shared equity financing agreement
(3) Rental to family member, etc., for use as principal residence (A) In general A taxpayer shall not be treated as using a dwelling unit for personal purposes by reason of a rental arrangement for any period if for such period such dwelling unit is rented, at a fair rental, to any person for use as such person’s principal residence. (B) Special rules for rental to person having interest in unit (i) Rental must be pursuant to shared equity financing agreement Subparagraph (A) shall apply to a rental to a person who has an interest in the dwelling unit only if such rental is pursuant to a shared equity financing agreement. (ii) Determination of fair rental In the case of a rental pursuant to a shared equity financing agreement, fair rental shall be determined as of the time the agreement is entered into and by taking into account the occupant’s qualified ownership interest. (C) Shared equity financing agreement For purposes of this paragraph, the term “shared equity financing agreement” means an agreement under which— (i) 2 or more persons acquire qualified ownership interests in a dwelling unit, and (ii) the person (or persons) holding 1 or more of such interests— (I) is entitled to occupy the dwelling unit for use as a principal residence, and (II) is required to pay rent to 1 or more other persons holding qualified ownership interests in the dwelling unit. (D) Qualified ownership interest For purposes of this paragraph, the term “qualified ownership interest” means an undivided interest for more than 50 years in the entire dwelling unit and appurtenant land being acquired in the transaction to which the shared equity financing agreement relates.