I assume this was done without professional advice. extremely inefficient from a tax standpoint. he gets their tax basis so if he sells the gain is the difference between the sales price net of selling costs and the parent's tax basis + the cost of any improvements he makes. There will be no home sale exclusion unless he (and you) lives in it for a least two years before the sale as his (your) principal residence. He may also have the right to evict his parents so the property can be sold. It would have been much better if the parents had created a life estate that would allow them to live there until they die. your husband would get a step-up in basis which would reduce any taxable gain.
