Contract and Tax Question

[Josh Clemence]

This is unfamiliar territory to me so thought I would as here. I am going to talk to my accountant next week, but thought I might be able to get some information ahead of time.

I am in the process of buying a house that my mom owns essentially for just what is owed on the mortgage. She currently has a mortgage on it with an exceptional rate, that I won't be able to duplicate since it will be a rental property. The initial plan is that we have a lawyer draw up a contract to purchase, for which I will make payments to her monthly. She will get a Deed signed over to me, but not file it.

The first question is do you see any major holes or problems with that?

The second question is, what are the tax implications? I am thinking I am not going to be able to take the interest deduction, depreciation, repairs, or any other of the operating expenses as deductions on my taxes, is that correct? It seems I should be able to deduct some stuff, as I will have to report the difference between my payments to her and gross rents as income, but I just have never dealt with a situation like this before.

Any input would be appreciated.