LLC holding rental house that is used personally

The formation of the LLC could be for ease of management & for estate tax reasons. Best case, they engaged an attorney to write an operating agreement that will help the family manage and use the property over the years, maybe even generationally.

The expenses could be partly deductible - i.e. property taxes and potentially interest. Should not be on lines 1& 2, though. Should be on Sch K in the other deductions section. Maintenance & other expenses would be nondeductible if the property is used only personally.  Forming an entity doesn't change the nature of the expenses, which have to follow the use of the property.

If it has property taxes or other federally deductible items to report, then 1065 is required to be filed, but even if not required, could be worth the expense if it forces them to account to each other at least annually for contributions made & expenses incurred, assuming the capital account section is completed.

Let me guess, Mom still lives in the house?  But now if she goes to a nursing home, the taxpayers cover the expense while the kids go on a cruise?  Or maybe this is a second home that has been in the family for years.  Too bad they don't get stepped-up basis if they decide to sell after Mom's death.

@Karen_pdx writes that "The formation of the LLC could be for ease of management & for estate tax reasons."  Well, you see how easy it makes management.  As I have noted previously, there are two kinds of state, those like California that have an annual fee for LLC's ($800 in CA, right?) and those that soon might, as Washington cuts off funding.  There's really no way this saves on estate taxes, but that sounds good. 

If they're trying to evade the $10K SALT cap, they can't do it with a properly-prepared K-1.  Since they're not in business, they shouldn't be preparing a 1065 with any amounts on it anyway.  Zero income, zero deductions, attach a statement that says "personal assets only."  Substance over form.  

Partnership
A partnership is the relationship between two or more persons
who join to carry on a trade or business, with each person
contributing money, property, labor, or skill and each expecting to
share in the profits and losses of the business whether or not a
formal partnership agreement is made.

Domestic Partnerships
Except as provided below, every domestic partnership must file
Form 1065, unless it neither receives income nor incurs any
expenditures treated as deductions or credits for federal income
tax purposes.