There are several tax implications.
1. If your wife received the home as a gift, her mother should have filed 709 gift form for 2022.
2. If your wife sells that home her cost basis is her mother’s adjusted cost basis (if it was a gift) so there may be a large capital gain when that property is sold.
3. Whether you should convert your home to a rental for the mother is beyond what this forum can offer since that decision must be made in view of your entire financial situation and goals.
