I have just received a draft of my tax return with the schedule E.

Sure you’ll be taxed on it.

Selling a primary residence and then buying it back as part of a 1031 exchange could raise red flags with the IRS.Your parents have a valuable opportunity to defer a significant amount of taxes by utilizing the $500,000 exclusion on their primary residence.

Rentals generate passive income, so an S-Corp offers no added tax benefit.

https://www.biggerpockets.com/forums/51-tax-legal-issues-con...

We put together a purchase price, interest rate, insurance cost, and property taxes. 

i would speak to your cpa, as you may be able to get all or most of the gains tax free if they lives in it two of the last 5 years. vs what you can get if you rent it outof course consult with your cpa for tax advise

Buying at the mortgage balance (~$150K) positions is under the fair market value and can trigger gift tax rules.

You can hand them over all your information to organize at tax time and their staff should be able to organize everything and get your taxes filed.

This is what the assessed tax value will reset to after you purchase.