Or, you can tell the truth, and say something like, "We have to get rid of toys every other month because the kids grow out of them and we don't have room to store them". Your obligation to the gift giver really doesn't extend beyond a thank you note. You don't have to show them the gift every time they come over.

We just say they grow out of it just too fast.

Or you can say you rotate them so the kids don't get bored so the X or Z toy is in storage now and will re-appear again soon.

We have a small home with almost no storage space. We have a few well-meaning relatived who have a knack for buying either incredibly loud gifts or gifts that frustrate and upset our kids and all these gifts seem to be large. I always write a thank you note. Inevitably they want more and they frequently ask about said gift and it's usage. When they visit they ask where these gifts are. We try to pull out the gifts, but some we don't have room to store in the first place let alone keep in our kids rooms or our family room.

I have gently said the gift is seeing them and they don't need to bring material gifts. I've also gently mentioned and shown how little space we have. Beyond that I stumped.

Ideas?