This is only a suggestion, or advice, or whatever. This can be done several ways. You can do either way really. But in my *personal* opinion (and we know what opinions are like.) it's much easer to set up a partnership - and you do not necessarily need an EIN - though I would recommend it. Then for the rental it will not be owned by an individual. It will be purchased and owned by "the partnership".
For taxes, a partnership files a 1065 partnership return that has nothing to do with your personal taxes. The "partnership" will issue each partner the appropriate tax documents at tax time, and each partner will use that information to report income/losses on their personal tax returns.
This is just a "brief gist" of what I suggest, and is not all inclusive of everything you need to know so you can make an informed and educated decision on what's best for you. Note one thing I'm not discussing here is weather or not you live in a community property state, which can make a difference if either or both of you are married.
Both of you should seek legal advice from a lawyer well versed and experienced in partnerships. In my experience when it comes to things like this, when family is involved the only ship that never sails is a partnership. So get legal advice, and get it from more than one *QUALIFIED* source. (This public user to user forum is NOT a qualified source.)
The reason I see most often that family partnerships fail, is because they fail to spell out the terms of the partnerships in a legally binding document. You have to separate your family relationship from the business relationship from the start. If you do not, both of those "ships" will eventually sink. Count on it.
