Legal Question in Real Estate Law in California

Cost plus improvements minus depreciation would be their tax basis. Net sales price less tax basis is their gain. The capital gain is taxed depending on their tax bracket.

Gifting the house to you would just transfer their tax basis to you. So, that would not help. Although the gift to you would allow the property taxes to stay the same.

Moving back for 2 years would be best if they want to sell soon.

Otherwise, they should continue to hold the property until they die, at which time, there would be a step up in tax basis would would allow the inheritance at that tax basis which after inheritance would allow for a minimum gain or loss depending on the net sales price.

It is even possible for a full step up on basis if the property is community property and title is held properly (or it is in a living trust). You will need proper legal and tax advice to get all this done correctly and documented properly to minimize the tax consequences.

I suggest you, or your parents, retain an estate planning attorney and get things planned out now for the best outcome.

Neal is basically right. Your two options are for them to move back for two years, or place it in a trust so that it passes to you without probate and with a stepped up tax basis to the market value on the date it passes to you. So basically, if they need to sell it before they die, they will have to move back for two years or pay the taxes. If they can hold it until it passes to you via trust (or will, but that is unlikely to be as advantageous as a trust) then that is the better way to go.