if they sell, they’re going to have to pay the LTgain tax. what you have to avoid are gift taxes when they give you the proceeds.
fortunately, this is not difficult
step 1. have them put some in a roth or education IRA for the kids. this is easy, good future planning and avoids all kinds of hassles. Roth IRA’s pass to heirs tax free as do the education IRAs.
step 2. each of your parents can give each of you, including grandkids up to $11,000 a year tax free. (I’m sure this limit has changed, I’m not up-to-date). That’s $88,000 to your family this year. [11 from each parent = 22k to each of you = 88k]. sis gets screwed a little in this scenario as she can only get $22k since she has no spouse or kids. but they can do this EVERY year to catch her up. Is she looking for a husband? Is she cute? Nevermind.
step 3. if you don’t want to go multiple years to get the cash, you can take it all in year 1. You will have to file a form 709 for the gift tax, BUT you can offset the tax against your lifetime unified credit of $340,000. In other words, until the tax is over $340,000 EACH, you’ll pay nothing. Note that the unified credit is a lifetime limit, so every dollar you take today reduces amounts you have to use against future gifts taxes. that’s usually not a problem.
they can gift it to you now, you take the gift at market value, avoid gift taxes as above. sell it at your gifted value and avoid cap gains taxes to boot. I like this plan now that I think about it.
personally, I’d get Dad to do a power of atty to one of you and hold out for the extra $150k to market value.
I know this is probably confusing as it’s hard to explain. short answer is don’t worry about the gift taxes. pick up form 709 and publication 950 from irs.ustreas.gov.
meanwhile I’ll think on the 2nd gifting strategy to make sure it’s airtight.