My question is, what is the best way to describe this scenario for tax purposes.  

I assume there is zero or almost zero appreciation and that’s the reason you aren’t selling tax free?

Be mindful that there are rules that the lenders want you to check off.Furthermore, there are other rules on the tax side where you want to normally be under to get the most tax benefits.The magic number in both instances is '14 days'Lenders want you to stay atleast 14 days to meet the secondary home requirement.The tax accountant normally wants you to stay less than 14 days or 10% of the days it was used as a rental to treat it as a rental and not as a personal residence.Best of luck!

Quote from @Kevin Akers: Quote from @Brittany Minocchi: Can you qualify full doc (meaning with employment history, income, DTI, tax returns)?

Sure you’ll be taxed on it.

Do you not have taxes?

This will help attract more business to the state, keep it coming! 

Performing "better" should also be analyzed on an after-tax basis.

It's very disingenuous to blame the overall poor performance on Covid and not even mention the property tax expense issue.

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.