because you say the property was fully depreciated on the date of the gift your basis is your basis + their basis when the property was acquired + subsequent improvements less all the depreciation taken. you assume the depreciation they took so basically your cost is 100% of the original cost + the costs of improvements and the depreciation subject to recapture is the total taken by you and your parents.
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your parents made a gift to you when they sold it to you for $1 and should have filed a gift tax return for that year. when you receive a gift generally your basis in it is the same as the donors. that's true when the fair market value equals or exceeds their tax basis.
