It would be deductible if you were the real or equitable owner of the property.
Depending
on the facts and circumstances, you might be able to make the argument that you
are a beneficial owner, but that's a difficult argument to make. For example,
see this discussion on the TaxAlmanac site:
http://www.taxalmanac.org/index.php/Equitable_or_Beneficial_Ownership
Another
example is Blanton (TCM 1998-211). The US Tax Court denied the Sec. 121 gain
exclusion because there was no equitable ownership. In the case, the Tax Court
found that there was no risk of loss if the property was damaged, they couldn’t
rent out the property, and had no legal title. Simply put, Equitable Ownership
is difficult to support.
