I caution you about relying on "free" advice on this board or any other place, because you cannot rely upon it when your transaction gets discovered by the IRS. But if you pay a professional for his/her advice you can rely on it and at least avoid the negligence penalty.Although you cannot use any advice on this board to minimize potential penalties, you can get a written response from IRS by asking your tax law question on their website: http://www.irs.ustreas.gov/help/newmail/user.htmlAny written responses from them should be printed and saved with your paperwork for future use if necessary. This will support your claim that you relied on advice from IRS, hence no penalty if you are deemed to owe additional tax.Personally, I would deem the transfer as a gift. As a gift, your basis will be their basis so you should ask them for their cost and the cost of all improvements they've made. I would also look into your state rules on medicare support for your parents if your name had just been added with their names on the property instead of removing their names. If all three of your names had been put on the deed of record, then you'd be entitled to stepped up basis at the time of their death (tax law). Your state (each state has their own rules) could put a lien on the property for medicare support provided which would be settled when the property is sold (civil law). This might be less costly than the taxes that will due if you report a gain of everything except $1. If all three names had been put on the deed, then no gift tax return would be due. Since there is a big difference between civil law and tax law regarding your parents' transfer of property to you, I'd address your question to IRS to get a written opinion first. Then you might check with a real estate attorney who could advise you about reversing any damage that might have been done by your parents' advisor.I hope you follow up on this. It would be great if you'd post any results of your search on this board for the benefit of anyone else who finds themselves in a similar position.Best wishes
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