.edu/uscode/text/26/168
“A lessor is entitled to recover the cost of depreciable leasehold improvements that it makes. If such improvements are made for the lessee AND are irrevocably disposed of or abandoned by the lessor at the termination of the lease by the lessee, then for purposes of determining gain or loss, the improvement is treated as disposed of by the lessor at that time.” (from the RIA Federal Tax Handbook)
The tenant is the lessee - no deduction unless business purpose
The landlord is the lessor - deduction allowed
What if the tenant sublets the apartment? Then the tenant becomes a lessor as well, so report the rent income and corresponding expenses including depreciation.