[jyl]

My aged and widowed mother-in-law (who will also be referred to as "the aged relation"), in poor health with heart problems, sold her house and moved into a rented townhome in a retirement community. The owner of the townhome passed away, and her children decided to sell the townhome. This would have displaced the mother-in-law, very traumatic for an older person.

So my wife and I, and my wife's sister and her husband (hereafter referred to as "we") are going to buy the townhome and rent it to the mother-in-law. We negotiated a price that will permit the mortgage to be pretty close to the mother-in-law's existing rent, and we will eat the monthly difference as well as maintenance, insurance, etc. We found a loan that works and is straightforward, 30 yr fixed, we had to jack up the downpayment up to mke it affordable for the aged relation, ouch. (Thank you to someone on PPOT for giving me advice on the financing, you know who you are.)

The townhome will not be in the mother-in-law's name, to avoid complications with her other children when she passes away. My brother-in-law had his attorney set up an LLC to hold the townhome, and my brother-in-law will handle the record-keeping for the property (he lives in the same town and the aged relation, I live 3 blessed hours away). Things seem pretty much on track so far. My brother-in-law and sister-in-law are 110% trustworthy and competent.

Here is my question. What is the tax treatment of the mortgage interest and maintenance costs for the townhome? Is any of it going to be deductible to me, and if so does that still apply under AMT? To be clear, this is not my primary residence, not even my second or vacation house, perhaps it is technically an "investment property" although we don't wish to own it, will have negative cash flow from it, and all involved intend to sell it promptly, likely at a loss, after the mother-in-law passes away or otherwise can no longer live there.

I hope someone tells me that this can at least help my tax bill a smidge.