Question: My elderly parents want to sell us their house and then rent it back. Is this a good strategy?

Answer: This gets us to a ghoulish discussion, but it is probably best for them to will the property to you -- you would then receive the property at its stepped-up basis (no capital gains tax). If each estate is less than $600,000 you could avoid all federal taxes at this point.

Alternatively, you and your parents may want to consider the creation of a "life estate" that would allow you to own the property while letting them live on it.

Please see an attorney who specializes in elder law for information regarding life estates, wills, and living wills as well as a tax professional.