Names on Titles Swapped

[Rameez Balagamwala]

Rookie tax-law question: two of my family members swapped the names in the titles of their homes with each other, using an attorney, with "warranty deeds". The names on the mortgages stayed the same. Later, one of the properties was rented out.

Now, how to handle the taxes? The person whose name is on the title will have to claim the rental income in taxes, but cannot show the mortgage expenses? Gross income becomes net?