If you have lived in that property for 2 out of the 5 years prior to sale you can exempt the first $250K of gain ($500K if married) tax free!! 

Not a deal breaker in most cases, but be sure to be aware of this and discuss with your CPA tax implication that your IRA will owe if you decide to go this route.Self-directed 401k on the other hand is exempt from taxes on leveraged real estate, therefore if you are eligible you may want to explore this option. 

I'd encourage you to explore simply selling the house and letting your parents take the tax free exemption. 

If they have used their lifetime exemption of 22M, the gift tax they pay will increase your basis. ( I dont expect this is the case) Your basis will be their basis which will be lower than 150k FMV.

I then had a thought while talking to him, what if we used my LLC to hold assists for him, then there could be a tax exemption.

It is looking more and more like STRs will only be allowed in some commercial areas and in properties that are owner occupied with a homestead exemption in place.See articles below:https://nola.curbed.com/2018/5/25/17394232/new-orl...https://www.nola.com/politics/index.ssf/2018/07/sh...https://www.nola.com/politics/index.ssf/2018/10/sh...https://www.theadvocate.com/new_orleans/news/artic...https://www.nola.com/politics/index.ssf/2018/09/sh...https://www.theadvocate.com/new_orleans/news/artic...https://www.theadvocate.com/gambit/new_orleans/new...https://www.nola.gov/city-planning/major-studies-a...https://www.nola.gov/city-planning/major-studies-a...

But that was prior to 2008.Since 2008 the full 121 exemption is no longer available. 

But there are a few exemptions to the rule and I think inheritance may be one of them. 

Just make sure he has insurance and workers comp or at least an exemption on all his guys.

Citizen you don't get 5 million  U.S. dollar tax exemption and it doesn't seem likely possible  to have an workaround for this (e.g. living trust)My dad, who is age 65, doesn't speak English ,invested about 7 million U.S dollar worth of property  in commercial and residential property(houses, stores, offices) , from his personal fund a few years ago, investment are doing fine  ,however,   recently  I discover that there  is no way for him to leave his asset to me after he passed away without an heavy tax because he is Chinese national, I asked with my dad's   accountant ,property manager, and Everwill , they have no clue how to solve this problem and Everwill told me the living trust will not able to help on estate tax if he is not a U.S.