My wife and I are purchasing a house where her parents will live rent-free. We are in the U.S.
Obviously (?) this is a gift from us to them, which by my understanding will not be taxable. The house and equivalent market rent are modest.
Her parents want to show their gratitude by... doing things for us. At what point would that become less like mutual gift-giving and more like a renter/landlord arrangement? For tax purposes, I mean.
For example, could they "give" us monthly checks? How about paying for our kids' music lessons?
If this is a blurry line, assume I want to stay definitively on the safe side of it.
[Update, since there seems to be some confusion]
My in-laws are under no obligation to give us (or our kids) anything. Actually, I would prefer that they not, but they are insisting. In the interest of -- shall we say -- "domestic tranquility", I am willing to accept their generosity, but not if it creates a taxable event. My question is whether this is possible.