More thoughts on shared-appreciation mortgages

I have sometimes joked that the IRS has a better understanding of the Christian (Reformed) doctrine of imputation than perhaps many Christians. Forgiveness of debt is treated by the IRS as imputed income, just as Christ’s work of atonement (both his active and passive obedience) is treated by God as imputed righteousness to us. Except that IRS wants to tax that income.

Anyway, shared-appreciation mortgages have another complication when provisions are made for additional contributions from either party (e.g., for the purpose of improvement and remodeling). How should the percentage of the lender be adjusted? Should it be a percentage based on the value of the property, or based on the appreciation of the property (i.e., value minus basis)?