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What happens when they eventually die. I have no plans to live in the house. I assume my cost basis for the house is $1, and if I sold it for, say, $150,000, that my profit would be $149,999. Do I pay taxes on that, and if so at what rate?

You are correct that your cost basis would be $1, but you can offset the sales price by any commissions, fees, etc. you pay to sell. You would have to pay taxes on the gain, because you didn't live there for at least 2 years before you sold. Most likely it would be capital gains tax. The rate would depend upon your marginal tax rate (what your salary income is taxed at.) However, if you live there for 2 years before you sell it, then you could avoid paying the taxes altogether.

Something you did not mention ... your parents should have incurred some gift tax on this transfer of property. So they should have filed a gift tax return. If they paid any gift tax, a portion of that can be added to your $1 basis. If they did file a gift tax return, your basis amount could change. See a tax professional and tell him or her that you had a part-gift / part-sale transaction. That should point him or her in the right direction.
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