Below Market Rent to Family Member

[Greystache]

Here is the situation. My wife and I are retired empty-nesters  with a four bedroom house in a HCOL  SoCal. We are looking to travel and live part time in other parts of the country, but maintain a "home base" in SoCal. Our plan is to have our son and his wife move in to our house and pay enough rent to cover utilities and taxes and maintenance. They get below market rent  and we get a full time house-sitter. We would reserve one room for our home base that we would occupy maybe three months out of the year. What are the tax implications of this arrangement? Would I report the below market rent as income? I do not plan to treat the home as a rental unit for tax purposes ( meaning I don't plan to deduct any expenses associated with the house as business expenses).  Do you see any issues with the arrangement? Do you see a better way to do this?

[Fishindude]

We did the same thing with my daughters family when they were between houses.   They paid all the bills while living there and kept the place up, we still came whenever we wanted.   We did not charge them rent.
It helped them out and wasn't much of an inconvenience for us, plus the house was being looked after.   I'd keep the whole deal off the record.   

The downside could be huge if your kids are deadbeats and tear the place up or don't take care of things, don't pay bills, and / or won't vacate when you want to move back in permanent.