Rental property

Hi,

My parent and a sibling are living in my second home.  The median rent is $3,500 per month.  They have low income, each can only contribute $800 a month.  We file separately.

 

Question:

I consider $1,600 as a gift because it is below the fair rent value.  They think it is rent and want to file as such.  Is that acceptable?

Please advise, thanks.