@Carl - Thank you for such an informative post. I will need to talk to my uncle (single/unmarried) with whom I'll co-own to property to find out how he's filed/filing taxes. There is no mortgage on this house, and my uncles are currently benefiting from Prop 58 in CA, where they pay very low property taxes on the house.
You wrote, "More than likely the two brothers are not filing a 1065 Partnership Return. Instead, they are each reporting their half of the rental income/expenses on SCH E of their individual tax returns, claiming a 50% ownership interest in the property. It's okay to do things that way with rental property. But if any of the partners are married and live in a community property state, it has the potential to create legal issues should the married partner(s) divorce, or separate and file separate returns for whatever reasons." The brother who I'm buying out is married and lives in Washington. The brother with whom I'm co-owning is single/never married. Does this help make things less complicated if they are simply using Schedule E and my uncle who will keep the house is single?
I realize that this may not seem like an ideal set-up, but I think it makes sense for my mother, uncle, and me. The price I'm paying for half of this house is less than the cost of owning a condo in the neighborhood. Houses go for over 1 mil. This was my grandparent's house, and when my grandmother passed away 3 years ago, her estate passed to her 3 children (my mom and her 2 brothers). My mom disclaimed her inheritance, so it passed to me. The 2 brothers bought my/my mom's share of the house with the intent they'd sell it after about 2 years, which would give her time to figure out another living situation. She's lived in the house for the last 20 years. In the last few months, I found out that one of my uncles (single, unmarried) would prefer to keep the house. He uses it for garage storage and visits every weekend to help with maintenance, etc., and has done so for his entire life. So after finding out that my uncle would prefer to keep the house, and my mom would prefer to keep living in the house, it seems to make the most sense to co-own the property with him. This gives my mom a place to live affordably in Los Angeles, and it's near her work.
