Proper Way to Report Rental Gains / Losses

I've seen examples that ALMOST mirror ours, but not quite.  So here goes.

 

We bought a two-family in Boston with our son. My wife and I put up half the money, while our son put up the other half. We started with $105K each but both parties have added another $5k. Now it seems to be generating enough income to cover expenses.

 

The son lives in unit 1 with his fiancee.  They pay rent, about $250/month less than the market rate because he is the on-site landlord and deals with most issues that come up.

 

A family lives in Unit 2 and pays market rent.

 

So how do we figure the taxes, for (1) My wife and I, and (2) for my son? (It so happens that I do the taxes for him and us.)

 

For my wife and I, would we report the whole building on schedule E, all the rent, all the expenses and depreciation? Then take 50% of the gain/loss on our return?

 

For my son, does he report just the numbers for Unit 2 on his schedule E, the rent and the allocated expenses? Then take 50%?

 

Any insight would be appreciated.