"If I report as an LLC"

You are treating this as Single-Member LLC? There is no business purpose here.

If there is no Rental income, and no intent for operating for rental income (because it is residential and occupied for free), there is no write off of expenses for the LLC (even as disregarded); not on Sched C or E. You cannot have the intent to write off LLC Costs without the intent to generate income with those expenses.

And they have forfeited a lot of ownership benefits, including capital gains exclusion. You cannot pretend the LLC doesn't own the house, if it does.