The key is that you would need to demonstrate to an auditor that your father had the intent to hold should he be audited.  

If she won't go down in price, then have her pay some of your closing because it appears you are paying market price according to the auditor's site.Also, your rent should go up with up with that much repair.  

Or, would you prefer one who is qualified to represent you and can answer construction-related questions by an IRS auditor?

However, and after exhaustive phone calls to the county SO, Clerk of Courts & auditors' offices, no one knows or will give that answer because it is "legal" advice.

Go to the auditor's site and look to see the sales history of the house and how long ago it sold.  

The exchange company said that depending on the IRS auditor (in the scenario I was audited) they would see that the property was purchased in my name (solo), and then placed into a trust with both my wife and my name, therefore eliminating 50 percent of the exchange benefit.My Attorney setting up my trust (out of state) does not think this is an issue because California is a "common law" state, My Exchange company thinks there is a sizable chance of this happening, and my CPA is split between the two.

By the way, the auditor site says it is logged as a 4-19 unit building.

According to auditor, owners address is still listed as property address.

@Max Tanenbaum  Don't you need receipts on file in case of an audit or will the bank statements work for the IRS?

Well, you can't dodge taxes with poor records- an auditor would laugh you right out of your deed.