I'm trying to make a mod that will override how the game originally handles stolen items but I have yet to figure out what's actually involved here. I'm new to modding but anyway, here's what I'm trying to figure out:

Note: Basically, I'm trying to rewrite how different factions react to thievery.

Let's say I have a sword in my inventory and I steal a similar sword. So now I have 2 similar swords but one of them is stolen. How does the game differentiate from a stolen item and a normal one? A list of some of the objects and scripts involved would be handy.

There are some nice functions in the faction script but it's only about the player and the crime. There doesn't seem to be any functions about individual crimes like stealing etc.

Please help me

I would suggest taking a look at object "ownership", you can modify it both in the CK and script:
http://www.creationkit.com/SetOwnership
http://www.creationkit.com/SetActorOwner_-_ObjectReference
http://www.creationkit.com/SetFactionOwner_-_ObjectReference

These should do the trick! Thanks