His accountant told him he also could not claim the mortgage interest deduction because it came in her name and not his.
That is not "quite" the whole truth. The father has a demonstrated and provable vested interest in the property, and therefore can claim the mortgage interest if he actually paid it. The IRS has one court case on this that I am personally aware of, which you can read at https://www.irs.gov/pub/irs-wd/01-0072.pdf. There are many more such cases which I'm only aware of through 3rd party sources. It all has to do with what the IRS terms "Equitable Ownership". If you do a google search on "IRS EQUITABLE OWNERSHIP" you'll find many cases on this - albeit not on any IRS website; but many cases still the same.
Bottom line is, the person who receives the rental income and pays the rental expenses is the one required to report it on SCH E on their personal tax return. (assuming this was not set up as a partnership, which would then require a 1065 partnership return to be filed.)
The person who pays the mortgage interest and property taxes only needs to meet two requirements to claim those expenses.
1) Must be legally obligated to pay it (which under equitable ownership in many cases, they could be "considered" legally obligated)
2) Must actually pay it.
The laws on this are significantly more complex, and I have barely scratched the surface. I would suggest you seek legal advice, as if your state taxes personal income it "will" have an impact on state requirements also, and one or both of you could very well be in violation of state tax laws for all we know.
