Thank you everyone for the help. I also spoke with a local CPA today to get their opinion. They recommended against going the full route of getting a 1099 as an independent contractor for my step dad saying it would end up costing me more due to having to pay both sides of the social security, etc. They said I should just go on into the section for rental income (Sch E) to enter the income and expenses (not the remodel expenses) but skip the sections on assets and depreciation since I don't actually own the property. That will allow me to report the income and expenses on that income for my taxes.
As for my step dad's point of view he could show the remodel expenses (we will work out the compensation for those costs), any depreciation, etc but just wouldn't show any income on that particular property.
Hopefully for our specific situation this will be sufficient. Going forward though I think we need to work towards just having him sign the properties over to my name which will simply everything and I would be able to put in everything in the Sch E section like a normal property owner.
