no rent and used by a relative - no schedule e deduction for any expenses. it might be best to have title in mothers name. since you'll be making a gift in this case paying cash for property. a gift tax return will be required by you and your brother. the reason to suggest this is that if you two are named as heirs you will get a stepped up basis upon her death. you could sell and would have no gain to report (possibly a loss). if you own the property and sell when she passes any gain would be fully taxable. if you keep title and finance it, at best it would be investment property. Any mortgage interest and real estate taxes would be schedule A (itemized) deductions. The mortgage interest would actually be investment interest subject to investment interest limitations. this means the interest would only be deductible to the extent of your dividend, interest and other investment income.
since i know nothing about your finances, it might be best to consult an estate attorney. this is especially true if your mother does not have a will or has not otherwise provided in writing for what happens to her property. failure can result in costly probate.
