My wife and I are buying a condo for one of our parents as an upgrade to her current apartment and let her live closer to us (especially since she is recently widowed and has no other family). The condo will be in our name as she has a poor credit score and very little savings, though she does have a fixed pension.

We're putting down half the cost of the condo (spending the majority of our retirement savings) and she has agreed to pay the mortgage payment and HOA fees out of her good pension (which she can afford). We are not trying to make any money off of this and trust her ability to pay.

The cost of the mortgage, property taxes, and HOA fees are around $1500/mo. According to the bank's appraiser fair market rent would be $2500/mo for the place.

My idea is to let her live there rent-free and then to the best of her ability ask her to give us cash gifts of $750/mo to both my wife and I (that would be less than the ~$15k/year per person gift tax limit) and my wife and I would make the mortgage/property tax/HOA payments and report $0 in rental income. Is this allowed if everyone is on board with the idea? Or would this be seen as some sort of illegal tax evasion?

The interest rate on the condo (being a second property) is also significantly higher than the interest rate on our house's mortgage. If we fully paid off the condo's mortgage (so there's only the property taxes/HOA fee), would there be any change to the answer as to whether we could charge her $1500/mo without it counting as rental income? (Or should we take extra money and payoff our house first even if its a lower interest rate).