Parents want to gift their portion of co-owned property?

[Jeremy Lee]

Hey all,

My parents and I are tenants in common on a property we bought back in 2007. My wife, kids and I currently occupy the property and the ownership split is 25/75. My parents want to gift their portion of ownership to us so that we have full ownership, also so we could sell and get a bigger place if we need. 

There are some caveats we would need to work through; I have two brothers that technically each have a third ownership per the trust (this would work out to 25% ownership for them each based on the current math since I already 'own' [on a private loan agreement with my parents] 25%). It sounds like the way it would work is that I would just opt to take that much less in cash from the estate in my parents' inheritance. All this would be spelled out in a contract of course as far as that arrangement. 

The other concern would be capital gains taxes. However, if this is our primary residence for at least 2 years after they gift/transfer ownership to us, would we be in the clear of owing on capital gains taxes up to $250k per person (or $500k total)? I really doubt this place will appreciate more than $100k assuming we sell within the next 5 years, so the presumption would be that we wouldn't end up owing anything...is that right?

We are just trying to look for ways to minimize/avoid the tax burden (either for my parents or myself). I assume since they would be gifting, there would be no tax burden for them as we would assume it. But the 2 year rule (assuming we stay for that long or longer) would override that.