Use and Occupancy agreements (also called "lease-backs") are a strategy we as realtors recommend with great frequency these days - both as a tax minimization strategy like you are doing, and because most people who currently OWN a home and simultaniously want to BUY a new one rarely have the funds to buy without first selling. Use of a lease-back arrangement gives the seller the abiltity to close on the sale of their property, and remain in it for an agreed upon period of time, in exchange for paying a rental fee to the new owners. It is a strategy sellers love because they do not have to move to a short-term rental while they seek new housing. Buyers, in this competitive market, are using the offering to "sweeten the pot" and actually get their offer accepted. Both parties can really benefit.
However, there are risks you need to be aware of - especially as the new owner that is leasing back to the party they are buying from. What if there is damage to the property during the rental period? what if someone gets hurt on the property during that time? What if the former owners (now renters) decide they can not vacate on time? These things seldom happen, but there can be significant risk if they do. It behooves both parties to engage this discussion with their legal counsel, and craft "tight" Use and Occupancy agreement that protects interests of both parties and clearly spells out expectation of both.
If you do not have legal counsel - my guidance is to seek one that specializes just in real estate. It wil save you money and serve you better than your neighbor's uncle's cousin in Florida who used to be an attorney :>) If you need referals to the top attorneys in Boston's real estate law community give me a call. I am happy to forward you some recommendations.