First, if the son owns the house and lived in it as his residence, it may qualify for sale of personal residence. Here is a link to read about that. If it does qualify, it should be sold as soon as possible to avoid being disqualified.
https://www.irs.gov/publications/p523
Any possible capital gains is based on difference between purchase price plus any substantial improvements and the selling price less commissions and fees. That might be excluded from income of the son if it qualifies as sale of personal residence.
You mention taking the house by the Government? Due to drug activity? I'm not an attorney and not offering legal advice, but if taken and no compensation given, there would be a non-deductible loss.
Again, I'm not offering a legal opinion, but you should consider seeking legal advice. I don't think a quit-claim deed from son to father will help. In my opinion, that would only tend to push some legal problems onto the father. And if to be taken by law enforcement, I don't think transfer to a related party will stop it...but that's for an attorney to give advice on.
If sold and there is taxable gain, as long as it remains in the son's ownership, any tax burden would be on the son. Father only has power of attorney and would not have the tax burden unless co-ownership etc., were in place. POA should not have a tax liability unless malfeasance or misconduct of POA.
There are more than tax questions here, and the consultation of legal advice would certainly be in order, in my opinion.
**Disclaimer: Effort has been made to offer correct information; but due to the discussion forum limitations, the poster disclaims any legal responsibility for the accuracy of the poster's response**
