Box 3 was the correct box to report this in, as the grantor did not pay you rent. You'll report it exactly as printed on the form. It's personal income to you. What you use it for, determines it's taxability or non-taxability. In the end, it is taxable income to you. If used for qualified property improvements on the rental, it will be depreciated over time - depending on precisely what specific property improvements it's used for.
