Because it's already foreclosed I can't negotiate something with her to quit claim it to me and then work a short sale for her. 

This did not sound right to me, i believe you cannot deduct your "rent" from the income of the property, you are the owner ( unless it's under a corp and you pay rent to the corp - possibly) That is considered your personal residence and all deductions need to be pro rated. here is an article to read: http://finance.zacks.com/tax-deductions-owneroccup...I would consult with a CPA on this, and BTW in your example you would both want to claim $400 so each had full deduction, not $0 for him.

There simply isn't enough to go off of at this point in order to make the claim of interest only via amortized as Melissa mentioned above.

Also if you only have the main house as a rental and the guest house is your vacation spot you are only allowed to claim depreciation on the cost basis of the main house and the guest house is non-depreciable since it isn't rental property it's personal property.

They also stole a few thousand dollars worth of materials when they finally got fired, claiming that the materials were stolen from them.

Homeowner's I wouldn't bother filing a claim.

Hi all,I was recently introduced to a real estate investment opportunity by an old friend (who claims to be a gap funder/broker). 

What can I claim?  

Your claims of any devaluation of the home may have a bigger impact on the result if it is a rental.  

You cannot claim it as both a payment/expense and as income.