@Ryan Ribinskas I would sell the house now and avoid paying capital gains tax, since you have lived there 2 out of the past 5 years. 

The tenant is interested in purchasing and I may give them the option since I've owned it for 2 years and I wouldn't have short term gains on it and I can avoid using any agents.

If you inherit a property there is a step up in tax basis and no capital gains tax or depreciation recapture if you sell the property for same market value as valued when inherited  Any gain occurring after inherited date can be avoided by doing a 1031 exchange.

No way to avoid the down payment on multifamily, that I am aware of

I know general investor mentality is to avoid it at all costs.

They want to sell the corporation to avoid this and only pay the cap gains, my attorney says no way (liability from unknowns, and we deal with the same when we want to sell)..There must be a way to navigate this and only sell the asset???

You want to make sure that you are setup correctly; to avoid having to make changes in the future and to verify that your setup is the most tax efficient for your goals.

Trying to help the seller avoid taking a tax hit, but I also want to purchase the property.

It gets even better because it's likely you didn't pay any tax on the $10,000 because of the depreciation offset and if you reinvest the principal and/or proceeds you can avoid paying take on the $25,000 gain as well. 

This is Texas. I lived in a condo for 5 years before it just sold a few months ago. How do I pay as little taxes as possible? I also have a W2 job.