Most of the time, the rent back agreement will be for the amount of your mortgage payment, and not the true fair market value of the property (what you could rent it for to an unrelated tenant). If the rent is below FMV, you can only deduct expenses up to the amount of the rent, which makes it a wash -- you go to all the trouble of reporting a schedule E, reporting the income and deducting the expense, can't show a tax loss, and you have to take depreciation which screws up your taxes when you sell. If it were me, I would ignore the situation entirely and not report it. You're not a landlord-investor, you are buying a personal home and making accommodation to the seller.
